Blog Post
India’s Unicorn Factory: Growth, Cracks, and a Reality Check
India is a unicorn factory, minting billion-dollar startups at a pace matched only by the US and China. The boom rests on strong economic growth, a massive digitizing consumer base and a deep pool of venture capital chasing the next big platform play. Many unicorns, especially in capital-intensive sectors like B2B commerce and edtech, have leaned on structured debt from hedge funds and private lenders to fund expansion alongside equity rounds. The strategy works when a company is on a clear path to an IPO and listing proceeds can retire the debt. The risks show up when the IPO window closes.
Failures among India’s unicorn club have been rare, but some will inevitably die. Byju’s, once India’s most valuable startup, spiraled through a mix of aggressive debt-fueled expansion and governance and transparency failures, culminating in high-profile cross-border legal disputes, including an alleged $500 million fund diversion. Now Udaan, a B2B e-commerce unicorn, has defaulted on $120 million of convertible notes, as Octus exclusively reported. The company tried and failed to raise new equity, debt or both over the past seven to eight months, in part because it and existing minority shareholders wanted a higher valuation than prospective new investors would offer. Holders of the convertibles have rejected a restructuring proposal.
Neither Byju’s nor Udaan reached the public markets. Both saw revenue and margins deteriorate as losses mounted. Both bet their ambitions on public market exits, and the risks of that strategy are now playing out in the distressed market.
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