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.

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.

For the last decade, Uber and Ola have controlled over 70% of the Indian online ride-hailing market. But in the past two years, startups and platforms such as BluSmart, InDrive, Rapido, Namma Yatri, Red Taxi, and Snap E Cabs have tried to wrestle the duopoly and grab market share.

While we have written about how BluSmart has scaled up in the past, US-headquartered InDrive is looking to become the second large global player to make inroads in India after Uber. 

In fact, Uber is already looking to customise its offerings in sync with what InDrive offers. 

Founded in 2012 in Yakutsk, Russia, InDrive incorporated in the US in 2018, after divesting the Russia business completely. Today the app has a presence in over 749 cities across 46 countries. In 2022 and 2023, it was the second most downloaded ride-hailing app worldwide based on Google Play and App Store data. 

The high number of downloads can be attributed to the high demand among consumers for alternatives to the ‘Uber + Ola’ duopoly in ride-hailing. At least that is the case in India where a number of platforms have emerged post the pandemic.

Part of this wave, InDrive made its India entry in 2022 and has since expanded to 12 Indian cities including Delhi NCR, Bengaluru, Mumbai, Chennai, Kolkata, Chandigarh, Jaipur, Lucknow and Ludhiana.

What makes InDrive so compelling is its peer-to-peer, fair-price setting model, where passengers and drivers negotiate fares among themselves. It offers ride-hailing, intercity, freight, and delivery services in India, just like many of its competitors, but it is the pricing model which has become a key moat. 

Relief From Ride-Hailing Pains

There’s little doubt that Uber and Ola created the market for ride-hailing apps in India and solved several of the challenges around early adoption on both the driver and rider side. 

But we have written extensively about the problems that are yet to be solved, particularly with Ola and its many attempts in the past. 

In fact, most of the competitors to Uber India and Ola are banking on the fact that customers are frustrated with the existing options and complained about complacency due to the duopolistic nature of the market. 

In particular, arbitrary ride cancellations and surge pricing are the big targets for the new ride-hailing brigade. InDrive claims to solve both by offering price negotiation between driver and rider and zero surge fees.

Speaking to Inc42, InDrive country head Pratip Mazumder said, “We provide freedom of choice to both driver partners and riders. They can decide if they want to take a ride at a certain price or not. Both sides of the marketplace can decide for themselves. This model offers freedom and does not charge any kind of surge fee. Two people can agree on a price without the platform intervening.”

The price negotiation feature allows riders and drivers to come to a mutually agreed rate while the default payment mode remains cash to the drivers and hence the cancellation due to price or payment modes is very low, he claimed. “We see significantly low cancellations and these are mostly due to navigation errors or wrong pick-up addresses.” 

Driver-Centric Models Emerge 

Uber and Ola have also faced criticism from drivers, who have gone on strike multiple times over the years, demanding fair platform commissions and better earnings predictability. 

Both platforms charge 20%-25% commission from drivers, with an extra 5% for GST. When accounting for vehicle maintenance, fuel costs and other expenses, app-based drivers see much of their earnings erased. In some cases, car loan EMIs further reduce the net earnings. 

Further, the commission structure is ever-changing due to incentives and deductions by the platforms, leaving drivers at the mercy of whatever the companies decide. For years, drivers on Ola and Uber looked for alternatives that could disrupt this model, and it is only in the past two years that these have emerged, partly fuelled by VC funding. 

For instance, JusPay-backed Namma Yatri partnered with Bengaluru-based Autorickshaw Drivers Union (ARDU) to launch its service in 2022. JusPay has raised over $88 Mn in its lifetime for its fintech platform, but saw the opportunity to diversify into mobility. 

Namma Yatri has largely been incubated within JusPay though it is now run as a separate product. It started with zero commission and currently offers two payment options to auto-rickshaw drivers: INR 25 for unlimited trips per day or INR 3.50 per trip with no charges after 10 trips. 

However, auto-rickshaw union ARDU has reportedly ended its partnership with Namma Yatri in recent weeks, which calls into question the sustainability of new models. 

Similarly, ride-hailing platform Rapido faced extensive pushback on its earlier bike-hailing service in many cities, and eventually it expanded into autos and cabs as well. It also introduced a zero-commission model for drivers, and currently allows users to set a higher price per ride to get guaranteed rides. 

EV-centric mobility startup BluSmart is another example of a VC-funded platform that is looking to challenge the duopoly. Founded in 2019 the company claims to be on course to reach INR 800 Cr in revenue in FY25. And it looked to find a niche by employing drivers who are paid fixed salaries as well as performance-based incentives.

In comparison, InDrive takes 10% commission per ride which includes a 5% platform commission as well as the GST for the ride. Mazumder added that this is also one of the reasons why InDrive has been able to offer fair pricing in comparison to other platforms for drivers, which goes a long way towards solving ride cancellations. 

However, it must be noted that other companies are experimenting with similar models depending on the vehicle being used for the service, as we will see below. 

Can InDrive Dethrone Ola & Uber?

InDrive’s entry and rise to prominence in terms of the user base has forced Uber’s hand and led to similar changes in Rapido. For instance, the price negotiation feature has been so appealing that Uber has begun piloting Uber Flex in around 12 smaller cities in India before a potential launch in metros and Tier 1 cities.

Here’s where it gets interesting. Can InDrive survive against Uber Flex once it’s fully launched? It’s worth mentioning that the platform is already present in 125 cities across India. 

The largest player, Ola Cabs, is already present in over 150+ cities in India. Rapido, with its bike taxi service as its key offering, has now expanded its presence to over 100 cities. The old veteran, Meru Cabs, currently has a presence in 24 cities. Then, there are Quick Ride, BlaBlaCar, Jugnoo, and other apps operating in almost a dozen cities. Besides, there are a few fast-growing players such as BluSmart, which is currently operational in Delhi NCR and Bengaluru, and Red Taxi in six cities.

Backed by the Karnataka State Driver’s Council, Bengaluru witnessed the launch of a new ride-hailing service called Nagara Metered Auto Drive, which charges government-fixed fares of INR 30 for the first 2 km and INR 15 per additional km.

In such a scenario, it’s not going to be an easy ride for InDrive in India to survive and then compete with the top players. The platform was initially launched with zero commission and later revised to 5%, similar to how BluSmart changed its policy from no surge pricing to rush hour pricing as it strived for profitability.

InDrive’s Path To Profitability

Besides the operational challenges, profitability has been a significant pain point for both Uber and Ola. 

Even if Uber registered a staggering $1.9 Bn profit for 2023 globally, Uber India’s loss widened from INR 216 Cr in FY22 to INR 311 Cr in FY23. Uber India’s revenue also increased to INR 2,666 Cr in FY23 from INR 1,726 Cr in FY22, which is definitely encouraging for the company despite the losses. 

Ola Cabs’ parent entity, ANI Technologies, managed to cut its losses by nearly 50% to INR 772 Cr during FY23 against INR 1,522 Cr in FY22. ANI Technologies recorded a 42% growth in scale to INR 2,799 Cr for FY23 as compared to INR 1,970 Cr in FY22. Despite high commissions, both companies are still posting significant losses. 

Similarly, Rapido, which claims to offer a zero-commission model for drivers with a daily subscription fee, reported a 53.6% widened standalone loss of INR 674.5 Cr in FY23 against INR 439 Cr in FY22. Rapido’s bottom line was hurt despite its operating revenue rising more than threefold to INR 443 Cr during the year under review from INR 144.8 Cr in FY22.

In terms of scale, InDrive is the smallest player among these standout platforms in the ride-hailing market. However, according to the InDrive data shared with Inc42, its monthly active users in India are growing at 20% while the Y-o-Y rides have grown by 29%.

So what’s InDrive’s path to profitability? Mazumder said the challenge in the Indian market is that it is very complex with diverse states, cities, languages, and aspirations. He also claimed that InDrive’s vision of ensuring fairness and solving problems transparently is critical for people to accept and love the product, and once that happens, profitability will follow.

That may have been true for many startups in the past, but the reality is that competing against VC-funded players who have already scaled up to a large extent will not be easy or inexpensive. 

The company recently closed a $150 Mn round led by General Catalyst, taking its total lifetime funding to over $380 Mn. How much of that will be allocated for India? 

Instead of directly responding about the financial performance of the India business, Mazumder said, “If we can solve for India, we can solve for the world. Our CEO has a clear vision of reaching a billion-plus people. We aim to challenge injustice, provide access to better jobs, and improve quality of life. Profitability is an outcome of scale, product value, and market acceptance.” 

So what kind of product innovation is InDrive looking at? Interestingly, the company is going forward with a ‘super app’ vision, so it’s quite bullish on the depth of the Indian market. “So if you look at the app, we already offer normal cab rides, we have moto rides, and we have deliveries over 20 kg. This is how we are trying to create more use cases for the Indian market,” added Mazumder.

Like Ola, Uber, BluSmart and other players, InDrive also plans to go green soon in India. Mazumder believes that the company will enter the space once charging is not as big a problem as it is today. At the moment, InDrive is looking at ways to solve the charging infrastructure problem and plans to have a significant EV build-up in the near future. 

But for now, the big question is: does InDrive India have enough fuel in its tank to outpace BluSmart, Rapido and others in the race against Uber India and Ola? 

[Edited by Nikhil Subramaniam]

The post Can Ride-Hailing Hotshot InDrive Smash The Ola-Uber Duopoly In India? appeared first on Inc42 Media.

As the Indian government pursues its vision of Viksit Bharat@2047, the focus is on nurturing a low-carbon economy. The high cost of gasoline and its growing shortage are pushing developed nations towards electric alternatives. And India, too, is looking forward to a decarbonised ecosystem, be it shifting freight from road to railways or the robust growth of electric vehicles (EVs) by 2030.    

On the back of growing EV demand, the Indian government approved Phase II of the FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme with an outlay of INR 10K Cr for three years, starting from April 1, 2019. The aim was to incentivise EV makers to promote domestic manufacturing of electric vehicles. The scheme was extended until March 31, 2024, and a four-month programme called the Electric Mobility Promotion Scheme (EMPS) was introduced in April this year to service OEMs during general elections.

However, all’s not well in a country that has never considered electric vehicles a passim fancy. In May 2023, the ministry of heavy industries (MHI), in charge of FAME II, issued show-cause notices to leading electric two-wheeler (E2W) players, including Hero Electric, Okinawa Autotech, Ampere Vehicles (Greaves Cotton), Benling India, Revolt Intellicorp and Amo Mobility. 

The allegation: Violation of FAME II manufacturing norms (more on that later) that may result in certain 2W models getting deregistered. The MHI also asked these companies to refund the entire subsidy amount worth INR 469 Cr spent on their models.

On March 27, 2024, debarment orders were issued to Hero Electric and Benling India, which means these companies cannot leverage the government’s schemes in the future. Okinawa received interim relief as its case was pending in the Delhi High Court.

An MHI official told Inc42 on condition of anonymity. “Non-compliance was established on various occasions. For instance, we tested a Benling India scooter and found almost all components were imported [as per FAME II, at least 50% should be locally manufactured]. Okinawa will also get the debarment order after the Delhi High Court disposes of the case.”

This may well be routine proceedings for the Ministry of Heavy Industries, but the issue may escalate into something more worrying.

“At least three to five OEMs may shut down in the following months, affecting 1K dealerships and more than 5K jobs,” an industry insider closely following the developments said when asked about the potential impact.

According to a report published in August 2023 by the Society of Manufacturers of Electric Vehicles (SMEV), with government subsidies on hold for 22 months, EV OEMs have suffered losses above INR 9,075 Cr.

Again, many dealers had no choice but to opt for legal proceedings against these companies for not meeting the demand as per the dealership agreements.

Speaking to Inc42, Vinkesh Gulati, chairman (Research & Academy) at the Federation of Automobile Dealers Association, revealed an intriguing scenario. According to him, some manufacturers initially fulfilled the PMP norms by purchasing imported components from local vendors. It was an ingenious supply chain where Vendor A imported the components and sold them to Vendor B. Next, Vendor B sold those to Vendor C, and finally, the OEMs purchased those components from Vendor C. 

However, it would be unfair to blame the OEMs alone, given the inadequate manufacturing infrastructure that led to the component crunch at home, said Gulati. 

How Hero Electric & Okinawa Pioneered EVs

Once the commanding force of the Indian E2W space with a combined market share of 70%, Okinawa and Hero Electric’s contributions have now shrunk to less than 1%. Their manufacturing units have been shut down for more than a year, although Okinawa and Benling India are reportedly rolling out a few batches now and then. 

Hero Electric and Okinawa were long lauded for bringing electric two-wheelers to the mainstream by lowering sticker prices. These companies started with lead-acid batteries to keep costs low and consistently commanded more than 50% of the market share in FY20 and FY21. But it dropped to 46% in FY22.

Okinawa’s founder, Jeetender Sharma, claimed several nifty innovations and was confident about the company’s future. “We were among the first ventures in India to mass manufacture high-speed electric scooters. With a top speed of 55 kmph, a loading capacity of 150 kg, a battery range of 88-90 km per charge and enough power in its motor to climb flyovers, the Okinawa Ridge was our breakthrough EV. The Ridge was greatly appreciated in the nascent Indian market, with more than 10K units sold in the first year. Naysayers said I would not even cross 500 units in the first year, but they were wrong,” he told the media a few years ago.  

Just before the lockdown, Okinawa used to sell more than 4.5K units a month, but Hero Electric soon surpassed it, reaching monthly sales of 6K+ EV two-wheelers. But in spite of creating an all-new E2W market in India, early entrants like Hero Electric, Okinawa, Benling India and Ampere heavily depended on imports for the supply of components, according to EV experts. Had India established a robust supply chain in early days, the subsidy misappropriation by wrongfully declaring imported components as locally produced could have been prevented, bringing EVs within striking distance of ICE-powered vehicles by now.   

The Anatomy Of A ‘Faulty’ Business Model

Commenting on the latest developments, Deb Mukherji, CEO of Clean Mobility Solution India, said, “Credit must be given where it is due. Both Hero Electric and Okinawa ushered in the E2W era here. But their dependency on imports cannot be overlooked. They used to purchase all their kits and components from China.” 

No doubt assembly and incremental value-additions (if any) came later. But what happened then could be likened to a trading model, according to Mukherji. 

“Such a model is adopted for two reasons. One may go for it if the business deals in low-value commodities such as toys and candles, which are cheaper to import and have no quality concerns involved. Or you may go for it if there is a strict cost advantage and competition is based solely on price,” he added.

However, the second option is always risky and short-term. If one is selling at INR 100 today, someone may offer it at INR 90 tomorrow, forcing others to lower their prices. Competing purely on cost is unsustainable because someone can always undercut the price.

As the market developed and demand grew, these companies were under significant pressure. They tried to shift to the next level of manufacturing but manufacturing prowess was not their strength.

