It started with a tweet on July 8, 2024, when Ola founder and CEO Bhavish Aggarwal announced the launch of Ola Maps for developers. The CEO also officially announced that Ola Cabs was moving away from Google Maps, the company’s mapping partner until then. 

Incidentally, this came on the heels of Aggarwal’s tussle with Microsoft-owned LinkedIn and the company migrating away from Microsoft’s cloud solution Azure. So the move from Google to Ola Maps naturally attracted a lot of attention on social media. 

Since then, Ola Maps has been in the news for various reasons. 

For one, Aggarwal claimed that Google Maps reduced prices for certain core APIs by up to 70% in response to the Ola Maps launch.

But Developers that use the Google Maps API told Inc42 that Google had already announced a price reduction a few months before Aggarwal tweeted about Ola Maps. “We knew about it for at least a month before the announcement. Google, being a big company, likely planned it further in advance,” said the founder of a route planning and optimisation startup.

Then, Ola was hit by a legal notice from listed mapping major MapmyIndia for alleged data theft and reverse engineering Ola Maps by duplicating MapmyIndia APIs. Soon after, Aggarwal dismissed this notice as being opportunistic. 

But out of nowhere, India’s mapping services space has become a hotbed of competition, controversy and allegations. Ola and Aggarwal are at the centre of this frenzy, and the CEO is supremely confident that Ola Maps will be the next big thing from the house of Ola.  

Sources told Inc42 that the CEO is keen on spinning off Ola Maps as a separate entity and Aggarwal has eyes on creating yet another unicorn, after taking Ola, Ola Electric and most recently Krutrim to the $1 Bn valuation club. 

“A spin-off is on the cards[A few years down the line]; however, at present, the company needs a lot of nurturing from the Ola ecosystem. Once the product nears maturity and the brand achieves a sizable clientele outside the ecosystem, it will be something to look into,” a senior employee working on the platform told Inc42. 

But does Ola Maps even have a shot in this market, where the incumbents have decades of expertise and experience? 

Ola Maps Joins India’s Digital Mapping Frenzy

For the past 18 months, Ola Maps has been developed by Ola Cabs’ parent company ANI Technologies, building on the 2021 acquisition of Pune-based startup GeoSpoc. 

Unlike Ola Krutrim and Ola Electric, which were independent entities from inception and shared the Ola brand name and the company’s resources, Ola Maps is currently part of Ola Cabs’ parent company ANI Technologies.

This is why there is some speculation about Ola spinning off Ola Maps into a separate entity and offering it to developers and other product startups as an API-based service. Aggarwal on X mentioned that Ola Cabs has been spending around INR 100 Cr on third-party mapping services.

It will be interesting to see how Ola differentiates itself from the host of players that make up the mapping market. Although Google Maps and MapmyIndia are the two most dominant players, there are others such as Apple Maps, Dutch giant HERE Technologies, TomTom, MapBox, OpenStreetMaps among others. 

The digital maps and location intelligence services market consists of digital maps services, navigation solutions and telematics for business as well as consumer applications. And most of these companies have products that cater to both B2B and B2C or either of these verticals.  

The opportunity in the digital mapping space is very large. For instance, MapmyIndia’s operating revenue nearly doubled in the past two fiscal years from INR 200 Cr in FY22 to INR 379.4 Cr in FY24.

It is hard to estimate how much Google Maps is earning from India, as the tech giant does not disclose numbers for Google Maps nor its business in India. We do know that most service providers that operate at scale rely on Google Maps.

Swiggy and Zomato, for instance, would be contributing significantly to Google Maps revenue in India, given the millions of orders these platforms process daily for food delivery and quick commerce. Uber India too is a major customer for Google Maps, and Google Maps is pre-installed on millions of Android devices. 

It is hard to fight dominance of this scale, but MapmyIndia has looked to do that through customer acquisition and leading an antitrust battle with Google Maps, as we have written about in the past. 

For context, Google Maps entered the Indian market in 2007, a decade after MapmyIndia’s first product. Last year, MapmyIndia CEO Rohan Verma told Inc42 that MapmyIndia offers a superior product thanks to speed limit indicators, pothole indicators, 3D junction view (for exits and flyovers), several of which are still missing from Google Maps.

However, dethroning Google is no easy task, particularly because of its extensive tech industry network, deep pockets and Android’s dominance in the smartphone market due to which most Android devices come preloaded with Google Maps. 

For MapMyIndia and other majors in the space, it’s the B2B market which includes ride-hailing services, automobile, enterprise solutions, and delivery services that’s been the key addressable market.  

MapMyIndia claims to have captured over 80% of the connected vehicle market, where its apps and devices are installed on-board by the OEM. It also claims to be working with distribution companies, particularly in the food and beverages space. 

So the question is where can Ola even compete in such a market, where two large players already have deep roots. 

Ola’s Maps Journey From 2021

Ola’s journey into the mapping world began after the Indian government changed the guidelines for geospatial data in early 2021. The guidelines restricted foreign companies to a 1-metre accuracy and mandated the use of APIs for such companies from authorised domestic licensees. No such restrictions are applicable for Indian companies. 

The 2021 Guidelines liberalised the entire approach to how an entity could collect the mapping data. Before, it was heavily guarded. And, one needed to have a license and approval from the Indian government to enter the mapping data / streetview data collection.

“This was a major reason why Google could not be directly involved in mapping data collection in India before 2021. Instead, it has had to partner with entities such as Tech Mahindra to collect data for mapping solutions,” a former India-based Google Maps developer told Inc42. 

It was in this India-first milieu that Aggarwal set the roadmap for Ola Maps after the GeoSpoc acquisition. 

Aggarwal’s thesis was that domestic map solutions are critical to democratise access to digital services for all Indians, especially outside the metros. 

He also said that multimodal transportation options such as drones, autonomous vehicles or other new-ge connected vehicles will require more detailed geospatial data, including high-definition and three-dimensional (3D) maps. 

In its first Maps blog, Ola claimed that existing maps do not address challenges such as inaccuracy, inconsistency, varying street names, frequent changes in road networks, non-standardised streets, potholes, and road quality issues. 

Some of these problems are incidentally also MapmyIndia’s USP as Verma told us in January last year. 

But Ola Maps does offer a big upside for Aggarwal and Ola’s many verticals:

1. Cutting Costs: The company will no longer have to spend INR 100 Cr on mapping APIs and SDKs 
2. New Revenue Stream: The in-house mapping solutions is a new revenue stream for Ola 
3. Data Ownership: Ola Maps allows the company to have complete control over user location data, which feeds into other Ola businesses such as ride-hailing, Ola Electric as well as any other verticals launched by the company, including Ola’s recent push into food delivery with ONDC

Of course, competition is beneficial for the entire ecosystem, since this will create a race to offer more features at better prices. 

But building a mapping platform is no easy task. During an interaction with Inc42, a few weeks back, MapmyIndia CEO Verma said, “It is a huge infrastructural task to create a solid foundation of accurate maps based on ground reality for a large country like India (3.2+ Mn sq km to 6.6 Mn sq km!), and then an even more herculean task to maintain and keep the maps updated as the landscape changes.”

According to him, it is very hard to firstly build and maintain maps, and secondly make it into a viable business. “Many players have tried and failed after a few years,” Verma said. 

Ola Maps, which first appeared on the company’s EVs and inside Ola Cabs, is now being offered to developers.

For a moment, let’s put aside the controversy around MapmyIndia’s legal notice to Ola and see how the latter claims to have built Ola Maps.  

As per the company’s statements, it acquired data from Open Street Maps under a licence agreement, as well and from government sources, while also deploying sensors in some Ola Cabs and across the data operations fleet such as cameras, radar, and LiDAR. 

By processing this data, Ola said it developed a suite of APIs and SDKs for B2B use cases. Ola claimed that its maps platform ingested more than 5 Mn messages per second from various sensors and telemetry sources. The petabytes of data is collated, normalised, anonymised, and stored in a data lakehouse. Data streams from various sources are further divided into pipelines to collect relevant data for training AI models, analytics, and data ops for maps. 

The final output is stored in map databases for tiles, places, and routes systems. Ola Electric, meanwhile, has shelved its electric project which was unveiled in 2022, so for now, Ola will instead be relying on its EV two-wheelers and its fleet of cabs for further data collection. 

Suvonil Chatterjee, the chief technology and product officer of Ola Electric, said in a tweet that AI is at the heart of Ola Maps. The company leverages natural language processing for contextual searches, real-time traffic prediction, dynamic routing algorithms, and automated map updates, Chatterjee said. 

What Ola Can Learn From Apple Maps

While the Indian ecosystem has largely applauded the launch, some maps users pointed out bugs and shortcomings such as Ola’s reliance on Google Autocomplete API, routing issues and even about Ola using SDKs from other mapping solutions such as MapBox.

“The APIs offered by Google Maps are simply much more extensive, but the start by Ola Maps is promising. However, with Ola Maps currently being constrained to the Ola ecosystem, most issues are still not public as drivers rarely report them,” according to a founder of location-based services startup.

Moreover, some APIs are difficult to build in terms of accuracy and seamlessness and require multiple datasets to work together. Take for instance, Google Maps’ Places APIs. Industry insiders believe this is especially difficult to develop, because Google relies on high-quality data from Search and other products. This is partly why Google’s Maps APIs are so feature-rich. 

In fact, mapping platforms have transformed into super apps / super platforms incorporating a slew of vertical requirements. Users can directly reserve a table using Google Maps or seek appointments with a doctor or make inquiries about what products a nearby kirana store has in stock. 

MapmyIndia’s consumer app Mappls has partnered with ONDC to incorporate some of these features and more into its products, and the company has also tied up with wearables maker boAt to introduce some features for smartwatches, a category where devices running Google Maps and Apple Maps are typically more expensive than boAt’s smartwatches. 

Apple Maps has also built such features into its APIs but not all of these are available in India. In the US, where Apple is in a much more dominant position, these APIs are more feature-rich. 

What these feature-rich mapping solutions tell us is that mapping apps are no longer just about directions or finding the fastest route between two points. Maps apps are moving towards super apps in some ways. 

Apple’s example is most apt for Ola. Apple Maps was heavily criticised at launch in 2012 for having poor accuracy and mislabelled information. It took the company more than a decade to come close to Google in terms of service quality and features. 

It wasn’t easy for Apple, but having a revenue-generating machine such as the iPhone did help in staying the course. Does Ola have the tenacity that Apple showed? 

For Ola to directly take on Google Maps or Apple Maps, it is critical to add some of these consumer-friendly features, since they can have a snowball effect and bring more B2B customers  on board as well. For Ola Maps, the arduous task begins now. 

Ola Maps might well find itself in the unicorn club if Aggarwal decides to spin it off, but that will still be a valuation game. Dethroning Google, MapmyIndia and even Apple Maps won’t be as simple as going from point A to point B.

[Edited by Nikhil Subramaniam]

The post A Long Road For Ola Maps: Can Bhavish Aggarwal Dethrone Google Maps, MapmyIndia? appeared first on Inc42 Media.

Just a few weeks ago, social media was abuzz about Zomato and Swiggy, but most users didn’t have good things to say. The debate was about platform fees — rising from INR 1 per order in August last year to INR 6 in July 2024 — and how this has weakened the food delivery proposition. 

But platform fees are only going to rise in the future. This is the price that consumers have to pay to get the convenience of food and quick commerce deliveries. And with no real competition in sight, Zomato and Swiggy pretty much follow each other’s moves when it comes to pricing.

We have seen the likes of Amazon, Uber Eats and Ola try to disrupt the duopoly, but Swiggy and Zomato continue to all-but split the food delivery market. The others just couldn’t expand beyond Bengaluru and other top cities, while keeping up with the discounts that Swiggy, Zomato offered. 

But now, things might be changing. Large players such as Ola and Paytm are increasingly leaning on the Open Network For Digital Commerce (ONDC) to gain ground and disrupt Zomato and Swiggy with more attractive pricing. 

To be clear, this is a battle that’s largely being fought on pricing thus far. ONDC-backed food delivery players such as Ola or Paytm do not have the operational expertise nor the resources to pull off food delivery on a consistent basis. In particular, Ola has leveraged ONDC to quickly mount a challenge, and take another shot at food delivery after its past failures. 

In other words, ONDC has opened the doors to competition for Swiggy and Zomato. But can Ola and others banking on ONDC truly outpace Zomato and Swiggy? 

Ola Dreams Food Delivery Again

Ola founder Bhavish Aggarwal has a fascination with food delivery. The company has attempted food delivery thrice through the Ola app, before the latest ONDC tryst.

When Ola and Aggarwal first experimented with food delivery through Ola Cafe in 2015, the idea was to build an instant delivery model through a restaurant network.

Unlike Zomato or Swiggy, which allowed consumers to browse through the entire menu of a restaurant, Ola limited itself to select few items from a handful of restaurants in the consumer’s vicinity. The company banked on its fleet for delivery, but the differentiated product did not go down well with consumers, and Ola Cafe was shut down within a year.

For act two, Ola acquired Berlin-based FoodPanda from Delivery Hero for $50 Mn in 2017, to again take on Swiggy, Zomato, as well as Uber Eats (eventually acquired by Zomato). The company wanted to replicate Uber Eats’ early success in India at the time, but once again, Ola fell short of the mark when it comes to user experience on Ola FoodPanda.

In 2022, Ola moved away from the restaurant aggregator model, and looked to leverage cloud kitchens to enter the space. Here, it was looking to emulate the likes of Rebel Foods, CureFoods, Box8, among others. Even though Ola put cofounder Pranav Jivrajka in place to lead this vertical, the business proved tough to scale up. Jivrajka quit the company just before the Ola’s third attempt failed.

But this time around, the company is hoping that ONDC will help it achieve its food delivery dreams, starting with Bengaluru. The company is also building a delivery fleet with EV bikes to improve the user experience, which was severely lacking in previous attempts. 

According to ONDC seller apps such as Magicpin and uEngage, which bring restaurants on board, Ola has seen good user traction on account of efficient operations and in-house logistics.

“Food delivery orders work on crucial delivery timelines which is why if a company has been in the business for many years, it will have better efficiencies as it can manage sensitive peak hours, will have prior experience of tie-ups with restaurants,” owner of a Bengaluru-based cafe told Inc42. 

In Ola’s case, a number of cloud kitchen brands and other infrastructure it was running until 2022 is likely to come in handy as it begins to scale operations to the other states. But it will not be easy to compete with juggernauts such as Swiggy and Zomato. 

Swiggy is on the verge of an IPO to raise cash before expanding further, and Zomato is cash rich after its profitable stint in FY24. Given these developments, how far will Ola’s discounts-heavy play work? 

Can Ola-ONDC Eat Into Zomato, Swiggy Share? 

There is one advantage to Ola’s strategy of offering high discounts through ONDC. It expands the base of food delivery consumers who are wary of the higher prices and extraneous fees on Zomato and Swiggy. This means Ola can attract customers who were either on the food delivery fence or who have abandoned the two primary apps. 

“Competitors like Zomato and Swiggy have entirely different business ambitions now compared to 2022. They aren’t looking to burn cash anymore which will definitely give more room to Ola to acquire more users through better user experience and discounts,” uEngage founder Sameer Sharma said. 

Sources told Inc42 that Ola’s Aggarwal is feeling bullish about eating away at market share by offering heavy discounts. In fact, Ola has also reduced take-rates from restaurants by 50% in comparison to Zomato and Swiggy, which has at least worked out in Bengaluru.

“When Ola begins charging delivery fees, it will be still another revenue source for the company. I think Bhavish is fully prepared to do the heavy lifting for ONDC in the food delivery space this time,” the source quoted above said.

Ola’s discounts in food delivery as per Inc42’s analysis are staggering. Ola is offering 70-80% cheaper food delivery than Swiggy, Zomato and even other ONDC buyer apps like Paytm or Magicpin.

In fact, sources tell us that Ola is also providing free deliveries for every order, which has doubled its order volumes in the past couple of months. 

Susmit Patodia, associate partner at early-stage venture capital firm Antler, believes that ONDC cannot dictate the pricing or discounts even though that was the case during the first two years. Now it’s left entirely up to the participants to decide the pricing for every order. 

Bengaluru-headquartered Antler has built a thesis around investing in startups that are building on the ONDC protocol. “We need to reinforce the idea that ONDC is an open protocol where the network participants will play a huge role in the price determination, the waiver of delivery charges. This includes even the merchants or sellers who are now realising that ONDC is a viable option,” Patodia said.

He added that although ONDC has taken giant steps in the initial years, and that cash burn is not a big problem for the moment. “The ecommerce giants have grown and scaled up after burning cash for about 5-7 years, including Zomato and Swiggy. The total cash burn under the ONDC model is not comparable to that, at the moment,” Antler’s associate partner added.

In both cases the idea is the same: get consumers habituated to ordering online, and gradually taper down the discounts. The big question is can Ola even scale up to the extent where it can take its foot off the discounts pedal? 

For that, it needs to build the leadership and the network effects that Zomato and Swiggy have. Both platforms offer a robust system for restaurants to manage online orders and also help in advertising and marketing, albeit this comes at a cost. How far can Ola replicate this on its ONDC-linked platform? 

ONDC’S Food Delivery Menu

Ola, Paytm and others on ONDC’s food delivery bandwagon are also banking on the network adding familiar features to ease onboarding of consumers and merchants. 

For instance, popular Bengaluru eateries are in the process of setting up QR codes that will enable consumers to place orders through ONDC-enabled apps on their smartphone. 

In fact, ONDC launched the interoperable QR code system on Tuesday (July 30), which allows sellers to generate a unique QR code that consumers can scan using an ONDC-registered buyer app, starting with magicpin and Paytm. 

This will soon be expanded across the entire network after initial testing. 

Within food delivery, this could help increase visibility of ONDC buyer apps as they look to take on Swiggy and Zomato. 

Neither of these two food delivery giants have such QR codes displayed inside restaurants. It must be understood, however, that the QR codes solve a problem that is unique to ONDC. 

While QR codes will be added soon, ONDC’S food delivery order volume has almost tripled to 14 Lakhs per month in June 2024 from 5 Lakhs per month in March this year. 

Currently, Zomato and Swiggy may together command close to 90% of the market in Delhi and Bengaluru, where ONDC has launched. But is the open network eating into this duopoly?

“Swiggy and Zomato are great companies. But this market is so huge that there is definitely room for other players which offer seamless user experience, cheaper alternatives especially if the hotels, restaurants are themselves willing to discount the end user without the aggregator,” uEngage founder Sharma added .

On the flip side, one does wonder, will ONDC see a decline in food delivery volumes when the discounts are taken off the table, especially if participants actually want to turn profitable. 

Currently, Ola ONDC charges anywhere between 5% to 10% in commission on each order besides nominal delivery charges. But not everyone wants to splurge on discounts to chase the food delivery high. 

PhonePe-backed Pincode and Paytm, which offered as much as INR 100 discount on each food order and free deliveries, are changing their tune.  

Sources claim Pincode has found it hard to navigate through the fragmented ONDC landscape of partners such as third-party logistics players, customer support companies, payments partners and more. 

Paytm took its foot off the discounts accelerator due to headwinds in its core UPI and merchant payments businesses. The fintech giant has turned the focus away from food delivery discounts, prices on Paytm are closer to Swiggy and Zomato prices than Ola. 

Lessons From The Past

Of course, Ola’s potential success in the future will only serve to attract other players to the ONDC space. Amazon has long held ambitions to scale food delivery beyond Bengaluru, while Flipkart is also considering early moves for ONDC-based food delivery. 

Flipkart and Amazon India were well positioned to foray into food delivery and leverage their existing user base, as well as logistics to make a dent. But there is pressure on both these giants to move towards profitability. This curtailed any food delivery ambitions held by Amazon and Flipkart never made a serious move into the space. 

Can Ola’s ONDC success lure these players in?

“Amazon is also in a wait-and-watch mode to see the traction enjoyed by Ola and other such ONDC apps. It may enter the space if Ola can prove that ONDC works for food delivery,” the owner of a popular cloud kitchen brand told us on the condition of anonymity. .

Antler’s Patodia added that one cannot ignore the challenges that being faced by merchants and restaurants in getting on board ONDC buyer apps. He acknowledged that the platform needs to remove the hurdles in the way. 

“Perhaps we will see founders and startups building products that will solve the impending issues associated with seller integrations and make them swifter and simpler. ONDC is too young right now but it is off to a good start. Scaling to 10 Mn transactions a month in two years is no easy feat,” Patodia added.

[Edited By Nikhil Subramaniam]

The post Can Ola’s ONDC Food Delivery Bet Match Swiggy, Zomato? appeared first on Inc42 Media.

It’s the season of spring for startup IPOs. After a lull in IPOs in 2022 and 2023 due to geopolitical tensions, a raging funding winter, and macroeconomic pressures, startups are lining up in droves to list on the bourses in 2024. 

Just six months into the year, five new-age tech companies have already listed on the exchanges – Go Digit General Insurance, TBO Tek, Awfis, ixigo and TAC Security. In contrast, five startups had listed in the entirety of 2023 and just three new-age tech companies made their way to the bourses in 2022. 

The first half of 2024 was just the precursor for the things to come. In the second half, segment giants such as foodtech major Swiggy, EV juggernaut Ola Electric, and omnichannel marketplace FirstCry are also eyeing a market debut. 

But, what is emboldening the startups to revisit their IPO plans, a year after many of them shelved or postponed their plans? The answer is the thawing funding winter, a renewed push for profitability and a growing investor appetite for startup IPOs. 

Speaking with Inc42, angel investor Nikhil Parmar said, “Firstly, many startups have matured to a point where they are ready for public markets, driven by strong growth, robust business models, and proven revenue streams. Additionally, favourable market sentiment and ample liquidity have made the stock market an attractive option for raising capital. Investor confidence is also a significant driver”.

Concurring with this, angel investing platform BizDateUp Technologies cofounder Meet Chandan said that the IPO spring has also been fuelled by investors looking to diversify their portfolio and the promise of substantial returns from tech-driven companies.

What has also helped the ecosystem is the bumper listing of all the new-age companies in 2024 so far. From TBO Tek and Awfis to GoDigit Insurance and ixigo, all have listed at a premium and many have even seen healthy rallies post their listing. 

Non-institutional investors (NIIs) and qualified institutional buyers (QIBs) are seeing merit in backing the growing number of Indian startups making a beeline for the bourses. However, challenges remain. 

Investors are primarily focussed on profitable and sustainable ventures and are steering clear of loss-making entities. Awfis, which reported a profitable quarter after its listing, was an outlier in this regard. Additionally, strong corporate governance guardrails and compliance with existing regulations also seem to be on the top of investors’ agenda. 

“Markets currently are receptive to IPO-bound companies with a good brand, decent unit economics and a clear path to profitability. Public markets are hungry for tech stocks and are welcoming good companies with open arms. So, it’s only natural that more founders would want to take their companies public. This is a great sign for the ecosystem,” said VC firm All In Capital’s cofounder Kushal Bhagia.

Parmar believes that the surge in IPOs amid the funding winter showcases the startup ecosystem’s resilience and adaptability. It also reflects the growing maturity of the ecosystem. 

With this in mind, Inc42 has collated a list of all top Indian startups that have listed on the bourses in 2024 so far as well as those who plan to go for IPO in the near term. Before we dive into the list, here are the latest developments from the Indian IPO landscape: 

Latest Updates:

• EV major Ola Electric’s IPO will open for retail subscription on August 2 and has set a price band in the range of INR 72-76 per equity share for its upcoming public issue
• SEBI has reportedly returned the IPO papers of NBFC Avanse Financial Services on “technical grounds”
• Flipkart-backed logistics unicorn BlackBuck has filed its DRHP with markets regulator SEBI for an INR 550 Cr IPO

Now, let’s take a detailed look at the list: 

Startups That Have Listed In 2024

This is not a listing of any kind. The startups have been listed in an alphabetical order | Data has been sourced from Inc42, respective DRHPs, MCA filings and other media reports | Asterisk (*) specifies reported numbers:

Awfis

Founded in 2015 by Amit Ramani, Awfis has evolved from just being a coworking network to a tech-enabled workspace solutions platform, catering to freelancers, startups, SMEs, large corporates, and MNCs.

The coworking space provider filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) in December last year. The market regulator greenlit the company’s public issue in April 2024 

The startup made its debut on the bourses in May this year. It listed on the BSE at INR 432.25 per share, a premium of 12.8% to its issue price. Similarly, it opened on the NSE at INR 435 apiece – 13.5 % higher than the issue price.

Awfis reported a profit of INR 1.4 Cr in Q4 FY24 against a net loss of INR 13.8 Cr in the year-ago period. Operating revenue also jumped over 45% year-on-year (YoY) to INR 232.3 Cr in the quarter ended March 2024.

Go Digit General Insurance

Founded in 2016, Go Digit offers insurance policies across verticals like health, motor vehicle, travel, property, and more.

The insurtech unicorn refiled its DRHP with SEBI in March after the capital markets regulator flagged concerns over its employee stock appreciation rights scheme. 

The Bengaluru-based startup’s IPO comprised a fresh issue of shares worth INR 1,125 Cr and an OFS component of 5.47 Cr equity shares.

The Virat Kohli-backed startup made a lukewarm debut on Dalal Street in May, listing at a 5.15% to its issue price. The stock listed at INR 286 apiece on the NSE and INR 272 on the BSE. 

Go Digit’s profit after tax (PAT) surged 74% YoY to INR 101 Cr in Q1 FY25 from INR 58 Cr in the previous fiscal year. Gross written premium rose 22.2% to INR 2,660 Cr in the quarter ended June 2024 from INR 2,178 Cr in the year-ago period.

ixigo

Founded in 2006, ixigo started as a travel search website to help users compare flight deals. In FY20, it rebranded as an online travel aggregator to offer services such as flights, trains, bus tickets, hotel bookings and holiday packages.

Le Travenues Technology Ltd, the parent company of ixigo, refiled its DRHP with SEBI in February. The travel tech startup got the market regulator’s nod to launch the public issue in May.

Its IPO comprised a fresh issue of shares worth INR 120 Cr and an OFS component of 6.67 Cr shares worth up to INR 620 Cr.

The startup made a stellar debut on the bourses in June this year. While the stock opened at INR 138.10 per share on the NSE, a premium of 48.5% from the issue price of INR 93, it made its debut at a premium of 45.16% on the BSE. 

Prior to that, the OTA’s public issue also saw high demand and was oversubscribed 98X. 

In Q4 FY24, ixigo posted a PAT of INR 7.4 Cr, up 55.2% from INR 4.7 Cr in the year-ago period. Meanwhile, revenue from operations jumped 20.4% YoY to INR 164.8 Cr Cr during the quarter compared to INR 136.9 Cr in Q4 FY23.

Menhood

Founded in 2019 by Dushyant Gandotra, Divya Gandotra and Shivam Bhateja, Menhood is a D2C men’s grooming brand that sells products such as trimmers, intimate perfumes, intimate wash and moisturiser, among others.

The startup’s parent entity Macobs Technologies Limited filed its DRHP in January 2024 for an IPO that comprised a fresh issue of 25.95 Lakh shares. Menhood’s public issue saw healthy response and was oversubscribed 157.5 times. 

The Jaipur-based brand eventually listed on NSE Emerge on July 24 at INR 96 apiece, a 28% premium to its issue price of INR 75.

TAC Infosec

Founded in 2016, TAC Infosec (also known as TAC Security) is a SaaS-based cybersecurity startup. It offers risk-based vulnerability management and assessment solutions, cybersecurity quantification, and penetration testing to enterprises.

The Vijay Kedia-backed startup filed its DRHP in January to list on the NSE’s small and medium enterprise (SME) platform NSE Emerge. 

TAC Infosec’s IPO only consisted of a fresh issue of 28.29 Lakh equity shares. The shares listed on NSE Emerge in April at INR 290, a whopping 173.6% premium over the issue price of INR 106.

The startup posted a net profit of INR 6.33 Cr in FY24, a 23% jump from INR 5.12 Cr in FY23. Operating revenue zoomed 17% to INR 11.84 Cr in FY24 from INR 10.09 Cr in FY23.

TBO Tek

Founded in 2006, Travel Boutique Online (TBO) is a B2B travel portal that provides solutions to travel agents and tour operators. It offers white-label solutions, hotel and flight booking APIs and dynamic packages, among others.

The Delhi NCR-based company filed its DRHP with SEBI in November last year. The market regulator granted approval for its public listing in April.

Shares of TBO Tek listed on the NSE in May at a premium of 55% to the issue price. The stock made its debut at INR 1,426 against the issue price of INR 920. On the BSE, the stock listed at INR 1,380, a 50% premium to the issue price.

TBO Tek logged a 64% jump in PAT to INR 46.4 Cr in Q4 FY24 from INR 28.2 Cr in the year-ago quarter. Revenue from operations stood at INR 369 Cr during the period under review, a 31% increase from INR 281.4 Cr in Q4 FY23.

Trust Fintech

Founded in 1998 by Hemant Chafale, Heramb Ramkrishna, and Mandar Kishor Deo, Trust Fintech is an enterprisetech company that offers SaaS products and fintech solutions for ERP implementation, and offshore IT services for the BFSI sector. 

The fintech SaaS company filed its DRHP with NSE Emerge to raise funds via an IPO in February this year and listed on the SME platform just two months later in April. 

It witnessed an oversubscription of 101X for its public issue on the back of huge demand from retail investors and non-institutional investors. Eventually, it listed at a premium of 42% at INR 143.25 apiece as against its issue price of INR 101 per share.

Trust Fintech saw its net profit jump 210% to INR 12.5 Cr in the financial year 2023-24 (FY24) from INR 4 Cr in FY23. Meanwhile, operating revenue jumped 55.4% to INR 35 Cr in the period under review as against INR 22.5 Cr in FY23.

Indian Startup IPOs In Pipeline

*As per reports

AITMC Ventures

Founded in 2016, AITMC Ventures offers drone training and other skill development programmes in the agriculture sector. So far, it has set up 46 centres across India for research, development, training, and testing of drone technology in agriculture.

The integrated agri-drone company filed its DRHP in October last year to list on NSE Emerge. 

The Gurugram-based startup IPO will comprise a fresh equity offering of up to 2.07 Cr shares. It won’t have an OFS component.

The startup reported revenue of INR 21.44 Cr and profit of INR 4.81 Cr in FY23.

Ather Energy

Founded in 2013 by Tarun Mehta and Swapnil Jain, Ather Energy is one of the major players in the Indian electric two-wheeler market. It manufactures and services electric two-wheelers and operates its own charging infrastructure.

