The report estimated that by FY28, there will be a significant increase in the number of companies that are either listed or ready for an IPO, with a strong emphasis on profitability.
The report comes a day after consumer brand Mamaearth’s parent firm secured Sebi approval for its planned IPO, and food and grocery delivery firm Zomato recording its first-ever quarterly profit (of Rs 2 crore) during the June quarter.
Despite facing challenges and macroeconomic headwinds, Indian startups have been resilient, leading to a substantial pipeline of IPO-ready companies for the next five years, said Rohan Agarwal, partner at Redseer.
“Listed new-age tech players bounced back after a period of sharp correction in stock prices until the last quarter of FY22, signalling a gradual recovery. By FY28, listed or IPO ready new-age companies are expected to reach 90,” added Agarwal.
In FY24, startups have notably improved their profitability, with a promising outlook projecting around 50% of Indian unicorns turning profitable by FY27. Compared to FY21, nearly twice the number of Indian unicorns are on track to achieve profitability by FY23, Agarwal added in the report.
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However, not all unicorns are likely to thrive, as the report suggested that around 20% of them might face difficulties due to regulatory challenges, plummeting demand, and unclear business models.Tech IPOs: Unlocking potential
The report highlighted the untapped potential in India’s tech sector, with its contribution to public market capitalisation currently at a mere 1%, compared to around 25% in the US. This implies substantial scope for value creation in the tech space.
The report said companies from sectors such as SaaS (Software-as-a-Service), B2C (Business-to-Consumers) product companies, and fintech have a higher likelihood to be IPO-ready and eventually hit the public markets. The report said these sectors have sizeable revenues, sustainable growth, and a strong Ebitda to show, along with defensive business models.
Agarwal added in the report that companies looking to go public are advised to prioritise building strong investor relationships and trust, emphasising reputation and transparency. “Establishing rapport with potential investors well in advance of the IPO is crucial, along with providing clarity on business models and key metrics, enabling well-informed investment decisions,” Agarwal added.