According to an analyst who did not want to be named, a close look at the companies’ financials would reveal how their dependency on FAME II incentives increased annually, rising from 1% to 20% of the operational revenue. It was understandable in the beginning when they had to import all components. But unlike other players, they maintained the same approach even when local component manufacturers were around. Their expenses also reveal little or no allocation for R&D, indicating a lack of long-term focus.

Randheer Singh, CEO of the EV value chain consulting ForeSee Advisors and former director of NITI Aayog, concurred saying that Hero Electric’s and Okinawa’s decline in market share could be attributed to intense competition from brands like Ola and TVS, which excel in affordability and extensive service networks. Product quality and the recent subsidy withdrawal for non-compliance have also impacted their market positioning.  

Singh believes enhancing product reliability and leveraging government incentives will be crucial for their comeback.

FAME II Violation Hurts EV Ecosystem  

The Indian government’s ambitious subsidy scheme to promote EVs was marred by alleged norms violations after whistleblowers started complaining in 2022. But before we enter the contentious ground, a quick look at the backstory will not be out of context.

The government launched the National Electric Mobility Mission Plan (NEMMP) in 2013 to promote hybrid and electric vehicles, aiming to hit 6-7 Mn sales by 2020 and enhance fuel security. Since EVs cost 30-40% more than their ICE counterparts, the FAME programme was introduced under NEMMP in March 2015 to make these ‘green’ vehicles more affordable through subsidies.

The first phase of FAME continued until March 31, 2019, with an allocation of INR 895 Cr, out of which INR 529 Cr was released. The remaining amount was reallocated to the FAME II scheme.

FAME I focussed on early market creation through demand incentives, in-house technology development and domestic production to help the industry reach self-sufficient economies of scale. It provided demand incentives for the adoption of 2.8 Lakh EVs (2Ws, 3Ws and 4Ws) and 425 electric and hybrid buses, besides the development of 520 charging stations.

FAME II came into force in April 2019 (FY20) for a three-year span, with an allocation of INR 10K Cr (including the remaining INR 366 Cr from FAME I). However, with the onset of the Covid-19 pandemic in 2020 and the following socio-economic setbacks, its subsidy period was extended to March 2024. Its focus areas included financial incentives for EV purchase, charging infrastructure development and all other related activities.

But the flagship scheme’s timeline got disrupted again. Based on the feedback from industry stakeholders, FAME II was overhauled in June 2021 and upfront costs were lowered to ensure faster EV adoption. Earlier, the government used to offer an incentive of INR 10K per kilowatt-hour (kWh indicates energy consumed per hour) for two-wheelers, but this was revised to INR 15K per kWh, with the maximum cap rising from 20% to 40% of the vehicle cost.

Maximum ex-factory prices for 2Ws, 3Ws and 4Ws remained unchanged at INR 1.5 Lakh, INR 5 Lakh and INR 15 Lakh, respectively, for manufacturers to avail of FAME II incentives.

EV makers were mandated to use locally produced components such as battery packs, traction motors, controllers, vehicle control units, onboard chargers and instrument panels in a phased manner. All other components must be sourced locally to meet FAME II compliance and obtain subsidies under the scheme. Subsequently, OEMs had to declare domestic value addition (DVA), a metric indicating how much value an EV manufacturer has created locally for every EV unit. At least 50% of vehicle components should be sourced from India to qualify for the FAME II incentive scheme.

Things took a bad turn when the MHI received several letters from whistleblowers between April and September 2022. They claimed that EV manufacturers such as Okinawa, Hero Electric, Ampere and Benling India had flouted FAME II procurement norms and imported components, which were supposed to be manufactured or assembled in India.

According to these letters, some of the components such as DC-DC converter, electronic throttle, vehicle control unit, onboard charger, traction motor and traction motor controller were supposed to be sourced locally from April 1, 2020. But a few E2W OEMs continued to use imported parts even after the deadline.

This violates the PMP framework of the FAME II scheme.

The MHI probed as many as 13 EV companies. Among these, six E2W players, including Hero Electric, Okinawa, Ampere Vehicles (Greaves Cotton), Benling India, Revolt Intellicorp and Amo Mobility, allegedly violated PMP/DVA norms. Others, such as Ather Energy, Ola Electric, TVS and Vida (from Hero MotoCorp), were accused of violating pricing norms. 

An MHI official told Inc42 that Hero Electric, Okinawa, Benling India and others had confessed during the probe that most of their components were imported. Among these were chassis, wheel rims, electric switches, steering locks, braking systems, suspensions, light sets and even body panels.

The tests were carried out by the International Centre for Automotive Technology (ICAT). In its strip-down analysis report, ICAT said both Hero Electric and Okinawa imported DC-DC converters, traction motors, onboard chargers, wheel rims and buzzers in FY22 and FY23.

“We are not even talking about controllers and motors,” the MHI official said. “In the case of Okinawa, we found even the tyres, horns and seats were imported. Literally, the entire scooter. How could we pass it off?”

After receiving the show-cause notice last year, Hero MotoCorp, TVS Motor Company, Ather Energy and Ola Electric deposited around INR 300 Cr as a penalty for violating the guidelines under the FAME scheme. 

A source close to the development made another point. “The certification process of the testing agencies had their interpretational issues at the time. Also, some OEMs used to send one model for certification and sold another variant post-certification. Even if they incorporated locally made components for testing purposes, the rest of the models featured imported parts.”

Rebuttal From The OEMs: What Hero Electric And Others Have To Say

Although most EV players have refunded past subsidies and publicly admitted wrongdoing, Hero Electric, Okinawa and Benling India have approached the court for a resolution.

According to a press statement by the industry body SMEV, the MHI owes the OEMs INR 1,200 Cr [unpaid earlier subsidies for which invoices were submitted]. If the ministry’s demand for a subsidy refund of INR 469 Cr under FAME II is actualised, it will have INR 1,669 Cr in all. This means the INR 2K Cr budget for the E2W sector will remain largely non-disbursed. In that case, the non-compliance becomes a non-issue, although the FAME II scheme would have become a complete non-starter [minus the subsidies].

A former SMEV official further argued if the certified models breached the FAME II framework, the responsibility should first fall on the testing agencies, not the OEMs.

The testing agencies in question include the Automotive Research Association of India (ARAI) in Pune, Maharashtra; the International Centre for Automotive Technology (ICAT) at Manesar, Haryana; the Global Automotive Research Centre at Oragadam, Tamil Nadu, and the National Automotive Test Tracks at Pithampur, Madhya Pradesh.

“Has the MHI punished any of these testing agencies? No. But they are punishing the OEMs who sold the models certified by these agencies,” a senior official working for Hero Electric said, requesting anonymity. “The MHI is asking for refunds at a time when these subsidies have already been paid to end users. We wanted to recall buyers’ subsidies and deposit them back to the ministry, but didn’t get approval for the same,” he added.

“Although Ampere, Amo and Revolt paid their dues, their models have still not been approved by the MHI. So, paying the subsidy back does not offer them any lifeline. As we no longer have financial backing, we won’t be able to compete with other players loaded with subsidies,” the employee observed. 

He also brought forward another anomaly. “Govt officials have alleged that we bought components from a vendor whose certification had already expired. Four-wheeler OEMs did it but the exception was extended to them for another year. We didn’t have that advantage, but rules must be the same for everyone. Approval for a new vendor would have taken months and we had no choice but to purchase components from the same company.”

The MHI official mentioned above called it a feeble excuse. “Per the PMP framework, different deadlines were set for component imports. After consultations with industry representatives, those timelines were specifically tailored for two-wheelers, three-wheelers and four-wheelers. So there should have been no bottlenecks regarding procurement.”

While Hero Electric officially declined to comment on these allegations and counter-allegations, Okinawa Autotech did not respond to Inc42 queries till the time of publishing this article. 

How The Legal Spat Panned Out

In September 2022, the customs commissioner in Ludhiana (the jurisdiction covers Punjab, Himachal Pradesh, and Chandigarh) issued a show-cause notice to Hero Electric under Section 28(9)(b) of the Customs Act, 1962. The notice alleged that the company imported whole e-scooters instead of their components.

In its response on February 14, 2023, Hero Electric claimed to have sufficient evidence to prove that only parts, not entire scooters, were imported.

In July 2023, after Hero Electric models were deregistered from the FAME subsidy portal, the company filed a petition in the Punjab and Haryana High Court. The petition argued that despite the company’s response, the Customs did not follow any procedures or take steps to finalise the proceedings on the show-cause notice.

On July 27, the HC directed the Indian government to complete the proceedings by issuing a final order on the show-cause notice by November 27, 2023.

In April 2024, the company filed another petition against the Indian government’s deregistration and debarment order. This will be heard on July 30, 2024.

In November 2023, Okinawa Autotech approached the Delhi High Court challenging the MHI order dated October 9, 2023, which deregistered Okinawa scooters from the FAME II portal and demanded a refund of the entire subsidy amount of INR 116.85 Cr.

Benling India also approached the Delhi High Court in May 2024, challenging the show-cause notice issued on May 25, 2023, and the debarment order dated March 7, 2023. The company argued that the scooter in question was obtained from a third party and, therefore, the company was not liable for any foreign components fitted in the vehicle.

Meanwhile, Hero Electric was taken to the Delhi High Court for non-payment of rent. The owner of the premise alleged that rent worth INR 68 Lakh had not been paid and requested arbitration. These matters, too, will be heard on July 23, 2024.

Kaybee Overseas, a vendor of Hero Electric, filed a petition regarding non-payment. Another dealer, Aurum Automobile, also approached the Delhi High Court Mediation and Conciliation Centre for a settlement with the company.

In April 2024, the Delhi HC appointed a sole arbitrator to adjudicate the dispute between Okinawa and Goyal Ebike, one of Okinawa’s dealers. Goyal Ebike alleged that Okinawa failed to supply its e-scooters despite multiple calls and email messages. The case will be heard on July 15, 2024.

EV Majors In A Deep Hole

The legal storm overtook the EV companies when Hero Electric was looking for strategic partners to raise $250 Mn and Okinawa was aiming to bag $100 Mn. They raised part of the capital through compulsorily convertible preference shares (CCPS) and compulsory convertible debentures (CCD), but the plan went south as the news of model deregistration and subsidy refund hit the headlines.

The current turmoil has brought the three companies to the brink of closure. Hero Electric’s plant has reportedly remained idle for the past 15 months, while the Benling India unit in Manesar has been non-operational for more than a year. Okinawa, too, is facing similar challenges, as it has invested substantially to set up a second unit in Karoli, Rajasthan (the first one is in Alwar). To fulfil some outstanding orders and thus avoid legal conflicts with their dealers, Okinawa and Benling have intermittently resumed operations and paid their workers daily wages, sources from these companies told Inc42.

More stories of suffering follow. More than 80% of permanent employees in Hero Electric and Benling have been laid off since May 2023. At Benling India, nearly all employees have been dismissed, barring four or five, said a former senior employee.

A host of component suppliers have not been paid yet and 1K+ dealers have run out of supplies after regular production has gone on hold. Assuming each dealership employed around five people, each supporting a family of four, nearly 20K lives have been impacted.

The MHI decision has impacted thousands of people. Vendors have not received payments for component supplies, and dealers face supply shortages after regular production is put on hold. This has affected 1K+ dealerships nationwide, affecting nearly 20,000 lives (assuming each dealership employed around five people and each supported a family of four).

Numerous dealerships listed on these companies’ websites have shut down, with some switching to other brands. When queried, sales staff cite a lack of support from these brands as the reason for the shift.

How the dealers are trying to sell these e-scooters now can be gleaned from a recent interaction. When we called a Benling India dealer regarding the availability of those E2Ws, he said, “We currently have two scooters in stock, but could not communicate with the company for the past few months. If you want to buy, I can offer some parts and provide a personal guarantee. But I cannot extend that assurance on behalf of the brand.”

This has impacted the owners as well. A significant number of users have not been getting after-sales services and support from these brands.

Summing up the situation, one of the E2W founders said, “Although this may not have been the MHI’s intention, it has overlooked the humane angle here when it implemented the decision. The MHI is primarily at fault in this scenario. The goal should have been to enforce the law in real-time, but the ministry failed miserably. After identifying the FAME II violation, it should have issued a warning and extended the deadline by a few months. Such extreme punishments are typically reserved for repeat violations, not for the first-time offenders, especially in a nascent market.”

Driving the adoption of EVs in India is not just about nurturing a new industry and market but is also critical for India’s sustainable development goals. The hurdles such as the FAME-II violation severely dent the confidence of the EV ecosystem, but execution and implementation gaps from the government side have also resulted in value erosion for the companies. For the sake of India’s EV future, many in the industry hope this is the last such fracas between EV makers and policymakers.

[Edited by Sanghamitra Mandal]

The post Will FAME-II Violation Blow Hero Electric, Okinawa And Benling India Off The EV Highway? appeared first on Inc42 Media.

The nuanced world of venture capital, a financial superhighway connecting visionary founders and investors, may not yet be past its golden era. However, VC firms are becoming more realistic, overcoming the fear of missing out (FOMO) and moving away from astronomical valuations. A thorough analysis of returns and growth potential is the new watchword after the funding winter, and most VC funds are now cautious about investing until startups can offer compelling propositions and solid numbers.    

Unlike many of its storied peers, Singapore-based Vertex Ventures Southeast Asia and India (VVSEAI) was quite active even during the recent turbulence. Set up in 2010, it is one of the biggest and oldest investors in SEA and closed its fifth fund in September 2023 with a corpus of $541 Mn. Interestingly, Fund V is nearly 80% larger than the previous one ($305 Mn) raised in 2019 and has surpassed its target of $450 Mn.

The latest fund is supported by existing and new limited partners (LPs), including sovereign wealth funds, financial institutions, corporate houses and family offices across Asia and the EU. Japan Investment Corporation (JIC), International Finance Corporation (IFC) and DEG (a German development finance institution) are the new LPs onboarded for Fund V.

The early stage VC fund has already invested in around 30 Indian startups across its funds. Among these are IPO-hopeful FirstCry (Vertex has exited the business), India’s first D2C unicorn Licious, profitable fintech app Kissht, leading audio content platform KukuFM and fintech AI platform Signzy. In fact, Vertex has funded a host of AI startups, such as Threado AI, Active.Ai (sold to Gupshup), Attentive and Validus, even before AI and GenAI took centre stage.

In 2022, the fund led a $9 Mn Series A round in its portfolio company BeepKart, a Bengaluru-based e-retailer of pre-owned two-wheelers. In January 2024, it also took part in the $6.3 Mn Series A funding of Mumbai-based on-demand manufacturing platform Karkhana.io. This investment was made from Vertex Ventures Fund V. In 2021, Karkhana.io also secured its pre-Series A funding worth $1.2 Mn from Vertex.

Asked about its diverse range of India investments, Piyush Kharbanda, general partner at VVSEAI, emphasised the fund’s market expertise and constant search for sustainable startups. “We don’t look for vanity metrics like high valuations. Our partners working for a country-specific market are not parachuted, either. They have a profound understanding of the local market and make the decisions accordingly.”

