India To Have 250 Unicorns By 2025; Next Wave From Healthtech, Deeptech & Crypto: Mohandas Pai

“It’s a great day for India when we reach the high aspirational target of 100 unicorns. By December 2025 we hope to have 250 unicorns in India,” TV Mohandas Pai, partner, Aarin Capital.

Bengaluru-based neobanking startup Open on Monday (May 2) announced its entry into the unicorn club of India, becoming the 100th startup to join the coveted club. Open said it raised $50 Mn in a Series D funding round from IIFL, Singapore’s sovereign wealth fund Temasek, US hedge fund Tiger Global, and 3one4 Capital.

From producing its first unicorn in the form of Inmobi in 2011 to completing a century of unicorns, it has been a long and eventful journey for the Indian startup ecosystem. 

India is now competing with the US (559) and China (173) in terms of the number of unicorns. According to Inc42 Plus, the year-on-year (YoY) growth of unicorns in India at 300% (2021-22) is higher than China whose YoY growth rate has been 267%. 

If the trend seen over the last year continues, India could surpass China by 2030, believe experts.

Speaking to Inc42, Pai, however, mixed hope and joy with a cautionary approach.

“India can do much better and grow many more unicorns if we could solve some structural issues in this country,” Pai said.

Pai, the former CTO of Infosys, has been at the forefront of the Indian startup ecosystem while the number of unicorns grew from zero to 100. 

RBI Is Hindering Reforms: PM Narendra Modi Must Intervene

Mentioning the changes which he would like to see, Pai said that the Reserve Bank of India’s (RBI’s) regulations with regard to the Foreign Exchange Management Act (FEMA) need to be eased. Besides, local investors must be treated better when it comes to investing in unlisted stocks, and harassment for unnecessary compliance must be removed, he added. 

Pai said, “India is comfortable in foreign exchange with the fastest growing sector in India and …this has to be a focus area for RBI. We have been talking to the RBI for the last six-seven years. We have raised the matter with DPIIT and with the finance ministry.”

“We hope that PM Modi will intervene and ask the RBI to relook at the regulations. We hope the RBI governor Shaktikanta Das will take a personal interest in this matter. Somehow the RBI has become an immovable object, stopping reforms in foreign exchange (area)…,” he added.

Insurance Companies Need To Be Encouraged To Invest In Startups

Pai also batted for more investment in the country’s startup ecosystem by Indian insurance companies, saying India has to be built by Indian capital.

“We need more Indian capital to come in. Even though regulations have been eased by LIC and LIC is going for an IPO, we see very little capital flows from LIC into the fastest growing sector with the highest returns. LIC is a laggard. There’s no reason why our money paid to LIC and insurance companies should not be invested in this high-growth area, which is delivering high returns for the next five years,” he said.

He added that if LIC and other insurance companies are unable to understand the risks, the investments could be done through a Fund of Funds, which will invest in the sector and reap the benefits. 

Next Indian Unicorns From Healthtech, Deeptech And Crypto

In the last few years, the Indian startup ecosystem has seen a boom in the ecommerce, fintech and edtech sectors. Pai said that the next wave of growth in this sector will be led by sectors such as healthtech, deeptech and crypto.

“I think the big unicorns are going to come from the healthtech sector, deeptech, which includes artificial intelligence, robotics, etc., and from crypto. India’s exporting this deeptech crypto market to Dubai,” Pai said.

However, Pai also raised concerns on Indian startups moving to Dubai and other locations. He said that the finance ministry needs to talk with the unicorns who have moved out of the country and see how they can be persuaded to come back to India without getting into unnecessary tax or regulatory issues.

“There’s no reason why GIFT city cannot become the centre of the crypto industry in India,” he added.