0

0

0

0

0

0

0

0

0

information technology | IST

Big Deal: Experts discuss IPO boom in SaaS companies

Mini

SaaS or software as a service is growing fast as an industry in India, and the successful listing of Freshworks in the US lifted the sentiment of the entire class of entrepreneurs at work in this space. Many companies are making a beeline for an IPO and let us understand what this sector entails and where it is headed with this sector insiders on this episode of ‘Big Deal’.

Now SaaS companies are attracting investor attention lately. SaaS, or software as a service, is growing fast as an industry in India, and the successful listing of Freshworks in the US lifted the sentiment of the entire class of entrepreneurs at work in this space.
Many companies are making a beeline for an IPO and let us understand what this sector entails and where it is headed with insiders on this episode of ‘Big Deal’. CNBC-TV18’s Nisha Poddar spoke to Manav Garg, Founder & CEO of Eka Software Solutions, Anurag Ramdasan, Partner & Head-Investments at 3one4 Capital, Aneesh Reddy, Co-Founder & CEO of Capillary Tech and Bhanu Chopra, CMD at RateGain Travel.
RateGain could be the first SaaS company to be listed, they have filed for the DRHP. Chopra said, “So IT service companies thrive in the last two decades on the needs for large organisations to custom build applications to run their businesses and these companies build these custom applications and fill the talent gap that their customers had to drive automation or digitisation. These Indian IT companies are apt for back-office and mid-office technology transformation, always underpinning them when compared to their global peers. So usually the IP is owned by the customer whereas in SaaS IP resides with the SaaS company. IT companies usually have dedicated project teams that work with the customer to drive the implementation of the project and in the long run, the customer would either have to upskill the talent pool, or move the project in-house, or outsource it completely based on the criticality of the process. By contrast, SaaS software's always used to augment the capabilities the customer has and is used mostly for front or mid-office processes when no amount of outsourcing or in-house talent pool can provide the extra value and they are usually best of breed technologies.”
Read Here:
“It is best to use a best in the class system from a SaaS company versus trying to build it in-house and we see that trend happening in the marketplace today. The shift in value perception and low cost of ownership due to the lack of dedicated project teams and infrastructure allows SaaS companies to have high unit economics. Usually the margins, the gross margins are much higher and this value creation will help SaaS overtake IT services in market value in the next 4-8 years as per the latest report by Zinnov.”
Reddy said, “I think what is creating SaaS as a sector is a fast evolving technology, the end consumer moving a lot faster and that means that legacy software or custom build software is not going to serve the needs of the organisation or the large enterprise. That is where companies like us tend to come in. I think our competitive benchmark against some of the mega-vendors, the Oracles or the SAP etc., tends to be that we are much more agile. We have already applied a bunch of these AI type use cases to the solution and because it is on the cloud, you can do it a lot faster. All your customers get to benefit. There is no need for each version being rolled out to a customer. The big advantage ends up being time and cost to implement and speed of keeping up to the market on whatever are the new trends.”
“We are also seeing very large enterprises starting to move to a few of those folks who can handle that scale that ends up becoming a very, very large differentiator for folks like us. Probably in the next 12 months or so, you should see us doing something on the IPO side. I do believe it is better to do it when the company is fully ready and, so probably in the next 12 months, you will see us do something.”
Is Indian investor ready for the IPO boom coming in? Ramdasan said, “What we are seeing is that the Indian public market is opening up more towards startups. We know that the Indian retail market is open for companies like this. Will these transitions of listing in India happen overnight? Of course not. It is a process. It takes time, but we are very bullish on the potential of SaaS startups listing in India. We hope some of our companies also end up doing it, but definitely optimistic about the prospects.”
For the full interview, watch accompanying video...