The EV major has raised more than $431 Mn from Hero MotoCorp, GIC, Tiger Global, among others, across multiple rounds since its inception. 

In June 2024, Ather Enegery’s board passed a resolution to convert the startup into a public company from a private entity previously. Previously, reports surfaced that the company had roped in HSBC Holdings Plc, Nomura Holdings Inc, and JP Morgan Chase & Co to helm its IPO. 

The company was said to be eyeing a listing in the second half of 2024 at a valuation of around $2 Bn.

Ather Energy clocked a net loss of INR 864 Cr in FY23, up 150% from INR 344.1 Cr in the previous year. Operating revenue jumped 4.3X YoY to INR 1,783.6 Cr during the year under review.

Avanse Financial Services

Incorporated in 2013, Avanse is an NBFC focussed on education financing for students and educational institutions in India. Its products cater to students looking to study higher education abroad and in India. 

The non-bank lender filed its DRHP in June 2024 for an INR 3,500 Cr IPO. The IPO will comprise a fresh issue of INR 1,000 Cr and an OFS component of shares worth up to INR 2,500 Cr.

Last reported, SEBI returned the NBFC’s IPO papers on “technical grounds”. The startup will now have to refile its DRHP with the market regulator before moving ahead with the public listing. 

Backed by the likes of Warburg Pincus, International Finance Corporation (IFC) and Kedaara Capital, the startup last raised INR 1,000 Cr in a funding round led by Abu Dhabi-based investment firm Mubadala Investment Company in March 2024.

As per the DRHP, Avanse’s net profit rose to INR 342.4 Cr in the financial year 2023-24 (FY24) from INR 157.71 Cr in the previous fiscal year. Operating revenue grew to INR 1,726.9 Cr from INR 989.5 Cr in FY23.

Bira 91

Founded in 2015 by Ankur Jain, Bira 91 sells craft, lager and strong beers. It also sells non-alcoholic beverages.

Backed by Peak XV Partners, Sofina and DS Group, Bira 91 has raised $449 Mn in funding across multiple rounds. 

In December 2022, the startup converted into a public company and renamed itself as B9 Beverages Limited. However, the beverage startup is yet to file its DRHP with the SEBI.

In July 2024, reports said that the alco-beverage brand was planning to list on the bourses in 2026 and has roped in investment banking firm Morgan Stanley to helm its pre-IPO process.

The Delhi NCR-based beer brand reported an operating revenue of INR 824.3 Cr in the year ended March 2023, up 15% from INR 718.8 Cr in FY22. Meanwhile, net loss jumped 12% YoY to INR 445.4 Cr in FY23.

BlackBuck

Founded in 2015 by Rajesh Yabaji, Chanakya Hridaya and Rama Subramaniam, BlackBuck operates an online marketplace for inter-city full truck load (FTL) transportation. It claims to be the largest online trucking platform in India, and connects with suppliers with truckers.

The Flipkart-backed logistics unicorn filed its IPO papers with SEBI in July 2024. Its public issue will comprise a fresh issue of shares worth INR 550 Cr and an OFS component of up to 2.16 Cr shares.

Backed by the likes of Tiger Global, Accel, Peak XV Partners and Goldman Sachs, BlackBuck has raised more than $360 Mn in funding to date. 

As per its DRHP, the logistics unicorn reported a net loss of INR 193.9 Cr in FY24, down 33% from INR 290 Cr in the previous year. Operating revenues jumped 69% YoY to INR 296.9 Cr in the fiscal ended March 2024. 

FirstCry

Founded in 2010, FirstCry is an omnichannel mother and kids-focused marketplace. It sells diapers, toys, apparel and cribs, as well as provides daycare facilities and runs a chain of play schools and preschools in India.

The Pune-based startup refiled its draft IPO prospectus in April following a directive from SEBI to include key metrics in its DRHP, first filed in December 2023. The company received the market watchdog’s approval for a public listing in July.

As per the DRHP, FirstCry’s IPO will comprise a fresh issue of shares worth INR 1,816 Cr and an OFS component of 5.4 Cr equity shares.

FirstCry clocked sales of INR 4,814 Cr and reported a loss of INR 278.2 Cr in the first nine months of the fiscal year ended March 2024 (FY24).

Flipkart

Binny Bansal and Sachin Bansal founded Flipkart in 2007 and later sold a majority of the company to Walmart in 2018 for $16 Bn. Since then, the ecommerce major has become India’s biggest ecommerce marketplace and has diversified into a host of new areas, including fintech, and travel aggregation. 

The ecommerce major, which is also backed by Google, was last valued at $35 Bn during a $1 Bn fundraise that saw participation from the two investors. 

Just like its sister arm PhonePe, the company is vying for a 2026 IPO. Its B2C arm, Flipkart Internet Private Limited, reported an operating revenue of nearly INR 15,000 Cr mark in the financial year ended March 31, 2023. The marketplace arm’s operating revenue zoomed 42% to INR 14,845.8 Cr in FY23 from INR 10,477.4 Cr in FY22.

Flipkart Internet primarily earns revenue through commission charges and other services it offers to merchants, including advertising of products. Including other income, the B2C arm’s total revenue rose 41% to INR 15,044 Cr during the year under review from INR 10,640.5 Cr in FY22.

Garuda Aerospace

Founded in 2015 by Agnishwar Jayaprakash, Garuda Aerospace designs, manufactures and sells drones. Its offerings also include drone-as-a-service (DaaS) for use cases such as agriculture, defence, and mining. 

Backed by Venture Catalysts, Silver Swan Capital and Claris Capital, the startup has raised $28.2 Mn in funding till date. 

In a chat with Inc42 last year, Jayaprakash said that the company would commence its IPO proceedings post March 2024 and would list by October-November 2024.

InMobi

Founded in 2007 by Naveen Tewari, Piyush Shah, Mohit Saxena and Abhay Singhal, InMobi is an adtech platform that offers a suite of product discovery and monetisation solutions. 

Headquartered in Singapore, the SaaS startup also has offices in Bengaluru, New York, Beijing, London, Dubai, and several other locations.

Backed by the likes of Sherpalo Ventures, SoftBank and Kleiner Perkins, InMobi has raised more than $320 Mn in funding till date and was one of the first Indian new-age tech companies to enter the unicorn club in 2011. 

The SaaS startup is eyeing a public listing in India by 2026 at a valuation of about $10 Bn. However, this will not be InMobi’s first stab at an IPO. 

In 2021, it was reportedly planning for an IPO but shelved the plans due to adverse market conditions and funding winter.

MobiKwik

Founded in 2009, MobiKwik started operations as a digital wallet. Since then, it has diversified its business to offer consumer payments, buy now pay later (BNPL), and payment gateway services.

The Delhi NCR-based startup has also introduced a Soundbox-like device, called Vibe, to take on Paytm and PhonePe.

The fintech unicorn refiled its DRHP with SEBI in January to raise INR 700 Cr through a fresh issue of equity shares, down from its earlier attempt to go public in 2021 when it tried to raise INR 1,900 Cr.

Besides, the startup managed to turn profitable in the first six months of FY24. In the first two quarters of FY24, it clocked a net profit of INR 9.5 Cr against a loss of INR 83.8 Cr in the entire of FY23. Meanwhile, revenue from operations stood at INR 381 Cr in H1 FY24, nearly 70% of the startup’s INR 539 Cr top line in the entire FY23.

Ola Cabs

A brainchild of Bhavish Aggarwal, Ola Cabs operates a mobility platform that offers ride-hailing and food delivery services. 

Backed by SoftBank, Ola Cabs has raised more than $3.84 Bn in funding till date and is one of the biggest players in the country in the ride-hailing space. 

Last reported, Ola Cabs was holding talks with investment banks like Goldman Sachs, Bank of America, Citi, Kotak, and Axis to helm its IPO. As per the reports, the company was looking to raise $500 Mn via its public listing at a nearly $5 Bn valuation. 

Ola parent ANI Technologies trimmed its loss by nearly half to INR 772.2 Cr in FY23 from INR 1,522.3 Cr in the previous year. Operating revenue rose 42% YoY to INR 2,799.3 Cr .

Ola Electric

Founded in 2017, Ola Electric is an electric two-wheeler maker that currently retails a portfolio of five scooter models. The Bhavish Aggarwal-led startup is also planning to launch an electric autorickshaw in the coming days.

The Bengaluru-based startup filed its DRHP with SEBI in December last year for an INR 5,500+ Cr IPO. 

Ola Electric secured approval from the markets regulator for its much-awaited IPO in late June. As per its red herring prospectus (RHP), Ola Electric’s IPO will comprise a fresh issue of shares worth up to INR 5,500 Cr and an OFS component of up to 8.49 Cr shares.

The EV maker’s public issue will open for retail subscription on August 2 and will close on August 6. Meanwhile, anchor bidding will take place on August 1. The company has set a price band in the range of INR 72-76 per equity share for its upcoming IPO.

As per reports, the Temasek-backed startup is eyeing a valuation between $4.2 Bn and $4.4 Bn for the public listing. 

In FY24, Ola Electric’s net loss widened 7.6% to INR 1,584.4 Cr in FY24 from INR 1,472.1 Cr in the previous fiscal. Meanwhile, it reported sales of INR 5,009.8 Cr during the period under review, up 90% from INR 2,630.9 Cr in FY23.

OYO

Founded in 2012, OYO is a travel tech startup that offers vacation homes, casino hotels, coworking spaces, budget hotels, corporate stays and more. The hospitality major is also planning to launch 13 self-operated hotels under its premium brand ‘Palette’ by 2024-end.

In May 2024, the Delhi NCR-based hospitality major officially withdrew its IPO documents from the market regulator SEBI. Interestingly, this was OYO’s second attempt at a public listing. 

In early-2024, OYO was said to be looking to raise $400 Bn to $600 Bn, nearly half of its earlier attempt in 2021 when it was looking to raise INR 8,430 Cr ($1.2 Bn).

OYO narrowed its net loss by 34% to INR 1,286.5 Cr in FY23 from INR 1,941.5 Cr in FY22. Operating revenue grew 14% to INR 5,463.9 Cr in FY23 from INR 4,781.3 Cr in the previous fiscal year.  Its cofounder and CEO Ritesh Agarwal claimed that the startup reported a net profit of INR 100 Cr in FY24.

PayMate

Founded in 2006 by Ajay Adiseshann, PayMate is a full-stack supply chain payments automation platform that offers B2B payments solutions for SMEs and enterprises. 

The Mumbai-based fintech startup filed its DRHP in 2022 for an INR 1,500 Cr IPO. At the time, PayMate said that its public issue would comprise a fresh issue of INR 1,125 Cr and an OFS of INR 375 Cr. 

Eventually, the market regulator returned the company’s DRHP and asked PayMate India to refile the IPO papers with certain updates. In early 2023, the company reportedly said that it was planning to refile its DRHP but there has been no clarity on its IPO plans since then. 

In FY23, the startup trimmed its net loss by 3.5% YoY to INR 55.7 Cr in FY23. Operating revenue jumped 11.7% YoY to INR 1,350.1 Cr in FY23.

PayU

The Prosus-backed fintech major is also gearing up for a public listing in India. In October last year, the company was reportedly mulling seeking regulatory approval for a $500 Mn IPO. 

At the time, it was said that PayU had appointed Goldman Sachs, Morgan Stanley and Bank of America as advisors for the IPO, reportedly slated to happen by 2024-end. 

In  November, the then interim Prosus CEO Ervin Tu said that PayU could be ready for a public listing in India by the second half of calendar year 2024. 

As per the Dutch investor’s annual report, PayU India clocked a revenue growth of 11% year-on-year (YoY) to $444 Mn in FY24. However, this was lower than the 31% revenue growth reported in FY23 and over 40% jump it clocked in FY22.

PhonePe

Founded in 2015 by Sameer Nigam, Rahul Chari and Burzin Engineer, PhonePe is India’s biggest digital payments platform and accounts for nearly half of all Unified Payments Interface (UPI) payments processed in the country. 

Since its inception, it has morphed into a full-fledged financial services platform offering a host of digital payment services, mutual funds and insurance products to customers. The fintech major was acquired by ecommerce juggernaut Flipkart in 2016. 

Six years later, Flipkart parent Walmart set into motion its plans to hive off PhonePe as a separate entity and redomicile the fintech company back to India. In late-2022, PhonePe flipped back to its home turf, with an eye on listing on Indian bourses. 

However, in June 2024, a senior Walmart executive said that PhonePe’s IPO could take a couple of years, setting the stage for a 2026 IPO. 

The fintech major saw its consolidated net loss widen 39% YoY to INR 2,795.3 Cr FY23. Revenue soared 77% YoY to INR 2,913.7 Cr during the year under review. 

Portea Medical 

A brainchild of Krishnan Ganesh and Meena Ganesh, Portea Medical is a healthtech startup that offers services such as maternal care, physiotherapy, nursing, lab tests, counselling and critical care. 

Backed by Accel, InnoVen Capital, Alteria Capital and British International Investment, Portea Medical has raised more than $92.3 Mn across multiple rounds till date.

The healthtech startup filed its IPO papers in July 2022 for an INR 800 Cr IPO. As per its DRHP, the IPO then comprised a fresh issue of equity shares worth INR 200 Cr and an OFS component of up to 56.25 Mn shares.

In April 2023, it received approval from the market regulator to go ahead with the public listing on the BSE and NSE. However, there have been no further updates on its IPO plans.

Portea Medical posted a net loss of INR 53 Cr in FY23, up from INR 40 Cr in the previous year. Revenue from operations declined 3.3% YoY to INR 145 Cr during the year under review. 

Smartworks

Founded in 2016 by Neetish Sarda and Harsh Binani, Smartworks is a shared workspace provider that offers customisable coworking solutions for enterprises. 

The startup has raised $41 Mn in funding till date and is backed by the likes of Ananta Capital, Keppel Land and Plutus Capital. 

Taking the first step towards its IPO, the startup turned into a public company in July 2024 and changed its name to Smartworks Coworking Spaces Ltd from Smartworks Coworking Spaces Private Ltd previously.

It reported a net loss of INR 101 Cr in FY23, up 44% YoY. Meanwhile, operating revenue nearly doubled to INR 711 Cr during the year under review from INR 360 Cr in FY22. 

Swiggy

Swiggy commenced operations as an online food delivery platform in 2014. In 2020, it also entered the grocery delivery business with Swiggy Instamart. 

Now, the Bengaluru-based startup has begun diversifying beyond the quick commerce grocery business. Swiggy Instamart now also offers high-value products, allowing shoppers to order fitness and electronics devices. 

Swiggy filed its DRHP with markets regulator SEBI via the confidential pre-filing route for an IPO worth INR 10,414.1 Cr ($1.2 Bn) in April. The IPO will include a fresh issuance of shares worth INR 3,750.1 Cr (about $449 Mn), and an OFS of INR 6,664 Cr (about $799 Mn), as per regulatory filings. 

On top of that, Swiggy is also looking for a INR 750 Cr pre-IPO funding round. 

Swiggy reportedly posted a net loss of $207 Mn (INR 1,730 Cr) during the first nine months of FY24 as against a net loss of INR 4,179.3 Cr in FY23. Revenue from operations stood at $1.02 Bn (around INR 8,505 Cr as per current exchange rates) during April-December 2023, as compared to INR 8,264.4 Cr in the entirety of FY23.

Ullu

Founded by the husband-wife duo of Vibhu Agarwal and Megha Agarwal, Ullu Digital is a Mumbai-based OTT platform that deals with the distribution, promotion, exhibition, marketing and delivery of video content on its streaming platform Ullu. 

It filed its DRHP with the BSE SME for an IPO in February this year. As per the draft papers, the company’s IPO would comprise a fresh issue of 62.63 Lakh shares and would not have OFS component.

Ullu Digital plans to raise INR 135-INR 150 Cr via the IPO, which, if approved, would become the biggest SME IPO till date. 

The platform plans to use the net proceeds raised via the IPO to meet its expenses for production of new content, purchase of international shows, tech investment, and to meet the working capital requirements.

While Vibhu Agarwal holds a 61.75% stake in Ullu Digital, Megha Aggarwal owns 33.25% of the company. 

In March 2024, the OTT streaming platform came under the scanner of multiple government authorities including SEBI, the Ministry of Corporate Affairs and the Ministry of Electronics and Information Technology (MeitY) for allegedly selling “pornographic” content using school children.

Unicommerce

Founded in 2012 and acquired by Snapdeal in 2015, Unicommerce is an ecommerce SaaS startup that enables sellers to manage their inventory across all online marketplaces. It offers integrations with all major ecommerce platforms active in India.

Unicommerce filed its DRHP in January and received regulatory approval on July 1. The startup plans to sell up to 2.98 Cr shares through the IPO route.

The SoftBank-backed startup’s IPO will only have an OFS component, with no fresh issuance of shares. 

Unicommerce’s net profit stood at INR 6.3 Cr in H1 FY24. In FY23, the startup clocked a 8% jump in its net profit to INR 6.4 Cr as against INR 6 Cr in the previous fiscal year. 

Meanwhile, the ecommerce SaaS startup reported an operating revenue of INR 51 Cr in H1 FY24. In FY23, the startup’s operating revenue shot up 52% to INR 90 Cr from INR 59 Cr in FY22.

Zappfresh

Founded by Deepanshu Manchanda and Shruti Gochhwal in 2015, Zappfresh is a D2C meat startup that supplies meat from farms to customers within 90 minutes. 

Taking its first step towards IPO,the startup converted into a public entity in April 2024 after dropping “private” from its name. As per its RoC filings, the company changed its name to DSM Fresh Foods Limited from DSM Fresh Foods Private Limited previously. 

Last Updated: July 30, 10:00 AM IST

The post Indian Startup IPO Tracker 2024 appeared first on Inc42 Media.

“We will try everything possible to get your pending salaries, even if it requires liquidating assets,” Kumar Sangeetesh, cofounder and CEO of 1K Kirana said in the last week of May 2024. 

Just 30 odd employees were left in the kirana tech startup, which just in August last year had over 1,000 employees. Several of these employees told Inc42 that this was the day when 1K Kirana all-but shut shop.

Sources say that the startup which began operations in 2019 — at the peak of the kirana tech wave — is on the verge of shutting its operations and is currently staring at possible bankruptcy. To avoid one of these outcomes, 1K Kirana is also said to have held talks with other startups in the kirana tech space. Following these talks, Info Edge-backed ShopKirana is close to acquiring 1K Kirana, multiple sources claimed.

CEO Sangeetesh confirmed that the startup has had to halt supply chain operations to save costs, but insisted that the tech platform is operational. He further claimed that the startup is exploring all the potential options and “will not need to file for bankruptcy.” 

But Inc42 found that 1K Kirana’s website isn’t functional, and its Android and iOS apps seemed to be malfunctioning and remain unusable. For instance, the app didn’t allow new user sign-ups and returned an error when we tried to register. 

The company did not respond to questions about the acquisition deal with ShopKirana or other startups. Incidentally, Info Edge is also an investor in 1K Kirana. 

The tale of 1K Kirana mirrors what we have seen unfold in the Indian startup ecosystem throughout 2022 and 2023. Products and models born during the pandemic soon became irrelevant. This is most evident in the consolidation and pivots within the kirana tech space. 

Plus, the entry of large B2B ecommerce players in the kirana procurement chain has made it harder for startups to compete. But this was not the case in 2020 and 2021, when many of them raised large rounds. 

In the six years since inception, 1K Kirana has raised over $32 Mn (INR 250 Cr+) in funding across multiple rounds from the likes of Info Edge, Alpha Wave, Kae Capital, and a few angel investors. 

The startup’s pitch was centred around modernising kiranas by solving their supply chain and financing woes. In the heyday of kirana tech, 1K Kirana managed to sign up as many as 1,000 stores before the model crumbled. 

The startup is alleged to have overestimated the capabilities of its team in managing this network and recklessly invested in warehouses without an established presence in certain markets, ultimately resulting in a poor product experience for kiranas, and mass layoffs. Today, the company is looking at a stack of pending bills from vendors and salaries of employees, besides a fire sale.

Before we move ahead, let’s talk about what 1K Kirana does.

The 1K Kirana Model

Founded in 2018 By Kumar Sangeetesh, Sachin Sharma and Abhishek Halder, 1K Kirana (formerly called NiyoTail) claimed to enable kirana and mom-and-pop stores establish a presence online and expand their reach.

The primary business model involved procuring products from FMCG brands and selling them to retail stores within a 24-hour window, a concept already implemented by companies like Udaan, Dealshare, ElasticRun, Jumbotail, among others. 

Where 1K Kirana differentiated itself was in onboarding retail stores primarily in Tier-II cities using a franchise model. The startup’s key offerings included onboarding these stores to its platform then renovating and rebranding them entirely with 1K Kirana’s branding. 

Under this model, the startup also covered fixed costs for running these stores, including up to 50% of rent and electricity expenses. Furthermore, the startup provided a point of sale (PoS) device to accept digital payments and managed inventory for these stores. 

On the consumer side, 1K Kirana’s app allowed buyers to keep an eye on the products available in the neighbourhood partner or franchise store.

Besides, the startup claimed it could drive demand and foot fall to these stores through marketing and promotional campaigns. 

While 1K Kirana maintained complete control over the supply chain and pricing, the store owners earned commissions from 1K Kirana after selling products to consumers. 

1K Kirana earned through the margin between buying from FMCG brands and selling to kiranas.

With that said, 1K Kirana realised that making money in the grocery business is challenging due to razor-thin margins. However, the startup realised the only way to increase its topline was to expand its operations to enter new markets, which required funding.

2022: The Year Of Scaling Up

It’s easy to forget the mania around kirana tech in 2020. Four years later, many of the startups in this space are on the brink of irrelevance as the digital transformation wave among retailers has slowed down, and most of this market has been cornered by large scale players such as Udaan, JumboTail, and others. 

1K Kirana onboarded its first store in January 2020 in Rewari, Haryana, and quickly grew to 100 franchise stores within a year. Building on this rapid growth, the startup secured $7 Mn in Series A funding in August 2021. Soon after the funding, it launched private labels for wheat, mustard oil and flattened rice (poha) under the Farm Gold brand and ventured into non-grocery items through 1K Mall to add to its topline. 

Building on this proposition, in 2022, the startup raised a much larger $25 Mn in Series B funding round. “After April 2022, the startup was growing on steroids. It hired aggressively, set up new warehouses, and entered new regions to capture market share,” according one of our sources who was with the company till September 2023. 

The workforce shot up by roughly 4x in 2022 to around 1,000-1,200 payroll employees. It also hired hundreds of off-roll or contractual employees to look after their warehouses.

By 2022, the company claimed to have 1,000 stores across 25 districts in the Delhi NCR region and Harayana, which grew to around 1,400 stores soon after the Series B round. The startup wanted to cover over 100 districts and make inroads into Punjab, Rajasthan, and parts of Uttarakhand. 

To support these plans, the startup established additional warehouses. From a single warehouse in Gurugram, 1K Kirana established a 1 Lakh sq ft warehouse near Sonipat, followed by another in Punjab with double the capacity, and then another in Jaipur. Backing these were 10 distribution centres to streamline last-mile deliveries. 

In a 2022 interview, Sangeetesh said that warehouse capacity had grown from 2 lakh sq ft in to 6 lakh sq ft in the year, and the expansion paid off when it comes to the FY23 financial performance:

Despite the healthy revenue growth, 11 months after raising $25 Mn, 1K Kirana made the decision to scale back. 

By the end of Q1 FY24, the startup delisted around 200-250 stores, shut operations in several areas, and underwent a massive layoff impacting hundreds of employees. So what went wrong?

2023: The Year Of Regression

To answer what went wrong, we must first answer the question of what went right. From our conversations with sources — former employees of the company — it’s clear that the company was only growing rapidly because it had the funds to acquire new kiranas and expand its network. 

As soon the funding tap went dry, 1K Kirana was in a spot of bother. It had built up massive warehousing capacity, but all of a sudden without the capital base to set up new franchise stores, growth hit a wall. 

“The entire organisation knew about the second tranche of investment,” said one source, who added that the $25 Mn raised in Series B was just the first tranche for a full round of $50 Mn. This was supposed to come in at the end of 2022, but never materialised. Instead it received a much smaller cheque of around $4 Mn in August 2023. Existing shareholders invested in the company at a $45 Mn valuation, 60% marked down valuation from $110 Mn in 2022. 

Without the full second tranche, the company immediately looked to save costs and control its negative contribution margin. Sources indicated that the startup brought on new customers on occasion at a loss, hoping to retain them in the long run. 

However, this model only works if the company is able to continually offer low procurement rates to kiranas, which 1K Kirana did not achieve. 

The company’s management opted for larger warehouse space in anticipation of future demand, which never came, and so the company began scaling back and downsizing its warehouse capacity. 

“1K was working to build supply before it had the demand. Without studying the market or leveraging data, the startup set up warehouses, and then looked to partner with stores, hoping that this way it would capture the market eventually. But most other companies would have only set up a warehouse after establishing a distribution centre first,” added a former employee who looked at the logistics operations in the startup. 

Besides this, there were high operational costs that ultimately forced the company to delist some stores. As previously mentioned, the startup had to cover the marketing expenses for these stores, while also paying rent, utility bills and other costs to keep the stores running.

“There were instances where the stores were inside residential premises. So 1K Kirana was spending money to grow these stores without getting any revenue in return,” added another source. 

Former employees also allege that warehouses were also not established in the right zones, leading to higher service and supply costs. Several stores quit the platform due to unsatisfactory service, sources claimed.  

By early 2023, the company had delisted around 200 stores from its platform after shutting down warehouses and distribution centres. It was also forced to lay off 70% of its workforce or nearly 800 employees en masse in March-April 2023. 

Cofounder Sangeetesh confirmed the scaling back of the business, “We received the first tranche and we started growing very fast leading to high burn which was brought under control by the end of Dec ’23. But, by that time funding winter had already set in, leading to the second tranche not coming in. Hence, business was cut by 75%, leading to layoffs and valuation was cut in the bridge [round] that we raised in August 2023.”

There were other challenges in terms of collections from franchise stores. Many of them paid sales representatives directly instead of the company, as per our sources. Some stores existed only on paper or did not have the capacity to actually sell products they procured. 

Products were also dispatched to non-existent stores, and the company covered electricity and rent expenses for addresses where no stores existed. Inc42 couldn’t verify several of these allegations independently.

However, CEO Sangeetesh vehemently denied these allegations and said that rumours of corporate governance lapses are unfounded. He also claimed that the company was audited by one of the Big Four firms and it received a clean “due diligence” report. 

He further stressed that the store onboarding process was done with proper KYC documents and geo-tagging of stores. 

Meanwhile, several hundreds of employees are awaiting severance pay and final settlement. Other employees asked to take pay cuts last year are awaiting ESOPs which were promised as compensation for the lower pay. 

Sources claim not all employees received the ESOPs, and even when they did, it was 10 months after the pay cut. With the company staring at a distress sale, will these ESOPs even be worth anything? 

Questions sent to 1K Kirana’s investors didn’t elicit any response at the time of publishing this story. 

Desperate Times Call For Desperate Pivots 

It was only after the layoffs, that 1K Kirana reassessed its strategy and made several significant changes. 

First, it reduced the number of new stores in the franchising model and only brought them on after greater scrutiny. Secondly, it raised the minimum order value for kiranas when they placed a procurement order. 

Thirdly, it limited the number of SKUs it was offering significantly, so that it could get the best pricing from manufacturers by restricting demand to specific products. 

And finally, most importantly, it expanded beyond the franchise model to start selling products to stores that were outside the 1K Kirana network.  Moreover, the startup also onboarded wholesalers to its platforms to clear out inventory. 

“We just became another B2B grocery delivering startup in the space. We were trying to differentiate from Udaan and others in the space, but ended up becoming just like them,” said another person on the condition of anonymity. 

The downsizing of the network meant 1K Kirana’s procurement volume fell and it couldn’t get the best pricing possible from FMCG companies. Consequently, it couldn’t offer the discounted rates for procurement which it relied on to woo kiranas. 

Many of the kiranas switched to other players with deeper pockets who could bear the costs of discounts or who had better leverage in price negotiations with FMCG companies. 

The cost saving measures sent 1K Kirana on a spiral of deteriorating service quality and attrition of stores, leading to the startup looking for saviours in any shape or form.

Inc42 learnt that 1K Kirana held discussions with Indore-based ShopKirana, which operates in the same industry. Questions sent to ShopKirana didn’t elicit any response.

Given the situation at 1K Kirana, it’s looking like a distress sale where some investors in the startup might recover some portion of their investment. Info Edge is an investor in both these companies.

CEO Sangeetesh acknowledged that 1K Kirana is up for sale, but didn’t specify any other details. The CEO told Inc42 that in a bid to raise capital after lowering the expenses, the startup signed a share subscription agreement with its investors in August 2023. However, an unnamed investor backed out, causing the deal to collapse.

“Sangeetesh tried everything to make this work. But it is unfortunate that it had to end,” said another source who left the company earlier this year. 

The End Of Kirana Tech?

Even during the peak of the pandemic, it was clear that some business models would fall by the wayside once the worst of Covid is over. The end of kirana tech mirrors the pain suffered by edtech, where a number of startups emerged whose business models only seemed to have PMF during the pandemic. 

The shutdowns and pivots in edtech from online to offline business models, is also similar to how kirana tech players have morphed from supply chain models to ecommerce SaaS in many cases. 

Even B2B ecommerce unicorn Udaan, which launched in 2016 and has raised over a $1Bn in funding is yet to break even. 

Tiger Global-backed unicorn Dealshare, which has raised nearly 10X of 1K Kirana’s funding, is in hot soup and has already shut its B2B vertical.

Besides 1K Kirana, the kirana tech peak created the likes of Dukaan, Aarzoo, Kirana King, ShopKirana, Peel-Works, Khatabook’s MyStore, Dotpe’s DigitalDukaan, OkCredit, Bikayi, Magicpin and many more. Many of these have either pivoted to other models — including Dukaan, Aarzoo, Bikayi — while the likes of Peel-Works have scaled down, as per reports.

Moreover the entry of giants like JioMart and Tata into the retail supply space has made it even more challenging for players such as Udaan, Dealshare, 1K Kirana, among others. The emergence of quick commerce has also destabilised kirana businesses in many metro and Tier 1 locations. 

In such a market, it’s not surprising that kirana tech’s long tail is falling away. Unfortunately for 1K Kirana, the depth in the market means that growth expectation will always remain high, but in the current climate, this has to be demonstrated without too much reliance on VC funding. 

