Despite global challenges, Indian B2B SaaS industry looks promising with 'bullish' outlook for 2023: Report

Eight out of 10 Indian SaaS companies under a burn multiple of 1.5x, the report noted (Representative image)

On February 28, a report released by EY along with Upekkha Value SaaS Accelerator suggests that the outlook for the Indian B2B software-as-a-service (SaaS) market in 2023 is "bullish" despite global headwinds.

The report, titled ‘Bellwethers of Indian SaaS,’ highlights that the growth in this sector is highly capital-efficient, and remains largely unaffected by the recessionary trends of the past year.

According to the report, eight out of ten Indian SaaS companies have a burn multiple of 1.5x or less, which reflects strong financial and operational prudence in building and scaling capital-efficient businesses.

The report further states that this growth outlook is balanced, and globally, a burn multiple of less than 2x to 3x is considered good for growth-stage companies with annual recurring revenue (ARR) between $1M to $100M.

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Insights from the survey, conducted by EY and Upekkha, reveal that four out of 10 Indian B2B SaaS chief experience officers (CXOs) are targeting an ultra-growth of over 100 percent annual recurring revenue, whereas a majority of eight out of 10 CXOs are targeting above 50 percent growth in 2023.

The majority of ultra-growth companies are from artificial intelligence, HCM (human capital management) Fintech, CRM (customer resource management)/CDP (customer data platform) SaaS segments, the survey found.

The report also stated that with the anticipated economic recovery in the latter half of 2023 and the availability of "dry powder" within the Indian venture capital and private equity ecosystem that focuses on SaaS, funding activity is expected to increase.

This provides an opportunity for Indian SaaS companies that have shown profitability to secure funding at favorable terms and accelerate their growth.

Kamalanand Nithianandan, Partner of Business Consulting at EY India, noted that Indian B2B SaaS companies are approximately two times more capital-efficient than their global counterparts. This gives them an advantage when investors shift their focus from "growth at all costs" to "profitable growth."

Thiyagarajan Maruthavanan, Partner at Upekkha Value SaaS Accelerator, added that the end of the capital frenzy in 2021 means only companies that are capital-efficient can thrive.

The inherent capital efficiency of Indian SaaS provides a strong advantage, and this will likely lead to the emergence of the next generation of long-lasting SaaS companies from India, and the next phase of Indian SaaS will have a significant global impact.