When moving to the digital landscape, it is imperative that the business understands how to make payments simple and secure for its customers. While choosing the right payments partner is the first step, what follows, and forms an important part of the process, is the understanding of legal frameworks and regulations for the business.
To help businesses in this journey, Inc42 has chosen ‘Decoding Regulations on Digital Payments’ as the theme for its second webinar of the #GoingD2C webinar series. The series — in partnership with Shopify and PayPal — aims to address the concerns of businesses that want to adopt digitisation and explore the D2C business model.
The webinar will cover all aspects of setting up digital payments for online ventures and touch upon the laws and regulations that govern the digital payments landscape in India.
Joining the webinar are Mihir Ajit Shah, an experienced consultant, advisor and trainer in the field of international business and Nath Parameshwaran, director, corporate affairs, PayPal India. Together the speakers will help the businesses understand how digital payments can help them grow and scale in the digital world we live in today.
#GoingD2C Webinars | Decoding Regulations on Digital Payments
As businesses adapt to the online and D2C landscape, it is important to understand the intricacies of building an online venture and delivering a seamless buying experience to the customers. A major part of it can be achieved by making the checkout experience quick, simple and secure by choosing the right payments partner.
A part of the digital payment revolution for more than 20 years, PayPal has been striving to make financial services and commerce more convenient and secure for millions of businesses across the world. With over 345 Mn active users in more than 200 markets, it aims to help businesses thrive in both the domestic and the global economy.
In this webinar, we will cover how businesses can set up payments for their online business quickly and understand:
The right payment gateway for your business and some simplified ways of receiving payments
Global and domestic payment trends
Best practices for making payments simpler and secure for customers
Regulations and legal frameworks related to accepting domestic and international digital payments
Importance of FIRC, its benefits for the business and how can you easily obtain it
Threats and challenges associated with online payments and data security, and how to counter them
About The Speakers
The speakers both Shah and Parameshwaran come with extensive experience of the industry and of working with businesses across verticals.
As a service provider, Shah offers consultancy and advisory services in relation to foreign trade policy, GST, RBI, customs, excise and other allied subjects related to export and import business. As a trainer, he also provides training in the field of international business covering various topics from the basic setup, marketing, government incentives, international trade agreements and GST for foreign trade.
With over two decades of experience in the IT sector specifically in the domain of payments systems for banks and financial services, Parameshwaran is responsible for driving advocacy strategy and public policy in ecommerce and online payments for PayPal.
With the belief that India has huge potential in digital commerce and electronic payments, he has helped multiple small businesses scale globally and solve real problems related to digital commerce and electronic payments.
The Department for Promotion of Industry and Internal Trade (DPIIT) is reportedly planning to ask online retailers such as Amazon and Flipkart to focus on listing geographical indication (GI) items, to give a boost to local producers and manufacturers.
According to the World Intellectual Property Organisation (WIPO), GI is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.
In India, products such as Darjeeling Tea, Kullu Shawls and Kashmiri Saffron are some notable examples of items with the GI tag. As of March 2020, India has registered 361 GI products. The DPIIT is expected to meet with representatives of etailers this week to identify GI products with the maximum demand in the market for a pilot project, sources told Mint.
“The meeting will be on figuring out a standardised practice of listing these products on ecommerce platforms, and digital literacy, which is needed to be provided to manufacturers, sellers and cooperative societies manufacturing and selling these geographical indication products,” one of the sources cited above said.
The proposed pilot project for the promotion of products with GI tag comes amid growing calls to push the sales of ‘Made in India’ products and reduce the country’s reliance on exports, especially from China, after border clashes between the two countries in Ladakh’s Galwan Valley in June.
Since June, the government has upped the ante in its boycott of China-made products, with ministers from the ruling party calling on people to boycott Chinese items as part of the government’s ‘Aatma Nirbhar Bharat’ or Self-Reliant India’ vision. Recently, in its Consumer Protection (Ecommerce) Rules, 2020, the government instructed all etailers to provide the ‘country of origin’ information for all products listed on their website. The ‘country of origin’ clause for ecommerce entities is seen as a measure to provide consumers with all the information about a product they may wish to buy, thus empowering them to make an informed choice. The Government e-Marketplace (GeM) has also made the ‘country of origin’ clause mandatory.
Apart from ecommerce, the government is also seen to be moving away from Chinese telecom providers Huawei and ZTE, instructing state-owned telcos not to buy equipment from these companies.
Homegrown ecommerce giant Flipkart has managed to overcome the Covid-19 blues as its gross merchandise value (GMV) has exceeded pre-Covid levels, US-based parent company Walmart said while announcing the financials for the second quarter of the financial year 2020.
Walmart follows the February to January period as its financial year, meaning its second-quarter will last between May-July. Walmart’s president and CEO Doug McMillon, during the earnings call, said, “Flipkart reopened in mid-May and we saw GMV increasing pre-Covid levels.”
Overall, Walmart International’s net sales were at $27.2 Bn, representing a 6.8% fall. The company has claimed that the changes in currency rates negatively affected net sales by approximately $2.4 Bn. ”Excluding currency, net sales would have been $29.6 billion, an increase of 1.6%,” the company said.
Walmart also highlighted that the total net value was also hampered by the effects of the government-mandated closure of the company’s Flipkart business in India for a portion of the quarter, as well as similar actions in markets in Africa and Central America.
While announcing the results for the first quarter in May, Walmart had noted that the curbs on delivery of non-essential items in select zones till May 18 as part of the nationwide lockdown, which “negatively” impacted Flipkart’s ecommerce operations. The impact also hit the growth of Walmart. The company has maintained the same statement this quarter as well.
However, the quarter was also an important one as Flipkart Group acquired Walmart India’s business to launch its own service ‘Flipkart Wholesale’ in a bid to expand its presence in the food and retail segment. Thanks to this acquisition, the US-based company managed to increase its return on assets by 1.7% from 6.0% last quarter to 7.7% last quarter.
“The increase in ROA was primarily due to the increase in consolidated net income primarily driven by the change in fair value of the investment in JD.com, partially offset by the increase in average total assets due to the acquisition of Flipkart. ROI was 13.5% and 14.3% for the trailing twelve months ended July 31, 2020 and 2019, respectively. The decrease in ROI was primarily due to the increase in average total assets due to the acquisition of Flipkart,” the company said.
India’s first Earth-imaging satellite startup Pixxel has secured a funding of $5 Mn in a seed round led by Indian venture capital firms Blume Ventures, growX ventures and Lightspeed India. Inventus Capital India and angel investors Stanford Angels and Ryan Johnson, a veteran in the Earth-imaging space, also participated in the funding round. Further, Johnson, previously founder and CEO at Blackbridge, a Canadian Earth-imaging company and ex-president at Planet Labs, one of the largest satellite imaging companies in the world, will be joining the board of directors at the company.
Pixxel says that it’s building a constellation of Earth-imaging satellites to provide global coverage every 24 hours to enable organisations around the world to detect, monitor and predict global phenomena in real-time. The data gathered from Pixxel’s satellites will be analysed by its proprietary machine and deep learning models, to gain “actionable insights from this data blazingly fast and easy to use in domains such as agriculture, oil and gas, climate change monitoring and forestry, among others,” the company claims on its website.
Moreover, the micro-satellites that Pixxel is manufacturing are very compact, not more than the size of a mini-refrigerator (weight close to 15kg). The company claims to be ensuring that its satellites deorbit after their lifetime, thereby not contributing to the problem of space debris.
The Bengaluru-headquartered company was founded in February 2019 by then 21-year olds Awais Ahmed and Kshitij Khandelwal while still studying in their final year of undergraduate studies at BITS Pilani. Pixxel’s first satellite is scheduled to launch towards the end of this year on a Soyuz rocket. In June 2019, Pixxel had raised $700,000 in pre-seed funding round from Techstars, growX ventures and others.