An alumnus of Delhi College of Engineering and IIM-Ahmedabad, Kharbanda joined the fund in 2016 and worked closely with a number of startups such as Kissht, KukuFM, Signzy, Ayu Health, BeepKart, Tortoise, Threado and Certa.

In this edition of Moneyball, Inc42 has an exclusive interaction with Kharbanda, who speaks about the evolving VC landscape, emerging sectors, fintech’s regulatory hurdles and why the omnipotent AI may only operate as an in-built component across existing platforms. Here are the edited excerpts. 

Inc42: What are the key verticals Vertex targets? Does your investment focus vary based on the market you are in – it won’t be the same for India and Indonesia?

Piyush Kharbanda: Vertex caters to multiple geographies, including Singapore, Indonesia, India, Vietnam and Thailand. But we do not operate as outsiders parachuting into different markets. Instead, we draw upon our local expertise and work with dedicated teams to focus on local investments and growth sectors.

The fund house is guided by a unified set of themes, but we understand that each market is unique and the specifics vary. For instance, consumption [consumer trends] is a significant theme in emerging markets like India and Indonesia. Therefore, our India investments span beauty and personal care brands, pre-owned two-wheeler platforms, healthcare and more. 

Depending on the market, our investment strategy adopts different approaches to the same themes, including consumer technology, fintech, SaaS, local and cross-border software solutions, health and wellness, mobility and sustainability/climate-related initiatives.

Inc42: How many startups have you invested in, and how many are part of Fund V? Please tell us about your follow-on investment strategy.

 Piyush Kharbanda: We manage an active portfolio of 52 startups and have invested in 80 businesses. Among these, approximately 30 are Indian startups. Fund V is quite active and has already backed nine companies, five of which are Indian ventures. 

We have also seen some notable exits, including FirstCry, XpressBees and Recko, among several others. 

Our investments range from $2 Mn to $10-12 Mn. We consider ourselves long-term investors, reserving capital for follow-on rounds. On average, we commit $10-12 Mn per company, depending on its size, scale and scope.

Inc42: How long does it take to write a cheque after a startup pitch?

Piyush Kharbanda: We engage with startups well before they raise the money. It takes three to six weeks to initiate due diligence and issue a term sheet. An additional six weeks are required to complete due diligence and finalise the deal. This process can be faster sometimes, but closing an investment takes about three months.

Inc42: How does Vertex support portfolio companies beyond funding? 

Piyush Kharbanda: Every venture fund supports its startups, but the extent of that support often hinges on the size of its portfolio. We have a manageable portfolio at Vertex, allowing us to allocate time and resources to each company. Our partnerships team also leverages our extensive global network to help portfolio companies.

Active business development is a crucial part of our investment strategy. Recently, we organised a CIO meetup in Japan, giving our startups access to prominent Japanese corporations. In another instance, we introduced large clients to a portfolio company called Certa. These initiatives underscore our commitment to fostering meaningful connections and opportunities for our startups.

Inc42: What about the exit strategy at Vertex?

Piyush Kharbanda: We have to consider exit from Day 1 because we are accountable to our partners. It is not an easy conversation, though, as you typically seek to work with someone aiming to build a lasting legacy business. But we must discuss these matters with our founders at times.

We are very transparent during these discussions, regardless of the startup’s stage or condition. Our founders also understand our perspective and recognise its importance. It doesn’t mean we bring up exits at every board meeting, but there are appropriate times for such interactions.

We ensure that the founders are aware of the exit options, not just for our benefit but also for theirs. This involves staying in touch with competitors, potential strategic acquirers and everyone else in the ecosystem. This approach helps build a better business and opens the door for a favourable outcome. Then again, we are always mindful of the business model’s sustainability. So, these are critical conversations integral to building a business and developing an exit strategy.

Inc42: Early stage funding saw a 29% decline in FY24, compared to a 17% dip in overall startup funding. Why did early-stage investors lose interest?

Piyush Kharbanda: We are on an upward trajectory if you consider the trend during 2017-2024. The spike in 2020 and 2021 was an exception. An influx of cheap capital drove it and many startups secured funding with ease. But the market has since normalised and investors are now more cautious, focussing on sustainable business models.  

Inc42: A valuation reversal is underway, with dozens of unicorns and soonicorns losing their coveted status. What’s your take as an investor?

Piyush Kharbanda: We don’t focus on unicorn status as it is a vanity metric. The trend reflects the aftermath of the 2021-22 valuation surge when many startups were overvalued without sustainable business models or unit economics. Some of these entities may bounce back. Others will fail to raise capital or may soon seek funding at lower valuations.

Inc42: Which emerging sectors will grow significantly in the next three to four years? Is the current hype around AI sustainable?

Piyush Kharbanda: AI is crucial for the future of software. But it will become a feature within existing platforms rather than being the sole focus of standalone companies. Not every company can become AI-native or immediately disrupt all industry segments. But yes, established players with strong distribution networks will continue to thrive.

Beyond AI, we are bullish on the consumption economy, especially new consumer brands, cross-border B2B platforms and technology marketplaces. These sectors have substantial growth potential.

Inc42: What about regulatory issues? Do they impact VC investments such as in fintech?

Piyush Kharbanda: These issues should not affect businesses adhering to the law. We have not invested in fringe or under-regulated sectors, as success in financial services demands agility and strict compliance with regulations.

Inc42: VCs like Rocketship claim to be 100% outbound and data-driven, but many others rely on networks for deal hunting. What does Vertex do?

Piyush Kharbanda: Vertex works with exceptional founders, taps into thriving markets and nurtures robust business models. There must be a place and time for data to stay at the centre of these core elements for effective outcomes. The strategic use of data is paramount at this point. Just think about how the efficacy of a business model is validated through data over time. 

On the other hand, cultivating strong relationships remains equally critical for long-term success. Many would underscore the human element when deciding upon a VC partner or a startup founder. Our global network also helps us understand where markets will be tomorrow rather than where they are today. 

I would say there is no right or wrong answer here. Even within Vertex, people have different perspectives and put more weight on one aspect or another. Some people lean towards market-driven investments. Others are more founder-driven and value founders’ vision. Again, some may focus on business models and data. The beauty of the VC model is that all three approaches can work. 

As a team, we consistently ask each other probing questions to ensure a clear understanding of all critical factors. We are intellectually honest with each other and very transparent. This helps us do what we are doing.

Inc42: How do you see the VC landscape especially, investments in hardware and sustainability evolving over the next five years, given that current investment levels in these certain segments are still low?

Piyush Kharbanda: A collective ecosystem is out there and VCs are part of it. They focus on different segments based on their expertise and priorities. But as you said, there are certain sectors which are underinvested. We need a broader ecosystem to address that, as we don’t have enough people with a deep understanding of how to invest in areas like, say, hardware. [I am also one of those people lacking special knowledge.]

These investment cycles may evolve slowly, but certain sectors will soon gain momentum. Hardware, for instance, will see more expertise being built and attract more investments. We have witnessed this in the semiconductor space and other areas. I think it is just a matter of a few more cycles before these sectors become extremely relevant.            

As for the VC ecosystem, we are at a crossroads. We are going to see a lot of churn following a prolonged funding winter. Some big names may struggle to raise capital, and consequently, some large funds may have to reduce their subsequent fund sizes. We may also see new managers spinning out of existing VCs and setting up CVCs. Meanwhile, smaller funds which have spun out may become larger and gain prominence. Overall, there will be a lot of churn in the next five to seven years across the ecosystem.

[Edited by Sanghamitra Mandal]

The post Vertex Ventures’ Piyush Kharbanda On Why Big Investments In Deeptech, Sustainability Are Still A Few Cycles Away appeared first on Inc42 Media.

In March 2023, Vineet Gupta, a confectionery store owner from Roorkee, and his wife Anjali were looking for the best investment options, not only for savings but also something that would give them guaranteed returns with minimal risk.

“My son scored over 97% in 10th grade. We wanted to save money for his higher studies,” Vineet said.

This is when they learned about the agritech investment platform Growpital from Google ads and on YouTube videos, which promised a tax-free 15% return on investments.

“There are no risks involved,” Growpital’s executives assured the couple via phone calls, he recalled. Further, since it’s an agricultural investment, there will be no taxes.

After speaking to multiple such salespeople, and watching webinars and interviews on YouTube, the Guptas decided to invest what they described as their entire life savings into Growpital — a whopping INR 32 Lakh for three years.

As per Growpital’s investment model, the couple was supposed to receive around 15% returns on a half-yearly basis plus any bonuses. But as it turns out that was just a story. 

“We have received just one such payout last year from Growpital. After that, there have been no payouts. Now, we are unable to sleep at night, losing hope. We don’t have any money left to continue our only child’s education,” Vineet told Inc42. 

Interestingly, all payouts to investment partners were made to their respective Growpital wallets which many of the investor-partners either reinvested or did not withdraw before the SEBI’s order.

He is just one among over 5,200 investor-partners (as per SEBI records) who are now stuck in limbo after investing in Growpital. The extent of their plight is clear from interviews that Inc42 conducted with 15 such investor-partners over the past few weeks. 

Another investor Manoj (name changed) told us he was diagnosed with a severe mental illness after learning that he might not see any returns from the INR 20 Lakh invested with Growpital. 

From plans to hit a revenue of INR 400 Cr in FY24 to inching towards a shutdown with every passing day, the Growpital story and promise have completely soured in the last six months. 

• Over 5K investor-partners have stopped receiving instalments for the last six months
• Growpital’s employee count has reduced from around 100 to less than five, according to various sources close to the development 
• What’s more the main investing platform i.e. Growpital’s website is not operational leaving investor-partners knocking on several doors for their returns

As reported by Inc42 in January this year, SEBI froze all the company accounts, leading to day-to-day operations coming to a halt. In an email response to Inc42, Rituraj Sharma of Growpital said that the total amount frozen by SEBI in bank accounts of entities is approx INR 50 Cr. 

Besides this, the Ministry of Corporate Affairs imposed a penalty of INR 1.47 Cr on Yotta Agro, its partner entity which manages the farm properties and its directors including SHarma.

Growpital’s ‘False’ Promises

Founded by Rituraj Sharma in 2020, Jaipur-based Growpital was touted as one of the fastest-growing agritech investment platforms, offering 10%-18% returns on investments, and allowing investor-partners to invest as little as INR 5,000.

These investments were reportedly used for farming, and once the produce was sold, the firm claimed to have generated profits. These profits were then distributed among the investor-partners according to their respective investment plans.

Operated through a group of entities, the startup claimed to have raised funds for farming across 14 states in India for 70-plus crops, including fruits, vegetables, oilseeds, medicinal crops, and other cash crops.

To enable this, Growpital claimed to have partnered with various entities for farming and selling produce in the market. By collaborating with farmers, it provided standardised farming procedures. The platform compared its model to a mutual fund, cultivating a variety of crops across its agricultural projects.

Until SEBI issued its interim order in January 2024, the details of which we will see later in the article, Growpital had raised over INR 192 Cr. Interestingly, just before SEBI’s order, Growpital had increased discounts on its investment plans, which dozens of people subscribed to. Many of its plans were available only for a brief window, creating a sense of urgency among investor-partners.

In response to our query, Sharma claimed, “We had voluntarily also stopped taking any new contributions in the given structure w.e.f. 26 January, 2024, i.e. prior to the SEBI’s order and intimation in this regard was given to all partners on 8 January 2024 itself. This decision was in line with our business and commercial projections for deployment of funds on the farmlands.”

However, in January 2024, the company had in fact promised massive rewards too, from 0.5% to 1% of the invested amount as referral bonus during certain periods such as the consecration of the Ram Mandir at Ayodhya in January 2024, which was incidentally just a week before SEBI’s adverse order.

Understanding The Modus Operandi

Founder Sharma had set up numerous entities to operate the entire plan. These include:

• Farm Silo Tech LLP (Growpital): This platform acted as an interface between investor-partners and promoters, sharing all the investments plan details and luring investor-partners to invest in as partners in ZF Project LLPs.
• Yotta Agro Ventures Pvt Ltd: A DPIIT-registered startup entity that acquired properties such as farms on lease through agreements with other parties.
• ZF Project 1 LLP: This LLP was used for agreements with Indian investor-partners for fundraising, making them partners in the LLP. However, only the designated partner, Sharma, managed day-to-day operations. ZF stands for Zetta Farms.
• ZF Project 2 LLP: This LLP included institutional or B2B investor-partners
• ZF Project 3 LLP: This LLP was for NRI investor-partners only.

When investor-partners used the Growpital platform, they became partners in an LLP created by Growpital, with their investments treated as capital contributions to these LLPs. The pooled investments were claimed to be directed towards agricultural projects managed either by an in-house team or in collaboration with established market players. 

The returns or profits from these projects were promised as returns on the investment made through Growpital. 

The ZF Project LLPs had agreed with Yotta Agro Ventures, which stated: 

• Yotta Agro would purchase or buy back all the agricultural produce from ZF Project LLPs.
• ZF Project LLPs would produce based on the requirements of Yotta Agro.
• ZF Project would get a definite price for the produce with a minimum premium of 30% over the cost incurred.
• Yotta Agro would maintain and monitor the agricultural work on the land without being bound by any maximum or minimum target regarding the quantity, quality, or type of produce.
• The price received by ZF for the produce would not be influenced by market prices.

Profits from the sale of agricultural produce were then distributed to the partners aka Growpital investor-partners, excluding the designated partners, as stipulated in the LLP agreement.

To get investor-partners on board and keep their investments coming, Growpital and Sharma routinely shared images of farms and produce with investor-partners, looking to boost their confidence in the model and attract further investments.

The platform derived credibility from Yotta Agro Ventures, since the startup had ties to government bodies and was registered with the DPIIT. He marketed these ties to attract investments in the LLP.

Some of the claims he submitted in the Rajasthan High Court while filing a petition against SEBI include:

• Yotta Agro Ventures received startup recognition from the  Department for Promotion of Industry and Internal Trade (DPIIT)
• Received INR 18 Lakh in grants from the Department of Agriculture
• Received an appreciation letter from the Nagaland government’s District Planning and Development Board
• Signed an MoU with the Nagaland government
• Received a Rubber Nursery project under the supervision of the Rubber Board of India and Ministry of Commerce and Industry

Everything appeared fine on the surface, with investor-partners continuing to invest until SEBI’s interim order on January 29, 2024. 

However, as alleged by SEBI in its order, Growpital was operating without the requisite regulatory licences and that the business was run in an illegal and fraudulent way. 

Incidentally, the founder Rituraj Sharma has been on bail since 2021 in an unrelated case where he had allegedly defrauded another individual for INR 17 Lakh.  

