Cash flow-based lending will become a reality in next few years: Credit Suisse’s Neelkanth Mishra

India has 100 unicorns valued at USD 240 bln: Credit Suisse

He also said that he is surprised at the pace at which list of unicorns in India grew.

“The genesis of the report was a group meeting I was part of where someone mentioned that from about 25-30 unicorns we can get to maybe 35-40 unicorns by the end of this year. So that got me thinking that if there is such a lot of wealth creation happening, then there must be some good changes happening in the underlying business as well. And as we went about exploring this list further, we were surprised at the pace at which the list grew. The first big discovery was that there were so many of them. There are about 300 odd companies in the listed space and compared to that, there are more than 100 – we have discovered 12-15 more names after we published the report,” he said.

Mishra said that private equities have come in and given risk capital to firms in last 15-20 years. He also believes that many of the unicorns are enablers of other unicorns as well.

“There has been a lack of risk capital in the economy. So, as we flag in the report, the number of new private companies being registered was very rapidly growing even in the 1980s when India was still amidst the licence permit raj. The problem used to be that the capital was not there; companies had to build their capital and therefore take a long time to grow. However, what has happened in the last 15-20 years is that there has been a surge in private equity and that has provided the risk capital which has allowed for these companies to scale up much faster than they would have if they had been accruing their savings and then reinvesting,” he said.

According to Mishra, 5 percent of incremental GDP could come from these new companies in next 5 years. He also believes that a GDP growth rate of above 7 percent is a reality.

“Two third of these firms formed after 2005. For them to become large and have an impact, it takes a long time. The firms that have been seeded and funded in 2013-2014 are going to be creating impact on the economy of this scale 3-5 years later. I think the impact on GDP is only now starting to get felt. In our estimates, there is about Rs 2.4 trillion of revenues in these firms and if you think about last few years of growth and you project that over the next 3-5 years, in the next 5 years 5 percent of incremental GDP could be coming just from these firms. So, I think the impact on GDP will be far higher than it has been in the last 5 years,” he said.