The Reserve Bank of India (RBI) has stated that the interest in startups and new-age enterprises will continue only if the companies are able to breakeven, improve cash flow, and turn profitable.

In its August Bulletin, the RBI praised recent IPOs of tech-based companies such as Zomato, which drew strong investor interest, and predicted that 2021 might be India's year of the initial public offering (IPO).

Debut offerings by Indian unicorns — unlisted start-ups — have ignited domestic stock markets and sent global investors into a frenzy, sparked by a stunning IPO by a food delivery app that was oversubscribed 38 times.

"Yet, this explosion of interest in these companies will only be sustained if they are able to convert innovative ideas into metrics such as breaking even at the level of earnings before interest, taxes, depreciation and amortisation (EBITDA) level without expensing business development costs, followed by cash flows and profits," it said.

According to the Bulletin, "expanded and dynamic exploitation of inherent advantages such as data and logistics will be required to live up to investors' starry-eyed expectations."

"The jury is still out. Investors will closely scrutinise their stories. Analysts will put it down to stock markets' idiosyncratic behaviour, investors' greed and bandwagon effects, including myopic pursuit of listing day gains."

It stated that there are already warnings of systemic dangers to financial stability, which monetary policymakers should not dismiss as the unicorn IPO party gets underway.

The dotcom bubble burst in 2001 shown that many businesses might fail, but risk management procedures have improved to spread this risk among many entrants, according to the report, adding that those who survive can go on to become the future Googles, Facebooks, and Amazons.

The RBI research also stated that new-age company IPOs are on the rise as optimism about India grows, particularly in the tech sector.

"These listings coincide with a broader rush by Indian companies to tap the market and the fomo (fear of missing out) factor driving investors, which have taken the benchmark indices to records."

It is projected that India has 100 unicorns, with 10 being born in 2019, 13 in 2020 despite the epidemic, and three being born per month in 2021 so far, according to the report.