India’s software-as-a-service (SaaS) sector generated over $15 billion in annual revenue in FY24, driven by more than 36 companies achieving $100 million in annualised recurring revenue (ARR), according to a report by JM Financial.
The report, India’s SaaS: Taking Wings, analysed 250 SaaS firms with an ARR of at least $10 million. It highlighted that the sector grew at a compound annual growth rate (CAGR) of 24% between FY19 and FY24.
These companies are already profitable, setting the stage for potential initial public offerings (IPOs), even as market valuations reset.
SaaS firms operate with gross margins of 70-85%, and their fixed costs, such as technology investments, do not rise proportionally with revenue.
“As companies grow, they become very profitable because this is a high gross margin business,” said Abhishek Kumar, equity research analyst at JM Financial and co-author of the report.
However, smaller horizontal SaaS firms, with market capitalisations under $10 billion, have seen sharp valuation corrections. Investor focus has shifted from ‘growth at all costs’ to free cash flow and profitability. Metrics like customer retention and acquisition cost recovery now hold greater importance.
Vertical SaaS firms, catering to specific industries such as banking, retail, logistics, and ecommerce, grew at a faster CAGR of 26.3% between FY19 and FY24, compared to 22.3% for horizontal players. Companies like Perfios, Shiprocket, and Jumbotail are leading this growth.
Freshworks’ Nasdaq listing in 2021 and Unicommerce’s debut on Indian stock exchanges in 2024 have paved the way for more IPOs. Kumar predicts the India SaaS sector can sustain a 20-25% CAGR in the coming years.
Also Read: Goa Sees Record Tourist Footfall With Over 54 Lakh Visitors In First Half Of 2025
To read more such news, download Bharat Express news apps