“Space technology has tremendous potential to make life on Earth better and more sustainable. Our satellites will bring down the benefits of space down to Earth and help us see the unseen through a unique dataset that offers an unprecedented level of detail. We’re glad that some very high-quality investors have decided to partner with us on this long journey and acknowledged the potential of our technology and vision in making lives on Earth significantly better,” said Awais Ahmed, CEO of Pixxel.
Ahmed also lauded the government’s move of opening the space sector to privatisation, saying that the announcement had come at the right time for Pixxel’s ambitions.
India Opens Up Space For Private Sector
In June this year, during a cabinet meeting chaired by Prime Minister Narendra Modi, the government took the decision of opening up the space sector for private participation. The Cabinet also approved the newly formed Indian National Space Promotion and Authorisation Centre (IN-SPACe), which will act as an arm of the Indian Space Research Organisation (ISRO). During the announcement, it was said that IN-SPACe would be functioning within six months, and would provide a “level-playing field” to private companies in the country’s space programmes. Through IN-SPACe, private companies would be guided with ISRO’s infrastructural, scientific and technical resources for the betterment of their space programmes.
According to a Datalabs by Inc42+report, there are estimated to be 120 space technology startups active in India today. About 64% of these startups have launched after 2014.
From propulsion and rocket technology ventures such as Bellatrix to satellite makers such as Dhruva Space and Team Indus that aspire to bid for entire missions rather than supply piece-meal components, India’s aviation and aerospace startups are blooming. A few startups like Kawa Space, are even democratising space by providing space-as-a-service.
Just last week, Indian aerospace startup Skyroot Aerospace successfully test-fired an upper-stage rocket engine, which is the third and fourth stage of a traditional multi-stage rocket, fired at high altitude and designed to operate with little or no atmospheric pressure. Skyroot thus became the first Indian private company to have demonstrated the capability of building an indigenous rocket engine.
Seattle and Bangalore-based Unitus Ventures Fund II (formerly Unitus Seed Fund) has received INR 75 Cr from Small Industrial Development Bank of India’s (SIDBI) Fund of Funds for startups, the company announced on Tuesday (August 18).
Besides SIDBI, PepsiCo’s former CEO Indra Nooyi, AmSoft Systems’ president Raj Nooyi, former Cognizant CEO Lakshmi Narayanan have also joined as existing investors in the venture fund. The company is already backed by Michael and Susan Dell Foundation, Bill Gates, Hemendra Kothari from DSP BlackRock, Sify cofounder Padma Chandrasekaran, Bank of Baroda Chairman Ravi Venkatesan. The company has raised INR 100 Cr for its Fund II in 2018.
Of the amount raised recently, the venture fund has already infused INR 8.5 Cr in Bengaluru-based edtech startup Masai School. Overall, Masai School raised $2.5 Mn (nearly INR 18.7 Cr) in Pre-Series A funding led by Unitus Ventures. The round also saw participation from India Quotient and AngelList India. The startup focuses on upskilling students from a non-engineering background, rural areas to begin their career in the IT and tech industry.
Unitus Ventures’ Fund II will be used to invest an average ticket size of INR 5 Cr -INR 15 Cr in 15-20 early and growth-stage startups. Fund II focuses on startups developing platforms that connect job seekers with employers, the company said in a press statement. Overall, it focuses on education, healthcare and inclusive fintech.
The company has made 53 investments in India, including on-demand staffing platform Gigforce, conversational intelligence platform Salesken, online financial comparison platform SuperMoney, private finance company Eduvanz, blockchain startup New Street Technologies, on-demand private driver service provider DriveU, retail brand Caravan and others. Unitus Ventures has had 3 exits — jiffstore,mGaadi and OneClickwash.
Unitus Ventures is not the only startup that has been preparing itself to invest in Indian startups as the pandemic has hit. On Tuesday, Lightspeed Venture Partners’s Indian unit, Lightspeed India Partners, also raised its Fund III with a commitment of $275 Mn (nearly INR 2,055 Cr at current conversion rate) from global institutional limited partners. Overall, the early-stage VC firm has invested nearly $750 Mn in India since its inception in 2007.
Hyderabad-based early-stage venture capital firm Endiya Partners is currently raising its fund II to invest in B2B startups across healthcare, enterprise technology solutions and consumer services sectors. The firm has already raised $10 Mn (nearly INR 75 Cr) from World Bank’s International Finance Corporation (IFC) and $6.6 Mn (INR 50 Cr) from Japan-based Nippon India Digital Innovation AIF Fund.
Former Amazon and Microsoft executive Mukund Mohan, who was recently arrested in the US for forging documents to acquire more than $5.5 Mn from the coronavirus relief funds, has recently written a blog post apologising for his “screw up”.
Mohan, published his post on August 14, “I hurt people who trusted me, believed in me, and now are beside themselves. Unfortunately, I cannot talk about the details given the legal circumstances, but I truly apologise.”
“I own my mistake, and now I have to course correct. Seeking help is what I am doing. I think the road ahead, though, will be very long.”
The blog post goes on for seven paragraphs of apologies, and promises of better behavior. Mohan goes on to add that he has taken the high road and will never expect things to go back to “normal” again as he has broken the trust. But What Is Mohan Apologising For?
Last month, Mohan was arrested for forging documents to acquire more than $5.5 Mn from the coronavirus relief funds that were meant to help startups retain their workers amid the dried up capital flow. He had allegedly claimed these benefits by showing fraudulent tax filings and altered incorporation documents of six shell companies — Zuput, GitGrow, Vangal, Expect Success. Mahenjo Inc and Zigantic LLC.
Overall, Mohan had filed for eight fraudulent loan applications through six companies. The first seven of these eight applications have been summarised in the table below. Notably, two applications for $2 Mn loan were canceled, one for $1.7 Mn loan was withdrawn, while the other five applications for loans worth $2.57 Mn were approved.
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The US Attorney had highlighted that Mohan served as the founder and/or CEO for Zuput, GitGrow, Vangal, and Expect Success, while his wife is the founder of Zigantic. The court also noted that Mohan has applied to Financial Institution 5 for a Paycheck Protection Program (PPP) loan on behalf of Mahenjo for $431,250 on June 3, 2020, however his fraudulent activities were traced soon after.
According to the forged document submitted by Mohan and further investigation, these were the key takeaways:
Mohenjo Inc had 24 employees and paid millions of dollars in employee wages and payroll taxes
Mohan bought this company on the internet in May from an undisclosed company that specialises in “aging” shell corporations to make them seem more legitimate
Mohan was running Zigantic LLC with his teenage son as the chief marketing officer
This is not the first time, Mohan has been pulled up for his fraudulent claims, business activities and malpractices. Three out of the six above mentioned shell companies were previously investigated by Inc42 in 2015. Upon investigation, we found several loopholes in the six companies and their origins.
Besides this, he had also falsely claimed to have invested in three startups — ChargeBee, SignEasy and Appointy — through his early-stage startup fund NapkinStage. However, the three startups clarified that NapkinStage is not an investor in them, while ChargeBee and SignEasy that the company was only an advisor.
At the 74th Independence Day speech, Prime Minister Narendra Modi announced the launch of National Digital Health Mission, where the government plans to create a digital infrastructure for healthcare delivery, which will include personal health IDs and patient health records.
According to industry experts, this is said to facilitate telemedicine, e-pharmacy and collection consolidation and interoperability of health data, and most importantly, aid in the development of quality and predictive healthcare ecosystem. However, there is a huge concern around data privacy and safety around this ambitious project.
Infosys’ Kris Gopalakrishnan, told Hindustan Times that personal data, especially health data, is sensitive, and its privacy must be protected. Further, he said that we now have the technology to ensure that happens, and suggested the use of blockchain technology to guarantee that data created on the platform is encrypted and cannot be altered.
He further said that access to this data should stay with the individual and can be given to a trusted authority, including a physician, a pharmacy, diagnostic centre and research institution as per individual’s consent. “So, for example, if you approach a doctor for a second opinion, you could allow the doctor to see the complete diagnosis and previous care provided. A test lab needs to only get the samples without the patient identifying information,” he added.
