Indian SaaS firms may reach USD 30bn in sales by 2025: Report

New Delhi

Over the past five years, the number of software-as-a-service(SaaS) firms have doubled in India and the SaaS firms in the country are poisedto reach $30 billion in revenue by 2025, a new report showed on Tuesday.

 India now has 13 SaaSunicorns and between seven and nine companies with over $100 million in annualrecurring revenue (ARR).

 The investments inIndian SaaS companies rose to $4.5 billion in 2021 -- an increase of 170 percent from 2020, with growth primarily driven by a surge in the number dealsover $50 million, according to the report by management consulting firm Bain& Company.

 In 2021, more than 35Indian SaaS companies had more than $20 million ARR. "With heightenedinterest in SaaS, India has witnessed the emergence of dedicated SaaS-focusedfunds as well as participation from new investor categories, includingcorporate venture capital (CVC) and sovereign wealth funds," said ArpanSheth, Bain & Company partner and leader of the firm's India's PrivateEquity and Alternative Investor practice.

  The top 10 investors' share in total dealvalue across 2019-2021 was 30 per cent-35 per cent, with Tiger Global (byvalue) and Sequoia (by volume) being most active over 2020-2021. India's SaaSis driving value creation in four keyways, according to the report.

  The number of Indian SaaS exits increased by100 per cent from 6 in 2018 to 12 in 2021 with Freshworks' initial publicoffering (IPO), therefore initiating a new wave in exits. Further, Indian SaaSfirms have exhibited high capital efficiency with excellent ARR-to-fundingratio in line with their global SaaS peers.

  "Select Indian companies are evenoutperforming their US counterparts. Currently, these SaaS companies employmore than 62,000 people, which is in effect, helping to build a talent pool ofprofessionals with SaaS-relevant skills, in India," the findings showed. Inaddition, more than 250 new Indian firms founded by former employees of IndianSaaS companies themselves, who now employ more than 5,000 people.

  "This strong demand for high quality SaaSinvestment opportunities also means that beyond capital and network access,investors increasingly offer avalue add' operational support in areas such asGTM (go to market), product, and recruitment to meet rising expectations fromfounders and to participate in deals", explained Sheth.