Indian Startups Show Improved Financial Performance Amid Prolonged Funding Crunch

More than two dozen startups with combined revenues of over Rs 500 crore posted improved financial performance in FY24, reflecting a sharper focus to build robust businesses amid a prolonged funding crunch.

While some startups suffered narrower losses or higher profits due to strong revenue growth, others sacrificed growth to arrest financial bleeding. Startups that grew at a rapid pace while posting better margins include Purplle, Porter, PhonePe, Lenskart, Curefoods, Bookmyshow, Rapido, Perfios, and Shadowfax.

However, companies such as ElasticRun, CarDekho, Pharmeasy, and InfoEdge-backed Shopkirana saw a decline in revenues in the previous fiscal. Startups that posted moderate or slow growth while pushing to curb losses include Simplilearn, Cashify, Myntra, Udaan, Acko, Sugar Cosmetics, and Rebel Foods.

Industry experts suggest that startups have shifted their focus from customer growth at all costs to unit economics, discovering monetisation opportunities, strong investment appraisal processes, and a strong focus on driving and scaling strategic core businesses.

"Excessive funding can be as harmful as insufficient funding. As startups mature, they realise what public markets reward and their priorities change... it is how things happen naturally," said Rohan Lakhaiyar, partner at Grant Thornton Bharat.

The shift in strategy is evident across startups preparing to go public. Last year saw nine new age VC-backed firms going public, a figure that is expected to rise this year.

Major fintech startups focused on controlling costs and improving their financial health in FY24, but most remained elusive with net profits. Razorpay managed to grow its revenue by 9% to Rs 2,501 crore and improved the profitability of its core payments business to Rs 34 crore.

InsuranceDekho turned profitable last fiscal, closing at Rs 85.7 crore and total revenue of Rs 785 crore. Fintech lending startups, such as Fibe, Moneyview, and Kreditbee, reported strong growth in revenues and kept their businesses profitable.

However, the fintech sector continues to struggle with regulatory challenges. Regulatory overhang remains a key challenge for fintech startups, and the trend is expected to continue in 2025.

Despite these challenges, some companies are showing signs of recovery. Groww grew its business steadily and reported healthy operational profits, while Zerodha continued its profitable streak with net profit of Rs 5,496 crore on total revenue of Rs 9,372 crore.