Blockchain Graph Of The Week:
Global Blockchain Adoption Across Healthcare Applications
According to a study conducted by IBM ‘Healthcare Rallies for Blockchain,’ 15% of surveyed healthcare executives had solid plans to implement a commercial blockchain solution in 2017, and while 55% expected to by 2025.
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Blockchain News Of The Week
India Blockchain Alliance Partners With MIE Group
Blockchain trade association of India, IBA, recently announced that it will be collaborating with MIE Group to organise virtual edition of the Africa Technology and Security Week which will be held from September 21 to 25, 2020. With this partnership, IBA will convene subject matter experts in the blockchain ecosystem to drive thought leadership sessions that will cover topics such as blockchain technology, use cases, smart contracts and the benefits and challenges of blockchain technology in the supply chain and logistics.
US Postal Service Files A Patent For Blockchain Voting Technology
The US postal service (USPS) recently filed a patent application to use blockchain technology to streamline and secure mail-in voting. The patent application, published by the US patent and trademark office last week, states that how the technology could be used to ‘track and secure’ the vote by mail system. This development comes amid Donald Trump, who had won the previous election over Facebook, Cambridge Analytica scam, is now criticising mail-in voting, as he believes that it is at risk of widespread voter fraud and potential foreign interference, and stated that it has been widely debunked.
Rolls Royce, ING Bank, AB InBev Joins Blockchain Education Alliance
Large corporates and business conglomerates, including Rolls Royce, ING Bank, AB InBev, and trading platform Multi.io, recently joined the Blockchain Education Alliance. The alliance which was launched earlier last year believes in uniting industry leaders around blockchain technology and research. Some of the other members include Mastercard, Binance X and Ripple’s Xpring among others. The platform is said to help members of the alliance to work jointly to provide students with the connections and required knowledge to enter the workforce with practical blockchain skills to contribute to the growing industry.
As the country-wide lockdown due to the Covid-19 pandemic began in India on March 24, users on Twitter, celebrities and the common folk, went about detailing their mantras for being productive while stuck at home. Besides engaging in hobbies such as cooking, DIY arts and crafts and other more physical activities such as dance and cardio, there was a renewed focus on upskilling and gaining proficiency in the most in-demand skills. And besides the known players in the Indian edtech segment, new ones seem to have gained an in during the lockdown.
An edtech player which is benefiting from the growing preference for online learning and upskilling in India amid the pandemic is US-based Skillshare. In a recent interview, the company’s CEO Matt Cooper said that two-thirds of the new signups were coming from outside the US, with India having emerged as Skillshare’s fastest-growing market. A Skillshare spokesperson told Inc42 that the platform had seen 300% month-on-month (MoM) growth in India from February to April this year. Keeping the growing demand for its courses among Indian users in mind, the company is also looking to work on creating localised content for the Indian users.
The company spokesperson said that the most popular courses among Indian viewers were focused on graphic design, the Adobe Suite, illustration, animation and lifestyle skills such as productivity.
Most of Skillshare’s courses are available through subscription and are not accredited. The company claims that the courses offer a more personal and actionable experience through project-based learning. Moreover, any user who’s willing can teach a class on the platform, by uploading a video session of their class on Skillshare for free.
Skill Development Sees Demand In Indian Edtech During Lockdown
The demand for short-term online courses is separate from the gain in users witnessed by Indian edtech startups such as BYJU’S and Unacademy, as the majorly focus on the K12 segment or help users prepare for competitive examinations. On the other hand, platforms such as Coursera and Udemy offer Massive Online Open Courses (MOOC) on a range of subjects, both theoretical, such as World History, and practical, to help users hone their skills in digital or content marketing, videography, search engine optimization (SEO), as well as coding and computer programming, among others. Such courses are meant to help users advance in their respective careers, or further their passion in a field separate from their professional pursuits.
According to SimilarWeb, based on a study of 35 top online learning platforms, school-level learning platforms Vedantu, LearnCBSE, BYJU’S, Toppr, Tiwari Academy, Meritnation and Gradeup collectively captured 51.25% of the traffic share. However, in the first 28 days of the lockdown, the traffic shifted to MOOC platforms such as Coursera and Udemy, among others. While Udemy had 17.81% traffic share, Coursera had 10.10%.
According to the study, the Indian edtech segment saw a 26% increase in user visits between April 2019 to March 2020, as compared to April 2018 – March 2019. Further, in the first 28 days of lockdown, the edtech segment saw 128.8 Mn visits (on average, 4.6Mn daily visits) as compared to 102.2 Mn average visits between April 2019 – February 2020.
The Indian Edtech Opportunity
According to DataLabs by Inc42+ estimates, there are a total of 4,450 edtech startups operating in India at present spread across various segments such as — test preparation, online certification, skill development, online discovery, and STEAM kit and enterprise solutions.
In the current scenario, test preparation and online certification startups are holding the majority market share. According to the ‘Future Of India’s $2 Bn Edtech Opportunity Report 2020’, capital inflows into the test preparation and online certification segments are comparatively higher. Together, K-12 and test preparation combined will make 66% ($1.3 Bn) of the total online education market size in 2021, the report noted. Skill development and online certification are expected to account for $463 Mn of the Indian edtech segment, growing at a CAGR of 38% from 2016-21.
Two days ago, fantasy gaming unicorn became the first startup to get awarded the title sponsorship rights to IPL, beating out the likes of BYJU’S and Unacademy, but the company’s Chinese investors have come under fire especially at a time when anti-China sentiment is on the rise.
Traders’ body Confederation of All India Traders (CAIT) on Wednesday (August 19) wrote to the Board of Control for Cricket in India (BCCI) raising objections over Dream11 winning the IPL title sponsorship rights, even though China-based Tencent Holding reportedly holds a majority stake in the company. Tencent Holdings had led the $100 Mn Series D round of Dream11 in 2018.
Kalaari Capital, Multiples Alternate Asset Management and Steadview Capital have also backed the Dream11, which was founded in 2008 by Harsh Jain and Bhavit Sheth. Dream11, which was already an official gaming partner for the IPL, offers fantasy gaming in categories such as cricket, football, kabaddi, and basketball. It claims to have over 50 Mn users and enables them to showcase their sports knowledge through fantasy gaming.
In a letter to BCCI President Saurav Ganguly, CAIT said, “We are deeply pained to note that now Dream 11 has been chosen as a sponsor of IPL 2020 which has Chinese company Tencent Global as one of the major stakeholders.”
“We are of the considered opinion that awarding sponsorship to Dream11 is nothing but a bye-pass route to neglect the sentiments and feelings prevailing among the people of India against China for its regular attempts to invade the interests of India,” CAIT added.
Interestingly, Dream11 has won the title rights at almost half the amount (INR 222 Cr or nearly $33.5 Mn) that former title sponsor Vivo paid. The mobile manufacturer had signed a deal with the BCCI to pay INR 440 Cr annually for five-year title rights totalling up to INR 2,000 Cr in between 2018 to 2022.
The title sponsor of IPL 2020 was left vacant after Chinese mobile manufacturer Vivo withdrew this year due to the rising anti-China sentiment in the wake of India-China standoff at Galwan Valley in Ladakh in June. But even Dream11 is not devoid of the Chinese intervention as China-based Tencent Holding is a majority stakeholder in the company.
Dream11 outbid Tata Sons and edtech startups Unacademy and BYJU’S. BYJU’S also sponsors the jersey of the Indian cricket team.
Following through with its plans to expand into international markets, the National Payments Corporation of India (NPCI) has launched a wholly-owned subsidiary NPCI International Payments Limited (NIPL) to popularise domestic payments technologies such as unified interface payments (UPI) and RuPay cards platform abroad.
The entity would also be responsible for creating payment technologies in collaboration with other countries. In a press statement, the NPCI said, “NIPL is tasked with the responsibility of exporting NPCI’s indigenously developed offerings and technological acumen to foreign markets. The primary focus of NIPL would be internationalisation of RuPay and UPI, along with a few more offerings of NPCI.”
