Indian SaaS firms to achieve $35B in revenue in 5 years By CIOTechOutlook Team

Indian SaaS firms to achieve $35B in revenue in 5 years

CIOTechOutlook Team | Tuesday, 24 January 2023, 08:43 IST

According to a report, Indian software-as-a-Service (SaaS) companies will command 8% of the global SaaS market by 2027, generating $35 billion in annual recurring revenue (ARR).

Based on a Bain & Company report, homegrown SaaS firms will grow at a rate of 20-25 percent per year.

As per the report, investment in India SaaS increased by 20% last year compared to 2021, reaching an all-time high of $5.1 billion.

This was due to increased interest in earlier-stage deals, with significantly more seed deals doubling in size over the last three years and a doubling of Series A investments compared to 2021.

"This ecosystem is being driven by a flywheel comprised of SaaS companies who are successfully executing on their global ambitions and an investor base that believes in the potential of Indian SaaS," said Arpan Sheth, Partner at Bain & Company and lead of the Private Equity and Alternative Investor practice in India.

"We are now seeing the emergence of a set of Indian SaaS companies who have a right to win not just in India, but globally," added Sheth.

The future of Indian SaaS companies looks bright, as their total annual recurring revenue of $12 billion-$13 billion in 2022 is up four times in the last five years.

As stated in the report, of the 1,600 Indian SaaS companies that have been funded in the last five years, approximately 14 have exceeded $100 million in ARR (vs. 1-2 five years ago) and are approaching this growth milestone at the same rate as their US counterparts.

Indian SaaS venture capital (VC) investments increased by 10% in the first three quarters of 2022 compared to the same period in 2021.

Over the next 12 months, the outlook for Indian SaaS investment remains broadly positive, with 90% of Indian SaaS investors expecting to increase or maintain their capital allocation to SaaS.

"Over 70 per cent of Indian SaaS investors plan to increase their investment in the sector," said Prabhav Kashyap, Partner at Bain & Company and co-author of the report.

As per the report, buyer sentiment in SaaS will remain broadly positive in the future, with approximately 66% of enterprise software decision makers expecting to increase their software budgets in 2023.