As things stand, it seems next to impossible for any investor to pump in significant capital to revive the startup. The founders and investors can only hope to find an acquirer as a saviour for the company, but will that mean employees will get paid the salary backlog? 

Another complication is whether 1K Kirana has a tech stack that will attract the right bids. RIght now, there is no talent left in the startup, so it is more likely going for a brand or tech-led acquisition. 

[Edited by Nikhil Subramaniam]

The post 1K Kirana Collapse: Bankruptcy, Distress Sale Loom for Info Edge-Backed Kirana Tech Startup appeared first on Inc42 Media.

The likes of Groww, Zerodha, Angel One and others have seen unprecedented growth in the past couple of years, adding millions of active investors to their platforms. But this good run has seen two separate setbacks this month.

On July 1, SEBI decided to halt the zero-brokerage facility on discount broking platforms such as Zerodha, Groww, Upstox, among others, a move that was largely seen as tackling the massive surge in futures and options trading.

The second setback came via this week’s Union Budget (see highlights from our coverage below.) A hike has been proposed in capital gains tax and securities transaction tax. We’ll delve into why these taxes were hiked, but common sense dictates that retail investors are more likely to think twice about how much they now want to invest.

Together, these two developments threaten to disrupt the investment tech gravy train, and the risk of Jio Financial Services coming in and grabbing the market cannot be underestimated. So what happens to the top two players — Groww and Zerodha?

Let’s find out, after we go through the top stories from our newsroom this week:

• Josh Fizzles Out: VerSe Innovation’s Josh is faltering after failed monetisation models, 80% YoY dip in monthly downloads and 50% decline in monthly active users. Will it drop off like other short video apps?
• The Soothe Story: What’s surprising about women’s hygiene startup Soothe Healthcare entry into the INR 100 Cr revenue club is how it got there despite not playing by the rules of the D2C game. Here’s why

Budget Blues For Groww, Zerodha

Before we get to the impact from SEBI’s changes, let’s see what changes for Groww, Zerodha and others after the Union Budget.

The finance minister proposed increasing the rates of STT from 0.0625% to 0.1% on options and from 0.0125% to 0.02% for futures. Short term gains on certain financial assets will attract a tax of 20%, whereas the long term capital gains on all financial and non-financial assets, on the other hand, will attract a tax rate of 12.5%.

Many have called the budget a deathblow to the rapidly growing investment tech space as retail investors reassess their exposure to taxes.

Industry experts believe that this will largely impact F&O trading, which has seen exponential growth in the past year. As per the latest SEBI’s monthly bulletin, the equity derivatives volumes of the two bourses saw a whopping 71% YoY growth to INR 9,504 Lakh Cr in May 2024.

This growth has coincided with investors flocking to discount broking platforms. Groww now boasts over 10 Mn active investors as of May 2024, with Zerodha trailing at 7.5 Mn and Angel One not far behind at 6.5 Mn.

F&O and intra-day traders contributed to the revenue and user growth (more than 80%) for discount broking platforms such as Zerodha, Groww and Angel One, as per industry sources.

• Zerodha’s operating revenue grew 37% to INR 6,832 Cr in FY23 — fees and commission charges accounted for 84% of this total.
• Groww’s operating revenue more than tripled to INR 1,277.8 Cr in FY23, with the company breaking into profits. A whopping 95.9% of its revenue came from subscriptions and commissions fees in FY23.
• For publicly-listed Angel One, broking fees constituted 65% of the overall revenue in Q1 FY25.

The tax shock is likely to pull back the growth in FY25 to some extent, when combined with the hike in STT.

Zerodha cofounder and CEO Nikhil Kamath tweeted on budget day that the STT increase could increase tax collections by up to 66%, if trading volumes don’t drop. Kamath expects this to go up to INR 2,500 Cr annually from October, based on 2023 volumes.

Though he did not elaborate on how or whether this will affect trading activity, others say the budget has all but ended the frenzy around F&O, intra-day trading.

“Zerodha contributes 20% to the retail trading volumes of stock exchanges in India. Groww’s active user base was more than 11 Mn in June. Broking companies which have the highest market shares will get hit the hardest by these changes,” a Bengaluru-based wealth management app’s founder told Inc42 this week.

SEBI’s Slap

Now let’s step back to early July when SEBI asked MIIs such as broking platforms to levy a uniform exchange fee, irrespective of volume or turnover. They can no longer offer any rebate to traders for bringing in more volume through their platforms.

The regulator pressed ahead with the change as many platforms were nudging retail traders towards F&O trading. This is expected to push up the brokerage costs especially for investors who have become habituated to zero or near-zero fee structures.

Here’s how it used to work: Stock exchanges impose a transaction fee on trades executed on their platform, which they charge to brokers on a monthly basis. This fee constitutes the main revenue stream for any stock exchange such as NSE or BSE. In Q4 FY24, for instance, 74% of NSE’s revenue came from income from transaction fees.

While the exchange applies these transaction fees on a monthly basis, broking platforms charge their clients fees on a daily basis. The difference between the collected fees and the actual fees paid to the exchange is the net margin for the broking platform. Suffice to say, driving traffic on a daily basis is important for these platforms from the point of view of overall profitability.

“A majority of new investors in India prefer discount broking platforms such as Zerodha or Groww or Upstox or Paytm Money because of the zero-brokerage model. But now we have to let go of the zero-brokerage structure and increase brokerage for F&O trades from October 1,” said the cofounder of a Bengaluru-based discount broking platform.

In fact, zero brokerage was a USP, but now it’s gone. In the case of Zerodha, the change is expected to have a 10% impact on revenue, according to CEO Kamath.

The founder quoted above said platforms have lost the incentive to generate huge turnovers as this directly impacts margins at scale. The market making activity will be adversely impacted in the long term. Brokerage fees will also rise in the long run because intermediaries such as depositories and advisories will attempt to recover revenue losses.

Jio Waiting To Pounce

What will be really interesting to see is where the three largest platforms ended up in FY24 after flying high in FY23. If anything, we expect revenue to be at record levels for all the players due to the boom in F&O trading.

The financial performance is going to be even more under the spotlight when Jio Financial Services enters the market. Competition in this space is only growing, and existing players were all extremely bullish about growth — at least before July 2024.

Paytm is redoubling its efforts on this front as it looks to diversify revenue reliance on payments.

Walmart-owned PhonePe continues to press the accelerator on its investment platform Share.Market, which is a key part of its super app plan. CRED acquired investment tech startup Kuvera in January to enter the fast-growing wealth management space and expand its platform play.

As we wrote a few weeks ago, Zerodha, in particular, has lost pace to rivals such as Groww and Angel One. With IPO season in full swing (at least for the new-age tech companies) and likely to continue well into 2025, investor activity was expected to surge as these platforms competed for every trade.

What happens now after the double blow of SEBI changes and the changes from the budget? A stormy July has left Zerodha, Groww and every other player at a disadvantage after the boom of the past two years.

Best Of The Union Budget 2024-25

• Nirmala Sitharaman’s budget signalled that the government is looking at startups not as a separate class of businesses but as a key component of the business landscape at large. Here are the key takeaways
• Angel tax was an albatross across the neck of all Indian entrepreneurs for 12 years, and now the battle has been won, writes 3one4 Capital founding partner Siddarth Pai
• The INR 1,000 Cr VC fund for space tech shows the government’s faith in the space economy, and is a strong validation for the innovation in the sector, according to Vishesh Rajaram, managing partner at Speciale Invest
• While the abolition of angel tax has come as a big relief, now the government needs to dismiss pending cases, urges Mohandas Pai, the former CFO of Infosys and partner at Aarin Capital

Sunday Roundup: Tech Stocks, Startup Funding & More 

• Weekly investment activity fell to a new low for 2024, as just $43 Mn was invested into Indian startups this week. Effect of the Union Budget?
• The blame game continues in the WazirX crypto heist as the company pointed at digital asset management platform Liminal as being the weak link, which in turn laid the fault at WazirX’s doors

• Electric vehicle maker Ola Electricis is set to open its IPO on August 2 and has filed its red herring prospectus in preparation for the public listing
• Apple is set to begin manufacturing high-end iPhone Pro and Pro Max models in India, starting with iPhone 16 series, as it looks to further move production away from China

The post Zerodha, Groww In Revenue Storm  appeared first on Inc42 Media.

India is renowned for its rich culinary delights, with each state offering a diverse array of food and beverage (F&B) experiences. Despite this, the Indian palate craves more for fresh and exotic cuisines and flavours.

With over 140 Cr people having such affinity for a variety of food and beverages, Indian entrepreneurs have seemingly found a lucrative market, which, as per Inc42, is expected to grow to $68 Bn by 2030. Notably, startups have picked up this opportunity by catering to the requirements of people, through the D2C channels.

According to Inc42’s Findings From Inc42’s Hunt For India’s Fastest-Growing D2C Brands analysis, while the beauty and personal care segment is estimated to exhibit a CAGR of 28.6% by 2030 in the Indian D2C market, it is closely followed by the F&B industry with 27% CAGR.

From established brands like Pedigree Petfoods, Amul, Baskin Robbins, and McDonald’s to startups like iD Fresh Foods, Chaayos, Coolberg, and Paper Boat, there is no dearth of choices for Indian consumers, and still, there is enough headroom for both the existing and new players to flourish in the sector.

The above statement can be substantiated by the fact that several F&B startups, including Blue Tokai Coffee Roasters, Plix, Pluckk, and TagZ have been making waves in the industry, backed by investors’ trust.   

The influx of new startups with innovative product ranges has revitalised the sector, prompting Inc42 to compile a list of the F&B brands that are disrupting the Indian market.

With that said…

Here Are The F&B D2C Brands Reshaping The Indian Consumer Market

(Note: The list below is not meant to be a ranking of any kind. We have listed the Indian F&B startups in alphabetical order.)

1. Beyond Snack

• Year Of Inception: 2018
• Founders: Manas Madhu, Jyoti Rajguru, Gautam Raghuraman
• Funding Raised To Date: INR 33 Cr
• Investors: NABVentures, 100X.VC
• Headquarters: Kerala

Beyond Snack was incorporated to commercialise the popular South Indian snack, banana chips. The startup claims its banana chips are healthy because the nutrients are preserved during the manufacturing process. 

The bananas are sourced directly from farmers and the chips are prepared in under two minutes to retain their natural nutrients, unlike the usual 15-20 minutes of frying. This ensures the products go from farm to plate in less than 24 hours.

To ensure availability across the country, the startup has opened warehouses in Mumbai, Delhi, and Kolkata. As an omnichannel brand, its products are available on ecommerce platforms like Amazon, Flipkart, BigBasket, and Zepto, as well as in over 10,000 retail outlets, including DMart and Reliance stores.

Beyond Snack aims to become a leader in the banana chips market and reach INR 100 Cr in revenue by FY25.

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2. Boba Bhai

• Year Of Inception: 2023
• Founder: Dhruv Kohli
• Funding Raised To Date: INR 12.5 Cr
• Investors: Titan Capital, Arjun Vaidya, Varun Alagh
• Headquarters: Bengaluru 

Launched as a passion project by Dhruv Kohli in late 2023, Boba Bhai has swiftly become a notable player in the bubble tea market, capitalising on the growing trend for this popular Taiwanese drink.

Offering a diverse range of products priced between INR 99 and INR 219, Boba Bhai sets itself apart with its broad product selection and user-centric approach, distinguishing itself from competitors like Chai Point and Cha Bar.

In just one year, the startup has built a substantial customer base of over 4 Lakh and achieved revenues of INR 8 Cr. With plans to significantly expand its presence, Boba Bhai aims to increase its offline footprint to 80-100 stores by the end of 2024, seeking to further boost its revenue and market reach.

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3. Burger Singh

• Year Of Inception: 2014
• Founders: Kabir Jeet Singh, Nitin Rana, Rahul Seth
• Funding Raised To Date: INR 30 Cr + undisclosed
• Investors: RB Investments, Rukam Capital, KCT Family Office, and V.M. SALGAOCAR family office
• Headquarters: Gurugram

Established in 2014 by Kabir Jeet Singh, Nitin Rana, and Rahul Seth, Burger Singh is a Gurugram-based quick-service restaurant (QSR) chain.

In 2019, the company secured an undisclosed amount of funding from RB Investments, based in Singapore. Subsequently, in 2022, Burger Singh successfully raised INR 30 Cr in its Series A funding round. The round was led by Negen Capital, accompanied by LetsVenture, Mumbai Angels, Old World Hospitality, and musician Jasleen Royal.

Following the fundraising in 2022, the fast-food chain announced its plan to utilise the funds for opening 120 new food outlets by the end of FY23.

As of July 2022, Burger Singh boasted more than 80 exclusive food outlets and 12 franchisees across various locations in India.

In the competitive QSR industry, Burger Singh faces competition from well-known brands such as Burger King, McDonald’s, Subway, Domino’s, and KFC.

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4. Chaayos 

• Year Of Inception: 2012
• Founders: Nitin Saluja, Raghav Verma 
• Funding Raised To Date: $98 Mn
• Investors: Alpha Wave Ventures, Elevation Capital, Think Investments, Tiger Global, Integrated Capital, SAIF Partners, InnoVen Capital, Pactolus, Sachin Shukla, Bhavish Aggarwal, Ankit Bhati
• Headquarters: Delhi

F&B brand Chaayos sells multiple types of teas and pre-packaged food products via offline and online marketplaces and uses new-age technologies like AI and IoT to run its operations efficiently.

Earlier, it had shared that its online tea deliveries account for 45% of its revenue. It operates 190 retail outlets across six Indian cities. In June 2022, it secured $53 Mn in its Series C funding to develop tech infrastructure and expand its presence.

Its cap table includes Alpha Wave Ventures, Elevation Capital, Think Investments, Tiger Global, SAIF Partners, InnoVen Capital, Pactolus, and Ola cofounders Bhavish Aggarwal and Ankit Bhati, among others.

Chaayos’ FY22 revenues rose 2.4X YoY to INR 134.9 Cr, while its total revenues stood at INR 140.2 Cr during the period under review.

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5. Charcoal Eats

• Year Of Inception: 2015
• Founders:  Krishnakant Thakur, Anurag Mehrotra, Mohammed Bhol
• Funding Raised To Date: $9.8 Mn+
• Investors: Lokmat Media, Girish Patel, Anil Singhvi, Ajinkya Firodia
• Headquarters: Mumbai

Founded in 2015, Charcoal Eats is a quick-service restaurant chain that delivers “high quality, consistent, authentic, modern Indian flavours to its patrons across the country across snack and meal times at affordable prices” via its app. 

The company operates brands such as Charcoal Eats for Biryani and B Burger across Mumbai, Pune and Delhi NCR.

While the company started with six biryani variants, the company claims to be offering 50 different all-day food options across snack and meal times, that include biryanis, starters, curries, rice bowls, rolls among others.  

It has around 40 outlets, mostly cloud kitchens, across Mumbai, Pune and Delhi-NCR.

Through these outlets, customers can dine-in, take-away or order for delivery, as per their convenience. Charcoal Eats is also available on leading food platforms, Zomato and Swiggy. It also recently launched a new product line under the brand name Khichdibaba.

Among QSR restaurants, Charcoal Eats competes with Wow! Momo Foods, Faasos and Hello Curry, among others. 

The startup recently raised $5.3 Mn to boost its brand operations and expand its footprint across India and overseas.

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6. Coolberg 

• Year Of Inception: 2016
• Founders: Pankaj Aswani, Yashika Keswani
• Funding Raised To Date: $3.5 Mn
• Investors: RB Investments, India Quotient, Ashish Goenka, Indian Angel Network
• Headquarters: Mumbai

Coolberg is a non-alcoholic beer brand, which sells cranberry, peach, ginger, malt, strawberry, mint, and cranberry beverages via its website and offline distribution channels. Currently, it has a presence in India, Africa, Maldives, Bhutan, and Nepal. 

In 2019, Coolberg raised $3.5 Mn in its Series A funding round from RB Investments, India Quotient, Ashish Goenka from Suashish Diamonds, and Indian Angel Network. Prior to that, it bagged an undisclosed sum from India Quotient and Indian Angel Network’s maiden fund.

The beverage startup was acquired by Ghodawat Consumer in 2022 for an undisclosed amount. The startup said that this acquisition would help it develop a portfolio of new-age premium beverage brands as part of the deal. 

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7. Desi Farms

• Year Of Inception: 2022
• Founders:  Sunil Sahi 
• Funding Raised To Date: $6 Mn
• Investors: NAV Capital Emerging Funds, Venture Catalysts, Cummins India’s founder and MD Ashwath Ram
• Headquarters: Pune

Founded in 2022 by Sunil Sahi, the Maharashtra-based farm-to-table D2C brand offers fresh and chemical-free milk and dairy products.

Currently operational in Pune, the brand claims to offer milk within 12-24 hours of the milking process. Other than milk, its product category includes A2 milk, ghee, paneer and more, with each product passing through 20 quality checks. 

It has developed a tech-enabled in-house system, which takes care of production, delivery and franchise modules to ensure product provenance, tracking the entire journey from farms to customers.   

Desi Farms has an omnichannel presence. Its products are sold via its app and portal, on ecommerce marketplaces under the Manchar Farms brand and through 50+ Desi Farms outlets. 

Since inception, it has secured INR 50 Cr funding from investors like NAV Capital Emerging Funds, Venture Catalysts, Cummins India’s founder and MD Ashwath Ram, among others. 

The startup also made it to the list of Inc42’s latest edition of Fast42.

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8. Dogsee Chew

• Year Of Inception: 2015
• Founders:  Bhupendra Khanal, Sneh Sharma 
• Funding Raised To Date: $13.9 Mn  
• Investors: Mankind Pharma, Sixth Sense Ventures
• Headquarters: Bengaluru

Dogsee Chew offers vegetarian dog treats that are natural, human-grade, and protein-rich. These treats are made from yak milk cheese by residents of villages in Nepal, Sikkim, and Darjeeling. 

Earlier this year, the startup secured $6.7 Mn in its Series A funding round from Mankind Pharma and Sixth Sense Ventures.

In November 2021, it raised $7 Mn in its Pre-Series A funding round from Sixth Sense Ventures. Currently, it has a presence in over 30 countries. 

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9. DropKaffe

• Year Of Inception: 2019
• Founders: Rakshit Kejriwal, Lakshmi Dasaka, Chaitanya Chitta  
• Funding Raised To Date: $1.7 Mn 
• Investors: Fireside Ventures, Brigade Group, GrowthStory, Sidharth Pansari, Nirupa Shankar, Hitesh Oberoi, Kanwaljit Singh, Apurva Salarpuria, Manish Singhal P39 Capital
• Headquarters: Bengaluru

Beverage startup DropKaffe sells ready-to-drink cold coffee, fresh coffee beans, coffee powders, and gourmet foods under the brand SLAY Coffee through its website and cafe chains.

According to its LinkedIn page, the startup has a presence in over 160 locations across 19 Indian cities.

In 2016, its parent company raised $550K in a funding round led by Fireside Ventures’ Kanwaljit Singh, Srini Anumolu & Meena Ganesh of GrowthStory, Apurva Salarpuria from Salarpuria Group, Sidharth Pansari from Primac, Rahul Gidwani, Hitesh Oberoi from Naukri, Nirupa Shankar from Brigade Group, and Bhupen Shah also participated in the round. 

The venture claims to serve more than 500K customers across 20 cities across the country.

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10. Eat Better

• Year Of Inception: 2020
• Founders: Mridula Kanoria, Shaurya Kanoria  
• Funding Raised To Date:  $725K
• Investors: Java Capital, Mumbai Angels, Shiprocket Ventures, CapierCapital, Plan B Capital, Harpreet Grover, Arjun Vaidya, Bhavik Vasa, Radhika Ghai, Vishesh Khurana, Bimal Kartheek Rebba, Ishank Joshi, Venus Dhuria, and Divij Bajaj
• Headquarters: Jaipur

Organic food startup Eat Better sells healthy snacks such as coffee and almond laddoos, hazelnut chocolate laddoos, and vanilla, and cacao laddoos, among others, through its website and other ecommerce platforms. 

The startup has a manufacturing facility in Jaipur and manages a base of over 50 female employees.

In March 2022, it secured INR 5.5 Cr seed funding to strengthen its team, expand offerings and develop marketing and distribution channels. 

A slew of investors, including Java Capital, Mumbai Angels, Shiprocket Ventures, CapierCapital and Plan B Capital, participated in the funding round.

Earlier, it claimed to have reported over 10x growth in revenues between October 2020 and March 2022.

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11. Farmley

• Founded In: 2017
• Founders: Akash Sharma, Abhishek
• Funding Raised To Date: $12 Mn+
• Investors: BC Jindal Group, Alkemi Partners, Omnivore, DSG Consumer Partners
• Headquarters: Delhi NCR

Farmley, a direct-to-consumer (D2C) snacking brand founded in 2017 by Akash Sharma and Abhishek, specializes in offering an array of flavoured dry fruits and nuts. Their product range includes enticing options such as roasted peri peri makhanas, Thai chili cashews, and date bites.

With a presence across various ecommerce platforms like Amazon, Flipkart, Blinkit, Zepto, Instamart, and Big Basket, Farmley has established itself as an omnichannel brand. Additionally, it boasts a wide distribution network of over 10,000 retail outlets across India. 

It claims to have crossed an annual recurring revenue (ARR) of INR 300 Cr, growing by over 400% in the past two years. The startup also claims to have turned EBITDA positive.

In December 2023, the startup secured $6.7 Mn in a Pre-Series B funding round led by BC Jindal Group.

Since its inception, Farmley has raised more than $12 Mn from a number of investors, including DSG Consumer Partners, Omnivore, and Alkemi Partners. 

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12. Good Flippin’ Burgers 

• Year Of Inception: 2019
• Founders: Viren D’silva, Sijo Mathew, Sid Marchant
• Funding Raised To Date: $5.1 Mn
• Investors:  Karan Bhagat, Yatin Shah, Nikhil Bhardwaj, Tanglin Venture Partners
• Headquarters: Mumbai

Burger chain Good Flippin’ Burgers has 23 outlets across Mumbai and Delhi, of which 16 are in Mumbai. The brand entered the Delhi market with seven new outlets earlier this year.

In 2023, the startup raised $4 Mn in its Series A round, which was led by Tanglin Venture Partners. It has also raised $1.1 Mn in a seed round led by Kerala Blasters Football Club’s director Nikhil Bharadwaj, IIFL Wealth’s Karan Bhagat and Yatin Shah.

With outlets in only two cities in India, the startup is aiming to expand its footprint in India. It is also in the process of adopting cloud, hybrid, and dine-in formats with a focus on malls and airports. 

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13.  Go DESi

• Year Of Inception: 2018
• Founders: Vinay Kothari, Raksha Kothari
• Funding Raised To Date: INR 80 Cr
• Investors:  Aavishkaar Capital, Rukam Capital, DSG Consumer Partners, Roots Venture
• Headquarters: Bengaluru

The startup was founded by a brother-sister duo to commercialise traditional Indian treats and confectionery, all while empowering women in rural villages.

With an omnichannel presence, the startup’s products are available in over 40,000 stores nationwide, and it claims to have sold over 15 Mn units since inception.

In southern India, the products are available both online and offline. In cities like Mumbai and Delhi NCR, they are available only on quick commerce and online grocery apps.

The startup recently secured INR 41 Cr in funding led by Aavishkaar Capital. The round also saw participation from existing investors Rukam Capital, Roots Ventures and DSG Consumer.

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14. Happilo 

• Year Of Inception: 2016
• Founders: Vikas Nahar
• Funding Raised To Date: $38 Mn
• Bb Investors: Motilal Oswal Private Equity, A91 Partners
• Headquarters: Bengaluru

Happilo is a healthy snack brand that offers nuts, dried fruits, seeds and dry roasted snacks. It has a manufacturing unit at Yeshwantpur, Bengaluru. It follows an omnichannel approach to sell its products across the country. 

Happilo’s products are non-GMO verified, gluten-free, vegan and fat-free. The startup offers EMI options to customers if they cannot pay for products at once. 

In February, Happilo raised $25 Mn from Motilal Oswal Private Equity to expand its business and offerings and acquire other firms. Before this, it secured $13 Mn from A91 Partners.

It has grown over 4X in the last 24 months and is aiming to clock revenue of INR 2,000 Cr in the next four years.

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15. iD Fresh Food

• Year Of Inception: 2005
• Founders: PC Musthafa, Abdul Nazer, Shamsudeen TK, Jafar, Noushad TA
• Funding Raised To Date: $104 Mn
• Investors: NewQuest Capital Partner, Premji Invest, Peak XV Partners, Helion Ventures, Azim Premji
• Headquarters: Bengaluru

iD Fresh Food sells ready-to-make food such as dosa and idli batter, and rice rava idli batter, among others, in domestic and international markets. 

It has a presence in over 45 cities across the globe including Mumbai, Bengaluru, Pune, Hyderabad and Dubai, among others.

Recently, the Bengaluru-based D2C startup announced its seventh round of ESOPs worth INR 46 Cr for 27 employees.  

“In the coming months, we are excited to augment our 2,000+ workforce as we explore new markets and continue to create new opportunities for a diverse set of professionals, while actively creating a more inclusive workplace,” Musthafa said while announcing the ESOPs.

In January, the startup secured $68 Mn in its Series D funding round from NewQuest Capital Partner and Premji Invest. It has raised $104 Mn so far from individual and institutional investors. 

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16. Jade Forest

• Year Of Inception: 2019
• Founders: Shuchir Suri, Punweet Singh
• Funding Raised To Date: $1.25 Mn
• Investors: Mumbai Angels Network, Gaurav Kapur, Rohan Abbas, Ashish Tulsian, AngelList India 
• Headquarters: Delhi 

Jade Forest offers a slew of non-alcoholic beverages to customers via its website, ecommerce marketplaces and last-mile delivery platforms. Its products are priced between INR 80 and INR 85.

In 2021, it secured $1 Mn from Mumbai Angels Network. Before this, it secured $250,000 in its seed funding round from angel investors such as Gaurav Kapur, Rohan Abbas, Ashish Tulsian, and AngelList India. 

Its products are certified by the US FDA. In the last two years, it has expanded to 23 Indian cities.

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17. Jimmy’s Cocktails

• Year Of Inception: 2019
• Founders: Ankur Bhatia and Nitin Bhardwaj  
• Funding Raised To Date: $2.4 Mn
• Investors: Roots Ventures, 7Square Ventures, Vishesh Khurana, Varun Alagh, Keki Mistry, Vidur Talwar, Anirudh Somani, Vinay Agarwal, Ankur Bhatia, Mirza Baig, Ekcle Ventures, Angad Bhatia
• Headquarters: Gurugram

Jimmy’s Cocktails offers a slew of cocktail mixers including gin cherry sour, bloody mary, lime margarita, and mango chilli mojito, among others. 

In April, Jimmy’s Cocktails secured $1.8 Mn in its Pre-Series A funding round from investors such as Roots Ventures, 7Square Ventures, Vishesh Khurana from Shiprocket, Varun Alagh from Mamaearth, Keki Mistry from HDFC, among others. 

The startup then said that it sold over 6 Mn cocktails in the first three months of 2022. 

In the financial year 2021-22, it posted a 3X revenue growth. About 40% of its revenue came from Tier II and III cities.

This year, Radiohead Brands, the beverage maker’s parent company, secured $1.3 Mn and announced the launch of its energy drink brand Hustle. 

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18. Kapiva Ayurveda

• Year Of Inception: 2015
• Founders: Ameve Sharma, Shrey Badhani
• Funding Raised To Date:  $15.77 Mn
• Investors: Vertex Ventures, Fireside Ventures, 3one4 Capital
• Headquarters: Mumbai 

Kapiva Ayurveda offers a slew of ayurvedic products for building immunity, improving digestion, strengthening the body and controlling diabetes, among others. 

In October 2021, it got an undisclosed amount of funding from Bollywood actor Malaika Arora.

The startup’s revenue stood at INR 40 Cr in the financial year 2020-21. It claims to have sold over 8 Lakh ayurvedic products since its launch and has a user base of 3.5 Lakh.

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19. Lahori

• Year Of Inception: 2017
• Founders: Saurabh Munjal, Saurabh Bhutna, Nikhil Doda
• Funding Raised To Date: $15 Mn
• Investors: Verlinvest
• Headquarters: Punjab

Lahori offers traditional Indian beverages across the country. Currently, it offers Indian drinks in four flavours – jeera (cumin), nimboo (lemon), kacha aam (raw mango) and shikanji (lemonade). 

Lahori’s parent company, Archian Foods, manufactures nearly 1 Mn bottles in its fully automated manufacturing facility, which is spread across 1,50,000 sq ft. Its manufacturing unit is accredited by FSSAI, ISI, HACCP, RoHS and Make In India (offered by GeM). 

In January, Belgium-based Verlinvest infused $15 Mn in Lahori in exchange for a minority stake.

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20. Licious 

• Year Of Inception: 2015
• Founders: Abhay Hanjura, Vivek Gupta 
• Funding Raised To Date: $360 Mn
• Investors: Amansa Capital, Kotak PE, Axis Growth Avenues AIF – I, Nithin Kamath, Nikhil Kamath, Aman Gupta, Haresh Chawla, Temasek, Brunei Investment Agency, 3one4 Capital, Bertelsmann India Investments, Vertex Growth Fund, and Vertex Ventures
• Headquarters: Bengaluru

Licious offers a host of meat and seafood including prawns, kebabs and mutton, among others. Besides, it also offers an end-to-end supply chain of products that it sells to customers, right from their procurement to processing to delivery. 

In March, the foodtech unicorn secured $150 Mn from Amansa Capital, Kotak PE, Axis Growth Avenues AIF – I, Nithin and Nikhil Kamath of Zerodha, boAt’s Aman Gupta and Haresh Chawla from True North. 

Before this, it raised $52 Mn in October 2021. In the financial year 2020-21, it had an annual revenue rate of INR 1,000 Cr and operations in 14 Indian cities. Its customer base stood at over 2 Mn in the fiscal year 2020-21.

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21. MasterChow

• Year Of Inception: 2020
• Founders: Vidur Kataria, Sidhanth Mada
• Funding Raised To Date: $1.6 Mn
• Investors: Anicut Capital, WEH ventures, Fluid ventures 
• Headquarters: Delhi

D2C brand MasterChow offers ready-to-cook noodles, dipping sauces, and sticky rice, among others. 

In May, MasterChow raised $1.2 Mn from Anicut Capital, WEH ventures and Fluid ventures.

