India holds tech IPO potential, 90 companies to go public by FY28: Redseer

With an increased focus on profitability, startups are poised for a promising road ahead, including potential for a public listing, revealed a report by Redseer Strategy Consultants.

Offering insights into India's IPO (Initial Public Offering) landscape, the report estimated that by FY28, there will be a significant uptick in the number of companies listed or IPO-ready as they will shift their increased focus on profitability in the coming years. It stated that by FY25, India is likely to have up to 40 listed/IPO-ready new-age tech companies, and this number can grow to 90 by FY28.

Indian tech startups have been focusing on profitability, weathering through macroeconomic headwinds and a funding winter.

Sharing an insight into the IPO landscape, Rohan Agarwal, Partner at Redseer, explained that after a period of a sharp correction in stock prices until Q4 FY22, the listed new-age tech players bounced back in FY24, indicating a trend of gradual recovery.

He elaborated that startups have substantially improved their profitability in FY24, and going forward, about 50% of unicorns in India will be profitable by FY27. However, ~20% of unicorns will likely struggle due to regulatory challenges, plummeting demands, and unclear business models. These could pivot to new models, companies getting acquired by larger companies, or close for good.

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Commenting on what can be expected, Agarwal added, “SaaS, B2C product companies, and fintech are amongst the most promising categories to produce IPO-ready companies.”

These companies have sizable revenues, sustainable growth, a strong EBITDA, and operate on defensible business models, making them strong candidates for IPO, the report noted. 

Agarwal stressed three key areas that IPO-bound companies need to focus on. Firstly, they should prioritise building strong investor relationships and trust, emphasising reputation and transparency. Secondly, companies must proactively engage with potential investors well in advance of the IPO to establish rapport.

Lastly, providing clarity on business models and key metrics is crucial to enable investors to make informed decisions about their investments. By addressing these areas, companies can increase their chances of a successful IPO.