Majority of Indian startups eyeing IPOs in 2024 struggle with losses

Of the 12 startups looking to launch IPOs this year, eight have incurred a cumulative loss of Rs 8,000 crore, including Swiggy, and Ola Electric

More than half of the Indian startups gearing up to launch their initial public offerings (IPOs) this year are still contending with losses, according to a report by the Financial Express (FE). Among the annual filings of 12 companies filing their draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi), eight struggle to post profits and have incurred cumulative losses of Rs 8,000 crore. This includes unicorns such as FirstCry, MobiKwik, and Ola Electric.

The most significant contributors to the Rs 8,000 crore loss are Swiggy, and Ola Electric. Other startups such as Portea Medical, Awfis, FirstCry, MobiKwik, and PayMate have also reported losses in their recent filings.

While profitability is not mandatory for launching IPOs, the National Stock Exchange (NSE) does require companies to demonstrate operating profit or earnings before interest, depreciation, and tax for at least two of the three preceding financial years.

Investors, on the other hand, tend to focus on trends in operating profitability rather than immediate net profit, especially for high-growth startups, the FE report adds.

Despite the losses, some of these startups have witnessed substantial growth in sales over the last financial year. Ola Electric saw its topline surge nearly sixfold to Rs 2,782 crore at the end of FY23, and FirstCry doubled its revenue to Rs 5,632 crore in the same period, albeit with an increased net loss.

Prioritising scaling operations over profitability is common among startups preparing for IPOs. There are, however, some startups that are already profitable.

Oravel Stays, Oyo's operating entity, for instance, reported its first-ever profit at the end of the second quarter of the ongoing financial year (Q2FY24) at Rs 16 crore net profit.

Go Digit, Oyo, and FirstCry have filed their DRHP)and await regulatory approval. PayU, Unicommerce, Swiggy, and Garuda Aerospace, however, are yet to file their papers. MobiKwik, which received Sebi approval in 2021 and subsequently deferred its listing, is expected to file fresh IPO papers soon.