Why SEBI Termed Growpital ‘Illegal’

“There are no tangible assets owned by the ZF Project LLPs and the lands for farming are provided by Yotta Agro Ventures and the LLPs are used to deploy funds for growing and selling of crops. This kind of structuring makes it clear that the LLPs are mere conduits for pooling of funds in the guise of ‘capital contribution’, and actual operations are carried out through Yotta Agro Ventures.” – SEBI Order

In its January 29 interim order, SEBI called the Growpital business illegal and reiterated the same in its confirmatory order later in April. What exactly was the regulator’s problem with Growpital?

Interestingly, to investigate the matter fully, a SEBI official invested INR 5,000 through Growpital in June 2023 and then gained access to the documents shared with investor-partners. The regulator is known to undertake such investments to understand the extent of the illegality, if there is any. 

Post its investigations, SEBI cited multiple reasons for deeming the business illegal. Most importantly, it termed the fundraising scheme identical to a “Collective Investment Scheme (CIS)” even though Growpital was not registered as a CIS with the regulator.

Explaining the applicability of CIS and Growpital’s argument, Ravi Prakash, associate partner at Corporate Professionals, said that Growpital’s argument that its operations through various LLPs did not fall under the CIS regulations was flawed. 

While the platform claimed that investor-partners contributions in the LLP were capital contributions, no securities were issued in exchange and the contributions were in the form of partnership interests, placing them outside SEBI’s jurisdiction.

The definition of a CIS under Section 11AA of the SEBI Act includes any scheme where contributions are pooled and used for the scheme, with profits or returns promised to investor-partners. SEBI found that Growpital’s model met these conditions. 

“Funds were pooled and invested in agricultural projects with returns promised to investor-partners, fitting the CIS criteria despite being structured as LLPs, making SEBI’s jurisdiction applicable,” added Prakash.

Experts also pointed out that the Growpital website promoted investment opportunities similar to mutual funds. The LLP structure, with no cap on partners or contributions, was allegedly misused for a covert investment scheme. The various LLPs created by Growpital, lacking tangible assets and using Yotta Agro Ventures for operations, pooled funds under the guise of ‘capital contribution.’

Growpital acknowledged that partners joined the LLP to earn profits. The platform argued profit distribution capped at the LLP’s net profits did not meet Section 11AA(2)(ii) of the SEBI Act.

According to Section 11AA(2)(ii) of the SEBI Act, a scheme would be termed as CIS, if the contributions or payments are made to the scheme by investor-partners in exchange for future profits, income, produce or property from the scheme.

Interestingly, during an AMA, a SEBI official even asked cofounder Sharma about this issue, who explained that as none of the LLPs had reached INR 100 Cr in contributions individually, the model cannot be deemed to be a CIS.

MCA’s Parallel Probe

But at around the same time as SEBI, another regulatory body also began investigating Growpital. 

Sharma’s other entity, Yotta Agro, along with ZF Project LLPs, was under the scanner of the Ministry Of Corporate Affairs. 

Abhishek Modak, an investor who used the Growpital platform, complained to the MCA in December 2023 that the company did not file its Form 3 and Form 4, despite having collected over INR 40 Cr from 400+ investor-partners. 

It’s worth noting that Form 3 is required to be filed for information with regard to LLP agreement and changes, if any, while Form 4 is required to be filed for new appointment or cessation and changes in details pertaining designated partners or partners.

“While the LLP agreement has been amended more than 12 times with new investor-partners being added to the agreement list, the same was not being filed with the MCA. The MCA filing does not show us as partners even,” Growpital investor Geeta Vidyarthi told us.

In its investigation, the MCA also found that Yotta Agro had raised INR 1.47 Cr through non-convertible debentures from Tyke Invest from some 183 investors at an interest rate of 19%. 

Despite having filed the PAS-3 form (for private placement offer), the cofounder pitched to the public to raise funds and also used an ‘AMA’ video on YouTube, which has now been deleted.

In its order on May 6, 2024, the MCA observed that Yotta Agro had violated Section 42(7) of the Companies Act, 2013, and imposed a penalty of INR 1 Cr on Yotta Agro and INR 23,78,500 each on its directors, Rituraj Sharma and Krishna Joshi. 

Simply put, Section 42(7) says private placement offers must not be publicly advertised.  

The MCA further ordered the company and its directors to refund all the money to the 183 investor-partners with 19% interest as promised.

In a WhatsApp group, Sharma circulated a message stating that he was planning to file a petition against the MCA’s order. Out of two months given to appeal against the order, it’s been more than a month since the order, yet neither Sharma nor Yotta Agro has filed the appeal yet. 

“The entity on which the penalty has been imposed shall take available legal recourse against the said penalty,” said Sharma.

Behind The Alleged ‘Fraud’

Inc42 spoke to over a dozen investor-partners who alleged that Growpital has committed fraud by keeping investor-partners and partners in the dark.

Firstly, Sharma, as the designated partner of the LLPs, kept investor-partners uninformed on certain accounts. 

For instance, Vidyarthi, one of the investor-partners quoted above, told us that despite Sharma sharing images of farms and impressive production numbers, he didn’t share the actual locations of these farms.

“The farms were part of Yotta Agro Ventures and he said that he couldn’t share the locations of these farms since it is a separate business,” said Vidyarthi. 

Sharma also started a farm tourism business under Yotta Agro, but investor-partners were not informed about this new model even though it was directly associated with the farming business of ZF Project LLPs. The revenue from these activities was not shared with the investor-partners, alleged investors.

SEBI also observed discrepancies in the numbers shared by Sharma and the company. For instance, the number of unique crops for which information was submitted was 42, but Growpital actually claimed to be growing over 70 crops in its partner farms.

The farm projections shared with SEBI did not have any details on how the projections were made.

In one of his videos in December 2023, Growpital founder Sharma told investor-partners and partners that the platform has closed revenue of INR 110 Cr in the first nine months of FY24, and another INR 250 Cr-INR 300 Cr was expected by March 2024.

The revenue breakup from various farms was full of holes according to the people we spoke to. 

As shown in Growpital’s claims below, at least 85% of the projected revenues for FY25 were supposed to be derived from land parcels in Assam and Nagaland. However, no revenue has been claimed from these farms till date. 

Further, there were claims that 84% (INR 61.7 Cr out of a total of INR 73.8 Cr) of the total revenues was derived from jeera or cumin seeds farmed on a 75 acre farm in Barmer, Rajasthan. 

Another investor-partner told us jeera needs at least four months to grow, so farms growing jeera can only cultivate jeera between November 2022 and March 2023. On an average, Indian farms can produce around 700 Kg of jeera each season per acre of farm. At the price quoted by Growpital in its revenue breakdown, the platform would need to have access to around 2,500 acres of jeera cultivation in one cycle.

But as per Growpital’s disclosures to SEBI it only has 503 acres of farms dedicated to growing jeera. This is barely one-fifth of the required acreage for the revenue claimed. 

We asked about this irregularity and Sharma said, “This is part of the ongoing investigation and we have clarified the same to the SEBI. Accordingly, it is better to await the outcome of legal process in this regard.”  

Investor-partners further allege that Sharma was never truthful with them or SEBI on multiple fronts, including claims about requesting an inspection of farms from SEBI.

Further, in an AMA with investor-partners, he claimed to have 73K acres of farming land which is far from the truth. According to the documents shared with SEBI, he did not have more than 13K acres of land for farming.

Roughly 5,100 acres of this was awarded by the government of Nagaland for farming, as per Sharma’s claims, but he did not provide the locations of these farms or any proof of the allotment from authorities in Nagaland.

On the varying figures regarding the land area, Sharma replied, “There is a distinction between land area over which we had acquired the right or interest to cultivate and the land on which cultivation was happening as on the date of the SEBI order. We had plans to expand land under cultivation after January, 2024, which could not be put in place due to the SEBI order.  We had approx 60,000 Acres of Land area over which we had acquired the right or interest to cultivate the land, out of which cultivation was going on approximately 13,000 acres as on the date of the freeze order.”

The Fight Ahead For investor-partners

While Sharma continues to assure investor-partners that he will fight and appeal against SEBI, the Securities Appellate Tribunal (SAT) and the MCA and even claimed he would approach courts, things have not been in his favour so far.

His appeal against SEBI in the Rajasthan High Court was disposed of and he was told to appeal in the SAT. While the matter is still pending, SAT refused to offer any interim relief to Sharma.

Investor-partners meanwhile are still figuring out the legal remedies available. Maulik Lakhani, meanwhile has written to RoC, Jaipur and has complained to the Jaipur Police, on behalf of a group of investor-partners.

“The biggest problem for us is that we have to work daily to get our monthly bread and butter. Investments in Growpital were supposed to be our passive investments like mutual funds. We have kids who we barely manage to give our time to and at the same time, Growpital funds are our life savings which we can’t afford to lose,” one such investor-partner told us. 

Lakhani said, “We have already hired an advocate in this regard and have prepared the legal documents on behalf of certain investors. Once SAT order is out, we will explore our legal options, starting with FIR.”

Investor-partners say that SEBI needs to disburse the frozen funds, as most of the investors don’t even have funds to pursue any legal fight. 

While SEBI issued its confirmatory order on April 26, the investigation is still on. The SAT is set to pronounce its order on July 10, 2024. Inc42 will update the story on the basis of the SAT’s order or the status of the hearing.

In his response to Inc42, Sharma reiterated his stance stating, “We reaffirm our position that the LLPs established for agricultural activities operate as legitimate businesses, with individuals and corporate entities making capital contributions and becoming partners. We have meticulously adhered to all provisions stipulated under the LLP Act 2008 and its regulations.”

And it would also seem that Sharma has moved on — despite the thousands of investor-partners complaining and protesting. 

Will the Growpital investor-partners left in the lurch be able to express their gratitude to authorities in a similar manner?

[Edited by Nikhil Subramaniam]

The post How Growpital’s Investment Model Left 5K+ Investor-Partners In The Lurch appeared first on Inc42 Media.

Cofounded by Polygon’s Sandeep Nailwal, San Francisco-based Sentient has raised $85 Mn in a seed funding round co-led by Peter Thiel’s Founders Fund, Pantera Capital, and Framework Ventures. The blockchain-based AI startup also got backing from Robot Ventures, Delphi, Republic, Arrington Capital and few other VCs.

Besides Nailwal, Sentient Foundation counts Pramod Viswanath (Forrest G. Hamrick Professor of Engineering at Princeton University), and Himanshu Tyagi (Professor and Scientist at IISc Bangalore) as cofounders. 

Sensys, an open source AI venture development company is also part of the launch team for the startup which was founded in January 2024. 

Sentient is built on the Polygon CDK chain and aims to develop an open-source decentralised AI and, eventually, AGI. “Sentient is building on Polygon technology, that’s my main reason to support it,” Nailwal said to Inc42.

Speaking to Inc42, cofounder Tyagi said, “The funding will be utilised to scale our engineering team and the platform. Since we are committed to delivering results, it also requires building a supportive ecosystem — the developers’ community. That’s where the funds will be used.”

On the roadmap ahead, Tyagi said that Sentient will enter the testnet phase within the next two months. “Sentient is lean and thin, and we wish to remain so. The current team size is 20, and we will add a few more members,” he added.

How Sentient Differs From OpenAI And Google’s Gemini

There are over 70,000 AI projects listed on platforms like GitHub, GitLab, and OneDev. Most of them seem to be either redundant or replicas of existing AI projects. Why is there a need for another AI project like Sentient?

Nailwal has earlier explained the idea behind Sentient which is to build an open world through blockchain to achieve transparency and fairness, as opposed to a closed world dominated by large companies. He noted that the rapid development of centralised AI and its integration into daily life has brought humanity to a crossroads. 

“We can choose either a closed world controlled by a few closed-source models operated by large enterprises or an open world with open-source models and verifiable reasoning. The latter can only be achieved by using blockchain to make AI more transparent and fair,” he said at an event earlier this year. 

Tyagi stated that the difference lies in Sentient’s approach versus the AI giants such as OpenAI, Google or Meta. Most existing AI projects are either closed-source or semi-closed, with some not disclosing their data or technology. 

For example, Meta’s Llama is only partially open source because it releases model views but not the data used to create those models. Releasing such data would have legal implications due to the unknown contents within large datasets, as seen in cases where datasets contained inappropriate images.

“With Sentient’s open-source architecture, issues like plagiarism and backdoor attacks can be better monitored, similar to smart contracts on blockchain. The code and data need to be open source for better auditing and transparency,” said Tyagi.

Sentient has been developed based on the Open, Monetizable, and Loyal (OML) model, where community members are invited to develop for Sentient and will be rewarded accordingly. Nailwal has previously voiced concerns about developers not being truly rewarded for their work. The intersection of blockchain and AI enables the OML model, which Sentient claims benefits all stakeholders.

When asked about issuing a token to incentivise the community, Tyagi responded, “Eventually, something like that will be done. But monetisation and value distribution are separate points. We need to create powerful, useful AI that stands at par with leading AI technologies. When our AI is used, everyone who contributed will be rewarded through the blockchain protocol, which can take one to one and a half years.”

Crypto+AI: What Does That Mean?

In a statement shared with Inc42, Nailwal said that AI centralisation and its resulting safety issues are the biggest challenges humanity currently faces. Crypto and blockchain are the only ways to counter centralisation; hence, all efforts should be made to make something work on that front, however hard it might be. I have always hoped that the Polygon ecosystem puts its effort into that front.”

While other crypto projects have ventured into the AI space, the idea was to explore AI use cases for a particular crypto. However, Nailwal defines Sentient as a cloud-sourced AI company using blockchain incentives, but fundamentally an AI company.

“Sentient differs by focusing on what crypto can do for AI, creating a decentralised infrastructure that could compete with the likes of Google and AWS. Our long-term goal is to build an AI economy for all, enabled by an open-source ecosystem,” added Tyagi.

He also mentioned the importance of AI agents for blockchain functions and the need to ensure they perform as expected, drawing parallels to privacy and reliability concerns in enterprise AI. Sentient aims to enable a new AI economy where contributors are rewarded fairly, not just using open projects to build resumes for big companies.

Nailwal has set the goal of building an open AGI, which will require significant infrastructure. 

Tyagi noted, “We are taking one step at a time. Our ethos is to have a strong team of experts who came together for this mission. We believe a lot of AI development is happening outside large companies. We start with foundational models and align our efforts with ongoing benchmarks and research. Sentient is a research-first company, continually building and evolving.”

[With inputs from Debarghya Sil]

Update: 8 PM | July 4, 2024

The headquarters of the company has been updated.

The post Sandeep Nailwal’s New Venture Sentient Raises $85 Mn To Take On OpenAI, Llama appeared first on Inc42 Media.

What happened when tech giant Google flexed its muscles and delisted 10+ popular Indian apps from its world-leading app store, citing the long pendency of billing compliance? Well, homegrown Internet companies got angry; #EvilGoogle started trending and government intervention was sought to redeem the situation.