NIPL has been tasked with exporting NPCI’s indigenously developed offerings and technological acumen to foreign markets. Its focus will be internationalisation of the RuPay and UPI (unified payment interface) platform, the statement added.
“Several countries such as Asia, Africa and the Middle East have displayed interest towards replicating our model in their own nations,” NPCI MD and CEO Dilip Asbe said. NPCI claimed India’s cost-effective, secure and instantaneous standards have attracted the interest of several other countries.
Speculation of UPI’s expansion into overseas markets began in October last year with reports of In November 2019, the Federation of Indian Chambers of Commerce and Industry (FICCI) signed an agreement with the Singapore Fintech Association (SFA) to take UPI global. The implementation of UPI in Singapore is expected to solve the scarcity of payments options for Indians travelling abroad due to currency conversion and non-availability of credit or debit cards.
NPCI has been working with Singapore’s Network for Electronic Transfers (NETS) to jointly implement UPI-based QR code payments terminals at various points of interest, including airport terminals.
Ritesh Shukla will lead NIPL, joining from rival Mastercard’s Middle East and North Africa (MENA) team, backed by Anubhav Sharma, head of international business for partnership, business development and marketing, and Rina Penkar, head of international business for product development.
The UPI success story has not just influenced other nations, but also the future roadmap at tech giants. In February, Google said that it would take the learnings from its UPI success in India to shape its global digital payments products. Alphabet and Google CEO Sundar Pichai said Google Pay India and UPI has already influenced the course of product development.
“We had a tremendously successful launch in India from which we learned a lot of features, and we are bringing that and we are revamping our payments products globally,” Pichai had said at the time.
India’s antitrust watchdog Competition Commission of India (CCI) has scrapped a case claiming that Facebook-owned WhatsApp has abused its dominant positions in India to expand in the digital payments market.
The petition filed by lawyer Harshita Chawla in March 2020, alleged that WhatsApp was bundling its digital payments facility WhatsApp Payments within its messaging app, which has close to 400 Mn users in India. The petitioner believed that it will give the company an undue edge over its competitors — PhonePe, Google Pay and Paytm. The petitioner alleged that WhatsApp was abusing its position by forcing its payments feature on to its existing users.
CCI noted that WhatsApp has not even launched its services in India, and is currently running on a beta version, serving less than 1% of the total WhatsApp userbase in India. Notably, the company has been stuck in the beta version since 2018 due to non-compliance with RBI’s data localisation norms.
WhatsApp was serving 1 Mn customers since 2018, but the UPI managing body National Payments Corporation of India (NPCI) had reportedly allowed it to extend the services to 10 Mn customers from February 2020 onwards. The digital payments market will not see the full-rollout sunshine until it receives a nod from the RBI for being compliant with data localisations norms.
Though the NPCI has confirmed WhatsApp Payments’ compliance last week, however, the RBI is still reluctant to grant permission to WhatsApp Payments to live. RBI is concerned that WhatsApp is storing some payment data elements outside India beyond the permitted timelines indicated in the circular and the Frequently Asked Questions on ‘Storage of Payment System Data’ issued by the apex bank on June 26, 2019.
WhatsApp had informed the Supreme Court about its compliance, in June. WhatsApp had also alleged that an independent third-party auditor certified by the central government’s cybersecurity firm CERT-in had confirmed WhatsApp Payments’ data localisation compliance. It also specified that it has spent a “significant engineering time and effort” over the last seven months to comply with the guidelines.
Meanwhile, WhatsApp Payments has already set up its infrastructure to launch its services as soon as it receives RBI nod. It has reportedly partnered with ICICI Bank, Axis Bank and HDFC Bank while public sector State Bank of India (SBI) will join at a later stage to enable unified payments interface (UPI) transactions on the platform.
Indian foodtech unicorn Zomato, on Wednesday, said that the food delivery industry had largely recovered, with the sector clocking around 75-80% of pre-Covid GMV (gross merchandise value).
In a report shared by Zomato, the company said that it had surveyed thousands of restaurants and customers to gain an understanding of the current state and future outlook for the restaurant industry. The findings of the report majorly relate to two key components of the restaurant industry — food delivery and dining out. According to the report, the food delivery business is poised for a strong comeback, with customers living in residential areas of the big cities no longer fearing contagion from food delivery. While restaurants offering food delivery had recovered 70% of their pre-Covid volume, 5% of these are restaurants which previously did not offer the service. These were dining-out centric restaurants which showed the agility to pivot their business to food delivery during the lockdown, and are reaping the fruits of their timely decisions.
Other interesting insights from the report suggest that with many people working from home, those living in big cities have left for their hometowns, and are now ordering from Zomato from these Tier 2 and Tier 3 cities. One in every five Zomato customers in metros (pre-COVID) have opened their app from a smaller town recently. Out of these relocated folks, one third have already started ordering food again from their new location.
The report said that once a customer overcomes the hesitancy and fear of contagion from food delivery and places the first order, the subsequent order frequency is the same as pre-Covid. Fears of Covid-19 transmission through food delivery were accentuated after a pizza delivery boy in Delhi tested positive for the virus. The delivery boy had been showing Covid-19 symptoms for 20 days, while he was making food deliveries. After he tested positive, authorities placed 72 families, whom he had visited for food deliveries, under home quarantine. The members of these households weren’t placed under institutional quarantine as none of them had shown any symptoms of the infection. The delivery boy had made some deliveries for orders placed through Zomato. After the news broke, Zomato issued a clarification informing people of the safety precautions the company was asking its delivery boys to take, to minimise the risk of transmission.
“Zomato has delivered 7 crore food orders since lockdown started on March 25th. We estimate that between other food aggregators and direct restaurant channels, Indians have ordered 20 crore times since the lockdown. There have been zero reported cases of COVID transmission due to food delivery,” the Zomato report said.
The dining out industry is bearing the larger brunt of the Covid-19 pandemic and the resultant lockdown. Fears of virus transmission while dining out have meant that the industry is operating at 8-10% of pre-Covid levels. “Slump in the industry is largely driven by markets being in lockdown, consumers not stepping out due to fear of transmission and restaurants not opening up, even if the city is not in lockdown,” the report said.
The pandemic’s effect could mean that the dining out industry won’t be able to recover its business in the foreseeable future. The report noted that even in cities where lockdown restrictions have been lifted, only 17% of dining out restaurants are open for business. Of the 83% that are shut, 10% have shut permanently while another 30% could still close down.
“60% restaurateurs said they estimate to retain less than half of their original business volumes for a few months even post-COVID,” the report stated.
Zomato & Swiggy Announce Layoffs
In July, while announcing layoffs for 350 executives, Indian foodtech unicorn Swiggy said that the food delivery industry had recovered just about 50% of its pre-Covid levels. “In May, we began the exercise of realigning resources to create capacity in higher potential areas with the optimism of the business attaining pre-covid levels in the near-term. However, with the industry still only having recovered to about 50% of its peak, we have to, unfortunately, go ahead with this final realignment exercise, which will result in the net loss of 350 jobs. We are concluding the exercise we began late May and there are no plans for any further restructuring,” a Swiggy spokesperson had told Inc42.
Zomato too, laid off 13% of its workforce, translating to around 5000 employees in May, as its food delivery business underwent a slump due to the pandemic. In an analysis of Zomato’s annual report released in July, Inc42 found that FY 2020-21 could bring a 54-58% revenue drop for the company.
Both Zomato and Swiggy entered the grocery delivery business earlier this year, with Zomato Market and Swiggy Stores respectively. However, two months after launching its grocery delivery business in 80 cities in April, Zomato shut it down, reportedly after finding that the business was not scalable. Swiggy still operates Swiggy Stores, and recently launched InstaMart, for delivery of groceries and other household items within 30-45 minutes of the customer placing the order. The company is piloting the service in Gurugram.