Prior to this, it had raised around $462K in its seed funding round from WEH Ventures and some angel investors. The startup had then claimed that it had grown 10x over the previous 12 months and shipped products to over 17,000 pin codes across India.

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22. Namhya Foods

• Year Of Inception: 2019
• Founders: Ridhima Arora
• Funding Raised To Date: Undisclosed
• Investors: Aman Gupta 
• Headquarters: Jammu

Headquartered in Jammu, Namhya Foods specialises in snacks and beverages made from Indian herbs and natural ingredients.

The startup was established in 2019 by Ridhima Arora. To secure funding, she participated in Shark India’s inaugural season and successfully secured INR 50 Lakh against a 10% equity. Additionally, she obtained an additional INR 50 Lakh in debt funding from Aman Gupta, the cofounder of boAt.

Namhya Foods positions itself as a provider of nourishing food products designed to assist individuals with various health conditions such as diabetes, heart issues, high blood pressure, cholesterol, thyroid problems, as well as chest congestion. The company offers a diverse range of products.

In addition to its presence in India, Namhya Foods operates in the United States and has plans to expand into the UAE, Australia, and Canada.

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23. Nourish You

• Year Of Inception: 2015
• Founders: Rakesh Kilaru, Krishna Reddy, Sowmya Reddy
• Funding Raised To Date: $2 Mn
• Investors: Y Janardhana Rao, Rohit Chennamaneni, Nikhil Kamath, Abhijeet Pai, Abhinay Bollineni
• Headquarters: Hyderabad

Nourish You sells nutrient-rich breakfast food products and snacks to consumers via its website and ecommerce marketplaces, including Flipkart, BigBasket, and Amazon, among others. 

Besides selling products directly to consumers, the startup exports food items to countries like Singapore, Nepal, Kenya, Dubai, Mongolia and Maldives. Some of its products are quinoa flour, chocolate & banana muesli, and cranberry walnut mix. 

Earlier, the startup shared that it had 5,000 acres of quinoa and chia farms in Rajasthan, Karnataka, and Madhya Pradesh. 

In January 2023, it secured $2 Mn in seed funding for research and development activities, brand marketing and fortifying its distribution and market presence. As a part of this round, it also secured an undisclosed amount of funding from actress Samantha Prabhu. 

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24. Paper Boat

• Year Of Inception: 2010 
• Founders: Neeraj Kakkar, Niraj Biyani
• Funding Raised To Date: INR 458 Cr 
• Investors: Peak XV Partners, Hillhouse Capital Group, GIC, Advent International, Trifecta Capital, Sofina SA, A91 Partners, Catamaran, Footprint Ventures
• Headquarters: Gurugram

Paper Boat sells a slew of fruit-based drinks in Indian flavours including aam panna (raw mango), rose tamarind (tamarind juice), chilli guava (guava juice), ‘jaljeera’ (spicy, tangy lemonade), among others.

In August, the startup raised $50.1 Mn in funding from GIC-owned sovereign fund Lathe Investment Pte Ltd.

At the time, it used to have a presence in the metro cities, Tier II towns and beyond. In the fiscal year 2021-22, it posted revenue of INR 243 Cr, whilst its losses stood at INR 64 Cr. Meanwhile, in the fiscal year ending March 2020, it clocked revenue at INR 231 Cr and losses at INR 100 Cr, according to Tofler.

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25. Plix

• Year Of Inception: 2019
• Founders: Rishubh Satiya, Akash Zaveri
• Funding Raised To Date: $5 Mn
• Investors: Guild Capital, RPSG Ventures
• Headquarters: Mumbai

Based in Mumbai, Plix specialises in plant-based nutrition supplements, offering a range that includes gummies, superfood powders, and effervescent tablets. Plix asserts that its products effectively address concerns related to weight loss, hair fall and skin, daily wellness, women’s health, and workout requirements.

In July, FMCG giant Marico acquired a majority 58% stake in Plix for INR 369.01 Cr, marking its inaugural foray into the D2C arena. Under the terms of this deal, Marico assumed control over Plix’s board, and Plix became a subsidiary of Marico.

Competing alongside players like OZiva, Setu Nutrition, and Fast&Up, Plix boasts a customer base exceeding 1.5 Mn individuals. The omnichannel brand offers a diverse portfolio of 60 products spanning six categories. 

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26. Pluckk

• Year Of Inception: 2021
• Founders: Prateek Gupta
• Funding Raised To Date: $5 Mn+
• Investors: Exponentia Ventures, Kareena Kapoor Khan
• Headquarters: Mumbai

Pluck is an ecommerce platform which aims to serve the growing demand for lifestyle-oriented fresh produce. It focuses on the global food trends ranging from vegan, carb alternatives, gut health, immunity to plant-forward eating to prevent diabetes and mental health. 

The startup has a 400+ product range across 15+ categories including essentials, exotics, hydroponics, and cuts, mixes. The startup claims that the products are chemical free. Further, the products are customised following different food trends, suitable for gut and heart health, diabetes, and include organic and exotic produce as well. 

Pluckk’s products are available on its own D2C website along with partner ecommerce platforms  including Blinkit, Swiggy, Zepto, Dunzo, and Amazon. While it is currently operational in Mumbai, Delhi, Bengaluru and Pune, it plans to expand to more geographies in the coming quarters.

In 2022, it secured its seed funding of $5 Mn from Exponentia Ventures to develop farm to fork infrastructure, customer acquisition and expansion into key metro cities. It also said that parts of the fund would go towards the acquisition of B2B and B2C company Indus Fresh. 

Last year, it acquired DIY meal kit platform KOOK for $1.3 Mn in a combination of cash and equity.

Following this acquisition, it also secured an undisclosed amount of funding from actress Kareena Kapoor Khan and appointed her as brand ambassador. 

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27. Samosa Singh

• Year Of Inception: 2016
• Founders: Nidhi Singh, Shikhar Veer Singh
• Funding Raised To Date: $2.7 Mn
• Investors: Fireside Ventures, AL Trust, AET Fund, She Capital, Equanimity Investments, ANME
• Headquarters: Bengaluru

Food snack brand Samosa Singh sells Indian food snacks such as samosa, kachori, pani puri, and matar kulcha, among others, to its customers via cloud kitchens and kiosks.

It had earlier shared that its manufacturing unit holds the capacity to produce 25K food items daily.

In 2020, the startup secured $2.7 Mn (INR 17 Cr) in a Series A funding round to develop the capacity of its Bengaluru-based central kitchen. The round was led by She Capital.

As of March 2020, it had a presence in over 25 locations in Hyderabad and Bengaluru. It claims to have set up 100 cloud kitchens in prime cities of South India.

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28. Slurrp Farm 

• Year Of Inception: 2016
• Founders: Meghana Narayan, Shauravi Malik
• Funding Raised To Date: $9 Mn
• Investors: Anushka Sharma, Investment Corporation of Dubai, Fireside Ventures
• Headquarters: Delhi

Slurrp Farm is a children-focussed healthy snack brand. It offers a variety of cereals, milk mixes and snacks such as ready-to-mix pancakes, cakes, dosas, noodles and various kinds of pasta. For first-time users, it offers these products in trial packs. 

Slurrp Farm’s parent, Wholsum Foods, sells the products via its website and ecommerce marketplaces. Currently, it has a presence in India, the UAE, the US, and the UK. 

In the financial year 2021-22, it reported over INR 50 Cr annual revenue rate (ARR) and witnessed a 10X growth between June 2020 and December 2021. It further aims to achieve a revenue of INR 500 Cr by 2025.

In April, Bollywood actress Anushka Sharma backed Slurrp Farm. Prior to this deal, the D2C brand raised $7 Mn from the Investment Corporation of Dubai and Fireside Ventures and also bagged $2 Mn in a Series A round from Fireside Ventures.

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29. Storia

• Year Of Inception: 2017
• Founders: Vishal Shah
• Funding Raised To Date: $6 Mn 
• Investors: Sixth Sense Ventures
• Headquarters: Mumbai

Storia offers a range of processed fruit juices, coconut water, and shakes to customers. 

In 2021, it raised $6 Mn in its Series A funding from Sixth Sense Ventures. It currently has a presence in 33 Indian cities via its 50K retail outlets.

At the time of the announcement of its Series A funding round, the startup said it planned to launch new offerings, expand its distribution network and foray into packaged food. 

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30. Sweet Karam Coffee

• Year Of Inception: 2020
• Founders: Anand Bharadwaj, Nalini Parthiban, Srivatsan Sundararaman, Veera Raghavan
• Funding Raised To Date: $1.5 Mn 
• Investors: Fireside Ventures
• Headquarters: Chennai

Sweet Karam Coffee sells South-Indian delicacies, including filter coffee and ready meal mixes, which it claims to be free from palm oil and preservatives. 

On October 30, 2023, the startup announced that it raised $1.5 Mn from Fireside Ventures to expand its offline play, enter new geographies, and strengthen its product portfolio. 

The startup also aims to address the problem of poor availability of well-packaged traditional South Indian sweets and snacks.  

The startup sells its products primarily through its website and app, and claims to deliver them to more than 30 nations. 

The Chennai-based startup has also partnered with Tamil Nadu farmers to offer a range of millet-based products.

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31. TagZ Foods

• Year Of Inception: June 2019
• Founders: Anish Basu Roy, Sagar Bhalotia 
• Funding Raised To Date: $1.5 Mn 
• Investors: 9Unicorns, Umang Bedi, Venture Catalysts, Dexter Angels, Agility Ventures, Arjun Vaidya, Dharamveer Chouhan, Ashneer Grover, Namitha Thapar
• Headquarters: Bengaluru

TagZ makes and sells chips, chocolates, dips and cheese dribbling, among others. It recently also pitched investors on the television show Shark Tank India. 

It also raised money via a consumer stock option plan (CSOP), where it offered equity to customers for investing a minimum of INR 5,000. The CSOP was oversubscribed by 250%. 

Prior to this, it raised an undisclosed amount of investment in its Pre-Series A funding round from Venture Catalysts, Zostel’s Dharamveer Chouhan, The Pant Project’s Dhruv Toshniwal, and Loy Halder from Goldman Sachs, among others. 

In the financial year 2021-22, its revenue stood at INR 15 Cr. The startup claims to have served over 30 Mn consumers and sold more than 50 Mn packets of chips since its inception.  

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32. TenderCuts

• Year Of Inception: 2016
• Founders: Nishanth Chandran
• Funding Raised To Date: $19 Mn
• Investors: Stride Ventures, Paragon Partners, Nabventures 
• Headquarters: Chennai 

D2C brand TenderCuts offers meat and seafood products including chicken, mutton, seafood, marinades, pickles, and eggs and ready-to-cook products such as cold cuts, sausages, kebabs, shawarmas, etc.

In 2021, it secured approximately $4 Mn in a debt funding round from Stride Ventures. Prior to this, it raised $15 Mn from Paragon Partners and Nabventures and closed a seed funding round worth $759K in 2017. 

It follows an omnichannel marketing strategy and has been serving customers across Chennai, Hyderabad and Bangalore via its 50 retail stores. 

In September 2023, the omnichannel meat brand was reported to be planning the acquisition of TenderCuts along with Happy Chops. 

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33. The Divine Foods 

• Year Of Inception: 2019 
• Founders: Kiru Maikkapillai
• Funding Raised To Date: Undisclosed 
• Investors: Nayanthara, Vignesh Shivan
• Headquarters: Chennai

The Divine Foods is a D2C foodtech startup that specialises in manufacturing products from traditional Indian superfoods such as turmeric, moringa, millet, and others. 

Its portfolio includes products such as turmeric oil, turmeric golden milk, masks, turmeric drinks, turmeric powder, honey, among others. 

Under the flagship seed funding scheme of the Tamil Nadu government called TANSEED 4.0, the startup received a grant of an undisclosed amount. 

Last year, the startup secured an undisclosed amount of funding from actress Nayanthara and her husband Vignesh Shivan. Back then, founder Maikkapillai told Inc42 that the funding would be used for scaling up the infrastructure, expanding the startup’s product line, creating brand awareness among the masses and encouraging other celebrities to support the growth of native businesses. 

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34. The Filling Station

• Year Of Inception: 2021
• Founders: Mahua Ghosh, Suvankar Ghosh
• Funding Raised To Date: Undisclosed 
• Investors: NA (Not Available)
• Headquarters: Mumbai 

Healthy food snack startup The Filling Station sells nutrient-rich laddoos, oil-free snacks, and nutrient-rich spreads, among others, via its website and ecommerce marketplaces such as Amazon and Flipkart.

In snacks, it uses ingredients such as palm, oats, makhana, seeds, nuts, and date fruit. Its cofounder Mahua Ghosh holds 11 years of experience in the food industry. She has previously worked with many fast food joints, cloud kitchens and retail brands. The venture is recognised by the Centre’s Startup India Initiative, according to the website.

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35. The Good Bug

• Year Of Inception: 2022
• Founders: Keshav Biyani, Prabhu Karthikeyan
• Funding Raised To Date: $3.5 Mn
• Investors: Fireside Ventures
• Headquarters: Mumbai

The Mumbai-based startup, The Good Bugs, offers a range of products that are designed to promote and maintain gut health for consumers. Its primary focus lies in addressing the health concerns of individuals aged 25-60 who may be grappling with the negative consequences of unhealthy dietary and lifestyle choices.

Currently, the startup operates as an omnichannel brand, with approximately 70% of its revenue coming from its website and the remaining 30% from various online marketplaces. Notably, the startup has recently initiated partnerships with pharmacies to expand its offline presence.

Since its inception, the brand claims to have catered to over 2 Lakh customers. It also proclaims to have strong repeat rates of 40-45%. To expand its product offerings, the startup is planning to introduce 20 new products to its portfolio over the next six to twelve months.

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36. The Whole Truth

• Year Of Inception: 2019
• Founders:  Shashank Mehta
• Funding Raised To Date: $21 Mn
• Investors: Sequoia Capital India, Matrix Partners India, Sauce.vc, Kalyan Krishnamurthy, Sujeet Kumar, Ashneer Grover, Shashvat Nakrani
• Headquarters: Mumbai 

The Whole Truth sells dark chocolate, muesli, protein bars, nut butter and energy bars via its website and other ecommerce marketplaces.

In July, the D2C snack brand secured $6 Mn in its Series A funding round from Sequoia Capital India, Matrix Partners India, Sauce.vc, Flipkart’s Kalyan Krishnamurthy, Udaan’s Sujeet Kumar, Ashneer Grover and Shashvat Nakrani.

The startup had then claimed that it had grown 12x in the last 18 months. Besides, The Whole Truth said it receives 50% of its sales via its website and the rest from ecommerce marketplaces. 

This year, the startup secured $15 Mn to boost its manufacturing capacity, hire talent, and expand its retail distribution. 

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37. Troo Good

• Year Of Inception: 2018
• Founders: Raju Bhupati 
• Funding Raised To Date: $7.4 Mn 
• Investors: OAKS Asset Management
• Headquarters: Hyderabad

Troo Good offers a slew of millet, peanut, chocolate, and dry fruit snack bars and mixtures. In the year of its inception, it clocked a revenue of INR 12 Cr, while in 2019, it posted a revenue of INR 24 Cr. The startup claims that it is currently profitable before tax. 

In November 2021, Troo Good secured $7.4 Mn from OAKS Asset Management to expand its business in the domestic market.

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38. True Elements 

• Founded In: 2013 
• Founders: Puru Gupta and Sreejith Moolayil
• Funding Raised To Date: $2 Mn
• Investors: Marico, Maharashtra State Social Venture Fund
• Headquarters: Bengaluru 

True Elements offers millet, grains, and seeds-based breakfast and snack foods. It follows an omnichannel marketing strategy, selling products via its website, ecommerce marketplaces and brick-and-mortar stores. 

In May, consumer company Marico acquired a 53.98% stake in True Elements’ parent HW Wellness Solutions for an undisclosed sum. Prior to this, True Elements secured INR 10 Cr from the Maharashtra State Social Venture Fund last year. 

In the financial year 2021-22, it recorded sales of over INR 54.3 Cr as compared to INR 36.3 Cr in the previous fiscal year. 

Currently, it sells over 70 products and more than 200 stock-keeping units (SKUs) across 12,000 retail outlets in India. It claims to earn over 75% of its revenue from online distribution channels.

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39. Twigly

• Year Of Inception: 2015
• Founders: Sonal Minhas, Rohan Dayal, Naresh Kumar Kachhi
• Funding Raised To Date: $800K 
• Investors: Tracxn Labs, Hyderabad Angels, Kunal Shah, Aditya Verma, Gaurav Bhalotia, Amit Gupta, Sahil Barua, Mukul Singhal 
• Headquarters: Gurugram 

Twigly provides freshly cooked food at consumers’ doorstep via its website and mobile app. It currently delivers orders in Delhi NCR. Some of its products are burgers, pasta, grill platters, desserts, and various types of beverages. 

According to its founders, the startup is modelled on San Francisco-based food delivery startup Sprig, which used to offer freshly cooked meals to its consumers. The startup closed down its operations in 2017. 

In September 2018, Twigly was acquired by its competitor for an undisclosed amount.

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40. Vahdam India

• Year Of Inception: 2015
• Founders: Bala Sarda
• Funding Raised To Date: $62.3 Mn
• Investors: Sixth Sense Ventures, IIFL Asset Management, Mankind Group Family Office, SAR Group Family Office, Kris Gopalakrishnan, White Whale Ventures, Urmin Group
• Headquarters: New Delhi 

Vahdam offers an assorted range of teas, including herbal, white, oolong and iced teas, among others in India and across the world. Its other offerings include teaware and instant lattes.  

In September 2021, the startup secured INR 174 Cr in its Series D Round led by IIFL AMC’s Private Equity Fund. Post the fundraising, it was valued at INR 700 Cr. 

Presently, the startup claims that it has a presence in more than 100 countries and also turned profitable in the fiscal year 2021 after clocking a net revenue of INR 160 Cr+.

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41. Wellbeing Nutrition

• Year Of Inception: 2019
• Founders: Avnish Chhabria, Saurabh Kapoor 
• Funding Raised To Date: $10.7 Mn
• Investors: Rakulpreet Singh, Mira Kapoor, Fireside Ventures, HUL, etc.
• Headquarters: Mumbai

Founded in 2019, Wellbeing Nutrition is a direct-to-consumer (D2C) nutraceutical company based in Mumbai. Cofounded by Avnish Chhabria and Saurabh Kapoor, the startup specialises in offering healthy food products with a primary focus on women’s health.

Its product portfolio includes Melts, which are vitamin-based thin strips, Korean Marine for collagen, and Daily Fiber for plant-based prebiotic fibre.

In December 2022, Wellbeing Nutrition secured $10 Mn (INR 85 Cr) in its Series B funding round led by Hindustan Unilever Limited (HUL) and Fireside Ventures. HUL currently holds a 19.8% stake in the startup.

The company’s list of investors includes Bollywood actor Rakulpreet Singh, Mira Kapoor; Ashutosh Valani and Priyank Shah from RENEE Cosmetics, Nikhil Gandhi from MX Player, Harsh Vardhan Bhandari and Jeenendra Bhandari, among others.

Wellbeing Nutrition operates in the D2C segment and faces competition from brands such as Power Gummies and Fast&Up.

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42. WickedGud

• Year Of Inception: 2021
• Founders: Bhuman Dani, Soumalya Biswas, Monish Debnath 
• Funding Raised To Date: $1.34 Mn
• Investors: Mumbai Angels, NB Ventures, Dholakia Ventures, Jalaj Dani Family Office, Ashutosh Valani, Priyank Shah, Ravi Shroff, Ravi Nigam, Ashwini Deshpande, Jorge Fernandez Vidal, Akshay Gurnani, Titan Capital, Archana Priyadarshini, Gaurav Ahuja, Amit Chaudhary, Aman Gupta, Sameer Mehta, Harsh Vakharia, Jorge Fernandez Vidal
• Headquarters: Mumbai 

WickedGud sells pasta, noodles, malted beverages and other snacks via its website and ecommerce marketplaces. According to its website, its products are wholly vegan and contain plant-based protein. 

In April last year, WickedGud secured $1 Mn from Mumbai Angels, NB Ventures, Dholakia Ventures, Jalaj Dani Family Office, Ashutosh Valani and Priyank Shah from Renee Cosmetics, Ravi Shroff from Excel Industries, Ravi Nigam from Tasty Bite, Ashwini Deshpande from Elephant Design, among others. 

Prior to this, it secured $340K in its pre-seed funding round from Titan Capital, Archana Priyadarshini from Point One Capital, Gaurav Ahuja from Chrys Capital, and Amit Chaudhary from Lenskart, among others. 

The startup targets customers aged 26 to 42 and claims to have an average order value of INR 450.

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43. Wingreens Farms 

• Year Of Inception: 2011
• Founders: Anju Srivastava, Arun Srivastava
• Funding Raised To Date: $59.8 Mn
• Investors: Sequoia Capital, Investments AG, Investcorp, Omidyar Network
• Headquarters: Gurugram

The startup offers a diverse range of packaged food products spanning various categories such as healthy snacks, sauces, spreads, spice mixes, specialty bakery items, breakfast cereals, non-dairy milk, protein shakes, and a broad selection of organic products.

It faces competition from brands like Veeba Foods, while in the established FMCG brands segment, it competes with well-known names such as Nestle and Amul.

In 2022, the startup acquired a 100% stake in the Bengaluru-based snacks startup, Postcard. At the time, the startup stated that the acquisition would contribute to the expansion of its product portfolio under the ‘Wingreens World’ category. 

In an earlier acquisition in 2021, the startup acquired Raw Pressery during a distressed sale. The acquisition aimed to broaden its product portfolio and venture into the cold-pressed juices segment.

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Last updated: July 27, 2024 | The article has been updated to include two more names.

The post From Slurrp Farm To TagZ Foods: Here Are 43 F&B D2C Brands Reshaping The Indian Consumer Market appeared first on Inc42 Media.

Will the glory days of fintech be back with a bang post the valuation corrections and an excruciatingly long funding winter? Despite a reasonable thaw, the tailwinds have not been felt yet, and we tend to get mixed results. For instance, the fintech sector in India witnessed a 62.45% drop in funding in H1 2024, securing $809 Mn against $2.1 Bn raised in the first half of 2023 (according to Inc42 data).

But the silver lining was there, too. The country stayed among the top three funded fintech ecosystems, right after the US and the UK. More importantly, the Indian fintech opportunity has been pegged to reach $2.1 Tn by 2030, growing at an 18% CAGR.

The global fintech market also remained muted this year. According to a CB Insight report, Q2 2024 would have remained flat had it not been for two blockbuster deals. However, a decline in deal volume and average deal size indicates investors are still cautious. Although many venture capitalists think that 2024 will be the comeback year for fintech and may soon reach its pre-Covid status, the majority seems to be looking for startups that can deliver innovative and globally competitive solutions.

Sahil Anand is one of them and he claims to have struck gold by identifying the potential of a much-neglected sub-category – banktech, to be precise. Anand has launched Cedar-IBSi Capital, India’s first fintech-focussed VC fund, and aims to secure a corpus of $30 Mn. The fund reached its first close in March 2024, raising around 40% of the target amount.

While the entire corpus will be deployed in India, the fund may raise additional capital to expand its operations in the EU and the Middle East. Cedar-IBSi plans to invest INR 4-10 Cr in 15 early stage fintech startups and primarily targets pre-Series A businesses in B2B fintech and banktech space. Currently, it is building a deal pipeline and is about to make its debut investment.

Anand began his journey in 2013 with the Everstone Group, a leading private equity firm. As an investment analyst, he specialised in buyout transactions in consumer and IT services sectors and contributed significantly to Everstone’s venture capital arm.

“I was building a funnel for the work and meeting numerous founders every week as we focussed on early stage investments. This gave me significant exposure to early and late stage private equity during my time there,” he recalled.

After completing his MBA at London Business School in 2018, Anand joined his three-decade-old family business: IBS Intelligence, a financial technology research firm, and Cedar Management Consulting International, a financial technology consulting firm. But he wanted to achieve more.

In the wake of India’s demonetisation in November 2016, the fintech landscape was evolving rapidly. As the momentum continued after a temporary setback, Anand decided to make good of this trend and set up the Cedar-IBSi FinTech Lab in 2018.

The aim was to provide a ‘soft landing’ for local and global fintech companies entering the MENA and the Indian markets. More than 45 fintech companies, including Ebix, Intellect Design, Impactsure and Infosys Finacle, among others, have joined the lab and benefited.

By 2022, Anand realised that both family firms ran smoothly without his daily intervention. However, given his investment experience and his family firms’ combined expertise of 70 years, the decision to launch a VC firm was the natural next step.

“Our goal is to provide value beyond capital. Founders who raise funding from us will benefit from the extensive support bestowed by Cedar and IBSi, which will help drive sustainable growth. Although this is a maiden fund, many high-quality founders are eager to work with us, as they recognise its impact,” said Anand during a one-to-one interaction as part of Inc42’s ongoing Moneyball series.

During our conversation, we delved deep into the fund’s investment thesis, current trends within the fintech landscape and the critical importance of banktech as a fintech wave catching on rapidly. Here are the edited excerpts from the interview.

Inc42: Cedar-IBSi has positioned itself as a pure-play fintech VC fund with the focus on B2B fintech and banktech. What’s behind this niche investment thesis?

Sahil Anand: Before we discuss that, let us take a look at B2C fintech. This segment features platforms and applications that consumers can access via their devices for all sorts of transactions, be it trading, investment, loan or insurance. Therefore, companies in this space aim to acquire millions of users for their apps but primarily distribute financial services instead of developing core technologies.

Our focus is not B2C, as it is an overcrowded, intensely competitive market. The CAC [customer acquisition cost] is high, stringent regulations are in place and government agencies compete as well. For example, with the growing adoption of UPI, the government introduced BHIM to compete with private players like Paytm, PhonePe and Amazon Pay, among others. Similarly, while Visa and Mastercard dominate the market, the government-backed RuPay card has been promoted globally.

So, we prioritise B2B fintechs as they offer better economics and we have extensive experience in this space. These companies, often involved in banking technology [banktech] and related infrastructure [core systems and financial tools through which operations are managed], provide solutions, generate revenue and are profitable early on.

But things are more complex here. Even within the B2B space, you will find horizontal platforms like Razorpay and FlexiLoans. They call themselves fintech, but in reality, these are horizontal platforms helping embed financial services across industries. They are not necessarily focussing on the BFSI sector. The other category includes pure-play banktechs, startups that primarily offer software and services used by BFSI companies worldwide. This is our primary area of interest.

We are looking at banktech startups like Credgenics, Perfios and M2P so that we can leverage our deep expertise and networks to support businesses which develop innovative technologies for banks and FIs. This strategic focus allows us to identify and invest in startups with significant long-term growth potential and alignment with our vision.

Inc42: As a fintech subsect, what are the key opportunities banktech can offer Indian startups?

Sahil Anand: There will be plenty on the cards, as banktech has recently witnessed a significant shift in focus. Earlier, the spotlight was on B2C fintech, overshadowing the critical need for robust technology within the banks. But this has changed, and globally, banks are investing hundreds of millions of dollars in their systems and software every year. They also purchase 12-13 core systems annually and integrate them to support their operations.

I would say the B2C fintech disruption has run its course, with established players like Paytm, Upstox, Zerodha and others dominating all major segments. In contrast, banktech has remained relatively stagnant in the past 20 to 30 years. Traditional IT service companies are still selling their solutions across that domain. But the sector is ripe for a new wave of innovative banktech and B2B fintech offerings to drive further disruption.

Inc42: We have a limited number of banks and NBFCs in India and a growing number of startups catering to their technology needs. Will the surge in services surpass the demand anytime soon?

Sahil Anand: I don’t think so. Banktech is a versatile platform that offers software as a service to a wide range of financial institutions. These include consumer-centric and commercial banks, NBFCs and a growing number of co-operative and regional rural banks looking for technology upgrades. Insurance companies and other financial service institutions are also part of this fast-growing market.

Moreover, banktech startups need not be confined to the Indian market. The fundamental systems for core banking, treasury and payments are similar worldwide, which means these companies can easily target international markets.

Indian banktech companies typically start by partnering with the top five to seven banks in India and leverage these relationships to build credibility among Indian insurers. Once they have established a solid domestic base, they try to enter global markets such as the GCC, where banks invest heavily in technology. Additionally, markets in Malaysia, Vietnam, Singapore, Hong Kong, Sri Lanka and the EU [the region has more than 800 banks] offer significant growth potential. That’s how the whole game can be sold to 500 banks around the world.

This approach mirrors how Indian IT majors like Infosys grew by generating revenues from global banks and financial services customers. As a VC fund, we can help these banktech startups as our strength lies in our global footprint. We have offices and tech labs in many countries and a wealth of experience across international markets.

Inc42: India’s Financial Inclusion Index rose to 64.2 in March 2024, but we are well below the coveted 100%. Can B2B fintechs play a constructive role here?

Sahil Anand: To be honest, it is more like a hit-or-miss thing. Financial institutions must extend credit and services to a broader population segment to achieve better financial inclusion. Here, the core issue is not technology but the level of credit risk banks are willing to assume. If we say that a new banking technology/system, a new treasury system or a new payment solution will be more financially inclusive, it will be too much of a stretch.

The primary goal of the new banking technology, or banktech, is to enhance operational efficiency. It is not about financial inclusion but making banking more efficient. This new-age technology has the potential to improve efficiency, productivity and core operations, which may increase overall revenue. That’s an achievement from a technological standpoint.

Inc42: In that case, what horizontal and vertical SaaS solutions will be best for banktech success in the next five years?

Sahil Anand: Let us consider these one at a time for better understanding. Horizontal SaaS [industry-agnostic, general-purpose solutions] has limited scope in highly customised sectors like banktech.

Vertical SaaS is critical nowadays as banks are increasingly looking for vendors with expertise in specific use cases rather than generic, one-size-fits-all solutions. Every financial institution, whether a commercial bank, an NBFC, or an insurance platform, has a host of requirements that need to be addressed. So, they focus on service providers with deep domain knowledge and the capability of implementing solutions quickly and efficiently.

Banktech startups will do well to excel in specific use cases and master the most promising vertical SaaS solutions such as digital automation, customer lifecycle management, digital lending, wealth management, private banking and cash flow management.

Startups’ success will also hinge on nuanced execution and outstanding outcomes. For instance, five-year-old SaaS startup Credgenics now handles 11 Mn retail loan accounts and claims to have increased lenders’ resolution rates by 20% and improved debt collections by 25%.

