As India’s start-up ecosystem matures, a curious sample has emerged that loss-making ventures are immediately turning worthwhile simply earlier than their IPOs. From meals supply giants to fintech disruptors, the pre-IPO revenue flip is turning into a well-known storyline—and a controversial one.
Take Zepto, as an illustration. The fast commerce start-up, which is eyeing a public itemizing by the top of 2025, has made vital shifts in its monetary playbook. In response to co-founder Aadit Palicha, the corporate has lower its money burn by almost 65% in simply 5 months. “Our Ebitda has improved by 20 absolute share factors (2,000 foundation factors) from January 2025 to Might 2025, and is approaching single-digit territory. We’ve nonetheless grown roughly 20% in GOV over that interval, a mean of 4% to five% month-on-month,” he stated in a current LinkedIn put up.
One other instance is City Firm, which began operations in 2014 and not too long ago filed its Draft Purple Herring Prospectus (DRHP). The house providers platform turned money circulation constructive solely in 2024 after a number of fiscals of unfavorable money flows. For the yr ended March 2024, it posted revenues of ₹828 crore alongside a lack of ₹93 crore—an enchancment that trade watchers say might assist increase investor confidence in its upcoming IPO.
And the case of Ola Electrical is well-known. The corporate continues to be struggling to make income.
These circumstances usually are not remoted. They mirror a broader development amongst start-ups trying to tidy up their books and present operational self-discipline typically simply in time for the general public market debut. Is it an indication of real enterprise maturity or intelligent monetary engineering?
“Sudden profitability previous to an IPO may end up from improved unit economics or monetisation of earlier investments. However what’s essential is that traders get sufficient background to find out whether or not this can be a sustainable development or only a pure enterprise cycle peak,” explains Gaurav VK Singhvi, co-founder of Avinya Ventures.
On paper, these IPO-bound firms look more healthy than ever. However trade insiders warn of a paradox: rising income earlier than itemizing do not at all times translate to long-term efficiency post-IPO.
“Artificially boosting pre-IPO income to fetch the next subject worth isn’t a wholesome development. Discerning traders are cautious of such techniques,” says Jyoti Prakash Gadia, MD at Resurgent India, a Sebi-registered service provider banker.
The playbook
A number of start-ups undertake aggressive—although not essentially unlawful—accounting techniques to recast their financials. These embrace altering depreciation strategies, capitalising working prices, recording one-time asset gross sales, and adjusting income recognition fashions.
“Switching from the written-down to the straight-line technique of depreciation can inflate income within the quick time period,” Gadia notes. “Equally, one-time features from promoting legacy property might give an phantasm of profitability.”
Some additionally rely closely on adjusted metrics like Ebitda or non-GAAP income, which will be extra beneficiant representations of the corporate’s well being than commonplace accounting permits. Whereas such metrics can provide readability on core operations particularly throughout high-growth phases, in addition they open the door to selective disclosures.
“So long as such procedures are clear and rooted in sound enterprise selections, they type a authentic a part of getting ready an organization for itemizing,” Singhvi provides.
However transparency, each consultants warning, is usually briefly provide.
Auditors play a pivotal function in validating an organization’s financials. Nevertheless, they function inside a framework that permits some extent of discretion. Meaning firms, particularly start-ups, have to be held to tighter scrutiny.
“Auditors must be further cautious whereas verifying startup books. They have to assess if revenue margins are sustainable vis-à-vis projections,” says Gadia. “Extra disclosures across the assumptions behind these projections are wanted — together with accountability for misreporting.”
The concern isn’t simply inflated income, but additionally the absence of readability on long-term aggressive benefit, unit economics, and buyer retention — components extra indicative of actual enterprise well being than a single yr’s backside line.
So, what ought to retail traders be careful for?
“We have a look at traits past simply profitability,” says Singhvi. “Income high quality, consumer retention, value construction, money circulation, and whether or not there’s been a sudden discount in advertising and marketing spend with out matching acquisition effectivity — these are the true indicators.”
Gadia echoes this with a cautionary be aware: “The actual scent check is the integrity of the promoters. Fly-by-night founders with quickly inflated financials are an actual risk, even when they bring about what looks like a worthwhile enterprise to market.”
Each consultants agree that the present disclosure regime wants strengthening however with a balanced method.
“We should demand higher information on profitability assumptions, buyer metrics, and monetary methods,” Gadia says. “On the identical time, the system should not stifle innovation or block entry to capital for real companies.”
Singhvi means that standardising disclosures round unit economics, cohort information, and working histories may bridge the hole with out overwhelming founders.
Finally, the important thing lies in sincere storytelling, not simply worthwhile spreadsheets.
“Profitability aligned with long-term technique, not simply IPO timing, must be the benchmark,” Singhvi concludes. “That’s what builds belief — and market worth — in the long term.”
As India’s IPO pipeline swells with startup names, maybe it’s time to look past the income on paper—and into the technique behind the spreadsheets.
