Tech Start-ups Come Of Age

NOT TOO LONG AGO, new-age tech companies in India were often met with skepticism, and for good reason. The past few years saw Ola, BharatPe, Byju’s, NoBroker and Paytm entangled in performance, governance and regulatory scrutiny and investor litigation, shaking consumer and investor confidence alike. Those who weathered the storm survived.

Sure enough, the narrative about new-age tech firms has shifted significantly. They are seen as pivotal to India’s growth story, and the domestic market values such companies for their role in driving digital transformation, which has been a major trend for the last five to eight years and is expected to continue for the next 15 to 20 years.

“Only one or two firms are going to outlast everybody else. Ultimately, that’s the role you need to play: Not out-fund, outperform, or out-noise anybody, but simply outlast everybody,” says Ronnie Screwvala, founder, upGrad. He believes perpetuity comes from balancing impact and outcomes with return on investments (RoIs) and shareholder returns.

No wonder the Indian stock market is expected to see some of the biggest new-age tech IPOs this year. With Ola Electric (which listed and hit 20% upper circuit on Day One), Unicommerce (which listed at 117% premium) and FirstCry (Operator Brainbees Solutions listed at 40% premium) going public, and Swiggy, Ola Cabs, PayU, and MobiKwik expected to follow, the stakes are high.

In line with the market boom, personal fortunes of several founders in the new-age tech sector have surged significantly in 2024, reflecting a renewed maturity in the Indian tech ecosystem, especially since many companies now have a decade or more of operational history. For instance, Zomato and Paytm have evolved from being early-stage start-ups to influential players in their sectors. One of the largest IPOs among new-age companies after Zomato and Paytm, Ola Electric Mobility raised around $733 million. Bhavish Aggarwal, in particular, has been able to capitalise on the booming electric vehicle market, tapping into the vast revenue potential estimated at $7.09 billion by 2025. Aggarwal’s wealth soared from ₹22,315 crore in 2023 to ₹33,426 crore in 2024, up 50%, or ₹11,111 crore. In fact, even the company’s revenue from operations almost doubled to ₹5,010 crore in FY24, against ₹2,631 crore in FY23. The growth is attributed to sales of its flagship models, the Ola S1 and S1 Pro scooters, along with the roll-out of the Ola S1 Air and S1 X+.

The IPO landscape is expected to flourish further. Take, for instance, fintech player MobiKwik, which filed its draft red herring prospectus (DRHP) with Sebi for the second time with a more measured approach. The company now aims to raise ₹700 crore, a sharp recalibration from its earlier target of ₹1,900 crore. With a refined grounded strategy, the fintech has expanded beyond payments into credit, savings, and investment products, catering to middle India and focusing on financial inclusion.

“Like in any business, you need all the ingredients to succeed. Just being innovation-driven isn’t enough. While it’s great for short-term wins, consistent performance, scaling, and financial growth require a balance of factors — innovation from a product and tech perspective, effective marketing, governance, and financial controls. It’s about getting the elements right to build a successful company where consumers love the product and the brand, investors are satisfied, and governance is sound,” says Upasana Taku, co-founder, MobiKwik.

Screwvala, who owns 48% stake in UpGrad, debuts at 172th rank on the Fortune Rich List this year with a net worth of ₹10,863 crore. “In tech, it’s often all or nothing — either you hit it big or you don’t make it at all. In other sectors, if you don’t succeed in two years, you can still get there in five,” he says, emphasising the binary nature of the industry.

He credits tech success to a deeper, more fundamental shift — the evolution of the consumer. “If you don’t understand the consumer and tech is not enabling the consumer on its own, it’s not flying. Companies that have done well have understood the consumer as much as they’ve understood technology.”

