More than 35 Indian fintech firms, each valued at over $500 million, are now exploring or preparing for IPOs, suggesting a competitive rush for public funding in the near future, according to a report from Boston Consulting Group and Z47 (formerly Matrix Partners India), as cited by Moneycontrol.
Typically, Indian startups take about 3.5 to four years to go public after becoming unicorns, and the current market momentum is clear, the report noted. IPO filings have surged, nearly doubling from an average of 75 per year in 2018-2019 to 120-140 annually between 2021 and 2023.
While Indian markets remain optimistic, competition for capital across sectors is intensifying.
The report, titled State of the Fintech Union 2024, stated that “only 40-60 per cent of fintech founders feel fully prepared in terms of profitability, leadership, and governance — crucial components for a successful IPO.”
Moreover, it pointed out that nearly 70 per cent of fintechs listed in India in the past five years experienced a decline in share prices within six months of listing, highlighting the post-IPO challenges. The report stressed that “successful IPOs demand a clear equity story, solid financial fundamentals, governance, and a well-organised IPO office that prepares not only for the listing but for meeting post-IPO expectations.”
Fintech firms planning IPO
Fintech companies like Mobikwik have submitted draft IPO papers and are set to go public this year, while others such as PhonePe, Groww, Perfios, PayU, Pine Labs, and Fibe have expressed plans to list in the next two to three years.
Indian fintech valued at over $100 bn
The Indian fintech ecosystem, now collectively valued at over $100 billion, is still in its ‘middle’ phase of growth, with the potential to double or even triple in value over the next decade.
India remains one of the top three fintech destinations globally, with a 3.5x growth in Minicorns and a 3x increase in Unicorns and Soonicorns over the past four years, the report added.
The sector has also contributed significantly to financial inclusion, achieving a remarkable 56 per cent revenue growth from 2022 to 2023, compared to the global fintech sector’s 13 per cent growth in the same period.
Indian fintechs still in a nascent stage
However, despite generating over $100 billion in value over the past decade, Indian fintechs are still in the early stages compared to traditional financial institutions, which have created $600 billion in value over the last 30-50 years.
With 63 per cent of India’s population living outside major urban centres, there is a significant opportunity to tap into the “Bharat” market, particularly in Tier 2 cities, Moneycontrol said. A survey of over 60 fintech leaders found that expanding market share and growth remain top priorities for early and growth-stage companies.
Cybersecurity challenges
However, the sector faces notable challenges, especially in cybersecurity. Over the past two decades, cyber and digital attacks have caused losses exceeding $20 billion. Compliance is also a major concern, with the number of fines for non-compliance rising.
The report underscores the need for compliance to be treated as a “feature” rather than a ‘fix’, with over 80 per cent of respondents identifying robust risk management as key to improving governance and fostering better partnerships with established financial institutions.
First Published: Aug 29 2024 | 5:12 PM IST