Fintech’s Second IPO Wave: This Time, It’s About Profits

Almost five years ago, Paytm became one of the first Indian startups, and among the first fintech companies, to make its stock market debut. While the IPO received a muted response, it marked a defining moment for India’s startup ecosystem, signalling the beginning of the sector’s journey into the public markets. Around the same time, PB Fintech, the parent company of Policybazaar, also went public.

Much has changed since then. India now has more than 60 listed startups, and public market expectations have evolved. The focus has shifted from growth at any cost to sustainable profitability, while valuations have become more disciplined. Investors are also subjecting digital business models to greater scrutiny, placing increased emphasis on execution, governance and the path to consistent earnings.

It is against this backdrop that a new cohort of fintech startups is preparing to tap the public markets. After the first generation of listed fintech companies tested public market appetite, a fresh set of startups is preparing to make its debut.

Fibe has already filed its draft papers, Moneyview has received SEBI’s approval, Navi is expected to file its DRHP by the March quarter, KreditBee is laying the groundwork for a public listing, and PhonePe is expected to revive its IPO plans once market conditions improve.

But this is fundamentally different from the first. The first wave validated that digital distribution could disrupt financial services. The second wave is about proving that digital distribution can compound profitably.

“Over the last few years, India’s leading fintechs have evolved from single-product disruptors into diversified financial services platforms with significantly greater operating leverage, multiple revenue pools and improving profitability,” Aakash Agrawal, associate director of Anand Rathi Investment Banking, said.

That evolution naturally creates a much stronger pipeline of IPO candidates. This is less a continuation of the 2021 cycle and more the emergence of a mature fintech sector ready for public markets.

The emerging pipeline of fintech IPOs is less a replay of the 2021 listing cycle and more a reflection of how the sector has matured over the past five years. “This is not a wave in the 2021 sense, it’s a more disciplined, staggered pipeline of fintechs coming to market with real balance sheets and, in many cases, actual profitability,” Tarun Singh, founder of Highbrow Securities, said.

What’s Driving The Fintech IPO Cycle?

The timing is also being shaped by a more favourable backdrop. India’s equity markets have seen a steady revival in primary market activity over the past year, while listed new-age technology companies have demonstrated that public investors are willing to reward businesses that show a clear path to earnings. Several fintech startups that had deferred listing plans amid the market correction of 2022-23 have also spent the intervening years tightening costs, improving unit economics and reducing cash burn.

“The market has moved from backing narratives to underwriting financials. Fintechs are now being evaluated as financial services businesses rather than just technology companies,” Agrawal added.

That shift is evident in the questions investors are asking. Profitability has increasingly become the baseline for an IPO, while valuation premiums are likely to depend on whether earnings are sustainable, supported by prudent underwriting, efficient customer acquisition, recurring revenue streams and disciplined capital allocation.

For example, Fibe, which recently filed its draft papers with SEBI, reported a 31% jump in operating revenue to ₹1,585 Cr in FY26, while net profit more than doubled to ₹257 Cr. Its assets under management (AUM) stood at ₹8,603 Cr as of FY26.

The companies preparing to list also represent a more diverse cross-section of India’s fintech ecosystem. While lenders have expanded their product offerings and sharpened their focus on credit quality, broader financial platforms like PhonePe have built ecosystems spanning payments, lending, insurance and wealth management.

Moneyview, which has received SEBI’s approval for an IPO comprising a ₹1,500 Cr fresh issue, has evolved beyond personal loans into a broader consumer financial services platform spanning credit, credit cards and insurance distribution.

According to market analysts, businesses with multiple revenue streams and stronger cross-sell capabilities are likely to command higher valuations than companies dependent on a single product or aggressive customer incentives.

The New Fintech Playbook

The first generation of fintech companies went public at a time when India’s digital financial infrastructure was still taking shape. UPI was rapidly scaling, digital lending was nascent, and investors were willing to pay a premium for businesses that could acquire millions of users. Payments volumes, GMV and customer growth became the primary yardsticks, with the assumption that monetisation would follow.

The current cohort is emerging after that thesis has largely played out. The first structural change is business model maturity. Most fintechs are no longer single-product companies. PhonePe, once entirely synonymous with UPI, today earns from insurance distribution, lending, stockbroking, account aggregation and merchant services.

