Morningstar introduces industry-first ‘India Unicorn Index’

§ Morningstar PitchBook India Unicorn 25 Index among one of four country-specific indexes in the newly launched Morningstar PitchBook Global Unicorn Index series

§ Data shows as many as 10% of all new unicorns, across the globe, are born in India

Bangalore,10th November 2022: US-headquartered global investment research company, Morningstar has introduced the industry-first Morningstar PitchBook Global Unicorn Indexes, including the Morningstar PitchBook India Unicorn 25 Index, a new series of benchmarks to daily measure Unicorns, or privately held venture capital-backed companies with valuations of $1 billion or more.

Morningstar determined only four countries have a critical mass of unicorns sufficient to create a meaningful single-country unicorn index. The creation of the Morningstar PitchBook India Unicorn 25 Index reflects local market conditions that are fertile ground for companies to remain private while they undergo considerable growth.

Morningstar noted that the pace at which new unicorns are coming up in India is rapid; as many as 10% of all new unicorns across the globe are born in India. The investment, consumption, and regulatory landscape in India is ripe for the growth of unicorns, as well as for upcoming unicorns, or “soonicorns.” Active government support for India’s start-up ecosystem, including its openness to foreign capital being invested, helps Indian startups secure funding while staying private. Behavioral changes towards technology and online consumer products that were brought on by the pandemic have also created a favorable environment for innovative startups. And the size of the consumer market in India allows businesses to produce at scale.

Similar to the Indian stock markets that remained relatively resilient compared to global peers, Indian unicorns have remained resilient as well. Despite the slowdown in 2022, Indian unicorns have seen some large deals for companies. BYJU’s, Swiggy, ShareChat and Meesho were among the many Indian unicorns that have successfully raised funding in 2022.

Another important differentiator among Indian unicorns is that diversification has been consistently increasing among them. In 2019, the top 10 constituents of Morningstar Pitchbook India Unicorn 25 Index comprised nearly 80% of the index that has dropped to almost 60% in 2022. This is indicative of increasing number of companies having large up-rounds.

Sanjay Arya, Head of Innovation, Morningstar Indexes said, “Considering the pace at which internet and other technology solutions are turning mainstream in India, these segments are poised for further growth. Pandemic-induced lifestyle changes are also expected to bolster growth in these segments. B2B products and services are expected to witness growth as the focus shifts towards self-reliance among Indian businesses.”

B2C product and service providers such as BYJU’s, Swiggy, OYO Rooms, and Ola comprise of 60% weight in the Morningstar Pitchbook India Unicorn 25 Index. This is followed by a 25% weight in the Information Technology sector which include companies like Dream Sports and Razorpay.

“In today’s market, investors are increasingly looking to nontraditional asset classes like private markets for portfolio diversification and investment opportunity,” said Ron Bundy, President, Morningstar Indexes. “Our new global unicorn indexes combine the deep data and insight of PitchBook with the best practices of Morningstar Indexes to deliver a new state-of-the-art series of benchmarks for the late-stage venture capital market.”

According to Morningstar research, private capital markets have grown substantially in the last decade, with more companies staying private longer or pursuing less traditional funding strategies. This trend has fueled a growing number of “unicorns,” or VC-backed companies with more than a billion dollars in valuation.

This new series of market indexes combines the leading VC data, analytics and insights from PitchBook, an independent subsidiary of Morningstar, with the indexing best practices of Morningstar Indexes, one of the fastest-growing global index providers. It employs a proprietary three-factor mark-to-model pricing methodology to provide more frequent valuations for the asset class. The first of its kind, the model employs a range of valuation measures and comparable data from private and public market peers to bring transparency to an asset class that has been hard for investors to track.

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