Service providers should also ensure that they are not location-bound and may operate like implementation wizards, when needed. Earlier, sales cycles could stretch between 12 and 18 months and things were slow-paced by default. Now that new-age solutions can be implemented within 45-50 days, swift execution remains a critical mandate.

Contrary to the popular notion that banktech will saturate in the next decade, I would say the sector is still in its early stages. Addressing the pain points of decades-old technology will take at least another 20 years if the BFSI infrastructure/ecosystem has to evolve in tune with disruptive technologies.

Inc42: Talking about banktech startups, what will be the market size or revenue estimates by 2030? Can you give us an idea?

Sahil Anand: It is difficult to ascertain the market size of B2B fintech as there are no well-defined sub-sectors here. Different players offer different solutions and services tailored for FIs belonging to different categories and each solution addresses a specific issue. It is a bit chaotic. What we see here may boil down to 20 customer types with 11 different systems and businesses varying in scale from small to medium to large and located across many countries.

However, an average bank allocates 7-8% of its budget to banktech and this is steadily rising. Again, each bank typically requires around 20 different tech systems to enhance operational efficiency. The potential market becomes huge when you multiply the average banktech spending by the number of domestic and global FIs.

As we speak, a banktech startup could be selling its softwares to any bank in India and another bank located in the Maldives, thus ensuring better business growth. Unlike B2C, that is the beauty of B2B fintech or banktech.

Inc42: Overall, what will be the key trends and challenges for fintechs in India?

Sahil Anand: Even when a B2C startup identifies a niche – say, an insurer targeting women-specific schemes – large players can easily add this as a subset of their offerings or acquire the startup outright. Although B2C is primarily a no-entry zone for Cedar, we are still looking for B2C founders with a proven track record of building and scaling innovative solutions for the masses.

There are plenty of other challenges. Given the stringent government regulations, fintech companies must exercise great caution in all areas, including compliance, fundraising and navigating the competitive landscape. Banktechs should focus on developing robust software that can scale, achieve profitability and go global. Moreover, their tech products should be able to replace outdated technologies that have persisted for years.

Inc42: What will be the role of AI-GenAI in the B2B fintech space?

Sahil Anand: These are still the early days of AI adoption in the banking sector. Given their historically different data management practices, banks are gradually becoming comfortable with AI usage. They are just beginning to familiarise themselves with various external solutions for data processing and analytics [predictive, generative and what all may come up soon]. This gradual approach will ensure a smooth transition and allow necessary adjustments and adoptions.

Undoubtedly, AI will play a significant role here. However, the consensus is that the new tech cannot entirely replace the human workforce in the highly regulated financial services industry. Anything stated otherwise is an overstatement. AI remains a powerful tool that can boost productivity and enhance efficiency by 60-70%. It may even reduce headcounts by 30-50%. But human involvement will remain essential. That should provide a sense of security when people mull over the future of this industry.

Inc42: Will there be vibrant growth markets for Indian banktech startups? Please elaborate on the kind of dynamics and alignment they may find overseas. 

Sahil Anand: Well, the Middle East is a promising market right now, as it hosts around 100 banks across six or seven countries. These institutions are technologically advanced, well-capitalised and helmed by a new generation of young leaders. They have a favourable view of India and share a strong cultural affinity. Many of these banks had earlier worked with Indian vendors and Indian IT majors also serviced GCC banks. Overall, they are familiar with our operational style and actively seek disruptive solutions from us.

Apart from ME markets, Southeast Asia is another region brimming with opportunities, especially countries like Indonesia, Vietnam and Sri Lanka. Of course, Singapore and Hong Kong are fiercely competitive, but the broader region holds substantial growth potential.

Targeting these regions may yield as many as 200 B2B clients for a banktech venture, resulting in an annual recurring revenue [ARR] worth INR 150-250 Cr. Subsequent expansions across the EU, the US and other Western markets may follow, leading to further growth.

This strategic focus offers a promising avenue for banktech companies aiming to scale and achieve global success.

Inc42: What about new unicorns and public listings in the B2B fintech space? What developments will be there in the short term?

Sahil Anand: We have recently seen three unicorns – Pigment, QI Tech and Cyera – which are fintechs or servicing the fintech industry. Two of these are in the US, where the market is mature. At a jurisdictional level, the US attracted two-thirds of all fintech funding during 2023 ($73.5 Bn), according to a 2024 KPMG report.

The B2B fintech sector in India is on a similar growth trajectory. We have seen companies whose revenues are burgeoning to the tune of INR 600-700 Cr+. These are set to attract late stage investors in the long run. Additionally, there are fintech SaaS companies like Trust Fintech opting for the IPO route. However, this is just the beginning.

So far, everyone has been distracted by the B2C wave instead of deep-diving into B2B, but we are getting there now. That’s why the industry is also excited about our fund, as we are all set to capture the first 10 waves of B2B fintech/banktech in India.

[Edited by Sanghamitra Mandal]

The post Decoding Cedar-IBSi Capital’s $30 Mn Investment Playbook In Indian B2B Fintech, Banktech Startups appeared first on Inc42 Media.

Amid an industry-wide demand for some financial support from the government for the country’s nascent spacetech ecosystem, finance minister Nirmala Sitharaman announced in her Budget 2024-25 speech that the Centre would set up an INR 1,000 Cr venture capital (VC) fund for the sector.

The finance minister said that the move is part of the Centre’s efforts to expand the country’s space economy 5X in the next 10 years.

While the announcement was welcomed by founders and investors from the country’s specetech ecosystem, they are now awaiting the fine prints. Allocation procedure for the fund and eligibility criteria are some of the major points on which the industry is seeking clarity to put speculations to rest.

Speaking to Inc42 about the announcement, Pixxel founder and CEO Awais Ahmed said that the VC fund can either directly make investments or the government might go for a fund of funds approach.

It is pertinent to note that the Centre runs a Fund of Funds For Startups (FFS) scheme, under which it has facilitated an investment of INR 18,000 Cr by the end of the financial year 2023-24 (FY24).

Meanwhile, Ahmed also highlighted that there would be a need for more funds in the future for the spacetech sector. “… the private space sector is still nascent, and we recognise that even larger funds will be needed as the sector grows — eventually, an INR 10,000 Cr fund (might be needed),” he said.

Inc42 spoke to Vishesh Rajaram, managing partner at Speciale Invest, to understand the implications of the announcement for setting up the VC fund. 

Speciale is one of the leading spacetech investors in the country and counts the likes of Agnikul Cosmos, GalaxEye Space, Kawa Space, Astrogate Labs, and InspeCity in its portfolio.  

Here are the edited excerpts from the interview with Speciale’s Rajaram…

Inc42: As one of the leading VC funds in the spacetech sector, how do you look at the government’s step to establish an INR 1K Cr VC fund to boost the space economy?

Vishesh Rajaram: First of all, let me put a disclaimer. I am an optimist. We have looked at the Budget every year, and this is the first time such a fund has been created. 

So, to me, the quantum is incidental. The move from the government to say that this is a sector that needs support and its decision to put aside some amount of money is a strong validation. It shows the government aims to make this sector an important part of the economy.

A large part of India’s burgeoning spacetech market includes building from India

for the rest of the world. This is actually an export market for us and that’s going to need a lot of work and support through different aspects. 

The FDI policy that came in February was a strong signal that the government and the policy framework is welcoming international capital participation.

The creation of IN-SPACe and the policy framework for private companies to find a way to leverage the infrastructure capability and competency of Indian Space Research Organisation (ISRO) via IN-SPACe is another strong validation.

So, if you consider all these things, it is clear that the government is taking incremental steps and is realising the importance of the space sector and the support it needs.

So, as an existing investor in this category from 2018-2019, I think, it couldn’t get any better.

Inc42: What do you think the allocation strategy of this fund is going to look like? 

Vishesh Rajaram: There’s too much speculation at this point and it’s difficult to predict right now. However, if we go back in history, the government has a fund of funds programme through SIDBI that has invested in other funds.

If we look at IN-SPACe, it has a seed fund programme to invest small amounts of money in startups. But at this point, it will be pure speculation to figure out which will be the nodal agency to do it. 

But the focus is clear, the entire amount of money is set aside for entrepreneurs building for spacetech from India for the world. I am sure the Centre will put together the mechanisms of fund allocation in due course.  

I think this fund will have a multiplier effect.

Inc42: So, do you think this step to create a VC fund will encourage more investment from other participants in spacetech? Should the government have allocated a higher amount for the sector?

Vishesh Rajaram: If the government is willing to put in so much money, I am sure there will be participation from both domestic and international investors.

The real reason deeptech is not chosen by many is that there are a lot of technical risks involved, which sometimes lead to high gestation periods to build products. So, I don’t think every fund is going to do deeptech. 

Now, India is beginning to see more of such funds investing in deeptech sectors but it will always be a smaller market compared to the consumer market. So, the government’s step to focus on each sector separately is the right approach because there cannot be a one-size-fits-all model in a country of our size.

If the government puts in INR 1,000 Cr, it will make a bunch of other people think about this more seriously as a sector. It also sends a very positive signal internationally for investors to consider participating in the space sector in India.

If companies perform well, I am confident that more capital will come for the sector. 

Inc42: Which spacetech startups do you think would benefit the most from this financial boost?

Vishesh Rajaram: The upstream ones are building more hardware and the downstream ones are building more software. So, of course, hardware ends up taking more money than software, at least in the initial years. 

As such, upstream companies would want to raise capital from this type of vehicles and are likely to be the bigger beneficiary.

Inc42: How are you looking at the international focus on India’s spacetech sector?

Vishesh Rajaram: India has had a strong competitive advantage when building from here for the rest of the world, given the country’s talent base, credentials, and infrastructure that has produced some of the top companies in the space sector.

Besides, the Indian market is also growing. However, right now the focus is on growing our share in the global space market.

From my vantage point, international investors are looking at the Indian spacetech sector very positively. Some of them have been investing in the country’s spacetech sector even before the government made the announcements for the sector. This gives an idea of the reputation ISRO has built. Many of our companies benefit from the fact that they come from India, where ISRO operates. 

The post Speciale Invest’s Vishesh Rajaram On How Centre’s INR 1K Cr Fund Will Boost The Spacetech Economy appeared first on Inc42 Media.

VerSe Innovation is struggling to keep its Josh going.

After bagging $805 Mn in 2022 — the biggest cheque that year — and raising nearly $1.5 Bn in its lifetime, the Josh and Dailyhunt parent company is still stuck on the one question that most startups go through even one day one i.e. monetisation.

The revenue challenge is particularly hard on Josh, VerSe’s short video app that had all the momentum on its side just two years ago. The startup raised the money and acquired users to take short video platform Josh to the top of the pile of Indian short video apps over the past few years.

But Josh is now yet another example of an Indian short video app falling short of the mark.

The optimism around short video apps, which boomed in 2021 and fizzled out soon after, has proven to be misplaced. We have seen the situation at Sharechat’s Moj, Trell, Roposo, Mitron, Chingari and half a dozen other short video apps, all of which faced massive monetisation challenges. 

But Verse was bullish about Josh even through this downturn. In February 2023, VerSe’s cofounder Umang Bedi said the company is aiming to take Josh to the public markets in the next few quarters saying that the platform has started making money.

However, Inc42 learnt from sources that Josh has considerably scaled down its operations, letting go of 50-70 employees in the last two months even as monetisation continues to pose a challenge. 

While VerSe Innovation did not respond to our questions, sources close to management said these were a part of a routine performance review, with various employees asked to put down their papers. 

As per sources, the layoffs impacted senior employees who were drawing higher salaries than others. We were also told that team leaders often spoke about VerSe’s soaring losses, as a result of various initiatives that were shunted. 

“However, amidst this restructuring the company continued to hire freshers and others at junior positions,” one source told us. 

The retrenchments occurred after VerSe announced the acquisition of US-based magazine subscription platform Magzter in April 2024, as it looked to strengthen the content delivery business of Dailyhunt and One India. But none of these verticals are profitable, and therein lies the big problem for VerSe. 

Josh, which requires the most marketing dollars, is the heaviest weight around the company’s shoulders. 

In FY23, VerSe Innovation managed to cut its losses by 25% to INR 1,909 Cr from INR 2,563 Cr even as the startup’s operating revenue zoomed 51% to INR 1,456.5 Cr in FY23 from INR 964.7 Cr in FY22. Dailyhunt contributed more than 70% to this revenue, while Josh’s standalone revenue was INR 300 Cr. 

Given that VerSe raised more than $800 Mn (INR 6,700 Cr) Mn just over two years ago, these revenue figures make for lacklustre reading. It’s unclear whether VerSe has managed to scale up its revenue and profitability in FY24. 

So the question is will Josh also join the long list of dead short video apps in India or is there some life left in VerSe’s short video bet? 

How Josh Lost The Game Of Algorithms 

Most Indian short video apps — including Sharechat-backed Moj, Trell, MX TakaTak, Chingari and others — fizzled out due to their inability to retain advertisers and users for a long period. Advertiser attrition hurts the only source of revenue i.e ads, while de-growth on the user side means the virtuous cycle of engagement and content was broken. 

Sources say Josh has gone through all of these challenges in the past year. In addition, some key initiatives and customer acquisition strategies did not work out for the parent company. 

As per data sourced from Data.ai, Josh’s monthly downloads have fallen by nearly 80% — from around 6 Lakh in July 2023 to 1.1 Lakh in June 2024. Similarly, the monthly active user (MAU) base has also fallen by more than 50% from 20 Mn in July 2023 to 9.4 Mn in July this year.

Sources alleged the quality of content on Josh, as well as content moderation was substandard. Secondly, due to poor recommendation algorithms, engagement was always an issue, particularly on trending topics where Instagram, and Youtube Shorts have the edge.

“The user experience on Josh has deteriorated considerably since 2022 with algorithms no match to Instagram, Youtube which have better AI/ML algorithms and such platforms have almost captured all the viral, trending themes. Sometimes such organic trend content shows up on Josh days later,” another source claimed, adding that daily and monthly active users have seen a consistent slide in the past two years.

Another source well versed with Josh’s operational execution alleged that the platform was home to numerous bots (automated accounts) following some of the more popular creators and influencers. This resulted in some reputational damage for Josh among creators as well. The tactic attracted brands for some time, but most caught on eventually. 

“The inherent problem with such platforms is that old content is being pushed consistently to engage audiences from tier 2, 3 towns and this was combined with fake followers and fake views. But this is bound to flop as everyone will find out soon enough,” according to Pranav Panpalia, founder of Delhi-based influencer marketing agency Opraahfx. 

Brijesh Awasthi, founder & CEO of another homegrown social network platform Netclan Explorer, believes that building social media platforms has proven to be a capital intensive exercise which can only be sustained for some time, and organic user acquisition is key for the long run.

Cost Cutting Squeezes Out Creators

Besides the alleged fake followers, creators were also not seeing a revenue upside with Josh.

Nearly a year ago, Josh launched Creator Pro programme in a strategic shift to pay creators based on the engagement they can drive, instead of a fixed sum per month, which was roughly around INR 10,000 for smaller creators. 

“The shift to engagement-linked payouts turned out to be a disaster because the payouts were negligible. Creators could collect diamonds for a certain number of likes, but this was only equivalent to 1 paise or 1/100th of a rupee. So the creators were paid a meagre amount for the work they put in to get the likes and followers,” another person who was until recently a part of the community engagement at Josh, told Inc42. 

When it comes to brand campaigns, micro-creators (between 1K to 10K followers) are paid between INR 10,000 and INR 30,000 per video post, whereas those with higher follower counts were paid INR 50,000 per post. 

“In these campaigns, brands allocate some budget to pay creators and platforms get their commission too. Right now, Josh has around 3,000-5,000 micro creators who don’t charge much for content,” said another source who is well versed with the content management at Josh.

The person quoted above claimed that influencers with huge following Sameesksha Sud (60 Mn+ followers), Vishal Pandey (43 Mn+ followers) are paid up to INR 30 Lakh per year by Josh as a retention strategy. 

Influencer agency founder Panpalia said other platforms don’t have to pay such hefty retainer fees. YouTube, for instance, only shares revenues with creators that can get good engagement and the rest of the income that the creators draw is from brands or minimal ad-sharing from YouTube.

“However, there is a huge difference in the payouts between some of these Indian platforms and YouTube which has also led to influencer exodus from these short video apps,” he added.

No Country For Short Video Apps

This is a far cry from how VerSe Innovation catered to creators after it had raised funds in 2022. Many were given perks such as travel expenses, verified accounts and fixed pay to get them glued to the platform. All these have vanished slowly.

Josh also tried on-ground activation activities to draw in more creators and users in different states of the country.  The Josh Ambassador programme also saw VerSe Innovation splurge to retain creators and get them to refer other creators for bonus payouts. Both on-ground events and Josh Ambassador programmes have now been wound down to cut costs.

With many of these creator-centric activities now shelved, Josh is back to square one in many ways. Revenue is still heavily dependent on ads. And while Josh does get its fair share of regional language ads and political ads (for the 2024 General Elections), these are unlikely to go a long way in solving the revenue problem. 

“For instance,  a popular FMCG brand may want to target the Bihar market and Josh will provide them with a structured advertising campaign deal to target audiences in the region, saying that they have a fixed number of creators and influencers in Bihar for content creation,” another source at Josh told us. 

Our sources added that revenue from regional language ads has so far kept Josh running, but the revenue upside for campaigns in niche markets is low. To build on this scale, the company needs to crack other avenues of monetisation. 

User revenue is sorely missing for Josh and other apps of its kind. 

Ultimately, the demise of the Indian short video space is largely due to the fact that these platforms do not have the luxury of a long road to monetisation like early platforms such as Facebook or Twitter. 

For instance, neither Facebook nor Twitter had major sources of monetisation for a long time after their inception, but that was a different era, where a category was being created. The likes of Josh do not have the same luxury, and as such had to crack monetisation much faster than their western counterparts. 

We have not seen stickiness to any of the gamification features or subscription products launched by many of these platforms. And almost all of them are plagued by below-par experience for both users and creators, so is it any surprise that India’s short video ocean is littered with sunken ships? 

[Edited By Nikhil Subramaniam]

The post VerSe Innovation’s Josh Is Fizzling Out appeared first on Inc42 Media.

Manufacturing is at the top in the central government’s list of priorities, as evidenced by finance minister Nirmala Sitharaman’s Union Budget 2024-25 speech. 

A number of measures were announced — from a reduction in basic customs duty for inputs and raw material to incentives around job-creation — that should ideally further prop up the already-booming manufacturing industry.

The customs duty exemption will in particular reduce costs related to manufacturing mobile phones, lithium-based batteries for consumer electronics devices, electric vehicles (EVs), drones as well as the other focus areas such as space tech and semiconductors. 

Speaking with Inc42, 3one4 Capital’s Pranav Pai said that the government support to the homegrown manufacturing sector has addressed a significant barrier to growth. Hence, it eradicates reasons for investors who were hesitant about opportunities in India’s manufacturing ecosystem.

Stakeholders in the startup ecosystem believe that the manufacturing related enhancements will have a trickle down positive impact on the Indian startup ecosystem. 

“Given that this was a mid-term budget, we didn’t anticipate many sector-specific initiatives. Overall, it was a positive budget for local employers and manufacturers across industries. Therefore, there hasn’t been much investor concern caused by the budget. Investors will continue to maintain bullishness on industries like EV, consumer electronics, deep tech, logistics, among others,” Pai added. 

Cheer For Mobile OEMs

In a major boost to the growing smartphone market, the central government slashed the BCD for mobile phones, mobile printed circuit boards assembly (PCBA) and mobile chargers to 15% from the erstwhile 20%. 

Xiaomi India’s president Muralikrishnan B believes this will help further strengthen the domestic electronics manufacturing ecosystem. The popular notion is that this will encourage smartphone sales in the mid-premium and premium category. 

In the past, India Cellular And Electronics Association (ICEA), the apex industry body of mobile and electronics industry, had urged the government to reduce the number of import tariff slabs on mobile components as well as reduce import duties on the aforementioned mobile components.

While these demands have only been partially addressed, ICEA has welcomed the customs rebates.  

“The global nature of the electronics value chain necessitates such measures to enhance our manufacturing and export capabilities. These announcements will be a game changer, significantly boosting our industry’s competitiveness on the global stage,” ICEA’s chairman Pankaj Mohindroo said. 

Further, the tariff slab rationalisation was also acknowledged by the FM during the speech and will be taken up in the next six months. 

According to industry analysts, the BCD rebate will allow smartphone manufacturers to introduce price cuts across segments. Consultancy firm Techarc’s chief analyst Mohammad Faisal Ali Kawoosa told Inc42 that the development can potentially be the key to making the 5G smartphones more affordable.

How The EV Ecosystem Sees The Budget

Outside the smartphone and electronics manufacturing space, the budget’s announcements are expected to spur on EV production as well. Here too, the central government had turned to PLI to drive existing units to capacity, but the budget’s proposed incentives for new investments in manufacturing trend towards capacity addition. 

One of the key developments coming out of the budget was the quashing off of custom duties on the import of 25 key industrial minerals, including cobalt, lithium, copper, germanium, and silicon.

In particular, cobalt, lithium and copper are crucial in the manufacturing of batteries used in consumer electronics devices, EVs, drones, various energy storage systems and more.

Lithium, in fact, has been one of the most sought after minerals in the world. Similarly, cobalt is critical to develop high density batteries, whereas copper is used in electric motors, batteries, inverters, wiring and in charging stations. 

India has been in talks with multiple countries for partnerships for technical help on lithium processing, which when combined with a customs duty exemption will boost local manufacturing around lithium.

EV solutions provider Omega Seiki founder Uday Narang told Inc42 that 30% of the entire costs of producing an EV can be attributed to the battery itself. Hence, rolling back the import duties on critical materials like lithium, cobalt, and copper reduces the EV battery manufacturing costs substantially.

“While battery costs have been going down continuously in recent times, the roll back of the import duties on these critical elements will lead to a big boost in cost cutting. With this, we believe that we will cut down about 5-10% costs on battery manufacturing moving forward,” he said. 

Similarly, commercial EV maker EVage Motors’ founder and CEO Inderveer Singh said that battery production costs will fall by 7.5%-12% in the case of the company. Besides battery production, the startup recently entered into a joint venture with UK-based electric drivetrain systems manufacturer DG Innovate (DGI) to set up an electric motor manufacturing plant. Singh believes the duties rebate will lead to a 4% reduction in procurement costs for this plant.

Manufacturing Impacts Key Sectors

And while the Union Budget did not specifically mention how the central government is looking to boost manufacturing in other key sectors — space tech, defence and semiconductors, for instance — we expect the overall push in manufacturing to have a trickle down effect on all these key sectors. 

For instance, the rebate on customs duty for import of minerals and raw material is also slated to act as a boost for startups in sectors such as spacetech, defence and drone tech, where specialised minerals and metals are needed to create the products. 

And not unlike the case for the EV ecosystem, the exemption of customs duty on lithium, a crucial mineral used in the aforementioned sectors, will reduce costs, making lithium-based technologies more affordable. 

Besides this, the change in mobile PCBA customs duty and allied increase in customs duty on import of PCBA for telecom is also likely to spur the manufacture of 5G equipment in India. 

In addition to the roll back of customs duties on the aforementioned minerals, the centre has also slashed custom duties on gold, silver and platinum. This will directly benefit entities in the semiconductors and electronics manufacturing space, which leverage these precious metals for manufacturing components. 

Interestingly, the budget speech did not announce any particular government investments in the semiconductor manufacturing space, preferring to focus on incentives that cover the entire gamut of manufacturing. In the past year, the government set aside INR 1K Cr to fund semiconductor design startups, along with a $10 Bn allocation for semiconductor manufacturing research and design.

The post Budget 2024-25: Decoding The Big Manufacturing Push appeared first on Inc42 Media.

The Union Budget 2024-25 has introduced a host of new measures aimed at bolstering the growth of micro, small, and medium enterprises (MSMEs). Among these, the credit guarantee scheme for MSMEs has brought another ray of hope for much-needed financial support.

Finance minister Nirmala Sitharaman also announced plans to establish ecommerce export hubs in a public-private partnership (PPP) model to empower MSMEs and traditional artisans to sell their products in international markets.

These hubs will operate under a seamless regulatory and logistic framework, offering a comprehensive range of trade and export-related services under one roof, significantly enhancing the ease of doing business for small and medium enterprises, the FM said.

Despite MSME-related products accounting for 45.73% of India’s total exports in FY24, industry experts believe that the true potential of this sector remains untapped.

Historically, documentation and cumbersome compliance requirements have imposed substantial costs on small to medium sellers, creating barriers to enter into the ecommerce export market.

Will this change with the Union Budget 2024?

Compliance: Key Challenge For MSME Cross-Border Trade

One of the major challenges that hindered MSMEs selling outside India is the lack of understanding of foreign regulations and their inability to adhere to the intricate compliance standards required for international trade.

According to Tanmay Kumar, chief financial officer of logistics unicorn Shiprocket, managing and delivering orders to global markets affordably is a significant hurdle. Besides this, there are intricacies such as documentation, certifications, customs procedures, and adherence to different countries’ import-export policies.

Plus, international shipping can be expensive, and MSMEs may not have the same negotiating power as larger enterprises to secure better rates and services from logistics providers.

Many MSMEs lack the resources to conduct thorough market research to identify demand trends and potential markets for their products. This limits their ability to strategically position their products in the global marketplace. Dealing with multiple currencies and ensuring secure and timely payments can also be challenging, Kumar added.

The government’s Export Data Processing and Monitoring System (EDPMS) regulates the inflow and outflow of foreign currency, affecting export incentives and compliance.

Simplifying the regulatory maze is one big step towards enabling MSMEs to tap the global opportunity.

Besides compliance, MSMEs face challenges such as limited awareness of demand in different countries and unfamiliarity with international legal requirements, said Nishith Maheshwari, head of digital business loans at NBFC giant InCred.

Many MSMEs lack the resources to conduct thorough market research to identify demand trends and potential markets for their products. This limits their ability to strategically position their products in the global marketplace, added Shiprocket CFO Kumar

In addition, managing and delivering orders to global markets affordably is another significant hurdle. International shipping can be expensive, and MSMEs may not have the same negotiating power as larger enterprises to secure better rates and services from logistics providers, he added.

What Role Will Ecommerce Export Hubs Play?

The ecommerce export hubs, which the government has been working on for some time, could be the answer to many of these problems. It aims to simplify the compliance process and address existing issues through technology.

As per earlier reports, the regulatory framework to enable the setting up and functioning of ecommerce export hubs will be ready by September.

“The ecommerce export hubs should aim to provide market intelligence and customer preference insights, offering market research tools, simplifying documentation and regulatory processes, and facilitating access to trade finance,” Maheshwari said.

Shiprocket’s Kumar echoed the same saying that the hubs can offer access to critical market intelligence, helping MSMEs understand the export potential of their products and identify key demand markets. The insights will enable MSMEs to plan their entry into international markets more effectively.

Many of those we spoke to believe the export hubs can provide integrated financial services, including secure payment gateways and currency management tools, mitigating the risks associated with international transactions.

While the budget did not directly address this point, Shopclues MD Anuraag Gambhir pointed out that there is a significant need for skill-building and capacity-building as well. This would help MSMEs establish an online presence and then expand to international markets using the export hubs.

The Primary Challenge: Access To Capital

While the ecommerce hub will open new opportunities for MSMEs, the basic challenge remains access to capital. For a long time, this has been the main bottleneck for MSMEs. This is down to their limited ability to expand due to a lack of viable financing options or the requirement for collateral and guarantees.

The government’s proposed initiatives for MSMEs with regards to credit can help address this issue. For context, the finance minister announced a credit guarantee scheme for the MSME during her budget speech. The scheme will help in facilitating term loans to MSMEs for the purchase of machinery and equipment without collateral or third-party guarantee.

Moreover, Small Industries Development Bank of India (SIDBI) will open new branches to expand its reach to serve all major MSME clusters within three years and provide direct credit to them.

The new credit guarantee scheme, with a corpus of INR 100 Cr, is expected to enhance capital expenditure within MSMEs, particularly for machinery and equipment financing, Shachindra Nath, founder and managing director, UGRO Capital said.

He added that the value of machinery in many industries, such as CNC printers or plastic moulding machines, is often not well assessed. By providing a credit guarantee, this scheme aims to improve capital expenditure and support MSMEs in acquiring essential equipment.

As per Nath, another important aspect of the new scheme is its potential to improve partnerships between NBFCs and banks. The government has proposed that MSME credit from public sector banks should no longer rely solely on external assessments but also consider their digital footprint.

“This means banks will use data such as GST information and account aggregation data to assess creditworthiness. This shift is expected to encourage collaboration between public sector banks and NBFCs, leveraging digital data for more accurate lending decisions,” he added.

In addition, the term loans to MSMEs for purchase of machinery and equipment without collateral or third-party guarantee can boost the overall manufacturing potential of India as well. In India, the manufacturing sector has faced challenges, particularly with ecommerce companies importing products from China due to gaps in local manufacturing capabilities, as pointed out by Sunil Jhunjhulwala, cofounder of activewear maker Technosport.

Unlike other sectors, manufacturing often relies heavily on debt financing, which typically requires collateral. “The government’s initiative to guarantee manufacturing debt and review collateral requirements is expected to significantly enhance capital availability for the sector. This support could enable more investment in manufacturing, addressing the current reliance on debt and helping to boost domestic production,” he added.

The Indian MSME sector, which contributes approximately 30% to India’s GDP and accounts for nearly 45.73% of the country’s total exports, represents a significant and underutilised economic force. With over 63 mn MSMEs estimated to be operating in India across diverse industries, the sector holds immense potential for driving economic growth, job creation, and innovation.

By addressing fundamental barriers to capital access and simplifying the export process, it remains to be seen whether the Budget 2024’s measures can finally unlock the latent economic power long believed to be held in the MSME sector.

The post Beyond Borders: Budget 2024 Looks To Uplift MSME Exports, Financing appeared first on Inc42 Media.

Research and development (R&D) grabbed the spotlight as finance minister (FM) Nirmala Sitharaman presented the Union Budget 2024-25. The FM announced a slew of sops to spur research and innovation in the private sector.

Putting the R&D push in full throttle, Sitharaman said that the government will operationalise the INR 1 Lakh Cr Anusandhan National Research Fund in this fiscal. The fund, as per the FM, will look to incentivise basic research and prototype development in the country. 

Announced during the interim Budget in February, the fund will offer interest-free loans for a tenure of 50-years to finance long-term research and innovation in sunrise domains. 

