India startup profitability divide laid bare by the contrasting IPO performance of insurance marketplace PolicyBazaar as compared to consumer brands like Nykaa, FirstCry, and Mamaearth, exposes a fatal gap in business model design and unit economics that is now forcing global investors to rewrite the rules for the country’s INR 50,000 crore IPO class of 2026.

The data highlights significant contrasts in the current landscape of India’s new-age companies. PB Fintech, the parent company of PolicyBazaar, went public at INR 980, alongside Nykaa, in 2021. Today, its stock price has risen to INR 1,526, up 56 percent.

The company has achieved a compound annual growth rate (CAGR) of nearly 11 percent and is now profitable. Its revenue is growing 37 percent year-on-year, and it holds a 93 percent market share in the digital insurance sector. While its price-to-earnings (PE) ratio of 122 suggests it may be considered expensive, PB Fintech is at least generating real profits.

The company has experienced remarkable success, posting a net profit of INR 353 crore for FY25, an incredible 448 percent increase from the previous year. Their revenue also grew substantially, rising 45 percent to INR 4,977 crore. By the second quarter of FY26, their momentum continued, with profits rising another 165 percent to INR 189 crore and profit after tax (PAT) margins improving to 11 percent.

The Grim Reality of Consumer tech

On the flip side, Nykaa went public at INR 1,125 in November 2021. After adjusting for the 5:1 bonus, the effective price was INR 187.50. Currently, it is trading around INR 265, representing a total return of 41 percent over 4 years, translating to a compound annual growth rate (CAGR) of roughly 8 percent.

This is comparable to what a fixed deposit (FD) in India would have yielded without the associated risks. Moreover, this calculation assumes that one received an IPO allotment, which most retail investors did not. If one bought shares on the listing day at INR 2,001 (or INR 333 adjusted), one would still be down 20 percent four years later.

Similarly, Mamaearth had its IPO at INR 324 in November 2023. Presently, it is valued at around INR 285, indicating a 12 percent decline over two years. Despite being a brand trusted by millions of mothers, the market seems to be asking, “That’s a nice story, but where’s the profit?”

Meanwhile, FirstCry’s IPO occurred at INR 465 in August 2024, where it initially listed at INR 651 due to high excitement.

However, it is now trading at INR 218, reflecting a 53 percent drop from the IPO price and a staggering 66 percent decrease from its listing price. Despite being the largest mother-and-baby platform in India, the market has reduced its valuation by two-thirds in just 18 months.

These developments reflect a mixed bag for startups that once symbolized the promise of India’s burgeoning consumer economy, highlighting the unpredictable and often harsh realities of the market after IPO.

The Model Is the Moat

The IPO performance gap between these companies begins with business model architecture, not execution. PolicyBazaar earns a fee every time a consumer buys or renews an insurance policy, without holding inventory, running warehouses, or managing store networks. That business model naturally generates expanding margins as volume scales; the marginal cost of processing the ten-millionth policy is a fraction of the cost of processing the first.

Consumer brands often find themselves in a challenging position. Take FirstCry, for example: in the third quarter of FY25, they spent a staggering INR 2,210 crore while bringing in revenue of only INR 2,172 crore. This means they were spending INR 1.02 for every INR 1 earned, which isn’t sustainable. As a result, they had to close 38 stores due to tough real estate conditions.

Similarly, Nykaa faced its own struggles in the first quarter of FY26, reporting a net profit of just INR 24 crore on revenue of INR 2,155 crore, a slim 1.1% margin. For these brands, it turns out that growing in size can complicate their operations much faster than it increases profits. The reality is that, with growth, a host of challenges can overshadow the gains they hope to achieve.

“Appetite for new-age companies has remained robust,” said Gaurav Sood, managing director and head of equity capital markets at Avendus Capital. “But sustained interest is now driven by execution rather than narrative alone.”

Renewals Beat Acquisition Every Time

PolicyBazaar has a strong advantage in customer retention that positively influences its long-term unit economics. For instance, renewal premiums increased from 26 percent of total premiums in FY19 to 42 percent in FY21, and have continued to rise since then.

By Q3 FY26, renewal revenue reached INR 841 crore, marking a 38 percent year-on-year growth. Additionally, on Paisabazaar, PB Fintech’s credit marketplace, between 40 percent and 67 percent of quarterly loan disbursals originated from existing users, indicating a successful model in which customers can be monetized multiple times after initial acquisition.

In contrast, consumer brands must constantly regain customer attention every quarter. The beauty and personal care market in India, particularly for Nykaa, experiences fierce competition not only from major players like Amazon and Flipkart but also from rapidly growing quick-commerce platforms like Blinkit and Zepto.

As a result, brands need to launch new influencer campaigns and regularly offer new promotional discounts just to maintain their market positions. This environment makes it structurally more challenging to improve unit economics for consumer brands, as customer acquisition is a never-ending cycle.

The India Startup Profitability Reckoning

The path to startup profitability in India has become a crucial factor as the country looks toward its next wave of public market offerings. In 2026, eleven innovative companies, including PhonePe, Zepto, and OYO, are aiming to raise a staggering INR 36,700 crore through their IPOs.

Ranvir Davda, co-head of investment banking at HSBC India, noted that the post-listing performance of these new-age firms in 2025 has been surprisingly strong. This suggests that, with solid execution, they can deliver solid returns for public investors.

However, history tells a different story when we look at the IPO performance of consumer-focused platforms. For instance, PB Fintech, which launched PolicyBazaar at INR 980, has seen a 56 percent return, translating to an annualized return of around 11 percent as mentioned earlier.

On the other hand, FirstCry has lost over half its IPO value, and Nykaa is only yielding an annualized return of about 8 percent after adjustments. The message from the market is clear: even a popular brand can’t guarantee a good investment if it lacks solid unit economics and a strong business model. Instead, it risks becoming just another story of missed potential.

Lessons for Next Generation of Founders

In today’s landscape, Indian startups are facing a shift in investor expectations. It’s no longer enough to focus solely on capturing market share; now, public investors are looking for a clear, timely path to profitability before they’re willing to invest at premium valuations.

This has become painfully evident for consumer brands entering the public markets, where high gross merchandise value (GMV) often comes with surprisingly low profit margins, leading to significant losses in market value.

Yashish Dahiya, co-founder of PolicyBazaar, once noted that his company was willing to sacrifice margins to build consumer trust. However, over the past four years, it’s become clear that this trust was never just a trade-off; it was an essential part of a successful strategy. A strong consumer foundation, backed by solid business practices and sustainable profits, is crucial for long-term success.

For the next generation of Indian entrepreneurs, understanding this shift is vital, especially as they prepare to go public. The way a company performs post-IPO really reflects the strength and integrity of its business model. In this evolving environment, profitability isn’t just a target to shoot for later—it’s the bedrock upon which successful startups are built.

Stay ahead of the curve and follow IndiaTechDesk on Facebook, Twitter and Linkedin for in-depth news of market trends, funding updates, and regulatory changes affecting startups in India.