Tech IPO Boom in India, 90 Companies to Go Public by FY28: Redseer
- ByStartupStory | August 4, 2023
With a strong emphasis on profitability, the Indian startup landscape is on a trajectory towards a promising future, including the potential for increased public listings, according to a comprehensive report by Redseer Strategy Consultants.
The report, which delves into India’s Initial Public Offering (IPO) landscape, projects a significant rise in the number of companies preparing for public listings as they shift their strategic focus towards profitability in the upcoming years. It anticipates a noteworthy surge in the number of new-age tech companies being listed or IPO-ready by the fiscal year 2028. The report forecasts that India may witness up to 40 new-age tech companies being listed or IPO-ready by the fiscal year 2025, and this number could further escalate to around 90 by the fiscal year 2028.
In a testament to the resilience and adaptability of Indian tech startups, the study highlights their dedication to achieving profitability despite facing macroeconomic challenges and periods of reduced funding.
Rohan Agarwal, Partner at Redseer, provided valuable insights into the evolving IPO landscape. He noted that after experiencing a phase of significant stock price correction until the fourth quarter of the fiscal year 2022, listed new-age tech players demonstrated a marked recovery during the fiscal year 2024, indicating a trend of gradual rebound.
Agarwal elaborated that startups have made substantial strides in enhancing their profitability during the fiscal year 2024. Looking ahead, the report predicts that approximately 50% of Indian unicorns are likely to achieve profitability by the fiscal year 2027. However, Agarwal also pointed out that around 20% of unicorns could face challenges arising from regulatory hurdles, diminishing demand, and unclear business models. Such companies might need to consider transitioning to new business models, potential acquisition by larger entities, or even contemplating closure.
Agarwal identified specific sectors that are poised to generate IPO-ready companies. He highlighted Software as a Service (SaaS), Business-to-Consumer (B2C) product companies, and fintech ventures as some of the most promising categories. These entities boast substantial revenues, sustainable growth patterns, robust Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margins, and operate on sound and defensible business models, making them attractive candidates for IPO, as per the report.
The report emphasizes three key aspects that companies aiming for IPO should prioritize. Firstly, building strong relationships and fostering trust with potential investors are vital steps, underscoring the importance of maintaining a positive reputation and transparent operations. Secondly, companies are advised to engage proactively with potential investors well in advance of the IPO to establish rapport and instill confidence. Lastly, the report stresses the significance of providing clarity regarding business models and crucial metrics, enabling investors to make well-informed decisions regarding their investments. Addressing these focal points, companies can significantly enhance their prospects for a successful IPO.
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