Worried about IPOs not taking off? This fintech major's CEO has some advice

We are going through times when many unicorn start-ups have seen a fall in their valuation due to a prolonged funding winter. Many have already resorted to layoffs or restructuring, with thousands of employees getting affected. Most importantly, the initial public offers of some major companies in the recent past have also failed to take off, leading to a lull in the IPO market. Despite this, there are a few start-ups that are growing and turning profitable, and are even bullish about going public. Albeit, not yet. 

“There's a clear realisation that companies need to grow fast, but they also need to grow profitably. This is opposite to what was happening in 2021 when people were growing at any cost. Now for companies who are growing profitably it is a very good time. It's a good time because while generating profit, you're able to show your growth numbers, says Adhil Shetty, CEO of BankBazaar.com, a credit marketplace.

BankBazaar, in fact, is a good example of a start-up that is not only growing but is also turning profitable. The fintech company's topline revenue in Q2FY23 was up by 85 per cent on a year-on-year (YoY) basis. The annual recurring revenue (ARR) base touched Rs 170 crore in September on the back of strong growth of 115 per cent in credit card business. “There is a real scarcity of tech digital companies who can both show growth in revenue like we showed 85 per cent in Q2, but also with EBITDA profit,” points out Shetty.

Similarly, fintech platform MobiKwik is expected to be fully profitable by FY24 with its revenue crossing the mark of Rs 1,200 crore. In the current financial year (FY23), the company expects Rs 800 crore in revenue against Rs 540 crore of revenue last year. With the rise in revenue, losses are also expected to be reduced by half from Rs 72 crore to Rs 35-40 crore in FY23. 

"While we have done few profitable quarters, there is nobody in my competitive ecosystem who has turned profitable in even one quarter in their lifetime. So, we are definitely far ahead in the story of building a sustainable and profitable business...in fact, they're so far away that I don't think that they will ever become profitable in the next three years,” Upasana Taku, co-founder, MobiKwik told Business Today earlier.

Companies that are not able to grow profitably are cutting cost either by lowering their marketing cost or laying off employees. The challenge, however, as Shetty explains, is that both moves immediately can  affect your top line. “So, the minute you stop advertising, your top line goes down. The minute you cut down projects, you cut down your team size, your revenue starts to go down. So that a very vicious cycle,” he adds. 

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