• Startup Chai
  • Posts
  • (The Weekend Insight) - IPO Season in India: Why Every Startup Is Suddenly Profitable

(The Weekend Insight) - IPO Season in India: Why Every Startup Is Suddenly Profitable

As public markets heat up, Indian startups are tweaking metrics, delaying costs, and riding the IPO wave with perfect timing and polished narratives.

In today’s analysis, we will explore the curious case of India’s startup IPO boom - where profitability seems to magically appear just before listing, founders wait for peer companies to test the waters, and retail investors fuel momentum on the back of brand familiarity. From Lenskart to Pine Labs, Wakefit to PhonePe, a calculated wave of DRHP filings has emerged - but behind this IPO rush lies a deeper story of timing, perception, and engineered financials.

In India’s startup ecosystem, an interesting pattern has emerged over the last year: a growing number of startups - some newly profitable, others chasing liquidity - are lining up to go public. But this IPO rush isn’t random. It’s coordinated, cautious, and calculated driven by market sentiment, peer outcomes, and timing.

Post-2021, a wave of funding dried up. Valuations corrected, and late-stage capital became hard to come by. For startups that had already scaled and reached brand maturity, the only meaningful path left was the public markets. This is why Indian stock exchanges - especially NSE and BSE - have become the new battleground for growth-stage founders. The IPO pipeline now reads like a who’s who of the Indian startup world - Groww, Oyo, Boat, PhonePe, Urban Company, Physics Wallah, and more.

Over the last 8-10 months, many Indian startups that were previously sitting on the IPO fence have re-activated their plans. Groww filed its DRHP. Wakefit followed suit. Oyo is reportedly planning a re-entry. Many of these companies had been waiting for the right time - not just macroeconomic stability or retail investor sentiment, but for someone else to jump first. Indian exchanges, flush with liquidity and backed by a rising class of retail investors, are now seen as a legitimate exit route.

This herd behaviour is common. Startups rarely like to go first. They wait, observe how the markets react to a peer’s IPO - listing pop, retail subscription, anchor interest, stock performance - and then decide their own play. For instance, after Mamaearth’s IPO in November 2023 (which saw a muted but stable listing), other D2C startups started re-engaging bankers. Even Boat, which had previously postponed its IPO, is now actively exploring the market again. Zomato’s IPO became a bellwether of sorts.

But beyond timing, there’s a deeper insight here: the profitability switch. Multiple startups that had been loss-making for years suddenly reported a profit - either in the quarter leading up to the IPO or for the full year. This isn’t necessarily manipulation. It’s optimization. Founders and CFOs already know the levers - cut ad spends, reduce headcount, delay expansion, renegotiate vendor contracts, and bump up accounting revenue through deferred costs or bulk invoicing. They use these levers right before an IPO to show a cleaner, more palatable financial sheet.

Zepto did this before its recent fundraise. Mamaearth did it before its IPO. FirstCry, despite being in a cash-burning space, also showed a more disciplined P&L. Paytm, after suffering post-listing, has also shifted strategy - focusing on profitability over growth. Even fintech firms like MobiKwik and PhonePe began reporting segment-level profitability, even if their overall books were still in red. Delhivery reported operating profit for the first time in FY24. Fractal, too, reported a consolidated net profit of ₹220.6 Cr in the latest fiscal year as against a loss of ₹54.7 Cr in FY24.

This phenomenon isn’t unique to India. Globally, startups from the US to Southeast Asia have pulled similar moves. WeWork, ahead of its first IPO attempt, painted a profitability story through adjusted EBITDA. Grab showed GMV-led optimism in its listing prospectus. Klarna in Europe streamlined operations, slashed workforce, and spun a narrative of operational efficiency when prepping for future public listing. Uber, too, pushed adjusted EBITDA as the primary metric during IPO.

However, India’s dynamic is somewhat more grounded. Unlike the US, where IPOs often chase growth over profitability, Indian public markets reward conservative metrics. Retail investors in India still value bottom-line performance. This explains why most Indian startup IPOs now carry a profitability story - however recent or engineered. Indian regulators, too, are more conservative. SEBI's rules around profitability and disclosures are stricter than the US’s SEC, and this forces startups to tighten their operations pre-IPO.

Moreover, retail enthusiasm is unprecedented. Indian stock exchanges now have frameworks and infrastructure to absorb tech IPOs. Retail investors - especially the GenZ and young salaried class - are actively investing through apps like Zerodha, Groww, and Upstox. For many of them, IPOs of popular startups are aspirational events. They know the brands - Zepto, Swiggy, Ola Electric - and want to own a piece. The growing interest from investors is making a positive cycle: startups clean up books, retail lines up, and exchanges enable smoother listing processes.

The result? A more vibrant listing environment. India saw more than 268 IPOs (90 mainboard IPOs and 178 SME IPOs) in 2024 alone, with over ₹1.67 lakh crore raised from public markets. Startups like Yatra, Droneacharya, and IdeaForge also tasted IPO success. Even Mamaearth, despite media skepticism, had an oversubscribed IPO.

But not without caveats. Many startups still lack predictable earnings, have exposure to regulatory risks (especially in fintech and mobility), and depend heavily on promotional discounts. The IPO success of one startup doesn’t guarantee the same outcome for others. For every Paytm or Zomato that struggled post-listing, there’s a Nykaa or PolicyBazaar that found more stability. Global peers like Robinhood and Rivian also saw dramatic drops post-IPO.

That’s why timing remains everything. Founders don’t just watch the Sensex or Nifty - they watch each other. They wait for a peer to test waters. If it floats, they jump. If it sinks, they wait. IPO advisors, investment bankers, and PR firms are brought in months in advance to craft the right perception.

And when the moment feels right - they pull the profitability lever, rush to file DRHPs, and hope to get the retail stamp of approval. Behind the scenes, cost-cutting begins. Metrics are reframed. Narrative is tuned. Everyone - from employees to early investors - aligns behind the public market story.

India’s startup IPO wave is less about public listing and more about public perception. And perception, as we’ve learned, can be engineered. At least temporarily. But whether this perception translates into long-term trust and market performance remains the real test.

How did today's serving of StartupChai fare on your taste buds?

Login or Subscribe to participate in polls.