“Unicorns in India are facing issues related to profitability and (a) slowdown in funding,” said Satish Meena, senior forecast analyst at Forrester Research.
Meena told CNBC that most of the companies, especially those in online retail, are struggling to bring profitability into their business as a result of over-expenditure on customer acquisition following Amazon’s entrance into the Indian market in 2013.
Furthermore, Meena said, the problem has been exacerbated by an increasingly challenging regulatory environment — with more rules on discounts — and the government’s push for demonetization in November 2016, making it difficult for start-ups to realize aggressive targets.
Echoing Meena’s statements, Marcelo Ballvé, research director at CB Insights said “several of India’s prominent e-commerce and food delivery unicorns have not fared well recently.”
As a result, multiple high-profile unicorns have faced a reduction in valuation and fund raising efforts and the sector has seen an increase in consolidation.
For example, Ballvé cited the recent fundraising round for India’s largest e-commerce retailer Flipkart, in which the company’s overall valuation slid despite raising more than $1 billion.
Just a month before, its rival Snapdeal announced that it was laying off up to 600 employees due to over-expansion and diversification. In recent weeks, rumors have even started spreading about the possibility of an acquisition between the two companies, with VCCircle reporting that the deal could happen as early as this week.
