Blog

Fuelled by a maturing consumer and business base, Indian startups are racing towards IPOs, but questions remain about the lack of profitability among this cohort

The nine startups that listed on the stock exchanges in 2021 have a cumulative market cap of over $56 Bn, but only a handful are profitable

The average time taken for an Indian startup to IPO is expected to fall by 50% by the end of 2026, just as the drop seen in time taken to reach unicorn status

In 2021, the Indian startup ecosystem went past three remarkable milestones — the overall funding crossed the $100 Bn mark, a record-breaking 40 startups turned unicorns and 11 Indian startups listed publicly through IPOs.

Nine of these startups have already made their secondary market debut and are listed for trading on Indian and international stock markets. And six among these have listed at a premium, indicating the growing acceptance of IPOs as an exit opportunity for investors and also as an aspiration for startup founders and entrepreneurs. The nine startups that listed on the stock exchanges in 2021 have a cumulative market cap of over $56 Bn

In 2022, nearly two dozen startups are expected to hit the public markets — the likes of Flipkart, Swiggy, OYO, BYJU’S and others are lining up IPOs. But this streak of IPOs in 2021 and the confidence in public listings do not adequately convey the financial performance of the startups.

Sustainable profitability is still a major sore point for retail and institutional investors eyeing Indian tech stocks. Even those startups that have gone public need to prove their financial strength.

The latest release from Inc42 Plus — Indian Startup IPOs & Earnings Reports, Q3 2021 — will look deeper into this dichotomy between the IPOs and the financial performance,

It covers both stock performance as well as the quarterly financial performance of new-age listed Indian startups, covering metrics such as return on ad spend (ROAS), price-to-sales ratio, volatility of stocks compared to the benchmark index as well as the strengths and challenges of each listed company.

Download The Free Report

The State Of New-Age Indian Startup IPOs

While Indian startups are turning unicorns faster than ever before, our analysis shows that it takes approximately 13.8 years for an Indian startup to go public.

While startups founded in or before 2011 took an average of 9.3 years to turn unicorns, those founded in or after 2012 took an average of 4.8 years to get to this milestone — a 48% decrease in the average time taken. We expect a similar drop in average time taken for public listings among Indian startups.

This expectation is backed by the higher rate of adoption for technology products and services in the post-pandemic market since early 2020. Both businesses and consumers are now utilising digital products, services and platforms with greater regularity, and the investor ecosystem has also matured and expanded.

The record number of unicorns in 2021 has coincided with a massive transition towards apps, and digital services and products, with the active internet user base over 833 Mn.

“With the listing of Zomato, there’s a greater emphasis on new-age tech among the investor base. There’s an appreciation in the market that tech startups have come of age, and that indicates that the stock markets are also maturing. These startups don’t have the traditional metrics of profit, but rather the emphasis is on disruption and growth, which is being accepted by the market,” Gautam Benjamin, executive VP and head of technology investment banking at ICICI Securities, told Inc42.

As per our analysis, Indian startups will see a 50% reduction in average time taken for public listings from the current 13.8 years to 6.9 years by the end of CY2026.

Indian Startup Heavyweights Eye IPOs In 2022

The successful listings of Zomato, Nykaa, Policybazaar are the guiding stars for the 20+ startups that are about to IPO in 2022 and 2023. This list of IPO hopefuls includes behemoths such as Delhivery, BYJU’S, PharmEasy, Ola, OYO, Pine Labs, Swiggy, Flipkart and others — in other words, the cream of the Indian startup ecosystem.

The big question here is whether these startups will overcome the profitability hurdle by the time they list. Many of these continue to be loss-making businesses even as they have achieved massive scale — or perhaps due to that very reason.

Will this change in 2022? We have the answer for this and other burning questions around the long-term potential of Indian tech startups going for public listings. Get all the analysis, insights and data in this free release.

Download The Free Report