A temporary truce is in place, but Indian developers are now actively seeking a robust alternative. And that’s where fintech giant’s PhonePe four-year plan comes into the play, with a made-for-India Indus Appstore.

Much of this narrative is familiar. Once again, Google is up in arms, trying to ensure that all Play Store apps, annually earning $1 Mn or more, use its billing system so that it can collect 30% commission on every in-app purchase — more on the current fee structure later.

Google has been at it since 2020, allowing a year’s grace period for non-compliant apps to integrate the technology. After that, the tech giant faced roller-coaster legal battles in India regarding its alleged market dominance and anti-competitive practices on Play Store. Petitions have also been filed before the NCLAT against Play Store’s billing policy. 

Unsurprisingly, Google lost its initial lawsuits and was fined a little over INR 1,337 Cr and INR 936 Cr in two separate cases by the Competition Commission of India (CCI). After all, the tech behemoth owns the Android operating system, and Google Play Store, a leviathan of an app marketplace, comes preloaded on almost all Android smartphones. The reach and the convenience typically make the Play Store the go-to choice. Hence, it might have hit Google harder when Walmart-owned PhonePe launched the Indus Appstore in February this year to challenge Google’s dominance.

No doubt Google restored the apps after MeitY’s (ministry of electronics and information technology) intervention. But it is merely an extension of the payment deadline, and the tech giant will continue to send invoices to ‘non-compliant’ apps. Unless developers from all categories are ready to shell out the 30% ‘Google tax’ and want to abide by the company’s aggressive approach (the outright ban slapped on the Indian apps is proof enough).

The timing of Indus’ launch could not have been better. Indus went live on February 21, just ten days before Google made its delisting announcement on March 1, and nearly throttled a host of major apps such as Matrimony.com, Jeevansaathi, Shaadi, Naukri, 99acres, KukuFM and STAGE, among others. In essence, the all-new app store had a fortuitous entry amid a growing clamour for fair industry practices, while developers started looking for an India-focussed robust alternative. 

In contrast, the Indus Appstore offers a hyper-localised and affordable pp marketplace, aligning better with Indian customers through multilingual solutions.

Within three months of its launch, the new app store has started to make a dent in Google’s ‘alleged’ monopoly, as it offers a developer-friendly environment, charges zero commission on in-app transactions for the first year and has zero publishing fee. (Google charges a one-time publishing fee of $25, but Apple’s App Store is more expensive as it charges $99 per year.) It lists more than 2 Lakh apps across 45 categories and has surpassed 2 Mn installs, a PhonePe spokesperson told Inc42.  

Indus supports 12 Indian languages for access to localised content and has introduced a host of India-specific features such as voice search,  video-led discovery, multi-format ads and more.

“We are seeing a steady increase in the number of users. The app store has gained significant traction since its launch, especially in Tier II cities, which account for 45% of the user base. Popular app categories include finance, games, social media, entertainment, tools, communication and shopping,” the Indus Appstore and PhonePe spokesperson added.

For context, PhonePe has moved its domicile from Singapore to India, shifting all businesses and subsidiaries to India, including the Indus Appstore. Besides this, it had also been fully hived off from Flipkart, which had acquired PhonePe, and currently Walmart is the majority owner of PhonePe.

Why Google Play Store Has Won So Far 

Indus is not the first app marketplace to challenge the Play Store. Earlier, there were several app stores such as Nokia Download (SymbianOS), Download Fun, Pocket Gear, GetJar, Handango, Handmark and MiKandi. Others like Opera Mobile Store, BlackBerry World and HP App followed suit after the Play Store was launched in 2012. But challenging Google’s monopoly in the app marketplace was not possible even for pure-play tech companies like Opera, Firefox or others.

While Google fights lawsuits in various courts over industry practices and commission rates, will Indus be able to gain a strong position in the app marketplace? Before we delve into the pros and cons of the new app store’s success potential, let us look at the existing marketplaces and their fee structures.

Going by how Google Play Store stacks up compared to the competition, will it be fair to suggest that its contentious billing policy may pave the path for success for the likes of Indus? Amit Ranjan, founder of SlideShare (acquired by LinkedIn for $120 Mn) and architect of the Indian government’s project DigiLocker, said the priorities would tend to differ in this case. 

“Building an app store requires deep technical expertise and a strong technical team. The business aspect comes later. You also need to maintain ‘cyber hygiene’ by tracking and filtering out fraudulent apps. This is an ongoing process, and any misstep will directly impact the store’s reputation,” Ranjan told Inc42.

Ranjan has a point. Consider how Opera Mobile Store was fully decommissioned last year, although it catered to 130 Mn+ monthly active users and clocked 1 Mn daily downloads of apps at one point. The reason for shuttering: Opera was allegedly involved in unfair and illegal data transactions.

Even the Google Play Store drew flak and suspended or removed around 4.7K fraudulent loan apps between April 2021 and August 2023, according to Rajya Sabha data. Therefore, nothing short of a robust tech ecosystem and stringent compliance can ensure success for independent app stores despite significant download numbers. 

Nevertheless, a few Android app stores like Samsung have thrived as they have built robust technology and business ecosystems. Interestingly, Google has reportedly struck a deal with the Samsung Galaxy Store to keep its Play Store as the default app marketplace on Samsung mobiles. According to media reports, Google offered Samsung exclusive gaming content, deals and events on the Play Store and YouTube and agreed to ‘white label’ its Play Store as the Galaxy Store so that Samsung could maintain its branding.

When negotiating with Samsung, Google preferred a lump sum payment model over a user-focussed payment strategy.

Will these ‘agreements’ make it difficult for developers and users to opt for alternative app stores? We have an intriguing parallel here. In an antitrust lawsuit held in the US last year, states and the federal government questioned Google’s stand regarding its search engine dominance and how it tried to squash competition by paying Apple and other tech companies to ensure that Google search remained the default option. The search giant defended itself by saying none of these agreements were ‘exclusive’ in nature and users could easily change default settings and opt for other search options.

Although Inc42 cannot independently verify whether similar ‘business deals’ are impacting the app economy in India, Google’s agreements with different OEMs cannot be ignored. And these may warrant more scrutiny from the regulators in the near future (more on these challenges later). Incidentally, a company spokesperson has confirmed that the new app store no longer caters to the Samsung Galaxy Store.  

A user-friendly interface, a supply-demand match (enough engaging apps across categories are required to keep users coming back) and a robust revenue model for developers and publishers are also critical for an app marketplace to survive, according to Karan Lakhwani, India head at the app intelligence firm AppTweak. The major challenge is surpassing the Play Store’s consumer experience, validated by reviews, ratings and download numbers, he added.

How PhonePe Joined The App Store Bandwagon

Google Play Store may enjoy cutting-edge tech prowess and a better business network, but the biggest USP of Indus Appstore is its made-in-India tag, according to the PhonePe spokesperson. 

“Most users are driven to download and use the app store because it is made in India, for India. On the other hand, the developer-friendly ethos of the app store makes it an ideal platform for app creators – that’s the general feedback. They also think the integrated phone login, targeted advertising and engaging features will help them reach niche audiences, driving widespread adoption and engagement,” PhonePe said.

However, the Indus Appstore was not built in a day. Here is a brief look at the backstory, from the initial launch of Mofirst by three IIT-Bombay alumni to many pivots and developments – first as a smartphone maker and then as an app bazaar. Eventually, the company was acquired and rebranded by PhonePe after an intense valuation dispute with key stakeholders, including Affle. 

Many think that the Indus Appstore will soon emerge as the darling of the Indian market, offering unique features to empower consumers and enhance user delight.

How Indus Appstore Is Building A Moat Against Google Play

Indus parent PhonePe is aware that no standalone app store can counter Play Store’s power of innovation and deep pockets. However, it has a long-term plan to take on Google’s ubiquitous app marketplace by leveraging its knowledge of the local market and the subsequent rise in user base. 

Unlike other independent app stores that looked to take on Google, PhonePe holds an edge with more than 535 Mn registered users and 260 Mn monthly active users (MAU), which guarantees a significant number of quality users, and, hence, monetary success for developers.

However, this may not be comparable to what one earns on the Google Play Store or Apple App Store. 

PhonePe aims to create a moat around its app store business by partnering with smartphone makers such as Nokia and Lava. The goal is to pre-install Indus Appstore on up to 300 Mn devices by the end of 2024.

“Our collaborations will ensure seamless app installations and updates. We want to make the Indus Appstore a default choice on smartphones in India, signifying a shift towards a more inclusive, autonomous and developer-friendly app ecosystem,” the company’s spokesperson said.

PhonePe has also acquired a payment aggregator licence from the RBI to enable seamless in-app transactions (payment aggregators allow clients to accept various payment methods and disburse to multiple stakeholders). 

PhonePe Technology Services, a wholly owned subsidiary of the group, was also issued an account aggregator (AA) licence by the RBI. AAs typically share financial data across accounts and institutions securely so that financial information users or FIUs (like lenders or insurers) can make informed decisions. However, no data can be shared without the explicit consent of account holders.

“Some of our clients are keen to be on the Indus Appstore,” said Lakhwani of AppTweak. “I understand that its way of communication and advertising is very different from others. Google Play Store requires a different set of app metadata to succeed. So does Apple. And Indus, too, has a different strategy. Each has created a unique strategy for its app store to succeed.”

However, to attract more users, the company must target different segments uniquely, which Koo should have done when it tried to become as a Twitter killer.

“There’s always a value-seeking user, a discount-seeking user and a luxury or premium user seeking a high-quality experience. Indus should target different types by tailoring its communications to highlight discounts, user experience or specific apps,” said Lakhwani.

Can Indus Become The Atmanirbhar App Store? 

For a long time, Indian entrepreneurs and app developers have demanded that a truly Indian app store be built to look after their interests and counter the Play Store. Paytm founder and CEO Vijay Shekhar Sharma was particularly vocal, saying Google’s charges were costlier than the business taxes the internet businesses paid in India. Paytm also launched a mini app store, and a few more popped up, thinking it was an opportune moment. One such entity was Mitron, a short video app that hurriedly launched an app discovery platform. However, none of these lasted for long after the initial euphoria died.

Given these ground realities, can PhonePe’s app store topple the Google Play Store this time? Two of the five experts with whom Inc42 spoke doubted whether it would be viable in the long run due to Google’s near-monopoly across the Android ecosystem. 

For instance, the entire Android market can be split into five major segments – the licensable OS market for smart mobile devices (smartphones, tablets, and more), app stores, web search services and online video hosting platforms (OVHP). Google has standardised agreements with various companies to maintain its dominance in these segments. Its crucial agreements with OEMs encompass mobile application distribution, anti-fragmentation (for seamless versioning), Android compatibility commitment, revenue sharing and mobile service distribution/placement bonus.

OEMs must adhere to these stringent agreements, which prevent them from developing Android non-compatible hardware. Moreover, they can only include Google Mobile Services (a collection of applications and APIs such as Google Search, Chrome, Gmail, Google Maps, YouTube and more that help support functionality across devices) after signing the mobile application distribution and anti-fragmentation agreements. 

Also, Android prevents installations from third-party sources. When users manually download apps from a third-party app store, they receive multiple security warnings that the apps sourced from elsewhere may harm the device. These warnings often deter users, while developers have little choice but to operate through the Play Store.

Of course, such ‘trade practices’ under the guise of security have been challenged worldwide, including in India. The CCI had already fined the tech giant, but these penalties have been challenged in the Supreme Court. In a separate case, Winzo Games is also fighting a case in the apex court regarding these ‘security warnings’ and other issues. 

Elsewhere, in the Epic Games versus Google case, a California jury found that the latter violated antitrust laws (laws to ensure economic competitiveness and counter monopoly) in Google Play Store’s billing practices. The presiding judge will announce the measures to be undertaken in 2024. 

In May 2022, the European Commission and the Competition and Markets Authority also probed Google Play Store’s business practices. South Korean regulators are also investigating Play Store’s billing, including a formal review of Google’s compliance with new billing regulations.

Rameesh Kailasam, CEO at IndiaTech.Org, a think tank for Indian tech startups, pointed out that the Play Store makes in-app purchases prohibitively expensive and economically unviable for startups and internet economy companies.

To begin with, 15-30% commissions are an issue if transactions are done within the Google Play Billing system. Google came with an alternate billing system, where the app developers can use their payment gateways but have to pay a service fee of 11-26%, which is currently being investigated by CCI. But until now, it has not been a win-win for small developers, paying a cut to one of the world’s richest tech companies.

“Moreover, many of these apps are built outside India despite catering to the Indian market. It means the income from apps or the commission does not accrue to India. Although Google allows for some bypass routes, these are still prohibitively costly,” Kailasam added.

Even when developers list their apps on another app store, integrating them with Google Ads requires Google Play Store listing IDs. Therefore, anyone looking for a wider reach through Google’s pay-per-click advertising platform is compelled to list the apps on the Play Store.

But there’s more to this narrative. While developers struggle to cope with all sorts of arm-twisting, winning a business battle with an industry heavyweight could be too difficult, as the Aptoide App Store soon found out. The Portugal-based mobile app marketplace runs on the Android OS, and the store can be accessed and installed via the store’s official page. Moreover, unlike Google, developers can manage their stores on the platform.

“With Aptoide, that moment [of contention] came in 2018. We took Google to court after the tech Goliath tried by all means unnecessary to suffocate the company’s activity and kill the competition,” founders Paulo Trezentos and Álvaro Pinto shared on their website. “They told users that Aptoide was a menace to the mobile society. They made Aptoide’s app vanish from Android phones without warning. They kept circling more wagons around Google Play Store, making Android app downloads increasingly difficult outside of the platform.”

Google eventually lost the case. The courts and the European Commission found it guilty of abusing its dominant position and anti-competitive behaviour. The tech giant was heavily fined and ordered to backtrack.

But one thing is clear. Given its influence, capital and resources, it will always be tough to beat Google at its own game. Closer home, it will be even more difficult. After all, 95% of smartphones in India run on Android and the Google Play Store has been the default app store for most of these users.

Just like Aptoide, PhonePe or even Walmart may have to lock horns with Google sooner or later for a greater market share. However, the success of the Indus Appstore will largely depend on its ability to deliver a superior user and developer experience that can convince all stakeholders to give it a shot. 

PhonePe’s founder and CEO Sameer Nigam once said that a billion people or more could not be dictated regarding app discovery or transaction if they wanted a change. Indus and PhonePe could be heralding that change.

[Edited by Sanghamitra Mandal]

The post An App Store For India: Can PhonePe’s Indus Loosen Google’s Grip? appeared first on Inc42 Media.

Karnataka’s information technology and biotechnology (IT/BT) and rural development and panchayati raj (RDPR) minister Priyank Kharge expects the state to attract investment of $6.2 Bn in technology sectors such as biotechnology, AI, semiconductors, AVGC (animation, visual effects, gaming, and comics), and healthtech from the US and Europe. 