Global tech giant Google, on Thursday (August 20), announced that it will be launching its entry-level job search platform Kormo Jobs Android app in India to target temporary jobs, gig economy workers or any business which has a high workforce requirement.
Google Jobs Spot, which was launched in India last year, will also be rebranded to Kormo Jobs to create a consistent experience for users, the company has announced. With the rebranding on the plate, Google will continue to invest in the platforms with new features and jobs so that its users can continue to benefit from its convenience.
The jobs platform was originally piloted in Bangladesh and subsequently launched in Indonesia, under the brand Kormo Jobs. It has grown into a job platform that can help job seekers and businesses of all sizes in multiple countries, Google has claimed.
To ensure growth, it reached in India, the company had integrated this feature in digital payments platform Google Pay, which claimed to have over 67 Mn monthly active users in India. The company had decided to simplify it even further by integrating the new Spot feature, which allowed users to apply for jobs just by scanning a code present in retail stores and other startups that are looking for employees.
Dunzo and Zomato were two of the few Indian companies that relied on the platform due to its job matching algorithm that has enabled them to find the candidates with required skills, experience and location preferences. Google Jobs had more than 2 Mn verified jobs on the platform.
Besides offering a job portal, Google had also focused on creating the right workforce by collaborating with the National Skill Development Corporation (NSDC), which comes under the Ministry of Finance, to generate awareness among the fresh talent, who are actively enrolling themselves on the government-run platform to seek potential job opportunities.
Russell had previously told Inc42, “Our task is firstly, lower the awareness barrier, secondly, help candidates understand which skills and qualifications have applicability across sectors and accordingly recommend the right jobs to them.”
Now that the dynamics of the economies have changed due to the Covid-19 pandemic and the resultant restrictions, Google has decided to expand the reach of Kormo in India. “In the wake of the pandemic, the jobs landscape stands altered, with demand shifting to new services that require different sets of skills and experience. Businesses of all sizes face the challenges of the new normal, while job seekers are having to adapt to this shift quickly,” Bickey Russell, regional manager and operations lead at Kormo Jobs, said.
According to a report to Ernst & Young’s 2017 Future of Jobs in India report showcased that 24% of the world’s gig workers hail from India. In India, around 1.3 Mn Indians migrated to five cities — Bengaluru, Delhi, Hyderabad, Mumbai and Chennai — in the second half of the financial year 2019.
Online to offline (O2O) brokerage business Quikr Realty has been empanelled by the Securities and Exchange Board of India (SEBI) to conduct the e-auction process and disposal of stressed assets of various companies.
The company says that the multi-year empanelment, renewed every five years, will leverage Quikr Realty’s builder relationships across 22 cities and 4800+ brokers in its network to oversee real estate e-auctions. Quikr says that the transaction mandate includes stressed properties worth more than INR 7,000 Cr.
“This is the second stint of empanelment of Quikr Realty by SEBI for valuation & liquidation of Stressed Assets. Quikr Realty’s earlier associations with SEBI included liquidation of Pearls Agrotech Corporation (PACL), Sahara and Unitech assets,” the company says.
Quikr Realty (formerly HDFC Realty) claims to be the only O2O platform for real estate in India. The company says that it recorded a transaction volume of INR 3,000 Cr last year. Quikr Realty’s parent company, Quikr, is a Bengaluru-headquartered online marketplace and classified advertising platform.
In 2017, Quikr acquired HDFC Realty, India’s first corporate real estate services company, which had been operating since 2000. The company had also acquired HDFC Red, another subsidiary of HDFC and merged it with QuikrHomes, the online real estate property listing platform of Quikr. In 2018, Quikr rebranded HDFC Realty, launching it as Quikr Realty.
The real estate business in India is expected to touch $180 Bn by 2020. Of this, a major part is the brokerage industry, which is increasing at the rate of $4 Bn per year.
According to an IBEF report, the real estate sector in India is expected to reach a market size of $1 Tn by 2030 from $ 120 Bn in 2017, and contribute 13% to the country’s GDP by 2025. Some startups in this segment are HomeInspeKtor, NestAway, NoBroker, PropTiger Realty and more. Retail, hospitality, and commercial real estate are also growing significantly, providing the much-needed infrastructure for India’s growing needs, the report added.
Quikr’s Fall In Valuation After Major Scam
In February 2020, Quikr’s Swedish investor AB Kinnevik, which owns a 17% stake in the company, downgraded the fair value of its stake in the company from $177.02 Mn in September 2019 to $107.8 Mn. This brought about a 45% drop in valuation for the company. From being valued at $1.04 Bn at the end of the September quarter of 2019, in February, Quikr’s valuation stood at $554 Mn.
The fall in valuation occurred after the company, in December, was embroiled in a major scam by its own employees. Some employees of the company were alleged to have forged business transactions to fictitious clients to earn crores in commission. Later in December, Quikr announced layoffs for around 2,000 employees in multiple verticals. Employees of the company whom Inc42 spoke to at the time said that the layoffs were a result of the scam.
A senior Quikr employee, who worked in recruitment and exits, told Inc42 at the time that the layoffs had been taking place since November and were wrapped up on December 20, 2019. The company had reduced the Bengaluru team to 1,500 employees from a total of 2,700, the employee told us on the condition of anonymity. The Pune team had been cut short to 32 employees from 170 employees, whereas large layoffs had also happened in Delhi and Mumbai.
In January, Quikr explained that it had discovered some anomalies in its coliving and cars businesses where some market players had colluded with a small number of its employees to bypass the rules of engagement and game the system. Quikr had added that to ensure operational consistency and mitigate potential risks in the future, it would be investing in strengthening its compliance processes.
“We’ve undertaken third-party audits, identified and culled out such players from our marketplace, exited such employees from our company and initiated necessary action against all the parties involved. While this has had some short term impact on us, the impact is contained within these categories and has not affected any of our other categories which have traditionally driven a majority of revenue on our platform,” the company had said.
Quikr was founded in 2008 by Pranay Chulet as a classifieds website. Since then, the company has extended its verticals slowly and steadily. With 20 Mn monthly unique visitors, it is currently present in 1,200 cities in India. Quikr has spread its verticals across diverse domains like grocery, real estate, automobile sales as well as online recruitment for jobs, among others.
The company, which has raised $424.2 Mn in 12 funding rounds, from investors such as Tiger Global, Kinnevik, Warburg Pincus, Matrix Partners, Norwest Venture Partners, eBay, and NGP Capital (previously Nokia Growth Partners), is planning to go public by 2021 but hasn’t decided upon the place, India or the US, where it will issue its IPO.
The world’s largest social media platform Facebook is currently battling a public-relations and political crisis in India after a Wall Street Journal (WSJ) report called out one of its top executives Ankhi Das, who is the public policy director of India, for not apply company’s hate-speech posts to BJP politicians in order to seek favors from the Indian government.
The company is facing criticism across the country, and to make matters worse, Facebook employees across the globe have been questioning the procedures and content regulation practices followed by the India team. Nearly 11 employees had also written an open letter to Facebook leadership asking them to denounce “anti-Muslim bigotry” posts made by BJP politicians that Das has previously protected. Reuters had accessed the internal email.
The letter also demanded that Facebook’s policy team in India and other regions should include diverse representation. The open letter read, “It is hard not to feel frustrated and saddened by the incidents reported … We know we’re not alone in this. Employees across the company are expressing similar sentiment…The Muslim community at Facebook would like to hear from Facebook leadership on our asks.”
Facebook India Head Ajit Mohan Clears The Air
Meanwhile, Facebook India head Ajit Mohan claimed that the WSJ article’s claims about political affiliation influencing decision making in India was “inaccurate and without merit”.
The WSJ “article does not reflect the person I know or the extraordinarily complex issues we face everyday that benefits from Ankhi and the Public Policy team’s expertise,” Mohan wrote in an internal conversation, accessed by Reuters. But this is not the first time Facebook has been accused of having affiliation with a political party or protecting hate speech.
