Watch: India’s Unicorns explain how consolidation and diversification are helping them weather the funding winter

Bhanu Vohra, Head of Citi Commercial Bank, India, shares his views on this special series, In conversation with unicorn startups of India that Citi held in collaboration with MoneyControl, “We have had three sets of insightful discussions with start-up founders across Mumbai, Delhi and Bangalore. My key take away from these discussions is that start-ups are highly focussed on sharpening their businesses, diversification, building efficiencies and the bottom line. We strongly believe India’s startup ecosystem has all the right ingredients to grow manifold, including a young demographic, digital penetration, and favorable policies.  As India’s startup community continues to tackle the country’s on-ground problems, Citi Commercial Bank has been investing on our Global Digital Segment to support these digital disruptors. I have faith that Indian start-ups will continue to grow exponentially.

Join us for the finale episode of MoneyControl and Citibank’s In Conversation with Unicorn Startups of India series where we discuss diversification and consolidation, and how Indian Startup Ecosystem is Maturing and charting growth in the face of a funding winter”

Hosted by Paromita Chatterjee, this episode’s panellists include Dr Garima Sawhney - co-founder Pristyn Care, Varun Khurana - founder and CEO Crofarm and Otipy Agri-tech, Mehtab Singh Hans - co-founder Far-Mart, and Lokendra Saini - COO EaseMyTrip.

What follows is an edited summary featuring key highlights from the session.

Consolidation and diversification

Dr Garima Sawhney, co-founder of Pristyn care that delivers seamless tertiary care in India, says people are the focus of growth in any organisation. “You build teams with various capabilities, and then look to expand and scale up those capabilities. This scaling up, she says, happens primarily with technology and integration with other services. Since many of these integrations can’t be built in-house, they look for acquisitions that can solve these issues. She cites that acquisition of Lybrate as an example of this.

“Our intention of doing the acquisition was to increase the funnel of the patients for us. Lybrate is into primary healthcare and Pristyn is into secondary healthcare,” explains Dr Garima.

On the other hand, Crofarm and Otipy founder Varun Khurana says that the farm-to-fork service has its differences - they deal with perishable goods and reducing waste, and almost all their capabilities had to be built in-house. “The category is very unique and there is not a lot of official software that you can use,” he says.

Partnerships and expansion

FarMart co-founder Mehtab Singh Hans also works in the food industry, but his business deals primarily with non-perishable and semi-perishable goods. Their approach to partnerships is, again, different owing to the nature of the business. Given the spread and fragmentation of farms and landholdings in India, his company partners directly with existing mom-and-pop stores in rural markets and leverages their social capital to help the business grow. “We have kind of found these people in the value chain to partner with us.” FarMart’s success, however, comes from reading the market and pivoting from B2C to B2B. They started out as an Uber for tractors, after all.

EaseMyTrip, on the other hand, is thriving on its acquisitions and is actively looking to diversify and spread outside India. Company COO Lokendra Saini points out that EaseMyTrip targets expansion based on where Indians are travelling. They’re setting up shop in countries like Dubai, London, and Bangkok because those are popular travel destinations for Indians. “We thought it would be better for us to get into those geographies which come as an instant choice for an Indian traveller.”

Challenges that come with expansion

Lokendra agrees, noting that it takes anywhere from 6 months to a year of background research for EaseMyTrip to finally decide where and how to expand. He also explains that mistakes do happen, but that they usually have a Plan B and Plan C in place to fall back on.

In Garima’s view, culture and people management is key when dealing with a new acquisition. “I think the biggest challenge comes when you have to make two team meets. That’s two different cultures and people from different environments who have to get along. Bringing that all together was something which we faced as a bigger issue.”

Varun: “The objectives need to be aligned very closely because if they are not aligned at the top level, then you know further down the chain things break.” He goes on to give an example of the sale of his first startup to a Silicon Valley-based firm. Of the three founders, two travelled to the US to ease the transition and “bridge the gap” between the two teams. With his second company, he says that the objectives were aligned from the start, allowing for an easy exit.