Following the visit of a delegation of the IT/BT department to the US, the UK, and Europe to attract investments, Kharge said that the deals with the companies, institutions in these places are at various stages, ranging from signing a letter of intent to proposals pending before the State High-Level Clearance Committee (SHLCC).

Responding to Inc42’s query on the materialisation of these deals, the minister said, “We have set a deadline of 180 days for the key conversions.”

During its trip, the delegation held meetings with companies like SAP Labs, Bloom Energy, Ambient Photonics, Arm Holdings, and Waters Corporation. Besides, the members also met Vinod Dham, the founder of IndoUS Venture Partners, which has invested in Indian startups such as Snapdeal and Myntra in the past.

According to a statement issued by the state’s IT/BT department, the delegation also had discussions with several German companies that are looking to expand to India in the areas of semiconductors, electronics, and heavy industries.  

The department reached out to these companies for investment in Karnataka and is optimistic about attracting mega investments. The IT/BT department also conducted roadshows across four countries – the UK (in London), France (in Paris and Annecy), Switzerland (in Geneva), and Germany (in Munich).

Besides, while 25 French SMEs have already their presence in India, 50 more are in the queue to expand their presence here, thanks to anchor investors such as Airbus, Capgemini and other companies, said an IT/BT official.

The ministry organised the trip to pitch Karnataka as an investment hub for companies across sectors like electronics, IT, and biotech. Besides, one of the key agendas for the visit was to get more international investors at the Bengaluru Tech Summit 2024, which will be held in November this year.

The delegates also participated in the London Tech Week and the International Animated Film Festival at Annecy.

Kharge told the media that the idea behind such visits is to solidify Karnataka’s position as the number one investment destination and skill development and innovation capital.

Besides, Karnataka is likely to sign a memorandum of understanding with Stanford Biodesign for the latter’s medtech startup mentorship and accelerator programme. The initiative is part of the plans of the biodesign department of Stanford University to expand its ‘Founders Forum’ initiative to Bengaluru. A team from Stanford Biodesign is expected to visit Karnataka next month for this.

Meanwhile, the department of IT/BT said that it is currently working on preparing a ‘Startup Directory’, which will have details of all the startups in the state, their brief profiles and turnover. Besides, it is also working on an online startup platform to connect with VCs.

“The startup portal that will help connect startups and investors will go live within a month,” said Kharge. 

In a previous conversation with Inc42, Kharge said that the Karnataka government is engaging directly with VCs to discuss funding, exits, and more

“We have asked VCs what steps we should take to ensure better collaboration and support for startups. It may require bringing them together on a single platform for assessing ideas or providing mentorship and networking opportunities beyond just funding,” he said, adding that the state would announce a new collaboration framework for startups and VCs within the next few months after the Lok Sabha polls.

Karnataka’s capital Bengaluru is hailed as the Silicon Valley of India, with startups based out of the city dominating funding trends over the years. However, the trend witnessed a change last month, when Delhi NCR took the top spot in terms of funding. Bengaluru-based startups cumulatively raised $115 Mn in May, trailing Mumbai and Delhi NCR. 

The post Karnataka To Attract $6.2 Bn In Tech Investments From US, UK, And Europe: Priyank Kharge appeared first on Inc42 Media.

In July 2021, when Zomato filed for its IPO, there was no precedent for the food delivery market. Zomato had recorded a loss of INR 886 Cr in FY21 and was not profitable, a critical consideration for investors looking at a fresh IPO.

Despite all misgivings, the market sentiment for Zomato was positive. Few big tech companies or startups had gone for an IPO before Zomato. As a well-known brand for many Indians in tier I, II, and III cities, Zomato managed to bring in more than enough interest.

The IPO was subscribed 38.25 times, and Zomato listed at a premium of over 51% compared to the issue price. 

And now, the focus is on Swiggy, which, fortunately or unfortunately, has Zomato as a benchmark. 

Zomato has recovered from past losses and is trading at an all-time high. An investment of INR 1 lakh a year ago would have yielded over 200% profit today, showing investor confidence in the business.

Bengaluru-based delivery and quick commerce giant, Swiggy submitted draft papers to SEBI on April 30 for a confidential filing. While we don’t know the particulars of the IPO, Swiggy plans to raise approximately $1.25 Bn from the IPO, with a fresh issue of $450 Mn and an offer for sale (OFS) component worth $800 Mn. And, $90 Mn through pre-IPO placement.

After LIC, Paytm, Coal India, General Insurance and Reliance Power, this will be the sixth-largest IPO in the Indian market.

For Swiggy, the situation is clearer. With Zomato already listed, there is little room for overvalued pricing. If Swiggy’s pricing is accurate and the market remains positive, the IPO could easily be oversubscribed.

Drawing a parallel with Zomato, Umesh Chandra Paliwal, cofounder of UnlistedZone, said the current environment is positive for companies looking to raise funds via IPOs. The success of Zomato, which has delivered good returns and recently achieved profitability, sets a favourable precedent for Swiggy. 

“Zomato has become profitable in its food delivery business, although its Hyperpure and Quick commerce segments are still incurring losses. Quick commerce is expected to become more significant than the food delivery business in the future. We believe Swiggy, given its market position and potential growth in Quick commerce, should achieve profitability within the next two years,” said Paliwal.

If Swiggy is to replicate Zomato’s success, a clear barometer would be the company’s performance in the unlisted market. So how are grey market traders looking at Swiggy? 

Swiggy In The Grey Market

One caveat before we look at the analysis: Swiggy stocks are currently available only in tranches. Due to the limited supply, the stocks are not even being traded on multiple platforms, according to grey market analysts. 

Inc42 checked up to six unlisted market platforms where Swiggy stocks are traded, and saw share prices ranging between INR 320 and INR380.

Confirming this, UnlistedZone’s Paliwal said Swiggy’s stock is being traded very sparingly in the unlisted market so this traction is still inadequate to gauge the potential IPO sentiment. 

In January 2022, the company raised about $700 Mn at a $10.7 Bn valuation, led by US-based asset management company Invesco and Dutch investor Prosus Ventures. 

However, Invesco cut Swiggy’s valuation twice in 2023 before raising the value of its investment in Swiggy to over $12.7 Bn. In line with this, Baron Capital also raised the value of its investment in Swiggy to over $15 Bn this week.  

Currently, in the grey market, Swiggy is trading at a valuation of $9 Bn to $9.5 Bn, which could see some adjustments with Baron Capital’s markup. 

Abhishek Ginodia, cofounder of pre-IPO platform Altius Investech, said that since Swiggy shares were introduced in the unlisted space, they have been trading in the range of INR 320-INR 350, which is at a valuation of $9 Bn-$9.5 Bn. 

Trades are also limited as cheque sizes have been restricted to INR 5 Cr and above. 

Based on the available information, Paliwal estimates Swiggy’s IPO valuation to be around $10 Bn. On the other hand, Ginodia expects the IPO valuation to be around $11 Bn-$12 Bn, approximately 30-40% lower than Zomato’s current market cap.

A managing partner of an auditing firm closely working with Swiggy said the IPO is the ultimate exit strategy for most investors, particularly late-stage ones. To offer them a profitable exit, the valuation could be anywhere between $12 Bn to $14 Bn, depending on how the pre-IPO round goes. “This is why Swiggy shares could also see a decline initially, as many might consider it overpriced,” they added.

Swiggy Vs Zomato: How The Two Giants Compare

Despite Swiggy surpassing Zomato in revenue till FY 23, Zomato has always led the way, from building the food delivery industry to going public.

Swiggy has no choice but to directly compare Zomato’s bottom line and scale while justifying its pricing. And, it falls short on multiple accounts compared to Zomato which has recorded a 67% rise in revenue for FY 24.

Swiggy lags in monthly active users (MAU) and gross order value (GOV). Zomato claims over 30 Mn MAUs, while Swiggy has around 24 Mn. Zomato’s GOV is $3.1 Bn, compared to Swiggy’s $2.6 Bn.

Ginodia points out that quick commerce is Swiggy’s key differentiator. “Swiggy and Zomato have similar revenue rates, but Zomato has performed better. Zomato improved its performance by reducing losses from Blinkit, while Swiggy’s quick commerce business negatively impacts its contribution margin by 50%. This could result in Swiggy’s IPO being valued lower than Zomato’s,” said Ginodia.

While Swiggy’s food delivery services have become profitable, the quick commerce segment, Instamart, has incurred significant losses despite revenue growth. 

As per sources, who have seen Swiggy’s disclosures as of September 2023 (H1FY24), the company has touched INR 4,735 Cr in revenue from food delivery and quick commerce. 

Thanks to this momentum, Swiggy is on course to report over 20% higher revenue in FY24, from the INR 8,260 Cr it reported in FY23. 

While we don’t know the loss for FY24, Swiggy trimmed its net loss to around $207 Mn (INR 1,730 Cr) in the first nine months of the fiscal year. Sources did not indicate whether Swiggy would finish FY24 with a profit, after it reported a net loss of INR 4,179.3 Cr in FY23.

Will Confidential Draft Papers Sway Investors?

Swiggy has opted for the confidential route for its IPO. Will this create confusion among investors?

A managing partner of an audit firm explained that this means Swiggy’s draft red herring prospectus (DRHP) won’t be immediately available for public scrutiny. Swiggy can control the flow of information for a little longer. However, the papers will still be shared with institutional investors, so it won’t impact the overall IPO. 

The confidential filing strategy helps the company control the narrative for a bit longer and is beneficial for the pre-IPO round.

Does the lack of a public DRHP raise concerns about transparency for potential retail investors?

Paliwal explained, “Filing confidential draft papers is unlikely to impact investor confidence negatively. IPO investors typically fall into three categories: QIB, HNI, and Retail. QIBs usually have access to detailed business and financial information, while HNI and retail investors rely more on the grey market premium (GMP). Therefore, we do not foresee any adverse effects on investor confidence.”

Zomato And Swiggy’s Interlinked Future

Market analysts and experts believe that the timing for Swiggy to go for IPO couldn’t be better, especially with Zomato trading at an all-time high for several weeks. There has been some weakness in the stock in the last month or so, however, when there has roughly been a 12% drop in Zomato share price. 

This indicates that Zomato is not yet a stable stock and could be more vulnerable to market volatility. Paliwal thinks the timing looks favourable for Swiggy, however, when one compares the market to one year ago. 

The IPO market is lively, and Zomato’s strong performance in the past year has yielded significant returns for investors. Swiggy, being valued lower than Zomato, might attract investors seeking value opportunities. They may sell Zomato shares to buy Swiggy shares, hoping for similar or better returns.

Others also said that the IPO momentum is strong which is a good factor for new IPOs, but Ginodia believes Swiggy faces challenges in its core business, especially with the focus shifting towards quick commerce, where it has lost ground as highlighted by our data above.

Beyond immediate factors, broader market trends and shifts in consumer behaviour are crucial. 

The increasing adoption of online food delivery and quick commerce offers significant growth opportunities for Swiggy even as competition has grown in the latter — with the rise of Zepto and the imminent entry of Reliance Jio and Flipkart. 

Strategic partnerships and cutting per-order costs will be crucial for Swiggy, even as it explores ways to improve the customer experience, which has lagged behind the competition.

Ultimately, the success of the Swiggy IPO will depend on the company’s ability to effectively communicate its growth strategy and financial roadmap to investors and show that it indeed has a clear path to profits, like Zomato. 

After a decade-long duopoly and trying to outpace its archrival, Swiggy is realising that after all, its fortunes are more closely linked to Zomato than it may want to believe. 

[Edited by Nikhil Subramaniam]

The post Can Swiggy’s High Valuation Stand Up To The IPO Test? Here’s What Grey Market Indicates appeared first on Inc42 Media.

With the BJP-led National Democratic Alliance securing 290 out of 543 seats in the general election, Prime Minister Narendra Modi is poised to be sworn in for his third term. 

However, this time, the PM won’t command the same majority as before, with the ruling BJP winning 240 seats and its alliance partners securing 50 seats, unlike the previous election where they surpassed 350 seats.

The BJP’s victory for the third consecutive term has raised optimism among certain Indian startups and VCs. And there are reasons for that. Over the past decade, the number of startups has surged from a few hundred in 2014 to 1.38 lakh currently, plus the previous two Modi-led governments were seen as being bullish on Indian startups through policy as well. 

The introduction of the Startup India initiative in 2015 was a significant stride towards promoting entrepreneurship, offering policy support and encouragement. Measures like self-certification for startups under labour and environmental laws aimed to reduce compliance burdens. 

The establishment of the Fund of Funds for Startups scheme, managed by SIDBI, has facilitated funding, complemented by regulatory reforms that have simplified business processes, with over 50 implemented since 2016.

Notably, concerted efforts have been made to promote female entrepreneurship, including earmarking funds for women-led startups. Additionally, the government’s establishment of over 10,000 Atal Tinkering Labs in schools fosters innovation among students, underscoring its commitment to nurturing a dynamic startup ecosystem in India.

However, expectations are higher this time. Speaking to Inc42, T.V. Mohandas Pai, the former CFO of Infosys and partner at Aarin Capital, emphasised the need for funding support. He stated, “We must establish a INR 50,000 Cr fund through various entities in the next five years. With the economy at $3.6 Tn this year, we’re lagging behind in AI and other frontier technologies due to inadequate investment.”

Repeal Angel Tax

Angel tax continues to harass startups, and stakeholders across the ecosystem and Pai stressed that angel tax must be abolished. “The opposition included its removal in their manifesto, despite being the ones to introduce it. The Modi government should repeal the law to eliminate angel tax.”

Angel tax pertains to the taxation of capital raised by unlisted companies through the issuance of shares, where the share price surpasses the fair market value of the shares. The excess amount is considered as income and taxed at the startup’s hands, as per Section 56(2)(viib) of the Income Tax Act, 1961.

Initially introduced to combat money laundering via the issuance of shares at a premium substantially higher than their fair market value, angel tax has often impacted genuine startups, raising concerns within the entrepreneurial ecosystem.

In response, the Indian government has taken measures to alleviate the burden of angel tax on startups, including providing exemptions for eligible startups meeting specific criteria. However, this has resulted in creating numerous restrictions for startups, as evidenced by the fact that out of 1,14,902 startups registered with the Department for Promotion of Industry and Internal Trade, only 10,939 have applied for exemption from angel tax thus far.

“And they must, once again, resolve all disputes promptly and refrain from harassing people with unnecessary complications. Furthermore, suppose income tax officers lose a case in the high court. In that case, they should be penalised because only a certain group of people are deliberately causing such issues for reasons known to them,” Pai added.

Create INR 50K Cr Fund To Address The Capital Issue

During its first term in 2016, the Modi government launched the Fund of Funds for Startups (FFS). Through this scheme, the government has facilitated investments worth INR 17,354 crore in 928 Indian startups as of December 18, 2023.

Pai believes that since the startup fund is either exhausted or nearing exhaustion, the government should initiate another fund because startup funding remains insufficient. 