In her seventh consecutive Budget speech, Sitharaman said that the government will set up a mechanism to fuel private sector-driven research and innovation at commercial scale with the financing pool of the Anusandhan Fund. 

On top of that, she announced an INR 1,000 Cr venture capital (VC) fund that will invest in homegrown spacetech startups. 

The FM also said that the government will provide funding in “challenge mode” to R&D-focussed agritech startups to shore up the nation’s agriculture sector. 

“Our government will undertake a comprehensive review of the agriculture research setup to bring the focus on raising productivity and developing climate resilient varieties. Funding will be provided in challenge mode, including to the private sector. Domain experts both from the government and outside will oversee the conduct of such research,” added Sitharaman. 

The announcements were welcomed by the country’s startup ecosystem, which lauded the government’s focus on building a more research-oriented and innovation-driven product economy. 

R&D Push Gets A Big Thumbs Up

Speaking with Inc42, Manoj Agarwal, managing partner at deeptech VC firm Seafund, said, “As a deeptech-focussed VC fund, (we think) FM announcing INR 1,000 Cr space economy VC fund and R&D fund of INR 1 Lakh Cr will work as a strong catalyst for startups in deeptech and spacetech.” 

Echoing similar sentiment, Hyderabad-based incubator T-Hub’s CEO Mahankali Srinivas Rao said, “This fund (INR 1 Lakh Cr) will power basic research and prototype development, driving commercial-scale innovation and enabling startups to bring cutting-edge solutions to the market.”

However, healthtech startup NeuroEquilibrium’s founder Rajneesh Bhandari said it is essential to ensure that these funds are easily accessible to startups and not “bogged down” by bureaucratic hurdles. 

Deepak Gupta, general partner at WEH Ventures, told Inc42 that the R&D spending in the country has not grown commensurately with GDP growth. As such, the INR 1 Lakh Cr fund has the potential to spur the local innovation ecosystem. 

For context, as per government data, India more than doubled R&D spending to INR 1.27 Lakh Cr in 2021 compared to INR 60,000 Cr in 2011. However, the picture becomes bleak in terms of percentage, as spending on R&D fell from 0.76% of the GDP to 0.64% in 2021. 

Seafund’s Agarwal believes that the R&D-focused announcements in the Budget can push the country in the direction of a product-led economy. 

However, an investor, who didn’t want to be named, said while the Budget announcements are in the right direction, the goal of a product-led economy is still a long way off.

“The Budget does not solve this issue (low R&D spend) entirely… We need the best quality professors and equipment to build a research-led academia. While many of the professors and candidates are doing that in India at many universities, it will take a few years for that effect to trickle down and lead the country on the path of building world-class products,” said the investor. 

Centre Banking On Trickle-Down Effect

Industry players believe that the FM, with the announcements, is looking to foster a larger innovation ecosystem where many can benefit in a symbiotic manner. 

Warehouse automation startup Control One AI’s founder and CEO Pranav S believes that the R&D fund will also be impactful for the AI sector and will open up new avenues for accessing cutting-edge technologies.

Another industry founder said that both the “patient capital” as well as the spacetech funds will help startups across various domains explore synergies and leverage aspects such as talent and IP creation and build state-of-the-art local facilities. 

However, issues remain. The FM said that the INR 1 Lakh Cr R&D fund will also be utilised for spurring research in the nuclear energy sector to set up Bharat Small Reactors and develop Bharat Small Modular Reactor as well as newer technologies for nuclear energy. 

The nuclear sector is capex heavy and grapples with challenges such as scalability and commercialisation. Additionally, there are quite a few homegrown startups in the nuclear energy space, like HYLENR and Avasarala Technologies. As such, there are some concerns that the nuclear energy sector may end up utilising a large chunk of the fund. 

However, it is pertinent to mention there is no clarity yet on how the R&D fund will be utilised. Most stakeholders from the startup ecosystem expect it to be deployed in a Fund of Funds (FoF) fashion to reach the desired applicants. 

While the Centre has taken a major step towards pushing R&D, the onus is now on the startup ecosystem to leverage this pitch and turn the country into a product-led nation.

The post Budget 2024: Can The R&D Push Transform India Into A Product-Led Economy? appeared first on Inc42 Media.

Even as markets regulator Securities Exchange Board of India (SEBI) had indicated earlier this month that it was concerned about the rapid growth in India’s derivatives trading market, no one anticipated the big changes for short-term and long-term capital gains that the finance ministry would come down hard on the futures & options trading and securities markets in India in the Union Budget 2024. 

Earlier today, finance minister Nirmala Sitharaman hiked the short term and long term capital gains tax on financial and non-financial assets. 

The LTCG has been hiked from 10% to 12.5% whereas the STCG tax on some assets will be 20% now. Further, the securities transaction tax (STT) has hiked from 0.062% to 0.1% on options trading and from 0.0125% to 0.02% on futures trade.

These announcements did not jolt the stock markets heavily, but analysts reckon there may be a dramatic turn in the coming weeks as investor sentiments have certainly been impacted by the changes. 

Sonam Srivastava, CEO and founder of investment research firm Wright Research, said that the announcements have sent some shockwaves in the derivatives markets, particularly among short-term traders who look to book profits regularly. Srivastava claimed this will have a ripple effect on the trading volumes on NSE and BSE since there was a huge surge of futures and options (F&O), intra-day traders after the pandemic, which contributed to the trading turnover. 

As per the latest SEBI’s monthly bulletin, the equity derivatives volumes of the two bourses saw a whopping 71% YoY growth to INR 9,504 Lakh Cr in May 2024. 

Srivastava added that there is also a likelihood of short term investors like derivative traders now looking to invest in long-term investment tools as mutual funds which will attract comparatively less taxes.

Online discount broking platform Angel One’s senior vice president Aamar Deo Singh told Inc42 that the budget sprang a surprise in the form of hiking LTCG, STCG & STT on derivatives. ”While LTCG would have an impact on the long-term investors, STCG would primarily impact the trader community. Hiking the STT on derivatives will lead to higher transaction charges for the derivatives traders and it will be interesting to see how that impacts the overall volumes on the exchanges.” 

Will Zerodha, Groww Face The Heat?

While F&O and intra-day traders will now have to shell out more taxes, this group of investors also contributed to the revenue and user growth (more than 80%) for discount broking such as Zerodha, Groww and Angel One.

Brokerage fees from active retail traders (flat fees for each F&O trade and intraday order and  equity delivery) has been one of the major sources of profits for brokers such as Zerodha, Groww and Angel One, particularly as the number of active retail traders has grown exponentially in the past year. 

Zerodha’s operating revenue grew 37% to INR 6,832 Cr in FY23 from INR 4,977 Cr in the previous year. Fees and commission charges accounted for 84% of the revenue at INR 5,727.2 Cr.

Groww’s operating revenue more than tripled to INR 1,277.8 Cr in FY23 from INR 351 Cr in the previous fiscal year. At 95.9%, a majority of its revenue came from subscriptions and commissions fees in FY23.

For Angel One, broking fees constituted 65% of its overall revenue in Q1, FY25  which increased marginally  QoQ to INR 1,405 Cr.

Inc42 reached out to Groww, Upstox for comments on how the tax changes impact revenue. Our article will be updated as and when these startups respond. 

However, Zerodha cofounder and CEO Nikhil Kamath tweeted earlier in the day that the hike on STT would have up to 66% impact on tax collections. Zerodha collected INR 1,500 Cr through STT from its users last year, and if trading volumes don’t drop, Kamath expects this to go up to INR 2500 Cr annually, from October. 

Though Kamath did not elaborate on how the increase in various taxes for an active retail trader will affect the trading activity on Zerodha or decline in user base, analysts we spoke to said that discount brokerages have seen a huge bump from the surge in F&O, intra-day trading. 

“Zerodha contributes 20% to the retail trading volumes of stock exchanges in India. Groww’s active user base was more than 11 Mn in June. If the idea of the budget was to slow down the momentum of retail trading activity, then not only the stock exchanges, but also the broking companies which have the highest market shares will get hit,” a Bengaluru-based wealth management executive told Inc42 on the condition of anonymity. 

[Edited By Nikhil Subramaniam]

The post Budget 2024: Traders Reel Under Capital Gains Tax Shock; Will Zerodha, Groww Take A Hit? appeared first on Inc42 Media.

Finance minister Nirmala Sitharaman only mentioned the word ‘startup’ twice in her entire Union Budget 2024-25 address, but the budget itself had plenty in it for the evolving startup ecosystem, including companies in the manufacturing and MSME spaces.

Indeed, this year’s budget address signalled that the government is looking at startups as part of the corporate world at large, given many of the broader measures and the budgetary allocation for large sectors and industries.

The biggest announcement for startups was related to the abolishment of the contentious Angel Tax for investors in all classes, which would be a big relief for startups, but pending Angel Tax investigations are still a sore point for many startups.

In terms of sector-specific allocation, India’s spacetech startups are under the spotlight once again in the Union Budget 2024, but besides this, the biggest push has come for the manufacturing industry.

Additionally, the Union Budget 2024-25 showed that the government is looking at uplifting the MSME sector and startups in a big way by expanding the various credit access platforms available to this class of businesses.

For individuals, though, not much relief was found from the current tax regime in the Union Budget 2024. While some adjustments were made to the income tax structure, the bigger focus has been on increasing the tax collection by targetting the growth seen in securities and derivatives trading.

Sitharaman also spoke about the government’s focus on digital public infrastructure (DPI) for modernising agriculture, healthcare, finance, ecommerce, education, law and justice, logistics and other key areas. These are undoubtedly areas that Indian startups can target.

For instance, land records in urban areas are set to be digitised with geo information systems (GIS) mapping, while sector-specific databases will be created under the Digital India mission to improve data governance, collection and processing.

Here are the five key areas that were under the spotlight during Sitharaman’s 90-minute Union Budget 2024-25 address:

Huge Focus On Skilling, Employment 

• One-month wage to all persons newly entering the workforce in all formal sectors
• Incentive boosts for employers and new employees in the manufacturing and other sectors
• 1,000 Industrial Training Institutes will be upgraded around skill-focussed outcomes
• Loans for upskilling and higher education in domestic institutions

As expected in the run-up to the Union Budget 2024, Sitharaman focussed heavily on encouraging new employment and job creation in key sectors.

Job-creation measures included the new internship scheme, EPFO-based benefits for employees and employers as well as a focus on skill development through the Industrial Training Institutes.

In addition to the PLI schemes that have catapulted India in the global supply chain market, the government is looking to encourage investments in large-scale manufacturing and formal sectors by rewarding employers for hiring new workers.

Those in the manufacturing sector, in particular, stand to benefit as the pace of new job creation is higher in this sector as compared to the services industry. We can see these incentives driving investments in new manufacturing units for semiconductors, automotive and EV industry, while the already booming electronics manufacturing industry is likely to expand its base in India — especially when you read these changes along with the lower customs duty on many critical raw materials and inputs (more on this later).

Interestingly, the budget speech did not announce any particular government investments in the semiconductor manufacturing space, preferring to focus on incentives that cover the entire gamut of manufacturing. In the past year, the government set aside INR 1K Cr to fund semiconductor design startups, along with a $10 Bn allocation for semiconductor manufacturing research and design.

Budget 2024 Brings Mixed Bag For Taxes

• Contentious Angel Tax For Startups Abolished From April 1, 2024
• 2% Equalisation Levy AKA Digital Tax On Foreign Cos Abolished From August 2024
• Short-Term Capital Gains Tax Hiked To 12.5% From 10%
• Long-Term Capital Gains Tax Hiked To 20% From 15%

When it comes to tax-related changes, Sitharaman’s budget dished out the good news with an equal measure of the bad.

Firstly, most startups will welcome the abolishment of Angel Tax, which has been a thorn in the side of early-stage startups for the past six years when the IT department began looking at potential violations and sending notices to companies and their investors.

Ever since it was introduced in 2012, the Angel Tax clause was used to harass startups whichraised capital from investors, often at a premium based on valuation reports. The tax was levied on the difference between issue price of unlisted shares and their fair market value.

The government has now abolished the contentious Section 56(2)(viib) from April 1, 2024, but several cases are still pending with authorities as we reported a few days ago. These are unlikely to be cast away without a resolution, so startups could still see some residual pain from angel tax for the time being.

In conversations with Inc42, many investors have suggested that the government needs to wipe the slate clean when it comes to these pending probes.

Equalisation Levy Removed, TDS On Ecommerce Slashed

Next, Sitharaman threw a surprise when she abolished the 2% equalisation levy often called the digital tax on foreign tech and ecommerce companies operating from India. This tax was meant to offset the loss of revenue for India from foreign companies selling services or products in India.

The change in the equalisation levy is expected to provide a lot of cheer for US-based companies, which have long asked for this tax to be removed. The change will reduce the cost of some online and digital services, such as global companies advertising in India through digital ad networks, which have to pay a 2% premium to the service provider in many cases.

For ecommerce operators in India, the government has proposed a lower tax deducted at source (TDS) rate, slashing it significantly from 1% to 0.1%. This is likely to spur on digital commerce adoption as it reduces the cost of online selling in a big way. The TDS was introduced as a way to monitor ecommerce transactions for round-tripping of funds and to prevent money laundering. Lowering this will allow the government to continue monitoring transactions for those red flags, while operators will have to incur lower upfront costs to facilitate transactions.

Concerns Over Capital Gains Tax Hikes

Finally, in what is expected to raise a lot of concerns among individual and institutional investors, the finance minister hiked the tax rate on short term and long term capital gains, as well as the securities transaction tax (STT) applied for derivatives (futures and options). From October 1, 2024 — subject to the passing of the Finance Bill — the STT on options up from 0.062% to 0.1%. STT on futures goes up from 0.0125% to 0.02%.

According to Zerodha CEO and cofounder Nithin Kamath, this would result in 66% higher STT collection from users based on 2023 volumes. The volumes themselves have grown significantly —  monthly futures and options turnover reached a record $1.1 Tn in March 2024 from approximately $27 Bn in March 2019.

These higher taxes, coupled with higher STCG and LTCG taxes, are likely to cool down some of the F&O frenzy in the derivatives market, particularly for traders with low volumes.  If the idea was to cool down the activity in the markets, this might just do the trick,” Zerodha’s Kamath said in a post on X.

Budget 2024 Boost For Spacetech Startups

• INR 1,000 Cr government-backed venture fund for space economy

Following the privatisation of the space sector in 2020, and after introducing 100% foreign direct investments (FDI) for spacetech in February this year, Sitharaman brought in more good news for the space economy.

While the contours of the dedicated space economy fund will become clearer in the next few months, we know that the focus has been on indigenous manufacturing and creating application testbeds for spacetech startups.

While the FDI route is essential for scaled-up startups and for growth funding, the government-backed fund is likely to be a big boost for startups in seed and pre-seed stage.

Besides this, exempting and lowering customs duty on minerals such as lithium, copper, cobalt and rare earth elements is seen as a critical boost for sectors such as nuclear and renewable energy as well as space, defence and telecommunications, which have overlaps in terms of the component value chain.

Fuelling Manufacturing Growth

• Customs duty on mobile phones, mobile printed circuit board assembly (PCBA) and chargers reduced to 15%
• Ecommerce exports hub to be set up for MSMEs in manufacturing space
• Customs duties on 25 critical minerals, oxygen-free copper and parts for manufacturing of connectors
• 50% increase in customs duty on importing PCBs for telecom equipment

As expected, Sitharaman’s Union Budget 2024-25 ushered in the next phase of the central government’s major focus on manufacturing.

A host of raw materials and inputs have seen a reduction in basic customs duty (BCD), which is expected to drive domestic manufacturing and is seen as a hope of reducing the cost of finished goods. These savings are likely to be passed on to consumers in key areas such as smartphones and mobile devices, EV and smartphone batteries, and finished goods that are dependent on refining minerals and chemicals.

“A comprehensive review of the customs duty rate structure will also be carried out over the next six months to rationalise and simplify it for ease of trade, removal of duty inversion and reduction of disputes,” Sitharaman said in her budget speech.

While manufacturing costs are expected to go down, the changes are also likely to reduce disputes with the customs and imports authorities over raw materials. The customs duty exemptions are for 25 critical minerals, including cobalt, lithium, copper, germanium, and silicon, many of which are vital for electronics and battery manufacturing.

In addition, the relief through reduced customs duties on gold and silver (6% vs 15% previously) and platinum (6.4% from 15.5 %) will give a fillip to gems and jewellery industry as well as other sectors that leverage precious metals for manufacturing components, such as semiconductors and electronics manufacturing.

Credit Push For MSMEs

• Credit guarantee scheme for purchase of machinery and equipment without collateral
• Public sector banks will build their in-house capability to assess MSMEs for credit
• The limit of Mudra loans doubled to INR 20 Lakh for entrepreneurs
• Expanding TReDS trade invoicing platform to boost MSME working capital
• New SIDBI branches to serve major MSME clusters

The lower BCD on input and raw material will be critical to fuel large-scale manufacturing in electronics, space, clean energy, and other emerging industries. What did the Budget 2024-25 have in store for smaller businesses that are also looking to build India’s manufacturing capacity.

Firstly, the government plans to establish ecommerce export hubs in a public-private partnership (PPP) model to empower MSMEs and traditional artisans to sell their products in international markets.

These hubs will operate under a seamless regulatory and logistic framework, offering a comprehensive range of trade and export-related services under one roof, significantly enhancing the ease of doing business for small and medium enterprises (SMEs).

The ecommerce export hubs will be backed by over 100 food quality and safety testing labs certified by the National Accreditation Board for Testing and Calibration Laboratories (NABL), which are likely a measure to boost MSME food exports.

Further, the limit of loans provided under the Pradhan Mantri MUDRA Yojana (PMMY) will be increased to INR 20 Lakh from the existing INR 10 Lakh. The loan limit will be increased for entrepreneurs who had applied, availed and repaid MUDRA loans under the TARUN category previously.

Expanding MSME Credit Guarantees

Sitharaman also announced a credit guarantee scheme for MSMEs in the manufacturing sector. The government has provided MSMEs in the manufacturing sector with a guarantee cover of up to INR 100 Cr. “The scheme will operate on pooling of credit risks of such MSMEs, a separately constituted self-financing guarantee fund will provide to each applicant guarantee cover up to INR 100 Cr, while the loan amount may be larger,” the finance minister said.

The FM added that national banks will be tasked with creating credit assessment models for MSMEs based on a digital footprint score, instead of relying on external assessment, which rely on asset and turnover criteria.

The credit guarantee programmes should ideally allow MSMEs to secure loans from registered entities without providing collateral or a third-party guarantee. Additionally, term loans will be made available to facilitate the purchase of machinery, further supporting the growth and operational efficiency of micro, small and medium enterprises.

The post [Key Takeaways] Decoding The Budget For Startups: Mixed Bag For Taxes; Big Boost For Manufacturing appeared first on Inc42 Media.

It’s Budget Day today. With finance minister (FM) Nirmala Sitharaman all set to present the Union Budget 2024-25 (FY25) in a few hours, the Indian startup ecosystem is hoping that she will spare some time and the nation’s resources for it.

While the general expectation is that the FM will go for policy continuity under the third term of Prime Minister Narendra Modi, startups are hoping for some sops and tax cuts to give a further boost to the world’s third-largest startup ecosystem.

Ahead of the Union Budget, Inc42 spoke to a wide gamut of entrepreneurs, VCs and other industry stakeholders to understand the hopes and aspirations of the Indian startup ecosystem. 

As usual, solving legacy issues such as simplifying India’s complicated compliance regime and the taxation regime figured heavily in the demands of the startups. 

Entrepreneurs and industry experts want the Budget to overhaul the country’s entire startup taxation regime and address “demons” such as angel and corporate tax, Section 68 of the Income Tax Act, and ESOP and Redomicile taxation regimes.

They also want tax credits and incentives for research and development (R&D) and facilitating the redomiciling of startups to India by minimising tax liabilities to foster a more vibrant entrepreneurial ecosystem in the country. Additionally, they want a more strategic blueprint to support the growth of startups in India in the long run. 

Streamlining India’s tax maze can have a far-reaching impact on the Indian startup ecosystem in terms of funding and help the country attract more foreign direct investment (FDI). 

Turning Around India’s FDI Fortunes

Many of the founders Inc42 spoke to expressed optimism that the Budget will see the FM announce measures to spur foreign direct investment (FDI) into the country. 

The industry stakeholders want a reduction in corporate tax rates, in line with global standards, to make India an attractive destination for foreign investors, at least in the sunrise sectors. 

While emerging areas such as climate tech and green energy might see tax rebates, experts want a clarity on their implementation. 

“If tax incentives in climate tech necessitate fresh investments, this could make large-scale investments in conglomerates attractive, but it won’t exactly be a boon for MSMEs or startups. We’ll have to wait and see how the government looks to enable smaller businesses in this space as the focus is always on large-scale energy production,” said an economist with Kotak Mahindra Bank. 

Meanwhile, the climate tech industry wants reduced customs duties on imports of solar energy industry, expansion of green and climate finance through registered entities, and revision of GST on renewable energy production and sources to woo international investors to India. 

On top of that, industry stakeholders believe that tax exemptions or reductions for strategic relocations, especially for startups in priority sectors, can be a massive boost for FDI. 

Bigger Focus On Spurring Consumer Spending

While the upcoming Budget, as per media reports, may rejig the personal tax regime, Indian startups opine that boosting consumer spending will require more long-term measures rather than just tax cuts. 

Founders believe that higher capital allocation for areas such as manufacturing and infrastructure development can propel consumer spending indirectly. They also want the government to spend more to improve last-mile connectivity in the logistics sector to improve order fulfilment and reduce cost of doing business for brands in the long run. 

These savings can be passed on to consumers eventually, an industry stakeholder told Inc42. Many also believe that these accrued savings can enable B2C startups to spend more in rural areas, particularly in infrastructure, manufacturing and agriculture, which can fuel job creation and revitalise the economy outside the large cities and metros.

Industry experts also want the government to build a unified logistics platform to bring all stakeholders on a single platform and simplify regulatory frameworks to offer further impetus to the logistics sector. Additionally, strong push for EVs may pave the way for transition towards green logistics and help consumer internet firms trim last-mile delivery costs. 

The Deeptech Focus

Moving on, manufacturing is widely expected to emerge as another key focus area in the Budget. Previously, the Centre has not shied away from offering sops to push India towards a product-led deeptech economy, with production-linked incentives (PLIs) being the bedrock of this push. However, industry stakeholders want much more. 

Deeptech startup Ethereal Machines’ cofounder and CEO Kaushik Mudda wants PLI schemes to be expanded across the value chain so that incentives are not limited to the top few beneficiaries in the end-product manufacturing.

The manufacturing industry also wants tax incentives like tax holidays, accelerated depreciation rates, credits for expenses, and reduction in GST for private sector electronics R&D investments. 

Additionally, electric vehicle (EV) players want GST rates on batteries to be reduced to 5% from 18% and reduction in customs duty for cells and other key components 

Another facet of deeptech is AI, which has rapidly gained prominence globally in the past two years. However, infrastructure remains the most challenging hurdle for the AI industry in India. It is this bottleneck for which the industry stakeholders are seeking a resolution in the Budget. 

AI startup founders want the Budget to subsidise upfront costs (GPUs and other resources) associated with training and fine-tuning machine learning models for the first three years. They want the finance ministry to waive or reduce import duties on GPUs and related hardware to help foster a thriving indigenous AI ecosystem.

The AI startups also want to engage with the government at a bigger level, and increase collaboration with government agencies, including increasing the number of AI-focussed incubators and crafting policies that advance startups beyond initial phases.

The ecosystem also wants the Budget to offer tax benefits for early stage AI startups and formulate clear and consistent AI regulations that foster R&D without stifling innovation.

While it remains to be seen how many demands the FM can accommodate as she tries to balance the country’s growth and fiscal consolidation, the Indian startups will be waiting with bated breath as Sitharaman takes the stage to deliver her Budget speech later today.

The post Union Budget 2024-25: What Do Startups Expect From FM Nirmala Sitharaman? appeared first on Inc42 Media.

In the build-up to the Union Budget 2024-25, we have noted a lot of optimism among startup ecosystem stakeholders. For one, there’s a feeling that this budget will see heightened government spending for key areas such as foreign direct investments or FDI to drive economic growth.

We have already reported about how those catering to the consumer class have called for a focus on job creation through higher allocation for infrastructure creation and the manufacturing industry. These two areas are seen as pivotal for the Indian economic growth story, particularly as the focus has been on improving per capita income metrics by expanding the so-called middle class.

While on paper, focussing on infrastructure and manufacturing may seem obvious, it is not necessary for the Indian government to cater to this through government revenue and collections alone. The record $25 Bn (INR 2.1 Lakh Cr) surplus transfer from the Reserve Bank of India to the central government is certainly a great way to fund infrastructure spending. This gives finance minister Nirmala Sitharaman and her ministry more room to spend without expanding the national fiscal deficit.

Recent statistics from the RBI also highlight the pressing need to alleviate issues in the way of FDI in India. The country saw a significant 62% drop in FDI inflows in FY24, with the total FDI figure falling to $10.58 Bn.

India’s position fell from 8th in 2022 to 15th in 2023 in global FDI inflow rankings. Even though FDI inflow declined in 2022 as well by 10% compared to 2021, the total investment was still close to $49 Bn. In light of this, analysts have called for a sharper focus on policies and measures that will drive foreign direct investment in line with global investing themes such as ‘China+1’, cleantech and green energy, AI development as well as digital banking and financial inclusion.

Besides this, it is expected that the upcoming budget may relax FDI regulations for growth sectors such as defence, and agriculture, thereby attracting more investments and fuelling job creation.

Will Budget 2024 Fix FDI Blues?

In February’s interim budget, the finance ministry increased allocation by 33% for the PLI schemes related to manufacturing. But as per those in the manufacturing industry, sharper focus is needed across 14 key sectors that are linked to manufacturing.

So far, the government’s push has primarily been on electronics manufacturing, which has seen consumer tech giants such as Apple, Samsung and Google increase their manufacturing footprint in India through local partners.

As per the India Cellular and Electronics Association (ICEA) data, India’s electronics manufacturing output reached a record-breaking $115 Bn market in FY24, with $29.1 Bn in electronics exports, making electronics the fifth-largest export category from India.

With PLI schemes restricted to certain sectors of manufacturing, foreign investments — whether it is in capacity building or capex — are restricted to those sectors alone.

Besides smartphones and mobile devices, analysts have called for a big push on pharmaceuticals, automobiles, semiconductors, toys, textiles, apparel, and commercial aircraft. According to Kaushik Mudda, cofounder and CEO of deeptech startup Ethereal Machines, the PLI schemes need to be tailored such that the benefits can trickle down the manufacturing value chain, with component makers and those creating manufacturing tech also garnering foreign investments.

“While the budget announcements are awaited, I think the government’s preliminary steps are on the right track as it has covered the first layer to start with. But if it wants to achieve the scale it is looking at in a very short span of time, the government should start thinking a bit broader,” the CEO of Ethereal Machines added.

Fuelling China+One Movement

A day ahead of the Union Budget, the Economic Survey suggested that increased FDI inflows from investors looking to diversify away from China can be a big boost for India.

“China is India’s top import partner, and the trade deficit with China has been growing. As the US and Europe shift their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then export the products to these markets rather than importing from China, adding minimal value, and then re-exporting them,” the survey stated.

Will FDI Chase Green Manufacturing? 

Besides these expectations, those working in the green energy and cleantech space pointed at the disparity in the PLI schemes in the energy manufacturing sector.

For instance, a majority portion of the INR 19,744 Cr PLI budget for green hydrogen goes for the production of green hydrogen molecules and manufacturing of electrolysers at scale, and those who miss out are companies working in capacity building such as manufacturing efficiency, supply chain platforms and intellectual property-related models.

The current structure of PLIs in green energy manufacturing is in favour of importing existing technologies, rather than building up India’s capabilities in areas that are imports-reliant.

In this regard, one key expectation of those in the climate tech sector is introduction of green FDI through international carbon market mechanisms. This would not only attract capital for decarbonisation efforts but also put India among the leading nations for climate-related innovation.

The climate tech industry feels that the budget allocations over the years have failed to support the scaling up of renewable energy infrastructure. Reducing customs duties on imports for the solar energy industry, expanding green and climate finance through registered entities, and revising GST on renewable energy production and sources could be some signals to international investors to back Indian businesses.

A January 2024 report by the World Economic Forum and Bain & Company ranked India as the world’s third-largest economy in terms of energy requirements, with energy demand projected to increase by 35% by 2030. In 2022, India’s energy import bill totalled $185 Bn, which underscores the need to build green capacity to support domestic energy demand.

A Game Of Taxes, Subsidies And Exemptions

Ease of doing business has always been a hot topic in India. The policy measures over the past 10 years have certainly improved India’s position in this regard, but taxation remains the single biggest sore point for foreign investors in India.

As ever, the industry is eyeing proposals from the finance minister that will reduce the tax burden on companies and individuals, as well as more simplified compliance procedures to resolve tax-related issues.

These are considered to be vital to fuel private equity inflow into Indian startups as well as companies in hot sectors. The wide expectation is a reduction in corporate tax rates to align with global standards, making India a more attractive destination for foreign investors. An economist at Kotak Mahindra Bank said that while industry-wide tax cuts are unlikely, key sectors that desperately need FDI for growth and capacity building need to be given a longer rope.

For instance, the manufacturing industry believes that an extension of the sunset date for the 15% tax regime for new manufacturing entities by another fiscal year will prove to be a major factor pulling in FDI.

The current scheme allows for a 15% tax rate for manufacturing companies set up on or before March 31, 2024. Many believe that in addition to production-linked incentives in manufacturing (PLI), the favourable tax positions for new manufacturing companies will drive FDI in this space, which is interlinked with several other sectors.

Despite the relatively cushy position of the central government given high tax collections and the RBI dividend, economists and analysts caution against overenthusiasm on issues such as changes in the long-term capital gains exemption thresholds, or significant tax breaks for sectors such as healthcare, education and others.

On the other hand, tax rebates could be seen in investments in climate tech and green energy, but as expected there is no certainty on how this might be implemented by the government. “If tax incentives in climate tech necessitate fresh investments, this could make large-scale investments in conglomerates attractive, but it won’t exactly be a boon for MSMEs or startups. We’ll have to wait and see how the government looks to enable smaller businesses in this space as the focus is always on large-scale energy production,” said the Kotak economist quoted above.