Navi has expanded beyond consumer lending into mutual funds, insurance and UPI. Moneyview has similarly diversified from unsecured personal loans into credit cards and insurance. Investors are therefore evaluating ecosystem monetisation rather than the success of an individual product.

The second shift is where revenue comes from. Earlier, scale itself was considered a moat. Today, investors want recurring, high-margin revenue streams.

Distribution income, subscription-like fee businesses, lending spreads and cross-sell income carry far greater weight than transaction volumes. In payments, UPI has become a distribution rail rather than the end business, especially after MDR remained at zero, limiting direct monetisation.

Third, lending businesses are being judged on banking metrics rather than startup metrics. During the previous cycle, loan-book growth and disbursal volumes dominated investor discussions. Now the focus has moved to GNPA, credit costs, collection efficiency, return on assets, return on equity, funding diversification and the ability to maintain asset quality across economic cycles.

The first generation spent heavily on customer acquisition and cashback-led growth. Today’s fintechs are operating in a much tighter funding environment, forcing them to improve customer acquisition costs, increase repeat usage and raise lifetime value through cross-selling. The emphasis has moved from acquiring users to extracting greater value from existing customers.

Finally, the regulatory environment has fundamentally altered how fintechs operate. RBI’s tighter oversight on digital lending, first-loss default guarantees, unsecured credit and governance has raised compliance costs, but also weeded out weaker business models. The companies heading to the public markets today have largely spent the past three years adapting to these regulatory changes, making them operationally stronger than the previous generation.

What Public Markets Want Today

Market experts say investors are no longer looking at fintechs through the lens of technology startups. Instead, they are applying the same discipline they would to financial services companies, evaluating businesses on return ratios, capital allocation, earnings quality and governance.

Singh echoed the sentiment, noting that the conversation has fundamentally changed. “The first generation of fintech IPOs was largely evaluated on market leadership, customer acquisition and long-term optionality. Today, investors are asking a different question: not how large the business can become, but how profitably it can compound over time.”

That means profitability alone is unlikely to be enough. Investors are expected to examine whether earnings are supported by durable unit economics, disciplined underwriting, efficient customer acquisition and diversified revenue streams. Businesses capable of monetising customers across lending, insurance, wealth management and payments are likely to be viewed more favourably than those dependent on a single product or revenue line.

The valuation framework has also evolved. “The market will still pay for growth, but only when it sits on top of proven, repeatable profitability,” said Agrawal. “Valuations have reset from revenue and GMV multiples to earnings, return ratios and balance-sheet strength.”

Singh added that investors are increasingly rewarding companies that demonstrate operating leverage, improving margins and prudent capital allocation. “Growth remains important, but it is no longer sufficient on its own.”

Will This IPO Wave See Strong Response?

Whether this pipeline translates into successful listings will depend less on the sector and more on execution. Unlike the first fintech IPO cycle, investors are unlikely to reward companies simply because they operate in a high-growth category. Instead, analysts expect public markets to differentiate sharply between business models and execution quality.

“Public markets are unlikely to value fintech companies purely based on the vertical they operate in. The quality of execution within each vertical will matter far more,” added Singh.

Businesses with diversified revenue streams, high customer engagement and the ability to cross-sell multiple financial products are expected to command premium valuations. Wealth management, insurance distribution and other capital-light, fee-based businesses could attract stronger multiples, while lenders will need to demonstrate prudent underwriting and resilient asset quality across credit cycles. Pure-play payments businesses, meanwhile, will increasingly be judged on their ability to monetise distribution rather than transaction volumes.

Agrawal believes this reflects a broader maturation of the sector. “The biggest sign of maturity is that investors are no longer using a single lens. Each fintech model is now being valued on its own underlying economics.”

A successful listing by a large platform such as PhonePe could also shape sentiment for the rest of the sector, offering a fresh benchmark for valuation and public-market appetite. But analysts caution that unlike 2021, this is unlikely to trigger a flood of listings.

Instead, India’s next fintech IPO cycle is expected to unfold gradually, with companies entering the market only after demonstrating consistent profitability, governance standards and resilient business models.

[Edited by Nikhil Subramaniam]

The post Fintech’s Second IPO Wave: This Time, It’s About Profits appeared first on Inc42 Media.