'Key indicators for a startup's IPO success include robust financial performance, a well-defined business model, a clear growth strategy, a competitive market position, and a compelling value proposition.'
Layoffs, corporate restructuring, governance and most importantly profitability: The 14 Indian startups that plan initial public offerings (IPOs) this year are pulling out all the stops to ensure successful market debuts.
A majority of these companies are not profitable and they are cutting costs to improve their financial health.
"Key indicators for a startup's IPO success include robust financial performance, a well-defined business model, a clear growth strategy, a competitive market position, and a compelling value proposition," said Ankur Bansal, co-founder and director of Blacksoil, a venture debt firm.
Swiggy, the food delivery platform, is laying off employees ahead of what is likely to be 2024's biggest startup IPO, with a potential issue size of $1 billion (Rs 8,300 crore/Rs 83 billion).
Sources said that the Bengaluru-based firm is considering laying off 350 to 400 employees, or 6 per cent of its 6,000-strong workforce, as part of an operational efficiency drive, Business Standard reported earlier.
After a prolonged period of high cash burn, the company has since last year undergone retrenchments by way of layoffs and shut down its unviable business verticals.
Swiggy introduced a Rs 2 platform fee for all its users, which may now go up to Rs 10.
This led to the company's food delivery business turning profitable in the March quarter of FY23 (Q4 FY23) after considering corporate costs and excluding employee stock options (ESOP).
Several investors have since marked up Swiggy's valuation, indicating a healthy growth trajectory.
Flipkart, the e-commerce firm owned by Walmart, will lay off 1,000 employees -- around 5 to 7 per cent of its workforce -- as part of an annual performance review exercise as it intensifies efforts to achieve profitability ahead of its IPO in 2025-2026, source said.
To prepare for the IPO, the company is improving finance operations to create an effective system of corporate governance.
Kalyan Krishnamurthy, Flipkart's CEO, told employees in a town hall on January 25 that the company's financial health is improving, according to sources. the company's cash losses are at a historic low in January, he added.
Flipkart Internet, the marketplace arm of the company, recently reported a 42 per cent growth in operating revenue for FY23 at Rs 14,845 crore (Rs 148.45 billion).
Its total loss declined by 9 per cent to Rs 4,026 crore (Rs 40.26 billion), according to data accessed by business intelligence platform Tofler.
Electric vehicle company Ola Electric, which has also filed its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India, is also looking at building volumes before its IPO sometime in March if it gets regulatory clearances in time.
The firm grabbed a market share of over 41 per cent in the electric two-wheeler market, its highest in Calendar Year 2023 with 30,219 registrations in December.
Ola Electric has been approved for India's production-linked schemes, one relating to manufacturing advanced automotive technology products and another for advanced cell chemistry batteries.
Softbank-backed hospitality major Oyo is yet another large startup that has shored up its margins ahead of its upcoming public listing.
The company turned cash flow positive in the fourth quarter of FY2023, marking its first profitable quarter.
Bolstered by an increase in bookings, the firm expects to report adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization) of around Rs 800 crore in FY24.
Oravel Stays, the parent firm of OYO, recently refiled its DRHP with Sebi under the confidential pre-filing route.
The issue size for the company's public listing was reduced by almost half to between $400 billion to $600 billion, all of which will be raised through a primary issuance, in a bid to repay most of the firm's debt
"Unlike private markets that value future growth, public markets prioritize proven value. Success relies on showcasing tangible achievements and performance metrics. Public markets also demand strong financials and sustainable business models and startups must demonstrate a clear path to profitability for enduring success in the public domain," said Pratip Mazumdar, co-founder and Partner at Inflexor Ventures.
While larger IPO-bound startups are on track to improving their financial health, several smaller companies are ahead on the profitability front.
Firms like Prosus-backed PayU, drone startup Garuda Aerospace, e-commerce enablement platform Unicommerce and fintech SaaS startup Perfios are some which are already profitable.
While companies may face challenges brought about due to market volatility, regulatory hurdles in sectors like fintech, competition from other IPOs, and the need to meet high investor expectations, experts say that 2024 is likely to pan out better for startups looking to go public compared to the last two years.
Looking to lay off 250-400 employees
Shut down meat delivery, premium grocery delivery (handpicked) businesses, sold its cloud kitchen business (Swiggy Access) in 2023
Introduced Rs 2 platform fee for all its users, which may now go up to Rs 10.
Looking to lay off 1,000 employees
Cash losses are at a historic low in January
Travel as a business, especially domestic air travel, is now a big revenue generator.
Grocery business has grown by 50% in the last 6 months.
Grabbed a market share of over 41% in the electric two-wheeler market, its highest in CY23 with 30,219 registrations in December 2023.
Approved for two production-linked schemes: manufacturing advanced automotive technology products and advanced cell chemistry batteries
Turned cash flow positive in the fourth quarter of FY2023, marking its first profitable quarter.
Bolstered by an increase in bookings, Oyo expects to report adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization) of around Rs 800 crore in FY24.
IPO-bound startups that are profitable
Feature Presentation: Aslam Hunani/Rediff.com