A company that truly grasped the power of combining technology with consumer needs is Zerodha, the brainchild of brothers Nithin and Nikhil Kamath. Founded in 2010, the online brokerage firm revolutionised the stockbroking industry by offering a low-cost, technology-driven platform that has made investing accessible to millions of Indians. Without raising capital from investors, the duo has a combined wealth of over ₹41,520 crore, up 32% from ₹31,360 crore in 2023. Zerodha Broking, which houses the trading platform, remains privately held with Nikhil owning 28.91% and Nithin 30.91% in their personal capacities, while the remaining shares are in the hands of family members and their firms.

Similarly, the sibling trio — Sridhar, Sekar and Radha Vembu of Zoho Corp. have posted a combined wealth of ₹45,955 crore. The software-as-a-services (SaaS) player’s net profit rose 3% YoY to ₹2,836 crore in FY23, while revenue increased 30% to ₹8,703 crore, according to RoC filings. Contrary to the flow, CEO Sridhar Vembu is determined to keep the company private. “As a private company, we invest in long-term R&D and infrastructure without worrying about how quarterly numbers would look,” he wrote in a post on X.

Experts emphasise while strong fundamentals will be crucial in making public offers attractive, other factors should not be overlooked. A company’s first-mover advantage in a particular industry, for instance, can be a game-changer. Unique selling propositions (USPs) that set these companies apart from their competitors also play a key role in determining their success in the public market.

The squeeze in late-stage funding has led to a significant course correction in valuation metrics. “People have started valuing profitability a lot more than they used to seven-eight years ago… The real flex became who could secure the biggest round the fastest. In hindsight, it created a lot of dead bodies along the way,” says Aloke Bajpai, CMD, Ixigo. “Most of those companies died not due to scarcity of funding, but because too much money was being thrown at them. Today, capital is only going to firms that are building efficient businesses, and are using capital efficiently. The market is rewarding players who are showing improving profitability.” The online travel aggregator, which went public in June, reported a 78% YoY rise in net profit to ₹15 crore for Q1 FY2

Simultaneously, at the intersection of timing and investment, Info Edge has reaped impressive rewards from strategic stakes in companies, including Zomato, PB Fintech, and Adda247. By identifying optimal investment levels for these high-potential firms at the right time, Info Edge has seen substantial gains, particularly over the past year. “In India, if you enter at an early stage, you need to be patient. If you look at Zomato, we entered in 2010, and with Policybazaar, we entered in 2008, and we are still there. The significant value has come in the last three or four years, which means you need to stay invested for a long time before you truly get the value,” says Sanjeev Bikhchandani, co-founder, Info Edge, during a post-earnings call. Info Edge gained ₹2,189 crore in fair value from its investment in Zomato as of June 30, 2024. Its stake in insurtech giant Policybazaar’s parent company, PB Fintech, also generated gains worth ₹749 crore during the same period. According to BSE data, Info Edge holds a 13% stake in Zomato, valued at ₹31,886 crore, while its investment in PB Fintech is worth upwards of ₹8,351 crore. Bikhchandani’s wealth has climbed to ₹30,571 crore, a 57% increase from ₹19,512 in 2023, propelled by the back-to-back profitable quarters reported by the two companies and a healthy growth in their respective top lines.

As the IPO green shoots of 2024 bloom, seasoned players like Falguni Nayar of Nykaa have also benefited with her wealth increasing to ₹24,486 crore, a 13% increase from ₹21,695 in 2023. In July, the e-commerce start-up projected a 22-23% revenue growth for Q1 FY25.

“Tech companies will play a huge role in India’s economic transformation. Tech creates opportunities in all areas; everybody needs technology for efficiency. To that extent, there is a huge market, and that is why there has been a lot of interest in the development of the Indian tech start-up ecosystem over the last 10 years. There have been hits and misses, but we are reaching a stage where we have companies with a 10-year, 12-year, or 15-year history,” says Taku.

To keep up the momentum, Screwvala is against the investor chant of ‘just tank up and raise all the money you can when you’re getting it’. “If you’re overfunded, you’re bloated,” he says. Founders should rather go for funding in a validation format. “You do a certain amount, you remove a certain element of risk, you get a certain validation, and you go out and raise the next round,” he explains.