“For instance, deeptech and startups that have high gestation models don’t receive adequate funding. Once you establish a foundation, attention must be directed towards areas like deeptech and frontier technologies, which have not been adequately supported.”

Highlighting that over INR 8 Lakh Cr worth of subsidies are provided to farmers and others, Pai questioned, “Why not allocate additional funds to startups, which represent the next generation and create significant employment opportunities?

Additionally, he bemoaned the lack of participation by insurance companies in the investment pool for the startup ecosystem. “Globally, insurance companies are the largest investors, but in India, despite having a balance sheet of 65 lakh crores, they have invested minimally in startups. They should have invested, as it makes sense in the long term through funds of funds. However, this significant source of capital remains untapped,” the Aarin Capital partner remarked.

He believes that one of the priorities for the new government in the next five years should be to establish an INR 50,000 Cr fund through various entities. Despite the measurable progress in GDP, sectors such as AI and new emerging technologies are lagging behind in India due to inadequate investments.

Ease Of Doing Business: Address The Regulatory Cracks

While the Modi government deserves credit for introducing a fast-track tax dispute resolution mechanism, self-certification for startups under labour and environmental laws to reduce compliance burden, and tax incentives for startups, including a three-year income tax exemption, there is much more to be done, and some steps have even been taken in the reverse, believes Pai.

Pai criticised the government for making taxation laws complex. “I believe in the last 10 years, more controls have been implemented to grant more power to the taxman than in the previous 10 years. Although refunds and assessments have been expedited for the vast majority of people in the last three years, which is commendable, disputes have not decreased.” 

He pointed out that despite more refunds being issued last year, disputes have not decreased and that in fact, the amount involved in disputes has increased. This indicates that the dispute resolution process has been unsuccessful, which eventually hurts the ease of doing business, just as angel tax.

Additionally, Pai highlighted some RBI restrictions for startups that could have an adverse effect on investments in fintech startups. “Despite having $650 Bn in FDI equity inflow, there are too many restrictions and excessive documentation, which has resulted in a decline in FDI. Even though many big startups are returning to India today, they had previously left to establish domiciles outside. 

Now they are returning because they believe listing in India will provide them with better value. This decision is purely driven by self-interest, which is positive because India is an attractive market. However, the government could have done more for startups to foster a more positive environment, which they have not done.”

Pointing out the unnecessary requirements of three separate valuation reports, Pai said. “When two parties engage in a transaction, they determine the premium and provide a valuation report. However, remitting money takes longer because banks often misplace documents. The process should mirror that of the public market. It’s commendable that shares have been dematerialised, which allows for better tracking of investments in startups and funds. Therefore, it is essential to implement these measures. The IBC has prepared a document that I believe the government should follow.”

Reflecting on the achievements of the past 10 years, Pai asserted that the Modi government has made significant strides for startups by envisioning initiatives like Startup India and Stand-up India.

Moreover, the government has successfully propelled a digital revolution by establishing digital public infrastructure (DPI), which has been highly beneficial for startups.

The post Repeal Angel Tax & Set Up INR 50K Cr Startup Fund: Mohandas Pai Urges Modi 3.0 Govt appeared first on Inc42 Media.

In this brilliant yet turbulent era of generative AI (GenAI), OpenAI’s ChatGPT is undoubtedly one of the best breakthroughs. Using natural language understanding and processing (NLU & NLP), the intelligent chatbot has been built on a series of foundational large language models, or LLMs, ‘deep-learning’ from human languages, behaviours and knowledge repositories and generating new content in multiple formats and multiple languages. 

Whether it is a search generated on the World Wide Web, a complex piece of code writing, or the making of a creative wonder, ChatGPT can transform the output every time, demonstrating the true potential of the ongoing AI revolution. OpenAI further claims that its flagship GPT-4o (‘o’ stands for omni) is faster than the chatbot’s predecessors and will sound more conversational in responding to prompts.

Could this be a definitive step towards the concept of artificial general intelligence, a computing ecosystem on par with human intelligence, with the capability to self-learn? It is a matter of endless debate, with no concrete conclusion in sight. Meanwhile, the GenAI market across industries will likely witness a phenomenal surge from an estimated $67.2 Bn in 2024 to $967.6 Bn by 2032, growing at a CAGR of 39.6% during the forecast period.  

McKinsey & Company further estimates that GenAI and other technologies can automate work activities that currently absorb 60-70% of employees’ time. Combining GenAI with different technologies will also add 0.5 to 3.4 percentage points annually to productivity growth. As this is bound to create a huge economic impact, Google, Meta, Amazon and their ilk have rushed to commercialise their AI projects to tap into the market.

However, Microsoft remains ahead in this race due to its $13 Bn investment in OpenAI. Consequently, it has an exclusive licence to use the underlying model of the groundbreaking technology, although others can receive outputs from the public API. Microsoft’s Copilot currently uses the more advanced GPT-4 Turbo LLM, resulting in enhanced AI capabilities. 

Indian tech companies are not far behind. A handful of homegrown conglomerates, such as Reliance (Jio), TCS, Infosys and Mahindra & Mahindra, are already working on a slew of GenAI projects. A NASSCOM-BCG report estimates that the country’s AI market may reach $17 Bn by 2027, growing at an annualised rate of 25-30% during 2024-2027. 

But this time, the credit for developing an India-focussed equivalent of ChatGPT goes to the Bengaluru-based GenAI startup CoRover.ai. Powered by proprietary cognitive AI technology, the startup launched BharatGPT in December 2023, claiming it to be India’s first-ever large language model. To be sure, it is one of the largest GenAI conversational platforms, gaining traction from more than a billion users in less than six months.   

As GenAI platforms produce new content by processing massive amounts of existing data used to train algorithms, their output – in spite of its near-human excellence – mimics what we already know or tend to perceive. Because most of the training material is in English and comes from Western resources, these tools often fail to serve a diversified global audience or identify cultural nuances. 

That is why global versions of GenAI applications may not always be adequate for India-specific queries, exposing algorithmic biases against the country’s societal contexts. 

Here is a quick experiment we carried out at Inc42 to understand how GenAI falls short of community expectations. When we asked Copilot Designer (an image creator tool powered by OpenAI’s DALL-E) for a portrait of Lord Rama, the images it produced resembled Greek gods whom none of us could recognise as the iconic Indian figure. 

Such examples abound, not only in the Indian context but elsewhere. Google had to halt Gemini AI’s image generation capabilities earlier this year after it was blasted on social media for producing historically inaccurate images.  

Recognising this socio-cultural gap in existing systems, entrepreneurs and developers from India have started working on a GenAI ecosystem tailored for Indian consumption, therefore yielding better contextual outputs across all formats.

The need for India-focussed GenAI platforms led to a host of indigenous developments, such as BharatGPT, Ola Krutrim, and Project Indus (a Tech Mahindra venture including 40 different Indic languages). Each initiative is trying to overcome the language challenges pan-Indian users are bound to face in real life and now in the AI world. 

“The idea is to provide equal access to knowledge and information to all Indians regardless of their background,” says Ankush Sabharwal, founder and CEO of CoRover.ai. 

To avoid any misunderstanding, let us clarify that Sabharwal’s flagship GenAI BharatGPT must not be confused with Reliance Jio’s Bharat GPT. The confusion arose when Akash Ambani, chairman of Reliance Jio Infocomm, spoke at the IIT-Bombay Techfest 2023 and mentioned that the company was working with the premier institution to launch a homegrown AI model called Bharat GPT. 

According to him, the programme is part of Reliance Jio’s broader vision (Jio 2.0) to create a comprehensive AI ecosystem.  

On the other hand, CoRover.ai applied for the BharatGPT trademark in February 2023 and filed for a patent on the BharatGPT LLM model. 

Inside CoRover’s BharatGPT

Before we delve deeper into the LLM’s benefits and use cases, a quick look at its tech components will not be out of context. BharatGPT (GPT stands for generative pre-trained transformers) typically contains encoders for encoding/inputting information and sequences for deep learning and decoders for generating new sequences based on the input. It is further fine-tuned for conversational applications with the help of supervised learning and, at times, human feedback. 

The LLM also uses advanced techniques like word embedding for resource-efficient natural language processing. Simply put, word embedding is used in NLP for word vectorisation or converting words and phrases from human vocabulary into a set of real numbers, which is required for capturing syntactic and semantic information, text classification and text analysis. 

For instance, the word ‘Apple’ could be used as a company name or as a fruit in different contexts. In such cases, word embedding can help capture the most appropriate meaning based on the language and the region, sector and domain, user and business details and specific use cases. Also, faster ML means less burden on GPUs and other computing resources.        

The multilingual application covering audio, video and text has been developed with the government-funded BHASHINI project, the National Language Translation Mission (NLTM) operating under MeitY. BharatGPT offers voice modality integration in more than 14 Indian languages and text modality in all 22 official Indian languages mentioned in the Indian Constitution. Globally, it supports 120+ languages compared to 80+, supported by ChatGPT.

BharatGPT enables a number of features, such as integration with payment gateways, Aadhaar-based eKYC authentication, dialogue management and sentiment analysis. It also claims an accuracy rate of 90%. More importantly, a homegrown LLM will focus more on data localisation, leading to better data security.

How BharatGPT Is Building Use Cases Across Enterprises

Unlike ChatGPT, CoRover’s BharatGPT has been designed for the B2B segment and it has paid rich dividends. “Currently, more than 60 organisations are using our services and we have received 900+ inbound leads so far,” claims Sabharwal, underscoring the startup’s early-mover advantage. The company has secured projects worth over INR 100 Cr scheduled for the next 12 months

It has already onboarded a host of industry leaders and storied organisations, such as LIC, NPCI, HUL, Oracle, Digital India, Mahindra & Mahindra, IRCTC, VRL, KSRTC and redBus. Others like SEBI, India’s capital market regulator, will soon integrate BharatGPT into their existing platforms. 

Using the startup’s BharatGPT model, one can create text-, voice- and video-enabled multilingual virtual assistants (VAs) in no time by drawing information from content/documents specific to the business/use case. Depending on organisational requirements, data files are made accessible to the corresponding BharatGPT VA and generate answers and references from those resources.

Businesses can also integrate a custom knowledge base with enterprise resource planning (ERP) systems, customer relationship management (CRM) tools or application programming interfaces (APIs) for real-time transactions.

End consumers can start using a VA as soon as an organisation/business integrates the bot and facilitates engagement, says Sabharwal. Moreover, the end product is vertical, and the output solely depends on the data fed to a specific chatbot.

A look at an educational project brings further clarity here. If a chatbot built on BharatGPT is to be used for standard V learning, it will be primarily trained on standard V curricula and will respond in sync with the predetermined academic level. Ask a question on the same topic that requires more details expected from a standard XII student, and the response may not be adequate. 

BharatGPT generates output based on curated training materials/datasets instead of relying on random resources. It also limits the scope of generating wrong output, as was the case with Copilot Designer or Google’s Gemini, and the accuracy level remains high. 

Now, let us take a look at the website of National Payments Corporation of India (NPCI) to understand how the chatbot is operating in layers.

“If a person is asking pre-fed questions – say, from the FAQ list – the VA called Pai will respond directly. If Pai can’t fetch the response directly, it will use BharatGPT to come up with the answers, along with the references,” explained Sabharwal.

Similarly, CoRover, along with the Indian Railway Catering and Tourism Corporation (IRCTC), has developed another VA called RailGPT. The mobile application provides information, assistance and a bouquet of services to users while the bot understands user requests and responses in a conversational manner.

Interestingly, the startup recently announced it would shut down its overseas subsidiaries to focus more on the domestic market. 

“Earlier, we opened companies in the US and the UK. Today, we are closing them down. We have requested our partners to handle the legal aspects. Of course, our long-term plan is to cater to those markets. But just now, we are experiencing significant demand here in India and want to prioritise the Indian market first,” said Sabharwal. 

BharatGPT’s Multilingual Edge: Will It Nurture An Inclusive Culture?

According to a recent IBM survey, about 59% of Indian enterprises (companies with more than 1K employees) actively use AI in their businesses. Industry experts also think the country is poised to emerge as the largest market in the conversational AI segment, given its language census data. As per the 2011 census, India has 121 languages, each spoken by 10K people or more. Overall, more than 19.5K languages or dialects are spoken in this subcontinent. 

In a polyglot nation like India, the inability to communicate in local languages can have a heavy impact on the economy. Many liken it to a tariff on trade, increasing the difficulty and costs of doing business across India. On the other hand, talent acquisition based solely on language proficiency has been expensive and inadequate for most companies.

In fact, language and cultural barriers have a profound social impact. Consider this: More than 50K people from Punjab, Uttar Pradesh, West Bengal, Bihar, Odisha and other states reside in Chennai and its suburbs. However, the majority of them do not speak Tamil and often face difficulties when interacting with the local police or registering complaints. Chennai Police also struggled to cope with this communication challenge, which impacted their investigations.

To address this issue, the state police department partnered with CoRover to launch video bot kiosks where users can communicate in multiple languages and GenAI tools can process the information efficiently.

“We have more than 130 Cr users who have access to our virtual assistants,” said Sabharwal. “If you ask me, we have the highest amount of data here, the Indian conversational data. We support the largest set of languages, whether Indian or global.”

As Sabharwal emphasises, one of the most important aspects of GenAI in the future will be improving access to information. Although 90% of the Indian population does not speak English, more than 90% of the information is currently only available in English, which is a substantial gap. 

“With BharatGPT-like LLMs, people speaking different languages will have equal access to all available information,” he added.

The Bottom Line

According to research data by CB Insights, GenAI was the lone bright spot in 2023 amid a harsh funding winter, bagging 48% of the total AI investments, a substantial jump from a meagre 8% in the previous year. Despite a ‘down’ trend in deal size and count, AI startups worldwide raised $42.5 Bn in 2023 across 2.5K equity rounds.

Closer home, India’s GenAI market is expected to grow exponentially in the next few years, surpassing $17 Bn by 2030 from $1.1 Bn in 2023, growing at a CAGR of 48%, per an Inc42 report. The country’s startup ecosystem already comprises 70+ GenAI ventures and counting, pursuing the vision of ‘making AI in India’ and ‘making AI work for India.

With BharatGPT and its ilk (Ola Krutrim, Hanooman AI and more) taking charge and cementing their positions as the cornerstone of India’s conversational AI landscape, India is well prepared for a new era of digital empowerment, where language barriers are dissolved and access to information is democratised. It could be the beginning of a transformative future where AI augments human capabilities and creates an inclusive culture amid diversities to propel the nation towards economic and societal cohesion. 

However, industry experts still doubt whether the world is ready for a large-scale GenAI makeover or if the current traction is another FOMO. The new technology has many challenges, from biases and inaccuracies to deepfakes and hallucinations, which can trigger disasters in a tech-driven, knowledge-centric world.  