In June 2020, dozens of Facebook employees had staged a walkout in protest over the company’s decision not to take action against incendiary posts by the US President Donald Trump had made in the last week of May. These controversial posts included one which seemed to threaten violence against protestors by saying, “when the looting starts, the shooting starts.” Twitter determined that the same message violated its rules against the glorification of violence last week, limiting the ability to view, like, reply, and retweet the post on its platform.
Last year, India-based non-profit rights group Avaaz had revealed that Facebook was letting anti-Muslim hate speech spread unchecked across Assam, where the minority community were already being dogged by the National Registrar of India (NRC) issue. According to Avaaz, it reported 200 such cases of hate speech to Facebook. However, the social media company has removed less than half of them for breaching its community standards.
The report from the group further highlighted that these hate speech abuses often label Bengali Muslims as criminals, rapists, terrorists, pigs and dogs.
Ankhi Das Goes Against The Wrong Journalist
While Facebook is busy clearing out its mess, executive Das has also decided to file a criminal case against an Indian journalist, Awesh Tiwari, for allegedly defaming her in a public Facebook post and making “sexually coloured remarks.” Interestingly, the post was merely a summary of the WSJ article.
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The WSJ report had noted that Raja Singh, a BJP politician from Telangana representing the Goshamahal constituency in Hyderabad, had put up a Facebook post that called Rohingya immigrants from Myanmar Muslim traitors and threatened to destroy mosques. Facebook took down the post, which was made in 2018, this Sunday (August 16, 2020).
Despite the post being in violation of Facebook’s hate speech rules and qualified as dangerous due to Singh’s off-platform activities, the company chose not to take any action against him till the report emerged. Das had allegedly prevented takedown of hate speech content posted by members of the ruling BJP, even if it conflicted with the organisation’s global guidelines on hate speech.
According to some existing and former Facebook employees, Das reportedly told staff members that punishing the violations by leaders from BJP would damage the company’s business prospects in the country. A Facebook spokesperson, Andy Stone, acknowledged that Das had raised concerns about the political fallout that would result from designating Singh a dangerous individual.
But Stone also mentioned that her opposition wasn’t the sole factor in the company’s decision to let Singh remain on the platform. The spokesperson said Facebook is still considering whether a ban is warranted.
This week, the Information and Credit Rating Agency (ICRA) said that the subsidies offered under the Delhi government’s recent electric vehicle (EV) Policy 2020 for retail consumers could trigger faster EV penetration in the National Capital Region.
“It offers subsidies, waivers and incentives on purchase of EVs on the one hand and dis-incentivises use of conventional viz., Internal Combustion Engine (ICE)-based vehicles on the other…The incentives will be offered across segments like electric two-wheelers (e-2W), e-rickshaws (3W), goods carriers, electric cars, buses and will be incremental to those offered under the FAME-II scheme,” the agency said in a statement.
As per ICRA, Delhi government’s provision to subsidise two-wheelers, when coupled with the FAME II policy, would further reduce the cost of these vehicles by 25-30% than conventional 2Ws (for basic models), thereby proving to be a catalyst for accelerated electric two-wheeler penetration.
However, the FAME II has been no help to increase the sale of electric two-wheelers. According to the Society of Manufacturers of Electric Vehicles (SMEV), EV industry has registered a 20% hike with the sale of 1.56 Lakh units in FY20. Out of which, electric two-wheelers make up for almost 97% of the sales with 1.52 Lakh units sold.
Now, in the electric two-wheeler sections the low-speed e-scooters, which do not come under the FAME II policy, have overtaken the faster e-scooter market overwhelmingly.
According to the Society of Manufacturers of Electric Vehicles (SMEV), low-speed scooters constituted 90% of all the electric two-wheelers sold in the entire financial year.
Several industry leaders have highlighted that the FAME II policy has been giving the EV industry a hard time. With this policy, the cost of high-speed e-scooters has increased even with the subsidies, forcing customers to opt for less efficient low-cost versions, said SMEV.
Chart Of The Week: Global EV Market Growth
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EV News Of The Week
Yulu Rides Into Gurugram
Bengaluru-based Yulu partnered with a Gurugram-based real estate developer Vatika Group to offer its services across mega residential and integrated townships in Gurugram. The duo is looking to provide a safe mobility option to the residents in the current challenging situation with this partnership.
In the first phase, 200 electric two-wheelers Yulu Miracle have been deployed in the township and the company plans to double its fleet size in the city by early 2021. Yulu services will be further extended to all the commercial buildings across Gurugram.
BluSmart Expands To Delhi
EV ride hailing startup BluSmart mobility has expanded its services in the National Capital Region of Delhi. The cabs will now be operational in Vasant Kunj, Vasant Vihar, Dwarka, Mahipalpur and in the areas of Mehrauli-Gurgaon Road (MG Road) starting August 18, 2020. More than 350 all-electric cabs shall be interoperable in all the regions.
Residents from these areas can book their pollution-free, safe and sanitised hygienic rides to their destinations in and around Delhi, Gurgaon as well as to and from the Delhi International airport at no surge, flat fares starting at INR 99.
Etrio Launches Its First Electric Commercial Vehicles
Etrio has launched its first retrofitted electric commercial vehicle eLCV, which through our scientific retrofitment process revives the earning of the driver owner by saving almost 60% of the operational expenses, the company said in its press release.
Etrio’s eLCV is powered with a Lithium-Ion battery of 20 KWH on a high voltage 96 V system and has a certified range of 120 kms. The vehicle with a rated motor power of 15KW delivers a torque 120 NM and can overcome a gradient of 7 degrees.
Zypp Delivers 5 Lakh Shipments In 5 Months
Zypp electric mobility startup in India has announced that it has successfully delivered 5 Lakh shipments for its customers in the last four months since the outbreak of Covid-19. The company has partnered with the top ecommerce and grocery platforms like Amazon, BigBasket, Future Group, Flipkart, Spencers, and others.
Cofounder and CEO Akash Gupta said,”Now post Covid-19, last mile delivery is touching a new inflexion point and we as Zypp Electric are able to provide upto 20% savings to our customers on every delivery which is huge savings at scale in the logistics eco-system. Zypp Electric is here to disrupt the last mile ecosystem and would try and target 100% of last mile logistics to go Electric by 2025 which is what Delhi EV policy also suggests.”
EV Headlines From Around The World
Lucid Motors Unveils ‘Fastest’ Charging Vehicles
Lucid Motors, on August 19, announced that its upcoming all-electric sedan, Lucid Air, will be the fastest charging EV ever offered. The company claims that Air will have the capabilities to charge at rates of up to 20 miles per minute, which means it can run up to 300 miles per 20 minutes charge.
This charging time is possible by using a 900-volt charger with a peak charging rate of over 300 kW. By comparison, Tesla’s V3 Supercharger can pump out 250 kW, which comes out to around 15 miles per minute of charge, The Verge reported.
US Can Save Over $70 Bn If It Switches To EV
According to the Northwestern University Illinois report, the US can save as much as $70 Bn if 75% of the vehicles on the road were EVs. If just 25% of vehicles could be replaced with EVs, the country could save around $17 Bn.
It has been over six months since the pandemic emerged as a threat to life and livelihoods around the world. In India too, of course, the impact has been widespread, sparing no industry or sector as such. Even those startups that were profitable during pre-Covid-19 times are now struggling to extend their runways, and are looking for alternatives to raise capital. While cost-cutting and layoffs have helped some of these startups to remain sustainable to a certain extent, these measures are more for survival rather than scaling up and even funding roadmaps have been disrupted to a large extent.
Amid these stressful times, VC funding has run dry for many startups and even bank loans are harder to acquire with more stringent criteria as banks tighten up their belts to avoid bad debts. On the VC side, many deals have been either called off or valuations have been impacted — raising equity financing has become next to impossible in the current situation unless the startup is seeing direct growth during a tough period.
Here, venture debt funding has emerged as the go-to option for many startups as it offers them the flexibility to raise capital and helps companies to finance their working capital, in a much more structured and sustainable fashion. Though still at a nascent stage, in recent times, venture debt has seen an uptick in terms of interest from Indian startups who are racing to build long term business models.