As reported by Inc42 last week, Indian startup investors are looking forward to clarity on tax liabilities, prevent double taxation, and offer favourable tax treatment to entities redomiciling to India. The experiences of PhonePe, Groww and other startups has shown that reverse flipping isn’t without its pitfalls.

Archit Gupta, cofounder and CEO of fintech unicorn Clear, told Inc42 that advance rulings or certifications from tax authorities regarding the tax implications of redomiciling will provide certainty to startups and foreign investors.

The industry experts said that tax exemptions or reductions for strategic relocations, especially for startups in priority sectors could be a massive boost for FDI. The “Onshoring Indian Innovation to GIFT IFSC” report suggested a comprehensive scheme to help startups relocate to India in a tax-free manner, implementing parts of which could be the way forward.

Indian founders are hopeful that the upcoming budget will endorse the report, allowing flipped startups to redomicile with the lowest possible tax burden, reducing the tax burden for investors in India in the short and long run.

The post Union Budget 2024: How Will FM Nirmala Sitharaman Revive India’s FDI Fortunes? appeared first on Inc42 Media.

The startup ecosystem, the wider business world, and the taxpayers are brimming with hopes about what the Narendra Modi government will focus on in the upcoming Union Budget 2024-25. 

In the recent past, the electronics manufacturing industry received a significant boost from the central government policies and its ‘Make In India’ initiatives. From smartphone manufacturing to EVs, and semiconductors to large-scale electronics hardware manufacturing, several sectors have become the beneficiaries of these policy drives.

For instance, even during the interim Budget in February this year, the government said it would increase the allocation for semiconductor and display manufacturing development by more than 2X. 

It also announced a 30% higher allocation for 2024-25 for production-linked incentives (PLI) across all sectors and a double allocation for the production and development of green hydrogen and solar power. 

While the sunrise industries are largely pleased with the government’s policy boost so far, there are multiple gaps that need to be addressed. One such issue is with the PLI benefits for electronics component manufacturing companies, which many in the manufacturing sector feel need to be fine-tuned and extended to other categories. 

Extend PLI Across The Value Chain

As per India Cellular and Electronics Association (ICEA) data, India’s electronics manufacturing output has reached a record-breaking $115 Bn market in FY24, with $29.1 Bn in electronics exports, making electronics the fifth-largest export category from India.

Speaking to Inc42, Kaushik Mudda, cofounder and CEO of deeptech startup Ethereal Machines pointed out that the PLI schemes today are limited to the top few beneficiaries in the end product manufacturing, which needs to trickle down to the rest of the ecosystem.

“Companies like us are manufacturing products for some of the top electronics manufacturing services (EMS) companies but we do not qualify under PLI. Like us, there are multiple other manufacturing service providers in the second layer who help the top-facing EMS companies. If the government wants the whole EMS sector to grow, it needs to ensure that the whole ecosystem is covered and PLI benefits trickle down to the whole supply chain ecosystem,” Mudda said.

Ethereal Machines claims to be the only company in India developing 5-axis computer numerical control (CNC) machining technology. This is considered to be a bedrock for electronics component manufacturing from consumer electronics products to aerospace.

“While the budget announcements are awaited, I think the government’s preliminary steps are on the right track as it has covered the first layer to start with. But if it wants to achieve the scale it is looking at in a very short span of time, the government should start thinking a bit broader,” Mudda added.

It is pertinent to note that the ICEA has also submitted its recommendation to the government to bring components used in electronic goods under the PLI scheme.

In its recommendation to the centre earlier this month, ICEA said that it was imperative to develop a components and sub-assembly ecosystem in order to build a sustainable and robust electronics manufacturing industry in the country.

“The government should provide appropriate policy and financial support for building large-scale components and sub-assembly ecosystem, with a longer gestation and incentive period.” 

As per the electronics body, this would not only offer long-term policy predictability and certainty but create an environment for business continuity, enabling job creation, advanced skill development, integration into the electronics global value chains, increasing exports, and others.

Shifting the focus to the promising green hydrogen sector in India, Newtrace cofounder and CEO, Prasanta Sarkar, also pointed at a similar problem and said that the majority portion of the INR 19,744 Cr PLI budget for green hydrogen today goes for the production of green hydrogen molecule and manufacturing of electrolysers at scale, which in a way, favours importing existing technologies.

“A very small portion of it goes into capacity building within the country in terms of developing next-gen technologies with improved performance, visible supply chain and owning the IP to navigate any possible geo-political challenges or disruptions in the future,” he said. 

Sarkar believes policymaking should lean towards internal capacity building and developments as well owning the IP rights within the country to secure energy infrastructure.

Meanwhile, a reduction in tax and tariffs is another important aspect that startups in the manufacturing industry are also looking forward to. ICEA has also recommended a reduction in input tariffs for electronics manufacturing.

“Sustaining the tremendous growth in mobile phone production and exports requires matching the competitive tariff regimes of China and Vietnam. Current high tariffs increase manufacturing costs in India by 7-7.5% on the bill of materials (BoM), deterring local ecosystem development, hampering exports and adversely impacting job creation,” according to Pankaj Mohindroo, chairman of ICEA.

Manufacturing Industry Eyes Tax Benefits

Manufacturing as a industry has a cascading effect across sectors. For instance, the electric vehicle sector, which is a critical part of future economic growth, needs a thriving domestic manufacturing industry for components and parts. 

Amitabh Saran, cofounder and CEO of three-wheeler EV manufacturer Altigreen Propulsion Labs, believes that the central government should consider increasing funding and tax incentives like tax holidays, accelerated depreciation rates, credits for expenses, reducing GST for private sector electronics R&D investments.

In this regard, EV original equipment manufacturers have had a long-standing demand to slash GST rates on batteries from 18% to 5%, at par with the GST on the sale of vehicles. 

Ahead of the interim Budget, some industry players told Inc42 that along with GST, there was also a need to ease the taxation on imports of battery components and reduce customs duty for cells and other key components to help flourish this ecosystem further. However, no such announcements came at the time.  

In the upcoming budget, the broader electronics manufacturing industry is optimistic about certain reductions in taxes and tariffs.

Ashok Rajpal, managing director of Ambrane India, said, “Critical investments in infrastructure and technology will be pivotal for the growth of the electronics manufacturing sector. Tax incentives and streamlined regulatory processes are essential for sustaining sectoral health.” 

Meanwhile, Rashid K, director at Genrobotic Innovations, one of the leading Indian robotics startups, said that lowering the GST rate of manufacturing materials and other raw materials to below 18% would offer much-needed relief and promote an atmosphere that is more favourable for the development of new technologies. 

What Else Can The Government Do To Boost The Industry?

While the industry is largely positive on the steps taken by the central government so far, the scope for improvement is high.

For instance, Saran believes that the government’s PLI and Electronics Manufacturing Clusters (EMC) schemes are good schemes for the promotion of the electronics industry in India, but the centre must simplify foreign direct investment (FDI) policies for the electronics sector and help in export promotion schemes to assist in international market access

Besides, he emphasised the need to focus on promoting and creating a strong skilled pool of resources in the electronics manufacturing space, including the technicians, IT and electronics courses in educational institutions. 

He also said that the country needs to develop dedicated electronics manufacturing clusters in different parts of India.

With the Indian government eyeing to build self-reliance across its electronics and semiconductor manufacturing, which would ultimately boost all the allied sectors including EV and robotics, there is a common sentiment among market leaders that the first generation of these manufacturing companies requires more focussed incentivisation. 

“The first generation of electronics or semiconductors that we are going to develop and manufacture in the country are not going to be the most advanced ones globally but we will have to find use cases to create an ecosystem for them so that they get adopted and are incentivised to go back and further improve those products. Only then, over the next few years, India will have the advanced, globally competitive products,” added Newtrace’s Sarkar.

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Until two years ago, AI was not a prominent topic of discussion at the government level. However, with increasing conversations about generative AI and machine learning, it is now gaining prominence alongside sectors like semiconductor manufacturing, spacetech, and other emerging industries. As Finance Minister Nirmala Sitharaman prepares to present the full Union Budget 2024 on Tuesday (July 23), industry stakeholders expect more clarity from the government.

A month after the last interim budget, the cabinet announced the India AI Mission, a fund of funds. Developments since then have indicated that a large share of this allocation will focus on infrastructure such as GPUs.

For context, in March, the Union Cabinet approved an outlay of INR 10,372 Cr for five years for the India AI Mission, aiming to foster innovation in the sector through public-private partnerships (PPPs). The Centre has earmarked INR 4,500 Cr for AI computing infrastructure, equipped with GPUs.

“Now, of course, that was a high-level announcement, but something more concrete is expected. I don’t think it will come in the budget speech itself, but at least in the budget details. When they come out with the fine print, we need to see what this means for the segment and when it will be executed,”Ashwin Raguraman, cofounder of Bharat Innovation Fund, said.

Industry stakeholders are expecting a follow-up conversation or an update on the implementation and the next steps, he added. ”Is there anything else they are planning, such as the subsidisation of hardware infrastructure for startups? These are all areas that could be discussed further,” he added.

This sentiment was echoed across the board when Inc42 spoke to AI startup founders and investors. As infrastructure remains the most challenging hurdle for the AI industry in India, all of them are seeking more concrete announcements and policies in this regard.

Cutting Costs And Tackling Infrastructure Hurdles

The biggest challenge in a startup is the substantial upfront cost required for training and fine-tuning machine learning models. These models need significant computation power—CPU, GPU, and other resources.

If the government could offer support, such as subsidising these costs for entrepreneurs or founders for the first three years, it would make a huge difference, Aman Goel, cofounder and CEO of GreyLabs AI, told us.

For example, if import duties on GPUs or related hardware were waived or reduced, or if GST components were lowered, it would significantly decrease the cost of entry. This would encourage more entrepreneurs to enter the space, speed up innovation, and make customers more willing to experiment with new technologies, the GreyLabs CEO added.

“The government is already implementing some public infrastructure initiatives, like AI models for India. If they could offer these resources at an affordable rate, it would be incredibly beneficial for startups like ours,” he added.

India’s ambitious plan to build 10,000 GPUs might seem impressive, but in the context of the global AI race, it’s not a large figure, a policymaker said. When OpenAI developed GPT-4: it took approximately 25,000 GPUs running for three months to train a model with a trillion parameters.

“In a country where startups often struggle with limited access to capital, relying on just 10,000 GPUs may fall short of fostering a thriving indigenous AI ecosystem,” he said. However, he also mentioned that even 10,000 GPUs would be a big step to begin with, especially when very few startups in India are building foundational models.

Beyond Financial Support: Acceleration And Collaboration

Besides looking at a boost for the AI infrastructure, the AI startups also want to engage with the government at a bigger level, and increase collaboration with government agencies.

“AI startups also need customers, especially in the B2B sector. However, reaching out to large companies, government can be challenging. While organisations like NASSCOM assist with this, more collaboration opportunities and support mechanisms could further enhance the connection between startups and large enterprises,” Raga AI’s Agarwal said.

In addition, industry stakeholders believe that increasing the number of incubators could significantly benefit AI startups. To explain this need, IvyCap’s Guta said that there are approximately 30,000 accelerators globally, while India has only about 800 to 815, which accounts around 2.7% of the global total. This is despite India being one of the largest startup ecosystems in the world, with over 1.4 Lakh startups.

Bharat Innovation’s Raguraman also acknowledged the need for more accelerators but added that support must extend beyond the pre-seed stage. While incubators are vital for nurturing seed-stage and pre-seed startups, the government should also focus on policies that advance startups beyond these initial phases.

“It’s important to not only create a robust pipeline of early-stage startups but also to provide substantial support for those that are more mature or on the path to maturity. This could involve creating policies and programs that work in conjunction with incubators, investment funds, and infrastructure providers such as data centers,’ he said.

The government should use existing incubators and create strategies to help startups move from early stages to growth levels. While private venture capital is important, the government also needs to play a strategic role in supporting startups throughout their development, according to him.

Should AI Be Up For Tax Benefits?

“One area where support would be immensely beneficial is tax benefits. Early stage startups often face significant challenges in generating revenue and raising capital in the initial years. By offering tax incentives to AI startups, the government could alleviate some of this financial pressure,” Gaurav Agarwal, founder of Raga AI, said.

On the other hand, Vikram Gupta, founder and managing partner of IvyCap Ventures, thinks both the government and other stakeholders should focus on developing accelerators, angel networks, and seed-stage capital to support early-stage startups. This support can only be effective if accompanied by tax incentives, he added.

For example, in the UK, individual investors can deduct their investments in startups from their taxable income, recognising these investments as contributions to economic growth and job creation. However, India currently lacks such incentives, according to Gupta.

“Additionally, there should be parity in the treatment of long-term capital gains between public and private markets. In India, private investments are treated as a high-risk asset class with long-term capital gains taxed at 40% after two years, compared to just 10% for public markets after one year. This discrepancy discourages investors from putting their money into startups, as they prefer the lower risk and better tax treatment of public markets,” Gupta said.

To attract more investors, there is a need to offer extra incentives for investing in this asset class and remove obstacles such as unclear angel tax regulations, which have been a concern for over five years. Making these changes would make it easier and more appealing for individuals to bet on startups, which will eventually help emerging sectors like AI.

Most importantly, all of this requires a stable AI policy. Industry stakeholders emphasised the urgent need for clear and consistent AI regulations so that startups can align with them and focus on developing new products. However, it is crucial that the government ensures these policies do not stifle innovation, as has occurred in other emerging areas such as crypto in the past.

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As finance minister (FM) Nirmala Sitharaman prepares to present the first Union Budget of the third term of the Prime Minister Narendra Modi-led government on July 23, the general expectation is that the FM will choose policy continuity.

While some announcements with an eye on political objectives are also expected, economists and businesses believe that these announcements can give further impetus to the fast-growing economy. For instance, any move to spur consumer spending will benefit businesses and startups, at least in the short term.

In terms of policy continuity, the infrastructure sector is likely to emerge as the biggest beneficiary as the Modi government has focussed on higher capital expenditure for infrastructure and job creation. 

While the burgeoning Indian startup ecosystem has plenty of expectations from FM Sitharaman, there is also a realisation that there might not be many announcements directly linked to startups. For instance, the interim Budget for 2024-25 didn’t have many big announcements specifically for startups. However, the FM did announce INR 1 Lakh Cr corpus to fuel R&D in sunrise sectors, which would benefit both startups as well as well-established enterprises.

As such, ahead of the Union Budget 2024-25, the startup ecosystem is looking at the expected announcements on the broader themes to ride on the India growth story. Within this, the logistics startups are banking on the expected push for infrastructure creation to give an impetus to their growth.

Here’s What The Logistics Industry Wants:

• Enhanced Railways, Roads & Ports Connectivity
• Simplifying Ecommerce Export Policies And Setting Up Of Export Hubs 
• Increase Capital Expenditure For Infrastructure Projects
• Simplifying Regulatory Frameworks And Ensuring A Level Playing Field
• Strong Push For EVs To Transition Towards Green Logistics
• Institute Policy To Formalise Gig Worker Employment For Logistics Sector
• Leverage Tech To Build & Bolster A Unified Logistics Platform

Push For Infra

It is pertinent to note that in the interim budget, the FM proposed a capital expenditure of INR 11.1 Lakh Cr, nearly 3.4% of India’s GDP. 

Most of the logistics players Inc42 spoke to called for the announcement of measures to build ports, roads, and airports, as well as digital infrastructure, in the upcoming Budget to reduce logistics costs. 

“Strengthening ports, roads, and airports, alongside advanced digital infrastructure, will significantly reduce logistics costs from 13-14% of GDP to 8%. This improvement will streamline supply chains, reduce delivery times, and enhance operational efficiency for ecommerce firms. Such efficiency is crucial as it allows businesses to compete more effectively on a larger scale,” said Shiprocket chief financial officer (CFO) Tanmay Kumar.

Echoing the sentiment, managing director (MD) and CEO of Mahindra Logistics, Rampraveen Swaminathan, said that a renewed focus on automation and digitisation across the logistics value chain would be crucial to achieving higher efficiencies and reduced costs.

Emiza founder and CEO Ajay Rao said, “The logistics sector would greatly benefit from enhanced connectivity of railways, roads, and ports. Prioritising infrastructural development can reduce logistic costs, improve supply chain efficiency,and foster economic growth by establishing robust and integrated transport networks”.

The logistics players are clearly pinning their hopes on the FM boosting capex spending to bolster infrastructure to pave the way for lower logistics costs. 

As per the Economic Survey 2022-23, logistics costs in India stood in the range of 14-18% of the GDP against the global benchmark of 8%. The country also featured on the 38th spot out of 139 countries in the 2023 edition of the World Bank’s Logistics Performance Index (LPI).

Strengthening connectivity by improving and building new infrastructure will also help Indian ecommerce platforms. 

The Logistics Domino Effect 

The logistics sector has a direct bearing on segments like ecommerce and even the gig economy, which have risen to prominence in the past decade on the back of India’s smartphone boom. It is these emerging areas that the logistics sector wants the Budget to focus on. 

An industry executive, on the condition of anonymity, told Inc42 that the Budget should focus on expediting policies such as the National Logistics Policy (NLP) and the Unified Logistics Interface Platform (ULIP) to create a unified logistics ecosystem. 

The executive added that leveraging synergies of these tech platforms with projects such as state-backed Open Network for Digital Commerce (ONDC) will help boost the Indian ecommerce sector as well. 

Besides improving logistics, Emiza’s Rao believes that simplifying export policies and setting up export hubs can help spur ecommerce exports. “We hope the Budget introduces measures to make ecommerce exports more accessible and efficient, driving growth and diversification in the export sector,” he said. 

Mahindra Logistics’ Swaminathan foresees the Budget significantly boosting infrastructure investments, particularly in multi-modal transport and advanced warehousing. He also expects the Centre to continue the emphasis on green energy and strong EV infrastructure to accelerate transition towards green logistics. 

He also sought measures to address the skill development gap to meet the demands of modern logistics. While calling for establishing a comprehensive regulatory framework in the Budget to support the gig economy, he also sought prioritising the formalisation of last-mile delivery employment to build a “fair, inclusive, and innovative logistics landscape”.

Smitha Shetty, the Asia Pacific (APAC) regional director of supply chain management platform Achilles Information, expects the government to continue its focus on investments in distribution networks and global value chain linkages.

The Logistics Wishlist 

Moving on, logistics players want the Budget 2024 to offer tax sops, increase ease of doing business, and establish incubators in Tier II & III cities to foster startups in the sector. 

“The 2024 Budget presents a crucial opportunity to solidify India’s economic foundation. Budgetary support for startups, like extending the window for claiming tax benefits, increasing ease of doing business, and setting up incubators in Tier II & III cities, can further accelerate the growth of startups and Make in India,” said Vahan.ai cofounder and CEO Madhav Krishna.

On similar lines, Allcargo Gati’s chief commercial officer (CCO) Uday Sharma said, “Apart from infrastructure development, the budget needs to propose measures to strengthen the digital economy and skill development to build an enabling startup ecosystem. An empowered startup ecosystem benefits industries with innovations and fresh ideas”.

Achilles’ Shetty told Inc42 that the homegrown logistics startups are looking at the Centre to scrap the contentious angel tax, launch domestic investment schemes, and simplify taxation regime in the upcoming Budget. 

While there is no dearth of demands from the sector, the ball is now in the finance ministry’s court.

The post Budget 2024: Logistics Startups Banking On Infrastructure Push To Power Growth appeared first on Inc42 Media.

Finance minister (FM) Nirmala Sitharaman is set to present the Union Budget 2024 on July 23, 2024, for the 7th time in a row. Over the last five union budgets, excluding this year’s interim budget, the Indian startup community has amassed a list of long-pending expectations. 

While jotting down the list of expectations weeks before the FM’s budget speech, industry stakeholders told us that the country’s startup sector needs big reforms on the tax front. Not to mention, the taxation issue has proven to be the Achilles’ heel for Indian startups, impacting overall funding in the ecosystem.

For context — While a recent Inc42 survey of startup investors reveals the end of the funding winter, the Indian startup funding, in contrast, slipped 1.8% year-on-year (YoY) to settle at $5.3 Bn in the first six months (H1) of 2024. 

The paradox, as per several industry experts, is that the ecosystem is crying for reforms on the tax front, while the overall sentiment of investors towards Indian startups and founders seems vibrant.

Nevertheless, before we delve any deeper into the demands and requests of the stakeholders, let’s steal a glance at the reforms that ought to be implemented with much empathy to ensure the comprehensive development of the startup state.

Founders, VCs Demand A Full & Final Resolution Of Angel Tax

The story of the infamous angel tax starts with the introduction of Section 56(2)(viib) in the Income Tax Act, 1961 on March 16, 2012. The Government of India included this subsection to keep shell companies at bay and tighten its noose on the generation and circulation of black money. This tax is payable on capital raised by unlisted companies if the value of the shares issued to investors exceeds their fair market value (FMV).

Despite over 52 notifications and clarifications by various bodies under the DPIIT, Ministry of Commerce and Industry, and the Ministry of Finance, the issue remains unresolved. In fact, according to the DPIIT secretary, Rajesh Singh, the DPIIT has recommended the removal of angel tax for startups multiple times.

According to Siddarth Pai, founding partner, CFO, and ESG officer of 3one4 Capital, “The exemption criteria stated in the Feb 19, 2019, DPIIT circular are extremely onerous for any startup. The bar on startups opting for the exemption from dealing in shares and securities, capital contributions, and giving loans and advances prevent them from creating ESOP trusts, subsidiaries, or JV entities. Given the 200% penalty for any violation for seven years since they last raised funds, it’s a 17-year bar (10 years as a startup + 7 years after) from pursuing such routine transactions. This feedback has been given since 2019 but to no avail.”

Additionally, so far, hardly about 9K of the 1 Lakh+ DPIIT startups have received exemptions from angel tax.

Echoing Pai’s sentiment, Sandiip Bhammer, founder and co-managing partner of Green Frontier Capital, said that a broader exemption framework that can be extended to all DPIIT-registered startups is the need of the hour. In addition, a streamlined and clear exemption process would assist startup founders in reducing administrative burdens and uncertainty around the exemption process.

Fairness & Transparency To Make Section 68 Less Scarier

Section 68 of the Income Tax Act deals with unexplained cash. Under this, startups are required to disclose complete details of their income, along with investments for a particular fiscal year, and any lapses in doing so can attract a penalty of up to 78%. 

While investments are generally not categorised as income from other sources, however, if not disclosed properly, assessing officers may classify them as unexplained tax, which could result in penalties.

To resolve this, Archit Gupta, cofounder and CEO of ClearTax, suggests a few reforms that will protect startups from being burdened under Section 68. 

According to Gupta, the Indian tax authorities need to provide clear guidelines on the documentation required to substantiate investments received by startups. In addition, the country needs a mechanism under which investments received from certain recognised sources are treated as genuine unless proven otherwise by the authorities.

Gupta goes on to add that Indian startups are in dire need of a dedicated fast-track dispute resolution mechanism, specifically due to Section 68, which makes them vulnerable to the discretion of assessing officers.

In addition, the ClearTax CEO demands the participation of the representatives of the Indian startup ecosystem, along with crucial industry associations and experts, in formulating policies under Section 68. He believes this to help the government aid startups with amendments that are fair and hold little ambiguity.

Need A One-Stop Solution For Valuation Reports  

Currently, startups need to submit various valuation reports from different experts (registered valuers, merchant bankers, and CAs) to different entities like the RBI for FEMA requirements, the MCA, and the Income Tax Department for the same amount of funding.

While these incur a huge cost for startups, more often than not, these valuation reports do not conclude the same value of the startup. 

The core issue is that tax authorities compare actual performance to projections and reject valuation reports if there is a deviation of more than 10%.

Pai said, “This is at the core of the angel tax issue. Not meeting projections is a commercial risk, not a taxable event. The entire premise of angel tax is deeply flawed and nothing but its removal can solve the issue.”

Last year, the IT department made changes to Rule 11 UA, introducing several valuation methods to provide more clarity and flexibility to startups and investors. Non-resident investors now have access to five valuation methods, including the Comparable Company Multiple Method, Probability Weighted Expected Return Method, Option Pricing Method, Milestone Analysis Method, and Replacement Cost Method. 

However, as per Pai, this does not solve the issue.

Jitesh Agarwal, founder and CEO of Treelife, believes that the current requirement for startups to obtain valuation reports from SEBI-registered Category I Merchant Bankers for income tax purposes imposes significant financial burdens, especially for those raising smaller funding rounds. 

To alleviate this, the specific mandate to secure a valuation from a CAT-1 SEBI registered Merchant Banker should be relaxed for startups. This change would reduce costs and simplify the funding process, making it more accessible for emerging businesses.

Notably, T.V. Mohandas Pai, the former CFO of Infosys and partner at Aarin Capital, too, has recommended the use of a single valuation report multiple times.

ESOPs & Redomicile Taxation Reforms

In India, Employee Stock Option Plans (ESOPs) are considered part of salary and are taxed under the Income Tax Act of 1961. The taxable amount is the difference between the market value of the shares when you get them and the price you paid. This amount is added to your income and taxed under one’s tax bracket. 

Also, if employees sell their shares after holding them for more than two years, they are required to pay a long-term capital gains tax of 20% on any profit above INR 1 lakh in a year. However, if they sell their share within two years, the profit is treated as a short-term gain. This gain is added to the income and taxed as per the income bracket. 

The initial market value of the shares (not the price you paid) is used to calculate the capital gains, which reduces the taxable profit. Moreover, ESOPs are taxed twice — at the time of being granted and when being sold. 

According to experts, the overall ESOP taxation process is currently very complex due to factors like market value and exercise price, which leads to double taxation issues for employees.

On ESOP taxation reform policy, Gupta of Cleartax demands ESOPs, held for over two years, to be taxed only at the time of sale. 

Agarwal of Treelife further suggests that a policy needs to be implemented where taxation on the exercise of ESOPs is deferred until the occurrence of a significant company event, such as a merger, IPO, acquisition, or third-party liquidity event. This change would align the tax impact with actual financial gains for employees, reducing the upfront financial burden and potentially enhancing employee retention and motivation.

Now moving onto the issue of redomicile, or as we prefer to call it — “Desh Wapsi”. Currently, several Indian startups desire to shift their base back to the country. While a few, including PhonePe, Razorpay and Groww have already done it, others like Meesho, Udaan, and Zepto are in the process. 

However, the only setback is that the redomicile to India is a cost-heavy affair, as it requires startups to shell out massively in exit taxes and long-term capital gains. 

For instance, PhonePe had to cough up INR 8,000 Cr to shift its headquarters back to India. On the other hand, Razorpay is mulling its merger with the India entity at a lower valuation to minimise the tax blow.

While industry stakeholders demand respite from tax burdens for startups looking for “Desh Wapsi”, they suggest that negotiating and signing bilateral tax treaties with key jurisdictions are expected to provide clarity on tax liabilities, prevent double taxation, and offer favourable tax treatment to entities relocating under specified conditions.

According to Gupta, advance rulings or certifications from tax authorities regarding the tax implications of redomiciling will go a long way in providing certainty to startups and their investors. Similarly, implementing transitional relief measures to mitigate the immediate tax impact of relocating, such as phased taxation or deferred tax payments over a specified period, is another way to go.

The industry experts Inc42 spoke with also seek tax exemptions or reductions for strategic relocations, especially for startups in priority sectors or those bringing substantial economic value and job creation to India. They also demand clear guidelines on the indirect tax implications, such as GST, for startups relocating their operations.

Meanwhile, Pai, who has closely worked with GIFT IFSC, mentioned that the “Onshoring Indian Innovation to GIFT IFSC” report by the IFSCA includes a comprehensive scheme to help startups relocate to India in a tax-free manner. 

This initiative builds on the 2021 scheme to relocate funds to GIFT IFSC. Indian founders are hopeful that the upcoming budget will endorse this scheme, allowing flipped startups to redomicile to India with least or zilch tax burden. This move has the potential to spur many relocations and provide a strong pipeline of startups to tap into the Indian capital markets.

Corporate Tax & Other Demons

While much has been highlighted above, Startups hope the budget could signal at least a change in the area GST rationalisation. 

Ramesh Bafna, CFO of Zepto, states that easing of the GST registration compliance through a proposed Tatkal system will address lengthy approvals time, allowing for faster expansion. 

Moreover, releasing accumulated input tax credit (ITC) through proposals like selling ITC as tradable scrips, providing refunds for a stipulated period, and permitting cross-utilisation of CGST and IGST credits across group GST registrations will enable effective use of funds for business operations. 

These measures, once implemented, will create a more conducive environment for startups, fostering innovation and economic growth in India. Any clarification and ease in regulations would benefit the startup ecosystem, helping it grow and achieve the PM’s vision for 1,000 unicorns.

Meanwhile, there is also a need to address the tax dispute issue. Addressing the elephant in the room, Gupta of ClearTax said that startups that wish to contest tax demands must deposit 20% of the tax amount upfront. 

DPIIT-registered startups should be allowed either a reduced deposit rate or given leeway regarding the timing and amount of these deposits. This change would help protect the cash reserves of startups, which is a critical metric for their operation and growth.

A high corporate tax rate is another long-pending pain point for startups, which many like Gupta want to be lowered in a bid to get respite from tax burden and improve cash flow in the crucial early years of operation.

“The rates and holding periods between listed and unlisted, as well as foreign and domestic investors, should be bridged. It’s diverting domestic capital away from Indian startups and making the ecosystem overly reliant on foreign capital for survival,” said Pai.

The Blueprint For Startup Success

So far, tax reforms for startups have not been as consistence as they should be. This, in turn, has only complicated the current state of Indian startups, per startup founders and VCs.

To support the growth of startups in India in the long run, Sitharaman’s strategic blueprint should be aligned to duly addressing the aforementioned areas. Building clear and transparent tax policies and implementing measures to reduce tax burden should rank high on FM’s priority list.

And, to support these developments, DPIIT also needs to take a few steps starting with the very definition of startups. Gupta said, “There is ambiguity in the definition of what constitutes a ‘genuine startup’ eligible for exemption. Providing clearer criteria and guidelines can prevent misuse of the exemption and provide certainty to startups and investors alike.”

To sum it all up, offering tax credits and incentives for research and development (R&D) activities will encourage innovation and technological advancements. Facilitating the redomiciling of startups to India by minimising tax liabilities and ensuring a smooth transition is also a crucial part of the game. Furthermore, ESOP taxation reforms should align tax impact with actual financial gains for employees, promoting retention and maximising benefits. 

