Indian Unicorns Race Towards Profitability Many unicorns have been working towards improving their unit economics over the last 12 months, in line with expectations from investors

In the beginning years of the startup revolution in India, attaining 'unicorn status' was a difficult dream to chase. But, the pandemic made it easy for many startups to reach unicorn valuation. In fact, so much so that the valuation of a company started determining whether the startup was successful or not.

Even though many founders kept their eyes on the road to profitability, valuation was celebrated more than strong business models. Conventional performance indicators such as cash flow were put on the back burner by many. For instance, India is home to over 105 unicorns. But only around 25% of those startups are profitable.

However, the tables have turned again. The global downturn-induced funding winter has forced investors and founders to adopt a more rational approach and focus on building businesses that are robust. Many unicorns have been working towards improving their unit economics over the last 12 months, in line with expectations from investors. While some unicorns are announcing their first-ever profitable quarters, some are becoming profitable all over again after a gap of a few quarters.

Here are three such solid examples, that showcase a strong path to profitability.

Zomato

Two weeks ago, the food delivery giant announced that its first-ever quarterly profit. It reported a consolidated net profit of INR 2 crore for the quarter ended June 2023 against a loss of INR 186 crore in the corresponding quarter last financial year. The company also said in its exchange filing that its quick commerce business, Blinkit, turned contributive positive for the first time ever in the month of June 2023. A day after the announcement, Zomato's share price rose 12% in early trade. The stock opened at INR 89 against closing price of INR 86.22 the day before that.

Mobikwik

Last week, the fintech unicorn announced that it posted a consolidated profit for the first time at INR 3 crore in the first quarter of financial year 2024. "In the financial year 2022-23, we achieved all the major goals we set for MobiKwik the previous year, and our vision for FY 2023-24 is to achieve profitability in all quarters. The first quarter has been a good start to the fiscal year. Our numbers are positive in all parameters, be it adjusted Ebitda, Ebitda or profit before tax. We expect to deliver 80% or more top-line growth for this fiscal year," said Bipin Preet Singh, co-founder and chief executive officer, MobiKwik.

Meesho

In July, the Softbank-backed e-commerce firm turned profitable on a consolidated basis. Founder and CEO of the formerly social commerce startup, Vidit Aatrey, told PTI that a 43% surge in order volumes and 54% increase in revenue in the last 12 months contributed to the profitability of the company.

"We are humbled and proud to witness Meesho's bold aspiration of becoming profitable come to fruition. As the first horizontal e-commerce platform to achieve profitability in India, we remain committed to driving sustainable growth, democratizing e-commerce for everyone and unlocking the true potential of India's heartland," Aatrey was quoted as saying.

Even though many unicorn founders have been clear about building a strong foundation, fundamentals did get diverted for many. But, with market conditions becoming unstable, we are seeing a solid course correction in terms of many players, not only unicorns, choosing profitability over valuation.

"While unit economics at the beginning of a startup may be negative, we look for the path to positive unit economics with a sound business plan. Focus on the fundamentals may have diluted and built frothiness in the market recently, but it's back now and is here to stay. This is actually good for the overall ecosystem," said Sateesh Andra, founding partner and MD of Endiya Partners, in an earlier interview.

Today, there is an increased realization that only startups with strong business fundamentals can establish trust with both customers and VCs. Experts feel that the funding winter came as a blessing in disguise of sorts and we will see more and more companies, including unicorns, crack the profitability code in the near future.