For instance, Mumbai-based BlackSoil Capital told Inc42 that it witnessed a 2x growth in deal flow in the last few months, primarily driven by startups in sectors like healthcare, consumer, edtech, logistics and enterprisetech among other sectors. “The deal flow is very interesting, last year, we did close to about INR 20 crores deals. Cut to July, it got accelerated to INR 30 Cr,” said cofounder Ankur Bansal.
As a new-age venture debt firm, BlackSoil focuses on structured debt for tech startups while it runs a separate realty fund. In India, it has invested in startups such as OYO, Purplle, EarlySalary, BTI Payments, Chumbak, Holisol, iNurture, Homelane, Letstransport, Rentomojo, Bajaao amongst others.
Today, besides new age banks and family offices have also ventured into this sector and have tried to find ways to lend to growth-stage startups, either through working capital financing backed by cash collaterals. At the same time, the borrowers have also evolved, and are now looking at customised financing options rather than vanilla lending that was earlier on offer. Given this, there’s a whole range of startups within each sector in the debt funding market. So how exactly does BlackSoil determine the penetration within each sector?
For BlackSoil, the diversification of its portfolio is a key factor. Bansal believes that if 70% of the portfolio is not able to pay principal amount on time, a venture debt fund such as BlackSoil, which does not always look to invest with equity investors, is caught in a massive cash crunch.
“Our idea for debt is not like a typical venture debt, where they come in along with a new equity round. We are looking at ourselves as bridge finance or it can be a situation where our venture debt funding helps the company go to EBITDA breakeven or a situation where it helps them finance their working capital. More and more businesses are investing in receivables and inventory in these times, which is where our sort of financing plays a role,” the cofounder added.
The Covid-19 Fallout On Debt Funding
Besides BlackSoil Capital, other venture debt financing firms include InnoVen Capital, Trifecta Capital, Alteria Capital, Stride Ventures and other venture capital firms, who also offer a mix of both equity and debt financing for startups have also witnessed a spur in debt funding deals. According to Inc42 Plus, in the span of six months, over 35 startups have raised venture debt funding, including BigBasket, Bounce, Paper Boat, Furlenco, Dunzo, WayCool, Cars24, HealthcareAtHome among others.
Currently, BlackSoil invests in the range of INR 5 Cr to INR 20 Cr as venture debt, and it invests primarily in Series B and Series C rounds, with some selective Series A participation in mixed rounds. Till date, BlackSoil Group has made credit disbursement of over INR 1,600 Cr across 90+ transactions with 40+ notable exits, including nearby and NowFloats among others at an average internal rate of returns (IRR) of 18%. It has provided INR 820 Cr across 65 growth and VC backed companies, with several of them being potential future market leaders in their respective space.
Similarly, Trifecta Capital handles close to INR 1000 Cr in credit spread across 50 companies. It claims to manage some of the larger portfolio of companies across sectors, when compared to other venture debt funds in the country. Overall, the company has lent close to INR 1500 Cr till April 2020. Alteria Capital, on the other hand, also specializes in venture debt funding has managed close to INR 962 Cr of credit across 25 companies, with 40+ transactions, until April. A majority of venture debt investors deliver on average an IRR of 16-18%. This is expected to increase, given the rise in the deals happening across sectors.
Venture debt has remained the most preferred mode of investment into Indian startups in the last five years among all other debt instruments, excluding equity funding. As of early this year, among the various private debt investment instruments such as convertible notes and institutional debt, venture debt funding made up approximately 99% of the total $3.67 Bn raised through debt funding between 2014 and H1 2019. Similarly, in the case of the number of funding deals through debt investments, the contribution of venture debt deals stands at 97%.
In addition to this, Covid-19 has accelerated the startup investment deals by making venture debt a safer option. Plus, availing credit or loans from banks and NBFCs seems to have become risky given the higher interest rates. In other words, it is not feasible for startups that are sitting with a nine-month runway to extend it by just three months through such loans at an interest rate of 14-15%, say many industry experts. So venture debt is a natural way out, but the fundamental idea behind the investments is changing rapidly. No longer are debt investors interested in supporting cash burn without profit. Debt investors might have supported businesses with bridge rounds to extend runway in the past, but not any more. Without getting any guarantees that the business will survive the market turmoil, even debt investors want security in their portfolio.
Image may be NSFW. Clik here to view.Ankur Bansal, Co-Founder, BlackSoil Capital
What’s Fueling BlackSoil’s Debt Funding
BlackSoil noted that startups working in healthcare, delivery, edtech, logistics and enterprise tech are the most likley benefactors from venture debt funding in these stressful times since these have the highest cash generation currently. But how does the slowdown in the VC market affect debt funding outlook in the short term? With public markets crashing, VCs are becoming more stingy with their investments. But as a debt investor, cash-generating startups are the key for Blacksoil, so in that way not much has changed, believes Bansal.
“Equity guys have their own thought process to look at from the long-term point of view and sectors. Versus us, the debt guys, we are not looking to take long-term calls (unlike VCs). And it does not lead to any dilution and more importantly, it can be done quickly,” the Blacksoil cofounder said.
As Siddarth Pai, founding partner of 3one4 Capital, said during the initial phase of pandemic that the days of easy money are over and the path to profitability is paved through sustainability. This is about to continue as investors fear uncertainties, while many are awaiting for a Covid-19 vaccine. Currently, VCs are focussed on supporting their existing portfolio companies with little or no signs of new investments.
Bansal reiterated that VC funding is rightfully being cautious but the thought process comes from the long-term perspective that VCs have to adopt. For Blacksoil too, the basic idea is to keep business sustainability at the core of the portfolio. Without this metric, its own unit economics for debt funding gets impacted severely.
“Our philosophy has been to work with companies which are contribution margin positive. That means unit economics positive. They’re making money on every transaction. If they are going to EBITDA breakeven in the next nine to 12 months, then they fit our outlook.”
The UK-based publicly-owned impact investor CDC Group has committed to invest nearly $10 Mn to early-stage venture fund Chiratae Ventures’ Fund IV, which will in turn make investments with the flexibility to invest at seed and expansion stages.
Chiratae Venture’s Fund IV will focus on “highly” scalable tech-enabled startups across consumer deeptech, internet, software, healthtech, and fintech sectors. The early-stage investment firm believes that Chiratae’s investments will create large-scale employment for underserved groups and increase the availability, affordability and accessibility of goods and services.
CDC’s commitment falls under its South Asia Venture scale-up programme, which aims to invest in early-stage companies that leverage technology and innovative business models to achieve transformational impact at scale. Srini Nagarajan, MD and head of Asia at CDC added, “This investment will help generate tangible impact at scale by capitalising on the country’s world-class entrepreneurial potential.”
For CDC, the investment in Chiratae’s fund is part of a strategy to increase its investments in India’s rapidly growing technology startup ecosystem. The investment firms so far committed nearly $60 Mn across private equity and venture capital funds — such as pi ventures, Stellaris, Pravega, Chiratae, Omnivore and Ankur Capital — operating in India.
Besides this, it has also invested nearly $70 Mn in Indian startups directly. It’s portfolio includes grocery delivery startup BigBasket, deeptech startup iMerit Technology, B2B lender Indifi Technologies, Flipkart-owned fashion ecommerce Jabong (shut down in early 2020), logistics startup LoadShare, logistics solution provider Ecom Express, healthcare startup Portea Medical and others.
In 2018, the company had also shared its aim to invest $1.7 Bn in India and some of other countries in South Asia. The company had announced that it was looking to double its India portfolio by 2021.
Meanwhile, Chiratae Ventures, formerly known as IDG Ventures, has nearly $775 Mn worth assets under management spread across 85 portfolio companies, and had over 35 exit transactions. Its portfolio includes health and fitness startup Cure.Fit, ecommerce platforms FirstCry, shared mobility service Bounce, eyewear brand Lenskart and financial service marketplace PolicyBazaar, ecommerce giant Flipkart, health and fitness company HealthifyMe and others.
