New-Age Startup IPOs’ Results Analyzed: Q1 FY24 Performance Snapshot
Notably, the surge in Indian startup IPOs reflects the growing maturity and confidence of the startup ecosystem in the public markets. Examining the latest quarterly results of these newly listed startups provides insights into their post-IPO financial performance and the market’s reception of their offerings.
Profit-making new-age startup IPOs in Q1 FY24
The landscape of Indian startup IPOs has witnessed notable activity in recent years, reflecting the evolving dynamics of the ecosystem. In 2021, the startup-friendly environment fueled a surge in venture capital funding, enabling eight startups to go public successfully. These IPOs included Zomato, Nazara Technologies, Nykaa, CarTrade, EaseMyTrip, and others, collectively raising substantial capital and marking a significant milestone for the Indian startup ecosystem.
However, 2022 experienced a shift in momentum, with fewer startups making their way to the public markets. Delhivery and Tracxn were among the few that managed to go public during this period, while several startups deferred their IPO plans due to challenging market conditions. Notable names like OYO, boAt, PharmEasy, Mobikwik, Navi, Pine Labs, and ixigo chose to postpone their listings to more favourable times.
In the ongoing year, the trend of startups going public has remained relatively subdued. So far, only drone technology startup ideaForge has completed its IPO, highlighting startups’ cautious approach in navigating market dynamics.
The Indian startup landscape has witnessed a notable shift in the financial performance of several companies, with eight startups achieving profitability in the first quarter of FY24. Among these, Zomato’s transformation from a loss-making entity to a profitable one in the quarter ending June 2023 garnered significant attention. This achievement marked a remarkable turnaround for the Gurugram-based food tech giant, which had reported a loss of Rs 188 crore in the previous quarter, Q4 FY23.
Regarding profitability rankings, MapMyIndia, an older player founded in 1995, led the pack with a profit of Rs 32 crore in Q1 FY24. Other successful startups like EaseMyTrip, Nazara Technologies, CarTrade, and ideaForge followed closely. Nykaa reported a profit of Rs 5.4 crore during the same period, showcasing its financial resilience. Tracxn, on the other hand, registered a more modest profit of Rs 0.69 crore in Q1 FY24.
This wave of profitability among startups signifies a positive trend in the Indian startup ecosystem, as companies work towards sustainable business models and improved financial health. This list’s diverse mix of sectors highlights the growing maturity and diversity of the Indian startup landscape, demonstrating the potential for success across various industries and business models.
Loss-making new-age startup IPOs in Q1 FY24
In recent financial reports, Zomato and Nykaa have emerged as noteworthy success stories, reporting substantial profits. However, other prominent companies like Paytm (One97 Communications), Policybazaar (PB Fintech), Delhivery, and Freshworks continue to grapple with achieving profitability in their operations by the first quarter of the fiscal year 2023-24 (Q1 FY24). Despite their significant revenue generation, these companies have yet to reach a point where their earnings exceed their expenditures.
Among these companies, Paytm is the second-highest revenue generator on the list. Nevertheless, its financial situation has shown some concerning trends. During Q1 FY24, Paytm’s losses surged to Rs 358.4 crore, marking an increase of more than two times from the previous quarter’s loss of Rs 167.5 crore. This uptick in losses raises questions about the company’s ability to manage its expenses in proportion to its revenue effectively. However, a glimmer of hope can be found when comparing these figures to the same quarter in the previous fiscal year (Q1 FY23), as the losses had contracted by 44.5% year-on-year.
While these companies exhibit substantial revenue streams and considerable market presence, translating their high revenue figures into sustained profitability remains critical. The contrast between profitable ventures like Zomato and Nykaa and these revenue-focused yet unprofitable entities highlights the complexities of maintaining a healthy bottom line in today’s competitive business landscape.
Policybazaar, another prominent company, also experienced increased losses during the first quarter of the fiscal year 2023-24 (Q1 FY24). The company’s losses surged to Rs 11.9 crore, reflecting a rise from the Rs 9.37 crore loss recorded in the preceding quarter, Q4 FY23. This upward trend in losses suggests ongoing challenges in the company’s efforts to achieve profitability.
On the other hand, two other notable companies, Delhivery and Freshworks, managed to rein in their losses in the previous quarter. Among these, Freshworks, a Software-as-a-Service (SaaS) firm, achieved a significant milestone by reporting its first adjusted operating profit in Q4 FY23. Building on this accomplishment, the company anticipated sustaining its adjusted operating profit in the subsequent quarter, Q1 FY24. This positive performance indicates Freshworks has found a path to profitability through its operations.
In contrast, Policybazaar’s strategy involves a longer timeline for achieving profitability. The company has set its sights on attaining profitability in the full fiscal year 2023-24 (FY24). This forward-looking approach acknowledges that certain strategic shifts and financial adjustments may take time to materialize and ultimately contribute to the company’s bottom line.
Current market price Vs IPO price
Entrackr, a market analysis platform, has presented a comparative chart illustrating several companies’ current market share prices concerning their Initial Public Offering (IPO) prices, which the companies initially set. Among the companies mentioned, Zomato, ideaForge, and MapMyIndia are presently trading above their respective IPO prices. Conversely, the remaining companies are trading below their IPO price bands. Despite this initial disparity, many of these companies are on a trajectory towards recovery following periods of decline. This could indicate an improved understanding of their business models within the market.
For context, Zomato’s share price recently reached a 52-week high, underscoring the positive sentiment surrounding the company. Similarly, Paytm’s shares experienced an uptick as Vijay Shekhar Sharma, the founder and CEO of One97 Communications (Paytm’s parent company), entered an agreement to acquire a 10.3% stake from Ant Financial.
The arrival of profits for these companies can be interpreted in one of two ways: as a result of the accountability imposed by public markets or as a sign of these startups maturing. This dual perspective suggests that while founders might not openly acknowledge an anticipated decrease in future growth compared to their initial high-growth, high-loss years, the reality is that these firms still possess the potential for solid growth within an economy expanding by over 6% annually.
Importantly, even though valuations for certain companies suffered setbacks, such as Paytm and Freshworks, they have managed to recover sufficiently. This recovery has enabled them to access capital in a challenging market environment, benefiting other startups that have yet to go public.
