No Pain, All Gain? Cult.fit's IPO Comes With a Few Stretches

When startups go public, the spotlight usually falls on the money they plan to raise. Less attention is paid to who is using the IPO to head for the exit.

Cult.fit's draft red herring prospectus (DRHP) offers a reminder that an IPO serves two purposes. It brings fresh capital into the company, but it also gives long-term investors an opportunity to monetise their holdings after years of backing a private business.

While the company plans to raise ₹950 crore through a fresh issue of shares, the offer also includes the sale of up to 17.86 crore shares by existing investors. The list of selling shareholders reads like a timeline of India's startup ecosystem, with founder Mukesh Bansal, Tata Digital, Temasek-backed MacRitchie Investments, Accel, Kalaari Capital, Chiratae Ventures, Schroders Capital, IDG Ventures, Bruno Raschle and actor Hrithik Roshan among those trimming their stakes.

Individually, such exits are hardly unusual. Venture funds have finite lifecycles, strategic investors periodically rebalance their portfolios, and founders often monetise a portion of their holdings after years of building a company. Yet the breadth of participation makes one thing clear: the IPO is as much a liquidity event as it is a fundraising exercise.

That does not necessarily signal a loss of confidence. Many of these investors have supported Cult.fit through multiple funding rounds, and a public listing is the natural point at which they begin unlocking value.

But as early investors reduce their exposure, another group takes on the risk: public shareholders.

Cult. Fit's revenue from operations increased to ₹571.9 crore in FY25, up from ₹341.4 crore in FY24 and ₹193.4 crore in FY23, as per regulatory filings accessed from Tofler. Despite the strong revenue growth, the company remained loss-making, reporting a net loss of ₹154.7 crore in FY25, compared with a net loss of ₹181.4 crore in FY24 and ₹162.6 crore in FY23.

The DRHP suggests that while Cult.fit has evolved from a cash-burning startup into a more mature consumer business, several questions remain unresolved.

The first is whether the company has fully solved the economics of its business. Cult.fit highlights improving operating performance and narrowing losses, but the filing also acknowledges cash losses in certain subsidiaries. The distinction is important because improving operating metrics do not automatically translate into consistently healthy cash generation across the group.

Another key shift is in how the company plans to expand. Cult.fit is increasingly relying on a franchise-led, asset-light model rather than company-owned fitness centres. The strategy reduces capital requirements and allows faster expansion, but it also transfers a greater share of execution to franchise partners.

For a fitness brand, consistency is the product. Members expect the same trainer quality, equipment standards, hygiene and customer experience regardless of location. As more centres are operated by franchisees, maintaining those standards across the network becomes significantly more challenging.

The business also remains closely tied to discretionary consumer spending. Gym memberships, premium sportswear and wellness subscriptions are among the first expenses households tend to postpone during periods of economic uncertainty. The company also acknowledges seasonal fluctuations in memberships and product sales, meaning quarterly performance may continue to be uneven.

The governance structure raises another point worth watching. Unlike many traditional listed companies, Cult.fit will operate without an identifiable promoter. While professionally managed companies are becoming increasingly common among venture-backed startups, the absence of a promoter places greater emphasis on board oversight, institutional governance and management execution.

The DRHP also contains observations relating to certain information technology controls and audit trails. These are not audit qualifications and do not indicate financial irregularities. However, they are the kind of operational disclosures that tend to attract closer scrutiny once a company enters the public markets.

Perhaps the biggest challenge, however, is strategic.

Over the years, Cult.fit has expanded well beyond gyms into sportswear, connected fitness, diagnostics, nutrition and wellness services. The ambition is to become a comprehensive health ecosystem rather than a single-product company. But diversification also increases complexity. Every additional business line brings different economics, operational demands and competitive pressures.

That leaves public investors with a question that the DRHP cannot answer.

Can Cult.fit evolve from a venture-backed growth story into a disciplined public company capable of delivering consistent execution?

The IPO marks more than a change in ownership. It marks a shift in expectations. For years, venture capital and private equity investors funded the company's expansion while absorbing the uncertainty that accompanies fast-growing startups. Public market investors are typically less forgiving. They expect predictable governance, consistent execution and sustainable cash generation.

That may ultimately be the real story behind Cult.fit's IPO. It is creating liquidity for one generation of shareholders while asking another to decide whether the company's biggest challenge is no longer growth, but execution.