“CDC’s commitment to Chiratae Ventures’ Fund IV is a show of confidence in India’s innovative ecosystem,” said Sudhir Sethi, founder and chairman, Chiratae Ventures.
Chiratae Ventures is not the only company that has been preparing itself to invest in Indian startups as the pandemic has hit. On Tuesday, Lightspeed Venture Partners’s Indian unit, Lightspeed India Partners, also raised its Fund III with a commitment of $275 Mn (nearly INR 2,055 Cr at current conversion rate) from global institutional limited partners. Overall, the early-stage VC firm has invested nearly $750 Mn in India since its inception in 2007.
Hyderabad-based early-stage venture capital firm Endiya Partners is currently raising its fund II to invest in B2B startups across healthcare, enterprise technology solutions and consumer services sectors. The firm has already raised $10 Mn (nearly INR 75 Cr) from World Bank’s International Finance Corporation (IFC) and $6.6 Mn (INR 50 Cr) from Japan-based Nippon India Digital Innovation AIF Fund.
Seattle and Bengaluru-based Unitus Ventures Fund II has received INR 75 Cr from Small Industrial Development Bank of India’s (SIDBI) Fund of Funds for startups as well. Even PepsiCo’s former CEO Indra Nooyi, AmSoft Systems’ president Raj Nooyi, former Cognizant CEO Lakshmi Narayanan have also joined in its existing investors to back the firm.
Indian fantasy sports platform Dream11, which recently won the title sponsorship rights for the cash-rich Indian Premier League’s (IPL) 2020 edition, is reportedly looking to raise a fresh round of funds from at least four private equity firms. Sources privy to the matter told The Indian Express that the deal is worth $235 Mn, with a $35 Mn primary fund and a $200 Mn worth secondary sale of shares.
If the deal comes through, the shares of Chinese multinational conglomerate Tencent Holdings in the company could fall to a single digit. Reportedly, Tencent currently holds 10.9% shares in Dream11’s holding company Sporta Technologies Pvt Ltd. Further, the deal could see Dream11’s valuation increase to $2.5 Bn, from the $1.1 Bn it reportedly had in April 2019, when Steadview Capital bought stakes from the company’s early investors.
Dream11’s Chinese links have come under fire after it was awarded the title sponsorship rights for the IPL earlier this week. Dream11 won the rights with a reported bid of INR 222 Cr, after the league’s previous sponsor, Chinese technology company Vivo, which had signed a five-year contract for title sponsorship in 2017, opted out for this year amid growing anti-China sentiment in India. According to Vivo’s contract, the company paid the Board of Control for Cricket in India (BCCI) INR 440 Cr every year for the league’s title sponsorship. However, the present deal with Dream11 comes at half the price, for a period ending December 31, 2020.
BCCI Awards IPL Sponsorship To Tencent-Backed Dream11 Over Unacademy
In the form, ‘Invitations For Expressions Of Interest (IEOI) For IPL Title Sponsorship Rights’ released by the IPL on August 10, it was stated that BCCI wouldn’t be obliged to award the title sponsorship rights to the highest bidder. “BCCI’s decision in this regard will also depend on a number of other relevant factors, including but not limited to, the manner in which the third party intends to exploit the Rights and the potential impact of the same on brand IPL as also the fan/ viewer experience, which will be examined/ evaluated by BCCI in the course of discussions/ negotiations with interested third parties who submit an EOI,” the document had stated. It is unclear why the BCCI decided to award the title sponsorship rights to the highest bidder, Dream11, with its Chinese investors, given the prevalent anti-China sentiment which even prompted previous sponsor Vivo to pull out of the league this year. Indian edtech company Unacademy was also in the fray and was reportedly the second-highest bidder at INR 201 Cr. Bengaluru-headquartered Unacademy has no Chinese investors.
The private equity firms that are reportedly planning to buy a stake in Dream11 include TPG Capital, Tiger Global Management and Footpath Ventures, among others. Dream11’s most recent investors are Steadview Capital and Tencent Holdings. The company was founded in 2008 by Bhavit Seth and Harsh Jain.
Jain is the son of Anand Jain, a senior executive at Reliance Group and Jai Corp Ltd chairman.
Dream11 claims to have 80 Mn users on its platform. According to the 2019 annual report of Dream11, the latest available report, the gaming firm’s revenue from operations increased to INR 775 Cr from INR 224 Cr in the financial year 2018. Its losses widened to INR 131 Cr from INR 65 Cr a year ago.
Besides being the title sponsor for the IPL, Dream11 has also been the league’s official partner since last year. The platform, which runs fantasy leagues for various sports, is also associated with the Hero Indian Super League, the VIVO Pro Kabaddi League, T20 Mumbai League and Redmi Karnataka Premier League, among others.
Indian ecommerce giant Flipkart has entered into a strategic partnership with Nepal-based ecommerce company Sastodeal to explore cross-border trade opportunities for its lakhs of sellers.
According to the terms of the agreement, Sastodeal will host products from Flipkart marketplace sellers operating across the categories of baby care and kids, audio devices, men’s clothing, women’s ethnic wear and sports & fitness, among others, allowing Indian sellers access to Nepalese customers.
The company claims that the partnership with Sastodeal will be a boon for the MSME sellers on its platform, looking for new avenues of growth as they try to revive their business amid the Covid-19 pandemic. Flipkart, with a registered customer base of 250 Mn, claims that it has 2 lakh sellers across India on its platform, of which, 50% come from the Tier 2 and Tier 3 cities.
“The partnership with Sastodeal, a homegrown brand like ours, will not just open doors for a wider market reach to our sellers but also allow them to boost their business significantly. E-commerce business in Nepal has huge potential as more and more consumers take to online shopping. The trust a brand like Flipkart has amongst consumers along with the love of a local company like Sastodeal, makes the value proposition for consumers even more exciting,” said Jagjeet Harode, head of marketplace at Flipkart.
Flipkart’s private brands, MarQ and SmartBuy will also be listed on the Sastodeal platform, with a focus on categories such as electronics, home appliances/home decor, and furnishings.
The first phase of the partnership will see Flipkart’s more than 5,000 products across verticals being listed on the Sastodeal platform.
Lately, Flipkart has been trying a host of measures and experimenting with different offerings to diversify its ecommerce business as well as expand the customer reach for its sellers.
Earlier this month, it was reported that Flipkart was banking on neighbourhood ‘dark stores’ as it tried to boost its presence in the grocery delivery segment. The move was aimed to counter Reliance’s JioMart.
In July, Flipkart also announced its entry in the hyperlocal delivery space to take on Google-backed Dunzo, the biggest player in the segment. Flipkart Quick services will leverage Flipkart’s technology capabilities and supply chain infrastructure to deliver more than 2,000 products across several categories — grocery, fresh, dairy, meat, mobiles, electronics accessories, stationery items and home accessories — in the first phase. It will also be onboarding neighbourhood or kirana stores onto its network. The service is currently available in Bengaluru but will expand to six undisclosed cities in the coming six months.
Flipkart Hikes Commissions From Sellers
An Inc42 report from June highlighted that Flipkart was planning to hike the commissions it charged from sellers, as the company witnessed increased demand for non-essentials in the post-lockdown period. With the hike in commissions across product categories, sellers might have to either raise prices of their products or incur losses, either way, benefiting Flipkart in terms of its GMV or burn.
Reportedly, commissions for products would be increased in components such as local shipping charges.
A spokesperson for the All India Online Vendors Association (AIOVA) had said, “The price hikes by Flipkart need to be rolled back, and they should instead reduce their fees for sellers to survive while giving the best benefits to consumers. With the revised fees, the sellers will be forced to increase prices by 5-7%, depending on category and selling price.”
A Flipkart spokesperson had told Inc42 that it was working with lakhs of sellers so they could resume operations. “We regularly revise our commissions and shipping rate cards based on business metrics and this is a periodic exercise.”