Addressing specific tax issues such as the elimination of Section 56(2)(viib) for DPIIT-registered startups and providing clear guidelines for Section 68 to differentiate genuine investments are critical steps. The requirement for multiple valuation reports should be removed, and the effective corporate tax rate for startups should be reduced to 10-15%. 

Incorporating these strategic measures into Budget 2024 will pave the way for a more favourable and supportive environment for startups in India, unlocking their full potential and driving economic growth.

The post Union Budget 2024: Startup Founders, VC Need Escape From Complex Tax Maze, Brutal Compliances appeared first on Inc42 Media.

There’s optimism within Paytm again. In fact, founder and CEO Vijay Shekhar Sharma said the Q1 FY25 results mark the end of tough times for the Indian fintech giant.

Sharma lauded the company’s resilience and the capability of Paytm’s products, and said now the target is to head towards profitability in this fiscal year. This bullishness is not unwarranted, but there is still a long way to go before Paytm is back to where it was even three quarters ago.

One year ago, we said Paytm was knocking on profitability’s doors, and the momentum definitely seemed to be carrying the company towards this milestone after the bloodbath on the stock market post listing. However, since then, it has been a season of adjustments, reassessment, scaling back and preparing the Paytm machinery for leaner times.

After the Q1 results, it’s clear that Paytm has taken some steps forward, but there is a lot more of the mountain left to climb for Sharma and Co. This Sunday, we are looking to bring more context to Paytm’s Q1 results, in light of what’s happening in the market.

But as usual, a look at the top stories from our newsroom this week:

• Shein’s Second Innings: Shein is back in India with a little help from Reliance Retail, but can the fast fashion behemoth recreate the magic that worked for it in India before the ban in 2020?
• BYJU’S Vs Bankruptcy: After months of speculation, BYJU’S was finally hit with insolvency proceedings this week, and the company is precariously close to being auctioned for its parts as creditors look to settle matters
• Looking Ahead To The Budget: While most Indians would welcome tax rate cuts with open arms, the Union Budget 2024 need to look at long-term measures to boost consumer spending and the Indian startup story

Where Paytm Stands After Q1

Much of Paytm’s optimism at the end of Q1 stems from the fact that new merchant signups are reaching January 2024 levels and there has been an increase in payments GMV — both are critical indicators of the health of the company. Merchant stickiness is more important than consumer stickiness for Paytm, given the better unit economics on the merchant side and the ability to continually cross-sell products.

There was only a marginal increase in the merchant subscriber base to 1.09 Cr, but daily merchant payment GMV (excluding discontinued products) went back to January 2024 levels, much before the downturn began.

CEO Sharma claimed that this is the beginning of the end of the tough times. “This quarter reflects the full impact of the challenges we faced. As a team, we are committed to navigating through these times with a focus on compliance. My team and I are committed to ensuring we return to profitable quarters,” Sharma said.

But this optimism hides just how much more climbing Paytm has to do.

— Paytm reported a net loss of INR 840.1 Cr, more than double quarter-on-quarter

— Operating revenue fell by 36% QoQ to INR 1,502 Cr

— Plus, revenue from financial services (loans primarily) was down by 8% to INR 280 Cr

On personal loans, Paytm’s focus is on the distribution side and the company is looking to add more bank and non-bank partners to diversify its revenue streams. This particular change and the retreat from lower ticket size loans has nearly halved the revenue from financial services.

In other words, Paytm is not completely out of the weeds.

The Uphill Climb Continues

For one, Paytm has not exactly cut down on all expenses. While employee costs have lowered as a result of layoffs, there’s a lot more that needs to be done.

The scale of the potential layoffs and restructuring can be understood by the fact that Paytm reported just over 31K employees in the sales team as of Q1 FY25, which is down from 35K employees in Q4 FY24. In three months, the company has let go of nearly 5K employees from the sales team, but this is a drop in the bucket when considering Paytm’s target of saving INR 500 Cr in employee costs in FY25.

In Q1 FY25, indirect expenses (excluding ESOP costs) rose to INR 1,301 Cr from INR 1,186 Cr in the previous quarter and INR 1,220 Cr last June.

Even though employee cost has come down by 9% QoQ, it is still higher on a YoY basis. “Given the focus on merchant acquisition, we will continue to invest in the sales team while having a higher focus on productivity of sales employees,” Paytm said.

Further, marketing costs were also higher during the quarter since the company had to spend heavily to communicate the changes to its platforms after the RBI action. “Cost-optimisation across the board will continue to be our key focus area and we will continue to be disciplined about our overall cost structure.”

During the analyst call on Saturday (July 20), Paytm CFO Madhur Deora said that employee costs will go down 5%-7% quarter-on-quarter. He added that the marketing expenses were higher during the June quarter because of new ad campaigns but should go down in the coming quarters as marketing activities are scaled back.

Another big challenge for Paytm is that it still cannot bring on new users for UPI payments. Given that Sharma said the next few quarters will see a bigger push on the payments front to become a cross-selling channel, changing this will be crucial for Paytm’s future growth.

“In the process of completing technology and consumer migration. The merchant migration is completed, but on the consumer side, it is a multi-bank system, so all banks have to participate and our primary partner YES Bank has to also expand on certain technologies. We’re at the tail end of the migration on the consumer side and we can go back to the NPCI to request to add new users,” Sharma said.

Jio-Sized Threat For Paytm & Co

Of course, the competition is watching Paytm and many rival payments platforms are grabbing users and retaining them with new loyalty programmes and other cross-selling. Even Flipkart has jumped into the payments game and is investing heavily to grab and retain users.

And let’s not forget Jio Financial Services (JFS), which is expected to go from beta to full launch in the next quarter. JFS is essentially doing everything that Paytm was doing before the RBI action disrupted the momentum.

More entrenched players like PhonePe and Google Pay have cashed in on the vacuum left behind by Paytm, migrating its users to other banks and nodal accounts. Now, Paytm not only has to spend to get these merchants back and retain them but also compete in the cross-selling of financial services to these merchants.

But, as we said in the beginning, Sharma is optimistic and confident of beating the odds. Earlier this month, the company’s CEO said that RBI action and the fallout did take a heavy toll on his emotional and personal wellbeing, though it wasn’t the worst moment in Paytm’s 14-year journey.

“At a professional level, I would say we should have done better, there is no secret about it. We should have understood the situation better. We had responsibilities which we should have fulfilled in a better way. I think we have learnt our lesson from the issue and are making a better comeback,” Sharma said at an event in Delhi.

Despite that setback, Sharma said his vision continues to make Paytm a $100 Bn company. At the moment, that seems like a pipe dream; for now Paytm has to get back to the growth seen till January. And that will take a lot more from Sharma and the fintech giant.

Sunday Roundup: Tech Stocks, Startup Funding & More

• Funding momentum across India’s startup ecosystem has seen a slight revival as startups cumulatively raised $200 Mn across 25 deals this past week
• A day after the Microsoft outage wrecked havoc at a global level, the tech giant now claims to have managed to retrieve some of its more critical services, but many others are still down

• Reliance Retail’s digital and new commerce businesses contributed 18% to the total revenue of the retail giant in Q1 FY25, while ecommerce platform JioMart saw average bill value grow 16% YoY
• Several states, including New Delhi, Karnataka, Tamil Nadu, Goa, and Kerala, are said to be exploring allowing alcohol delivery through Swiggy, BigBasket, Zomato, and other platforms
• Ola Electric is likely to be valued at around $4.5 Bn for its upcoming IPO, a decline of roughly 20% from its last private valuation, according to reports this week

The post Can Paytm Bounce Back After ‘Hopeful’ Q1? appeared first on Inc42 Media.

The Indian government’s ban on Chinese apps and products in 2020 saw two massive casualties. Everyone knows about TikTok, but fast fashion brand Shein was equally as big in India four years ago.

But the India setback did not halt Shein’s global momentum, just as it did not stop TikTok from becoming what it is today. Shein became the world’s largest online-only fashion company in 2022.

Valued at a staggering $10 Bn, the brand accounted for nearly one-fifth of the global fast-fashion market in 2022, outpacing giants such as Zara and H&M. To put things in context, Shein was founded in 2008, whereas Zara was incorporated in 1975 and H&M in 1947.

In India, Shein set the market on fire. Launched in India in 2018, the brand was already a major player by 2020, dominating online searches and influencer-led content. But the ban in 2020 meant all that came to a halt.

The Indian government’s ban stemmed from fears of Shein’s Chinese parent company storing or transferring data of Indian customers to China. While the ban itself came under a tense geopolitical climate, one could say that Shein’s exit left a gap in India’s fashion market which D2C brands quickly filled.

Brands such as Urbanic, Twenty Dresses, Cilory, attempted to fill the void but couldn’t quite match Shein’s popularity. Indeed, VCs also backed fast fashion and casual wear startups such as The Souled Store, Virgio, NewMe and others which looked to replicate the Shein formula.

Ecommerce unicorn Meesho has also looked to fill the gap with affordable fashion and a similar content-led sales strategy that worked wonders for Shein.

While many of these brands have grown in scale over the past four years, none of them — at least so far — have quite replicated the magic of Shein and how quickly it disrupted the market.

And that’s arguably why Shein’s re-entry into India through a partnership with Reliance Retail is a big deal.

Shein joins the Mukesh Ambani-led conglomerate’s exclusive portfolio of over 50 brands, including Silk Feet, Jivers, Xlerate, Feet Up, Dhuni by Avaasa, Riva, John Player Select, Kidlyboo, and Altair. Besides this, Reliance Retail has similar deals with designer labels such as Kenzo, Y3, Marc Jacobs, ​​Coach, Steve Madden, Kate Spade, among others.

It’s clear why Shein has looked to re-enter India, where the fast fashion industry is projected to reach a size of $30 Bn by FY23, as per a Redseer report. The overall fashion segment grew at a modest 6% YoY in FY24, whereas the fast fashion subsegment surged by up to 40% in the same period. Now, Shein is back to grab a large chunk of the market once again, though there’s definitely a lot different about this Shein.

Reliance Punches Shein’s Ticket To India

The first thing that we need to note is that Shein is not back as a standalone entity, but its products will be available on Reliance Retail’s apps and physical stores. Shein is not operating business in India — Reliance is said to be bringing in former Meta director Manish Chopra to lead the brand.

Shein’s parent entity will receive a licence fee as a share of profits generated solely within India. The operations will be managed by a company wholly owned by Reliance Retail. Crucially, all data and the app itself will be hosted and stored within India, ensuring that Shein has no access to or control over this data.

These are some of the key factors behind Shein’s comeback to India being approved by the government nearly one year ago.

Reliance Retail is set to launch the Chinese fast-fashion label Shein within the coming weeks. Further, to diversify its supply chain and promote domestic industries, Shein reportedly will be sourcing goods from India for its global operation in the Middle East and other markets.

More than anything else, fast fashion brands and indeed other some of the more premium brands need to worry about the Reliance factor. Shein’s brand name and Reliance’s massive resource base are a deadly combo.

Reliance Retail’s fashion ecommerce app Ajio directly competes with Myntra, Nykaa Fashion, Meesho, Amazon India, Flipkart, Tata Cliq, and other platforms. From a distribution point of view, Ajio will be the exclusive storefront for Shein, and exclusivity is a big deal in fashion ecommerce.

Ajio commands around 30% market share based on monthly active users (MAUs), data sourced from AllianceBernstein shows.

Flipkart Group’s Myntra maintains the highest market share in terms of active users, surpassing 50%. However, the report notes a decrease in transaction frequency, with Myntra’s GMV growing only 12% in FY23 compared to 35% in FY22.

“Shein’s re-entry may have a somewhat negative impact on Nykaa Fashion, as Nykaa primarily targets the premium fashion segment. In contrast, Myntra caters to both the mass and premium fashion markets and already has strong brand recognition in the fashion industry. Therefore, the impact on Myntra might be mild, whereas Nykaa Fashion could feel more significant effects,” Karan Taurani, SVP, at Elara Capital said.

He added that Shein is part of a broader strategy by Reliance Retail to expand its portfolio of brands. In that sense, Shein is just another addition to its portfolio.

A Myntra executive admitted to Inc42 that Ajio has an edge when it comes to exclusivity, but added that Myntra has also introduced Gen Z-focussed features which are gaining fast traction. Myntra’s focus on in-house brands or private labels is paying off, however, at the same time, the company is also looking to snap up more exclusive brand partnerships.

Should D2C Brands Worry?

One thing that Ajio cannot afford to do is give Shein more prominence. Fashion ecommerce marketplaces are quick to see gaps in terms of sales of particular brands and look to woo them to their side. In this regard, Shein will be competing with a number of D2C brands as well as international labels in fast fashion.

As per Inc42 data, between 2018 and 2023, D2C fashion brands captured almost 93% of the total funding raised in the Indian fashion ecommerce space.

The Myntra executive quoted above believes that Shein will definitely disrupt D2C fashion brands in India as many of them target the Gen Z audience, but they are also looking to protect margins and break into the premium segment.

The D2C landscape in fashion includes the likes of Andamen, House Of Rare, Bombay Shirt Company, Snitch, Damensch, The Souled Store among others. And there are houses of brands such as Mensa Brands, TMRW and others which combined have dozens of brands across categories in fashion. It’s not easy to stand out, and Shein will have to fight for its space on the aisles.

Most of these brands are looking to widen their net margins by adding premium products. Premiumisation is a major thesis among Indian D2C brands right now as they realise many of them are targeting a very limited cream of the market.

On the other hand, Shein has built its reputation on affordability. So is Shein actually directly competing with these players? Market experts believe that Shein is not successful just because of its pricing, but its use of data.

“Brands with the right product and high-quality service should attract customers who are not price-sensitive. A price-oriented brand is not a major threat; the real risk is if your product fails to keep up with market trends. Fashion-driven brands could take your business away if your product quality and service do not meet customer expectations. However, if your product is trendy, the quality is high, and your service is good, you should be safe in retaining customers who are not focused on price,” Devangshu Dutta, founder and CEO of Third Eyesight, said.

Those in the industry do believe that one brand cannot conquer the fashion market. That simply does not happen with the fashion industry, which is why there is so much depth in the market. Shein’s success will lead to the emergence of more D2C brands that look to mimic the data-led, trend-first model.

“The potential of the Indian market is evident, and it’s becoming increasingly exciting. This means that many companies will emerge in this category to serve this customer base. It validates the hypothesis we had two and a half years ago: the Indian consumer is evolving, and fashion should evolve along with them. From that perspective, Shein’s entry justifies and validates our hypothesis,” the founder of a Bengaluru-based GenZ-focussed fashion brand said.

Good brands always emerge from intense competitive churn, and Indian brands have the potential to go global if they hit it big. “Competing against Shein and building a successful business will open new opportunities for us and strengthen our execution and agility,” the founded quoted above added.

Is Shein Ready For Second Innings?

Now, coming back to Shein, it remains to be seen if it will be able to gain popularity like its first stint in India. One must remember that Shein tried to make a comeback in India in 2021 after the government’s ban through ecommerce giant Amazon, but the brand supposedly did not get much traction.

“I think the case of visibility is different when comparing Amazon and Reliance Retail. Through Reliance Retail, the visibility could be much higher compared to Amazon because Reliance Retail already has a very wide portfolio of fashion brands, including more than 25-30 luxury brands across various categories. It’s all about creating visibility, generating buzz, and going to market together in terms of marketing efforts. Reliance has a very strong omnichannel presence, both online and offline,” Elara Capital’s Taurani said.

While Amazon is, of course, a large ecommerce phenomenon, the platform is not a primary port-of-call for online fashion shoppers. This is why Shein could potentially perform better with Reliance Retail.

“We have to wait and see how Shein performs in India. We will need to observe how this unfolds to comment on its visibility and performance, both online and offline. In marketplaces, brands compete daily, and Shein’s strength has always been its designs. We’ll have to closely watch how Reliance leverages this strength,” an industry analyst said.

The post How Shein-Reliance Nexus Will Shake Up India’s Online Fashion Market appeared first on Inc42 Media.

Finance Minister Nirmala Sitharaman should be more than familiar with all the pre-budget expectations for the startup ecosystem by now. The Union Budget presented in 2023 and the interim Budget of February 2024 were not exactly geared towards Indian startups. In terms of the primary expectations from the Union Budget 2024, there’s not much that has changed for Indian startups.

Having said that, there’s a feeling that this will be Union Budget focussing on the Indian startup story, at least for one major reason — the expected boost for consumer spending through infrastructure and job-creation schemes, and perhaps, even some rationalisation in the income tax slabs or rates as per the new regime.

As per media reports, speculation is that Sitharaman and the Finance Ministry have seriously considered friendlier tax measures such as cutting the rates of income tax or adding a new slab to push consumption, with a specific focus on the lower-income strata.

Reuters claimed that FinMin officials discussed making changes to the new tax regime which was introduced in 2020. Individuals reporting annual salaries of over 15 Lakh are likely to see some relief according to the agency. Besides this, the FM could announce lower personal tax rates for annual income of INR 10 Lakh as well.

The hope is that loss of government revenue through tax cuts could be partially offset by increased consumption. However, there are several economists who believe that tax rate cuts or adjustments would only be a short-term measure for boosting consumer spending.

While consumers and salaried workers would welcome tax rate cuts with open arms, boosting consumer spending and growth for Indian startups would need more long-term measures and capital allocation to areas that will propel consumption indirectly.

For instance, an economist at a national Indian bank told us that the lower taxes may not necessarily spur consumption. “The drop in consumption demand in India is largely led by the rural sector. This has corrected to some extent, but providing tax incentives which will majorly accrue to the urban organised sector workers, is unlikely to have the desired outcome on rural consumption. We need to look beyond taxes as a way to drive spending,” she added.

Looking Beyond Tax Rates

Analysts also believe that rural demand is slowly rebounding after remaining subdued throughout FY24, due to persistent inflation, slow growth in wages and other spending constraints.

Nielsen IQ reported in May 2024, India’s FMCG and consumer brands sector witnessed rural consumption growth in volume terms in the January to March quarter, and outpaced urban consumption for the first time in five quarters.

Rural consumption grew at 7.6% year on year (YoY) in the quarter, while urban consumption stood at 5.7%. In contrast, YoY rural volume growth was at 5.8% in the previous quarter, while urban consumption was at 6.9%.

Interestingly, the rural-urban consumption equation has flipped on the back of growth for non-food consumption, with a growth rate of 12.8% in the January-March quarter, led by beauty, personal care & home care categories. It is vital to continue fuelling this trend with non-tax measures as well as tax rebates.

So Indian startups with B2C models are also advocating for more spending in rural areas, particularly in infrastructure, manufacturing and agriculture, which will fuel job creation and revitalise the economy outside the large cities and metros.

Instead of tax sops and rebates, infrastructure-related measures such as improving last-mile connectivity in the logistics sector would be more beneficial for D2C brands and Indian startups. “The 2024 budget needs to focus on infra and manufacturing as this would improve demand fulfilment and reduce cost of doing business for brands in the long run. These savings can be passed on to consumers eventually,” the economist quoted above added.

These measures are critical as net household savings in India have declined from 22.7% of GDP in FY21 to 18.4% in FY23, as per the National Account Statistics 2024 data, released by the Ministry of Statistics and Programme Implementation (MoSPI).

Manufacturing Is Key For India’s Future

For many of the stakeholders in the consumer tech and products space, the government’s larger push on the manufacturing front is encouraging, since it creates jobs and drives consumption organically.  But more needs to be done in this regard.

In the past we have seen companies keep capital expenditure for new machinery and plants low when they are uncertain of demand. While the government has looked to increase capacity by incentivising exports and through production-linked incentives, these are still early days for these schemes.

Driving corporate investment in manufacturing calls for better visibility of consumer demand, which is where short-term tax rebates might provide a helpful hint. Tax cuts need to be applied along with long-term measures as this will allow for consistent growth.

“Job creation translates into more money in the hands of consumers and helps to kick-start the economy in places that need most help. Additionally, investments in agriculture bolster the rural economy and stimulate consumption across stratas,” said the founder of a Delhi NCR-based healthy food brand.

Many expect that the government will indeed look to spend more on infrastructure and manufacturing because of the record $25 Bn (INR 21 Lakh Cr) surplus transfer from the Reserve Bank of India to the central government. This gives the finance ministry more room to spend without expanding the fiscal deficit. Besides this, the higher tax revenue in the previous fiscal can also contribute to higher government spending on infrastructure, agriculture and job creation.

Any boost to the disposable income of individuals is a boon for sales and revenue generation. This includes a raft of the largest and most scaled up startups in India — ecommerce marketplaces Meesho, Amazon and Flipkart, delivery giants such as Zomato, Swiggy, Zepto and others, as well as the many new mobility platforms and thousands of D2C brands.

A Budget For Startups: Breaking The Pattern

Many economists expect that the government will not provide too much relief in income tax, because direct tax collection is an important priority for the government. Tax collections are critical for infrastructure schemes, and the government needs to have a strong and stable tax base to implement these schemes.

Over the past two terms, the Narendra Modi government’s biggest focus has been to reduce tax leakages, which has resulted in many tax-related litigation involving startups — reflected in the state of gaming startups — and large enterprises such as Airtel and Vodafone. The government is unlikely to break this pattern now and look at a short-term measure.

Indeed, it would be hard for the Sitharaman and the Finance Ministry to veer too far off from this because of fiscal deficit reduction targets. Instead, consumer spending boost is likely to come from a focus on capital expenditure, which is expected to benefit India’s middle-class in the long term. A tax rate cut, many experts reckon, will be anything but long-term and could only bring a short-term boost to consumer spending.

The RBI dividend boost and the positives from higher tax collections in the previous fiscals certainly solidifies the idea that the government will look to spend more in the hope of driving consumption for the long run.

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Run by Bengaluru-based Zinka Logistics Solutions, BlackBuck, an online marketplace for truckers and freight operators, is the latest to join the list of new-age tech startups preparing for public market entry in 2024. Backed by Peak XV, Accel, Tiger Global and other noted investors, the logistics unicorn recently filed its draft red herring prospectus (DRHP) with capital market regulator SEBI for an INR 550 Cr+ IPO. 

The issue will be a mix of new shares worth INR 550 Cr and an OFS (offer for sale) of up to 2.16 Cr shares from promoters and existing investors. The three cofounders of BlackBuck intend to offload 44.37 Lakh shares during the public market listing.

The IPO aspirant aims to utilise the proceeds to strengthen its sales and marketing initiatives and grow its NBFC subsidiary, BlackBuck Finserve. 

As many as six new-age tech startups have listed in the current calendar year – four on the mainboard and two on the SME platform – raising over INR 5,598 Cr ($670 Mn). In all cases, shares exceeded the initial pricing range, highlighting the typical rush for IPOs in the Indian stock market. It also gives us a sense of déjà vu, bringing back to mind the 2021 startup IPO market, although with a few twists and turns, including smaller IPO sizes and more reasonable valuations. 

Lately, IPOs in India have become more attractive with heavy retail participation, and several companies have been listed at a premium. Per a Fortune India report, 70% of the 30 main-board IPOs were listed at a premium, followed by 72% (out of 54 IPOs) in FY22 and 67% (out of 37 IPOs) in FY23. Interestingly, in the first nine months of FY24, 78% of the 54 main-board IPOs were listed at a premium.

Ola Electric, Swiggy, FirstCry and Unicommerce are among the most-awaited IPOs of the year, but these are still at various stages of preparation. A few others, like BlackBuck and Avanse Financial Services, are out with their DRHPs without any prior hint.

BlackBuck: Ushering In The Digital Drive To Redefine Road Freight

Before we weigh in the potential risks and rewards of the BlackBuck IPO, it will be pertinent to look at the company’s operations and how its business model stacks up against the country’s leading logistics players. 

Founded in 2015 by IIT Kharagpur alumni Rajesh Yabaji and Chanakya Hridaya, along with Rama Subramaniam, the B2B marketplace specialises in inter-city full truckload (FTL) transportation. In simple terms, it seamlessly connects truck operators with small and big businesses with shipping requirements in real time via its tech-enabled platform and operates pan-India. 

Although BlackBuck started as a truck aggregator, it currently provides a comprehensive range of solutions for load management, telematics, payment (fuel and FASTag or toll charges) and vehicle financing (with a focus on trucks). 

It has an asset-light business model and generates revenue through platform fees, subscriptions and commissions (more on its business fundamentals later). The startup has raised over $360 Mn in funding and directly competes with Wheelseye, Vahak and FleetX Loconav, digital freight platforms catering to truckers in India. 

BlackBuck says it is the largest digital freight platform for truckers in terms of revenue, accounting for 27% of the domestic market share. India’s road freight transport market, estimated at $140.3 Bn in 2024, is expected to reach $236.3 Bn by 2030, growing at a CAGR of 9.08% during the forecast period. 

As road transportation, especially trucking, continues to grow due to increased economic activities and improved infrastructure, ventures like BlackBuck will likely witness exponential growth as a core component of India’s booming logistics industry.       

The startup also claims to service the maximum number of truck operators. In FY24, it had 9.6 Lakh transacting users on the platform, accounting for 27.52% of the truckers in India, it said. 

Over the years, many Indian logistics companies, including Blue Dart Express, Allcargo Gati, VRL Logistics and Delhivery, have taken the IPO route to grow their capital base and expand their business. Although part of their operations covers the FTL market, where BlackBuck is a specialist, the latter is the first to go ahead with a unique value proposition – providing a digital edge to the highly fragmented road freight transportation space.

Speaking to Inc42, an analyst at a brokerage firm said it could be a bit early to discuss BlackBuck’s IPO prospects, given the pending SEBI nod. However, it has a more ‘mature’ business model and stands out from the rest of its listed and unlisted peers in the trucking/logistics market.

There is a catch, though, the analyst pointed out, requesting not to be named. “BlackBuck is a B2B tech company helping truckers leverage the on-demand economy and shaping the future of freight. Considering its multi-pronged approach, this narrative is a bit more complicated than Zomato or Nykaa, the [B2C] platforms people used regularly and understood their businesses better. In this case, investors may require more time to comprehend the entire business model or the long-term value proposition. But as I have said, it is too early to gauge the market sentiment,” he explained. 

Meanwhile, BlackBuck’s profitability at the operating level positions the company well for the public markets, the analyst added.

A Deep Dive Into BlackBuck’s Fundamentals Reveals The Pros & Cons

As per its DRHP, BlackBuck was a loss-making entity and reported INR 194 Cr in net losses in FY24. But compared to the previous financial year, this was a 33% drop from the INR 290.4 Cr loss posted in FY23, marking a significant improvement.  

Meanwhile, it turned profitable at an operating level in FY24 with an adjusted EBITDA of INR 13.3 Cr against a loss of INR 154.5 Cr in FY23.  

The startup said its adjusted EBITDA showed restated loss before tax from continuing operations, adjusted for finance costs, depreciation and amortisation expenses, employee share-based payment expenses and other net gains/losses. Its other net gains/losses amounted to nought in the reported year.

BlackBuck’s EBITDA loss stood at INR 138.8 Cr in FY24, but its operating revenue jumped 69% YoY to INR 296.9 Cr during that year. 

A close look at the startup’s revenue channels and its parent company’s business commitments will further clarify how the venture is faring overall.

BlackBuck generates revenue from its payment solutions for toll taxes and fuel charges, deployment of telematics (remote monitoring of vehicles) data to truck owners, vehicle financing and other service fees. 

A significant portion of its operating revenue comes from commissions (incomes from banks and oil marketing companies for the distribution and management of FASTags and fuel cards, respectively) and subscriptions for telematics-based fleet management and platform services. Its overall revenue from trucking services stood at INR 296.1 Cr in FY24, growing nearly 69% YoY.

Its parent entity, Zinka Logistics, runs other subsidiaries, including TZF Logistics Solutions, BlackBuck Finserve, ZZ Logistics Solutions and BlackBuck Netherlands B.V. 

Among these, BlackBuck Finserve received its non-deposit-taking NBFC licence on August 1, 2023, and commenced lending in October last year. It provides financing solutions for various assets such as plants and machinery and vehicles like buses and trucks.

In its DRHP, BlackBuck states that the vehicle financing business (backed by BFPL and its finance partners) enables truck operators to buy used commercial vehicles or get financing on existing ones. With this model in place, the startup generates revenues from interest incomes and loan processing fees.

The logistics major is too keen to pursue this revenue channel, as its draft filing reveals. 

As per its DRHP, the net proceeds invested in the NBFC subsidiary will be used to finance the augmentation of its capital base to meet its future capital requirements and not towards further acquisitions or repayments of its existing loans.

This approach is understandable since Indian think tank NITI Aayog estimates that the number of trucks on Indian roads will quadruple, from 4 Mn in 2022 to 17 Mn by 2050. With the concept of Vikshit Bharat set to culminate by 2047 and fuel India’s economic growth, the country’s core development areas, like manufacturing and supply chain logistics, are set to gain unprecedented momentum. This will throw open new growth opportunities for ventures like BlackBuck looking to finance different asset types, from infrastructural facilities and components to road freight essentials.

As of March 31, 2024, the NBFC arm disbursed 4,035 loans totalling INR 196.8 Cr. The interest income contributed around 0.23% to BlackBuck’s total consolidated revenue from operations in FY24. The finance and payments businesses contributed 45.26% to the startup’s consolidated operating revenue in FY24.

On the flip side, BlackBuck noted in its DRHP that any regulatory changes in the payment ecosystem or electronic toll collection technologies, among a few other global policy-related shifts, could have a material adverse effect on its payments and telematics business, which contributed to more than 94% to its consolidated operating revenue in FY24. 

The Road To Riches Will Be A Litmus Test   

Supported by a clutch of marquee investors such as Peak XV, Tiger Global, Tribe Capital, IFC Emerging  Asia Fund, VEF, Goldman Sachs Investment Partners and Accel, BlackBuck emerged as a unicorn in 2021.

After building a strong foothold in the trucking and logistics industry for nine years and undergoing bumpy rides to achieve a billion-dollar valuation, BlackBuck is finally ready to leap forward and go public when several other prominent household names are also on track for an IPO.

But more than the tussle for market attention, BlackBuck needs to get its house in order. The startup has civil, tax and criminal proceedings against the company, its promoters and its directors worth INR 277.2 Cr. Among these, one litigation worth INR 275.8 Cr involves a company director.

Still, what matters most is the ultimate litmus test. A blessing of tech unicorns is leaning towards initial public offerings now that private capital has grown scarce due to a harsh funding winter. Capital market investors, on the other hand, are genuinely excited to see high-growth startups making their debut. However, profit remains the prerequisite for success in today’s market scenario, and people can soon pull their money out without solid business outcomes.     

[Edited by Sanghamitra Mandal]

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