India's SaaS Companies Are Expected To Generate $30 Billion In Revenue By 2025: Bain & Company

In India, the number of software-as-a-service (SaaS) companies has doubled in the last five years. Now, according to a survey by Bain & Company, Indian SaaS companies are on track to generate $30 billion in sales by 2025, accounting for 8 to 9 per cent of the worldwide SaaS industry.

India today boasts 13 SaaS unicorns and seven to nine companies with annual recurring revenue (ARR) of more than $100 million. As per the survey, investments in Indian SaaS startups increased by 170 per cent from 2020 to $4.5 billion in 2021, with growth being driven mostly by a spike in the number of deals over $50 million.

It is also reported that in 2021, more than 35 Indian SaaS startups have an ARR of more than $20 million.

According to Prabhav Kashyap, the associate partner in Bain's private equity practice, the SaaS ecosystem is more mature. He said: “Last year, we had 10-12 firms with $50 million ARR and that number is 20 already and that number might go up to 25 this year-end.”

“More than 250 new Indian firms have been founded by former employees of Indian SaaS companies and now employ more than 5,000 people. Indian SaaS companies currently employ more than 62,000 people in India and this is set to scale up further,” Kashyap added.

Additionally, Arpan Sheth, a partner at Bain & Company and the head of the firm's Private Equity and Alternative Investor business in India, said: "With heightened interest in SaaS, India has witnessed the emergence of dedicated SaaS-focused funds as well as participation from new investor categories, including corporate venture capital (CVC) and sovereign wealth funds."

With Freshworks' initial public offering (IPO), the number of Indian SaaS exits jumped by 100 per cent from 6 in 2018 to 12 in 2021.

Kashyap said: “If you do an ARR to funding ratio, these firms are productive, generating value much faster. For top Indian SaaS companies, the average ARR to funding ratio was 0.4, and for the global firms it was 0.5.”

“If you look at Freshworks, they raised nearly $500 million before the IPO and their ARR was $350 million, BrowserStack raised $250 million and their ARR is at $100 million,” he noted.

According to the Bain analysis, Indian SaaS companies have great ARR-to-funding ratios, which are comparable to their worldwide rivals, with some Indian companies even surpassing their American counterparts.

According to Sheth: "This strong demand for high-quality SaaS investment opportunities also means that beyond capital and network access, investors increasingly offer a value added operational support in areas such as GTM (go to market), product, and recruitment to meet rising expectations from founders and to participate in deals."