Planning for growth

In Garima’s case, her company is looking to expand into different verticals, which means different specialisations given that her company is focused on medical services. Pristyn’s growth plans centre around taking those specialities deeper into different parts of the country, expanding into similar international markets where healthcare is still a challenge, and to work on medical tourism by bringing patients to India for treatment via her platform. The acquisition of Lybrate will help her gain access to tier 2, tier 3, and even tier 4 cities.

Varun adds that many startups tend to start burning cash and scaling up just when things start getting comfortable in terms of your product market fit. You need to be mindful of that, he says, noting that sometimes you need to take a step back and ensure that your business and cashflow is fundamentally sound.

Exactly, says Mehtab, pointing out that this funding winter means that everyone needs to play it a little safe right now. It’s still safe to scale up within your existing verticals, but expanding to others, especially those that require more investment, can be risky.

Mehtab also notes that having a cash-flow cushion, so to speak, is good to have when weighing risks. In his case, for example, the procurement side is earning more than enough money for FarMart to consider taking some risks outside its comfort zone. Essentially, in this climate, you’re taking risks, but not betting the company on those risks.

Mehtab believes that when it comes to most business decisions, common sense prevails. “If you are first principle based in your thinking — advisors are there, mentors are there — but I think you already know the answer. You are just searching for validation.”

For EaseMyTrip, Lokendra says expanding into new geographies is essential for growth. Travel is an established business and EaseMyTrip’s USP is about adding value to a customer’s trip. That can only happen by exploring other geographies.

Unit economics and focus on the bottom line

When asked about potential pitfalls and planning for rainy days, Garima appeared unfazed, noting that she doesn’t see any serious competition coming up in the near future. She adds that as an operation-heavy business, their unit economics have always been positive from day one, which is primarily why she’s not too worried about the future.

Varun indicates that unit economics are harder in his business, but that they’re at least breaking even in the Delhi NCR region, which is the worst market for them. The way he looks at it, if they can survive in Delhi, they can do well anywhere else in the world. Margins are better in other cities, and being in Delhi has made them harder and stronger. “We have struggled a lot. but hopefully it will make us so strong, and when it is time to expand, we’ll be able to do so quickly and more efficiently.”

“For us, being unit economics positive has been our strength and I think we've been the flag bearer in the travel space when we talk about that,” says Lokendra. It’s something they’ve been focused on from the start, and is allowing them to be aggressive with their acquisitions. They have big plans for expansion, but “everything that is to be done has to be done keeping the unit economics in mind.”

Bhanu Vohra shares his views on the current phase of consolidation and diversification of start-ups in the country.

Bhanu says, “India’s Start-up Ecosystem saw the highest number of mergers and acquisitions in 2022 amidst the funding slowdown over the last few months. This consolidation is being driven largely by mature start-ups looking to consolidate their market share, expand into new verticals or augment capabilities.  However, the success of any consolidation truly depends on the ability to integrate seamlessly and achieve the full potential of the synergies identified. Be it the cultural shift for employees, supply chain, technology integration, client journeys, cashflows or liquidity management. It is crucial to lay down a road map to achieve foundational milestones for a merged entity. This is where we come in. At Citi Commercial Bank, we offer clients comprehensive banking solutions that work for every stage of the growth journey including both before and after the acquisition. We not only help them with the consolidation process by identifying targets, providing advisory and raising capital, but we also help with efficient treasury management, technology integrations for smooth cash flows, and seamless cross-border operations”

Clearly, startups are continuing to look at opportunities and acquisitions despite the current climate but are doing so with a sharp focus on profitability and return on investment.

Paromita: “We wish all of them the very best. May they continue to thrive and continue to grow and spread their wings.”

 Moneycontrol journalists were not involved in the creation of the article.