As many as 100 matured and large-scale Indian startups, that are either profitable or on the path towards profitability, may hit the Indian market in the next five years. While about 20 of the 100 have already made their public market debut, the remaining —roughly 80 new-age companies —have the potential to go for an IPO, a Redseer report said.
The prediction comes despite a lacklustre public market performance by startups such as Paytm, Zomato, Nykaa, Cartrade, among others — all of which listed on the exchanges over the past year or so – are each down at least 40% from their initial listing price. “While the markets have been challenged, which has impacted the valuation of the tech companies a bit more than others, the potential is out there, especially for tech,” a Redseer report said.
From about $43-trillion market capitalisation in the US, about 25% can be attributed to tech/new-age companies, including giants such as Apple, Amazon and the like. But in India, with about a $3.9-trillion market capitalisation, only about 1% can be attributed to tech/new-age companies, Redseer highlighted, while adding that: “India, in particular, has a significant room for growth in the public market capitalisation, compared to other countries.”
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Of the 100 startups, 19 have made it to the stock exchanges. Nine startups have submitted their draft red herring prospectus (DRHP), 10 have commissioned or completed their DRHP drafts and about 62 of them may be open to the idea of an IPO, the report found.
However, there are several metrics that startups will need to focus on in their IPO journey. These include: market leadership, clearly visible total addressable market (TAM), moats/multiple use cases, diversified, consumer love, predictable revenues, high operating leverage, achieved sustainable unit economics and a clear path to profitability, Rohan Agarwal, partner, Redseer said.
“We always see IPOs bouncing back post a downturn. Whatever the goals may be, you have the time and scope to achieve much better outcomes before the IPO and showcase it strongly,” Agarwal added.