Profit or Growth? The Great Indian Startup IPO Conundrum Unveiled 

Of the 42 Indian startups preparing to go public, half are reporting significant financial losses, with giants like Flipkart, PhonePe, Meesho, and Zepto contributing to a combined deficit exceeding ₹12,000 crore. This trend highlights a major shift in how companies are evaluated for public listings, moving beyond traditional profit metrics to emphasize growth potential, scalability, and unit economics. Unlike conventional firms, startups often prioritize customer acquisition and market expansion—costs that immediately impact profitability—even if each transaction is economically viable.

Investors, particularly retail participants, are increasingly focused on long-term potential rather than short-term profits, betting on market position, cash flow management, and technological advantage. However, this approach requires careful scrutiny of valuation risks and growth sustainability, signaling a new, more nuanced era for IPO investments in India’s evolving digital economy.

Profit or Growth? The Great Indian Startup IPO Conundrum Unveiled 

Meta Description: As half of India’s IPO-bound startups report losses, we dive deep into the investor mindset, unit economics, and whether profitability is still the ultimate benchmark for public market success. 

Introduction: The Billion-Dollar Question Mark 

The year 2025 is shaping up to be a landmark chapter in the story of Indian startups. After years of operating in the private market’s shadows, fueled by venture capital and ambitious valuations, giants like Flipkart, PhonePe, and Meesho are marching towards the public arena. But they are not marching alone. They are accompanied by a formidable companion: significant, often eye-watering, financial losses. 

A recent analysis tracking 42 IPO-ready startups reveals a stark divide: exactly half are in the red, reporting a combined loss exceeding a staggering ₹12,000 crore. This statistic presents a fundamental question to the Indian retail investor: Should you bet on a company’s future potential or its present profitability? The answer is not a simple yes or no; it lies in understanding the new rules of the public markets game. 

The Cast of Characters: Who’s Losing and Who’s Winning? 

The list of loss-making companies preparing for an IPO reads like a who’s who of India’s digital ecosystem: 

• E-commerce & Quick Commerce: Flipkart, Meesho, and the lightning-fast Zepto represent the high-volume, low-margin world of retail, where customer acquisition and retention costs are colossal. 

• Fintech: Payment giants PhonePe and PayU are locked in a fierce market share battle, investing heavily in technology and user incentives. 

• Logistics: Behind every e-commerce order is a logistics engine. Firms like Shiprocket and Shadowfax are scaling infrastructure, which is a capital-intensive endeavor. 

• Consumer Brands: From Licious’s meat delivery to Wakefit’s mattresses and Curefoods’ cloud kitchens, these companies are building brands and supply chains from the ground up. 

On the other side of the divide, a cadre of profitable startups is building a compelling counter-narrative: 

• Hospitality: Oyo, once a symbol of startup excess, has staged a remarkable turnaround, reporting a net profit of ₹200 crore in Q1 FY26 and a 47% surge in revenue. 

• Eyewear: Lenskart has proven that offline-online hybrid models can be wildly successful, posting a net profit of ₹297 crore. 

• Digital Lending: Kissht and Moneyview have leveraged technology to tap into India’s vast credit demand, reporting profits of ₹160 crore (FY25) and ₹171 crore (FY24) respectively. 

This clear dichotomy sets the stage for a fascinating public market drama. 

Beyond the Bottom Line: Why “Losses” Don’t Tell the Whole Story 

To judge these startups by traditional profit-and-loss metrics is to miss the forest for the trees. As Punit Shah of Alteria Capital explains, startup accounting is fundamentally different. 

Traditional manufacturing firms “capitalize” major expenses—like building a factory or buying machinery—on their balance sheets. The cost is amortized over many years. Startups, however, spend their money on growth, marketing, and technology—expenses that are immediately recorded against their profits. This makes their P&L statements look bleak, even if the underlying business is healthy. 

The key metric savvy investors scrutinize is unit economics. 

• What are Unit Economics? Simply put, it’s the profit (or loss) earned from one unit of business. For Meesho, it might be the profit per order. For Zepto, it’s the margin on a delivery dark store. For PhonePe, it’s the revenue per transaction. 

• The Holy Grail: A startup can be burning millions overall but have positive unit economics. This means that on each individual transaction, it makes money. The overall loss is simply because it’s investing to acquire more of those profitable units. Once growth stabilizes, the path to profitability is clear. 

This is the central bet investors are making: that companies like Zepto and Meesho will eventually slow their customer acquisition spend and allow their positive unit economics to cascade down to the net profit line. 

The New Checklist for IPO Readiness: What Smart Investors Are Really Looking For 

So, if not just net profit, what determines a startup’s attractiveness for an IPO? Wealth experts like Shivani Nyati of Swastika Investmart point to a more nuanced checklist: 

• Scalability: Can the business model grow exponentially without proportional costs? A software platform can; a traditional retailer often cannot. 

• Positive Cash Flows: While a company may be reporting accounting losses, its operating cash flow can be positive. This is a crucial sign of a viable business that isn’t solely dependent on external funding to survive. 

• Working Capital Management: How efficiently does the company manage its inventory, receivables, and payables? A tight ship here indicates operational excellence. 

• Market Position & Moat: Is the company a leader in its category? Does it have a durable competitive advantage (a “moat”), like proprietary technology (Razorpay’s payment gateway), brand loyalty (Lenskart), or network effects (a platform like Flipkart where more buyers attract more sellers and vice versa)? 

• Path to Profitability: The most critical question in every analyst’s mind: “When and how will you become profitable?” The DRHP must outline a clear, credible strategy. 

The Retail Revolution: Why Main Street is Betting on Growth 

Despite the headlines about losses, there is an expectation of strong retail participation. This underscores a significant shift in the Indian investor psyche. 

The modern retail investor, often younger and digitally native, has grown up using these platforms. They have a personal connection to the brands and believe in their stories. They are increasingly drawn to high-growth, narrative-driven stocks, mirroring a global trend seen with companies like Tesla and Amazon in their early public days. 

They are not investing for quarterly dividends but for long-term capital appreciation. They are betting that today’s loss-leading disruptor will become tomorrow’s profitable monopoly. 

A Word of Caution: Navigating the Hype 

This enthusiasm, however, must be tempered with diligence. The history of IPOs, especially of new-age tech companies, is littered with examples of post-listing disappointments where valuations crashed as reality failed to meet lofty expectations. 

Retail investors must go beyond the brand name and dig into the DRHP. Key areas to focus on include: 

• Use of Proceeds: How exactly is the company planning to use the money raised? Is it to pay off debt (a red flag) or to fund future growth initiatives? 

• Risk Factors: This section is often glossed over but is a treasure trove of sobering realities. 

• Valuation: Is the asking price justified based on revenue multiples, sector benchmarks, and the growth trajectory? A profitable Kissht and a loss-making Zepto cannot be evaluated on the same scale. 

Conclusion: The Paradigm Shift is Here 

The wave of IPOs from both profitable and loss-making startups signifies a maturation of the Indian economy. It marks a transition from an era where businesses had to be profitable to list to one where they need to demonstrate potential to list. 

The market is no longer a monolith that values all companies by the same yardstick. It is developing the sophistication to value a stable, profitable lender like Kissht on one metric and a hyper-growth, network-based platform like PhonePe on another. 

For investors, this presents both unprecedented opportunity and unprecedented complexity. The winners will be those who learn to look beyond the simplistic “profit vs. loss” headline and develop the ability to analyze the deeper narrative of growth, scalability, and ultimate viability. The great Indian startup IPO boom is not just a test for the companies going public; it is the ultimate test of the Indian investor’s wisdom.