toppled Zendesk Inc. in terms of market capitalisation for the first time. Since then, however, it has been a slippery slope for the stock of India’s SaaS poster child.
On November 2, shares of the Chennai- and San Mateo, California-based software-as-a-service company hit an intraday high of $53.35 per share, ascribing the company a market cap of $13.56 billion—about $1.4 billion higher than Zendesk’s $12.1 billion on that day. But the stock has declined nearly 30% over the past month to $35.22 on December 1, eroding the company’s valuation by $5.45 billion.
That’s because of
Freshworks’ September quarter results declared on the same day.
Net loss of the Girish Mathrubootham-led firm stood at $0.04/share against an estimated $0.10/share, even as revenue rose 46% to $96.6 million. Free cash flow was negative $4.2 million compared to $10.3 million in the year-ago period.
“We beat our earnings number (and) we beat our revenue number,” Mathrubootham had said then, adding that the company thought its net dollar retention—the amount of revenue recorded from its existing clients from the previous year–would come down far below 118%. “But there was strong expansion across our existing customers so we still had 117% net dollar retention. Overall, I think we’re pretty happy with the results of Q3.”
The company has raised its revenue forecast for the fourth quarter and the full year. It now expects the revenue to be in the range of $99-101 million in Q4 and $364.5-366.5 million in 2021. Freshworks,
which listed on Nasdaq in September, follows the calendar year as its fiscal.
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Freshworks initiates $500 million share sale to tap listing gains
It has been a banner year for Indian SaaS as investors increasingly backed cross-border companies amid a record-breaking year of fundraising. SaaS firms like
Postman and
Browserstack have raised capital at much higher valuation compared to their previous rounds, signalling the premium investors are ascribing to these companies.
ETtech(Graphics: Rahul Awasthi/ETtech)
The new year comes with the promise of even brighter prospects.
The revenues of Indian software product companies are expected to touch $18-$20 billion by 2022, doubling their share in the global SaaS market to around 7-9%,
Bain & Co. said in its India SaaS Report 2020.
The report found that the number of Indian SaaS companies had doubled to around 7,000-8,000 companies in the last five years, with over 1,200 of them having raised funding.
ETtech“There’s a wide appreciation of Indian-founded companies and the impact they’re having on global SaaS is just phenomenal,” said Arpan Sheth, senior partner at Bain & Co. and one of the authors of the report. “We talk about the number of companies having greater than $100 million ARR being 4-5, but my sense would be that within a few years we would have two or three that are over $1 billion in revenues.”