As IBM aptly points out in its survey, the top barriers to developing trustworthy and ethical AI are the lack of an AI strategy, company guidelines and AI governance and management tools that work across all data environments. Unless these are addressed, grandiose predictions may turn into zany outcomes in a dystopian world.

[Edited by Sanghamitra Mandal]

The post How BharatGPT’s Indic-First LLM Is Bridging Language Barriers, Empowering Enterprises appeared first on Inc42 Media.

The number of credit cards reached 100 Mn in 2024, a 400% jump from 20 Mn in 2014 to over 102 Mn by April 2024. 

Despite a remarkable rise in UPI payments due to the digital payment platform’s speed and convenience, India’s credit card market has not taken much of a hit. For instance, the total number of credit cards rose to 10.18 Cr in FY24, compared to 8.53 Cr in the previous financial year (a 19% jump), according to the RBI. 

Similarly, YoY credit card spending in FY24 surged by 27% to reach INR 18.26 Lakh Cr compared to nearly INR 14 Lakh Cr in the previous financial year. The reason: The growing adoption of digital payments across Bharat since the Covid-19 pandemic and rise in discretionary spending in metros and beyond.  

Given these trends, credit cards remain a small but premium and most lucrative segment to cater to. However, in a seemingly counterintuitive approach, most Indian banks and NBFCs continue to focus on the lending market for two primary reasons. 

First, the loan market (both secured and unsecured) is much bigger. Second and more important, credit cards incur high operational costs involving reward programmes, fraud protection, customer services and more. Also, small sellers are unwilling to accept payments via credit cards as they are liable to pay a merchant discount rate (MDR) amounting to 1-3% of the transaction value.

The small percentage of credit card users in India poses another hurdle. According to the Federal Reserve data, 82% of U.S. adults had credit cards in 2022. In contrast, 5.5% of Indians hold credit cards, according to latest industry estimates. 

On the other hand, popular loan products like personal loans or even very short-term loans (think of payday loans) for emergencies are quite straightforward in structure and operational costs are typically less. Therefore, most fintechs partner with banks and NBFCs to cater to the loan market. However, with the RBI keeping a strict vigil on lending norms, KYC and advanced security measures, many are now compelled to look beyond lending. 

To be sure, a few fintech platforms have entered the credit card market with co-branded cards, BNPL (buy now, pay later) offerings and hassle-free credit card bill payments. But none managed to stand out except the fintech unicorn CRED, a member-only app that exclusively services credit card holders with a credit score of minimum of 750.

Set up in 2018 by Kunal Shah, CRED aims to provide a premium experience to credit card users through a range of exclusive products and services. Not Everyone Gets It, says its tagline, amply illustrating the unique concept driving its business vision. 

Besides its routine offerings, CRED has introduced a host of value-added services over the years, such as CRED Cash and CRED Mint, CRED UPI (integration with the UPI platform for secure transactions by generating UPI codes), Tap to Pay (NFC-enabled instant payment by tapping one’s smartphone on a merchant’s PoS device) without requiring any physical card and CRED RentPay, with provision for setting up auto-payment. 

The platform has recently launched a bouquet of services such as Garage, a vehicle management platform to keep track of car spending and enable Fastag recharge for toll payments, and Escapes, a selection of curated accommodations for specific destinations, diverging from its pure-play financial offerings.

In 2023, CRED acquihired Spenny, a microsavings platform that helped people save and invest tiny amounts in mutual funds and digital gold. Earlier this year, it also acquired online wealth management platform Kuvera in a cash-and-stock deal. Additionally, the fintech platform has obtained in-principal approval from the RBI to operate as a payment aggregator. It has also set up a Dreamplug AA Tech Solutions subsidiary and intends to acquire an account aggregator licence.

For context, PAs are third-party service providers enabling customers and businesses to make and receive payments online. On the other hand, account aggregators (AAs) are RBI-regulated intermediaries with NBFC-AA licences, enabling financial data-sharing between financial information providers (FIPs) and financial information users (FIUs) within the AA network. 

For instance, the AA ecosystem can help a lending bank (FIU, in this case) access the financial data of a potential borrower from another bank where the person has an account (here, the bank where the borrower has an account is the FIP). All data is accessed and shared securely and digitally, but no data-sharing is possible without the account holder’s digital consent (more on CRED’s role as a PA and a potential AA later).

Talking of numbers, currently 11 Mn use the platform for the monthly bill payments of their credit cards and UPI payments. Over 4 Mn vehicles are parked on CRED Garage, which was launched just last year.

A Close Look At CRED’s Design Thinking For Product Development

Considered quite a business buzzword nowadays, design thinking is all about an iterative process that dives deep into customer requirements, goes beyond conventional assumptions and comes up with innovative solutions.      

When quizzed about CRED’s design thinking approach, a former senior executive explained it candidly. “Take a look at Microsoft. Its operating system is hugely popular, commanding 72% of the [laptop] OS market, while Apple’s macOS accounts for 14.73%. Similarly, Google’s Android OS dominates the mobile space with more than 70% of the market share compared to Apple’s 28%. Yet, Apple’s revenue surpasses Google’s parent Alphabet and Microsoft by 40% and 120%, respectively. That’s because Apple has better identified their potential consumers and focuses on offering experience, while others focus on products.” 

According to the former exec, Shah is pursuing a similar approach for CRED.

The company has identified its user base — affluent and trustworthy Indian consumers. The design thinking is to enable financial progress for the trustworthy with products that improve their lives and lifestyles. 

And, perceiving credit cards and credit scores — a metric for trust — CRED launched the first product as credit card bill payment. This included reminders to pay bills on time, insights into their card usage patterns. 

Further to reward financial prudence, CRED came up with a host of instant gratification instruments including coins, cashback, merchant offers, vouchers for bill payment, as well as access to a curated selection of premium experiences across lifestyle products and travel. CRED Escapes and Store have been further designed to drive engagement and reward members for financial prudence with unique offers.

Garage has similarly been launched to serve their members’ vehicle-related needs. A platform where members could pay challans, recharge FAStag, and renew insurance policies, all on CRED.

CRED has its challenges, though, including market saturation and increasing customer acquisition cost (CAC). Consider this. According to the CRIF High Mark report, among credit card holders in the youngest age bracket of 18-25 years, 81% have one credit card, 12% have two cards, 3.6% have three cards, and 2.4% have more than three cards. Hence the total number of credit card holders indeed is less than 100 Mn.

Now CRED has already acquired over 11 Mn users and given its credit score cut off 750 (significantly higher than 650, minimum to have to qualify for credit cards), bringing the rest to its fold could be a near-impossible task. Even if it is theoretically possible, one simply can not afford to spend a huge amount on customer acquisition to capture the market. 

To mitigate such risks and overcome other business hurdles while aiming to attain long term sustainability, CRED has been working on five areas mentioned below:

• Building a unique portfolio of products: Instead of creating entirely new products, CRED aims to offer unique experiences by enhancing existing ones. Take, for example, the design makeover of CRED UPI during this cricket season. The cricket edition flaunted a rhodium-toned interactive skin, resembling the look and feel of a premium credit card or a designer wallet. Along with that came mega rewards for consecutive transactions and luxury drops at select locations across India to ensure that such lifestyle upgrades become valued experiences which go beyond transactions. Garage and Escapes are other additions to its benefit-first product portfolio.
• Developing multiple revenue streams: As per FY23 financials, currently 90% of its revenues come from Cred Cash or personal loans, utility bill payments, Cred Max and insurance services. The company hopes to channel new avenues of income through businesses acquired by CRED but run independently (like Kuvera), as well as from PA fees. 
• Reducing costs: CRED constantly evaluates its operating expenses to keep tabs on cash flow and stay cost-efficient. It has also handed out pink slips multiple times despite a 3.5x rise in revenue to INR 1400 Cr in FY23. Access to a PA licence will further help reduce costs.
• Building compliance and long-term trust: CRED aims to build a trusted ecosystem by obtaining licences from major regulatory bodies like the RBI, SEBI and IRDAI and strictly adhering to all compliance norms.
• Working on IPO plans: CRED is reportedly accelerating its IPO plans and may file the DRHP as soon as it reaches breakeven. An initial public offering is the best way to raise funds to reduce debt burdens, acquire target companies and pursue long-term goals. Again, a publicly traded company is trusted more by all stakeholders. However, the IPO exercise will be more challenging than it seems initially; the devil is in the details.

CRED’s Kuvera Move Will Drive Horizontal & Vertical Growth

As the UPI ecosystem evolves, fintech companies seek to generate multiple revenue streams through cross-selling. Whether it is Paytm, Google Pay, PhonePe or Amazon Pay, cross-selling has become the critical focus of these apps, leading to stiff competition.

With a vast UPI consumer base on board, every fintech platform wants to get into lending and investments to increase its revenue. But now that the RBI is zealously monitoring all lending operations, UPI platforms tend to focus on wealth management. CRED is also moving into this space, but with a difference.

“CRED faces limited competition compared to Paytm Money, PhonePe and Groww, as it aims to monetise a high-quality customer base and emulate the profitability achieved by wealth management platforms like Zerodha and Groww,” said Ankur Bansal, cofounder and director of Blacksoil Capital, a Mumbai-based financial services provider.

The acquisition of the wealth management platform Kuvera syncs well with this purpose.  

Kuvera, with assets worth $1.4 Bn+ under management for its 300K users, has become a preferred platform among India’s affluent investors. The average SIP size on Kuvera has reached INR 5K, twice the industry average, while total mutual investment amounts exceed INR 12 Lakh ($14,450), five times higher than the norm.

Kuvera, thus, fits into the CREDverse in terms of target customers and value creation. The acquisition also aims to fulfil the following short-term and long-term goals.  

• Customer acquisition beyond CRED: According to a CRED statement, Kuvera will continue to operate independently and serve beyond CRED members.  
• Vertical integration: CRED needs to cater to its users’ wealth management needs. Kuvera, with SEBI’s Investment Advisor (IA) licence, offers the opportunity to enter this segment. 
• Speed up operations: Acquiring a licensed entity eliminates the need to meet compliance requirements and undergo long waiting periods.

While the acquisitions of Kuvera and Spenny add to CRED’s curated user base, there are more advantages.

“The existing user base, which manages their credit cards and expenses via the CRED platform, may prefer to consolidate their financial activities under one roof, thereby allowing CRED to gain some mileage and catch up with Zerodha and Groww,” observed Kalindhi Bhatia, partner at BTG Advaya, a leading transactional law firm based in Mumbai.

But there is another glitch. By acquiring licensed entities, CRED may have avoided the extensive scrutiny and long wait periods involved in setting up these businesses. However, from an ongoing compliance standpoint, the platform has to follow various sector-specific regulations. For instance, SEBI regulations are there for stocks, mutual funds and financial advisory; IRDAI looks after insurance, and the RBI monitors payment aggregation, KYC and more. So, it can still be an uphill task for CRED to comply with multiple requirements from the get-go, added Bhatia.  

How CRED’s PA Licence Will Bring Value, Increase Revenue

Third-party payment aggregators are costly affairs, to say the least. PAs usually charge 1.75%-4% per transaction as processing fees, in addition to set-up costs and annual maintenance fees. 

“The payment aggregator licence will allow CRED to leverage its payment processing services for partner brands and third-party merchants. Of course, the play here lacks clarity as the PA sector is now saturated. But it will help CRED reduce external costs incurred by relying on third-party PAs as and when required,” said Bhatia.

Currently, CRED’s partner brands are responsible for paying the PA charges, as the fintech platform does not offer these services or cover these costs.

Now that CRED’s wholly owned subsidiary Dreamplug Paytech Services has been granted in-principal approval for the PA licence from the RBI, merchandise costs may likely to go down and the platform can leverage a brand new revenue channel.

“A PA licence enables direct payment processing, enhancing the platform’s offerings like CRED Pay and CRED RentPay. However, it comes with regulatory challenges, including strict monitoring and compliance, similar to what Paytm has undergone. In case restrictions are slapped on a business, they can impact innovations and product scope,” said Abhinav Paliwal, cofounder and CEO of PayNet Systems, a white-label neobanking software platform catering to new-age fintechs. 

Nevertheless, the PA licence will be instrumental in trust-building, user base expansion and brand positioning. There can also be a possible shift in branding – from ‘exclusive’ to ‘more inclusive’ – while retaining the premium service aspects, he added.

Account Aggregator Licence For Seamless Operations

To break new ground, CRED reportedly had plans to obtain an account aggregator (AA) licence via Dreamplug AA Tech Solutions. As explained, the AA framework helps simplify financial services like loans and credit facilities by providing a fast, comprehensive and transparent way to share verified financial data among regulated entities.

According to sources close to the development, the company has not applied for the AA license yet. “Our approach to licences is to apply for those that will enable us to provide a better member experience while remaining compliant with the letter and spirit of regulations,” said a company official without wanting to be named.

As CRED is now involved in business operations regulated by the RBI, SEBI and IRDAI, acquiring an AA licence is required to ensure a seamless experience across its products and services. In simple terms, an AA licence will enable CRED users to consent to data sharing without investing time and effort to provide all essential details whenever the need arises. 

“Instead, CRED’s subsidiary will enable secure financial data sharing and boost capabilities in service areas like CRED Mint,” said Paliwal of PayNet.

Pratekk Agarwaal, founder and general partner at GrowthCap Ventures, a Mumbai-based early stage VC firm, noted that obtaining these licences would strengthen CRED’s fintech portfolio and regulatory compliance. However, exploring synergies and optimising customer journeys to enhance user engagement would be essential, given its reliance on partner channels.

Bhatia of BTG Advaya underscores yet another point. With these licences in its kitty, it looks like CRED intends to validate a user’s financial credentials internally rather than relying on external agencies. Since the platform enables lending services and payment gateways, it can carry out stipulated KYC verifications and assess a user’s financial rating pretty swiftly. 

CRED Is Building The Top 1% Club; Here’s A Glimpse Of What To Expect

Popular opinions and market research data often highlight that the larger the TAM (total addressable market), the bigger the growth opportunity. However, CRED has changed tack. Instead of exploring the untapped market for humungous growth, it has been focussing on members’ requirements to build new value propositions for its curated community. 

A former CRED executive, quoted earlier in this article, concurred. 

“Take Garage, for instance. More than 70% of CRED members might own vehicles. Hence, they must analyse and understand what they spend on their vehicles. CRED has made it extremely convenient by putting all relevant data in one place. Your FASTag payments are here. You get to know the last servicing cost and how much you spend on your vehicle every month. Is your car leaking money? This is crucial as you no longer have to feed the data separately to manage your vehicle expenditure,” he added.

Similarly, there is Escapes, another feature to help members with their travel plans. Almost all CRED members travel at least twice a year. Of course, critics may say that the fintech is deviating from its business model but that is not the case. CRED is simply catering to what its members like to have on the platform, the executive said.

However, cross-selling does not always work. 

According to Bansal of Blacksoil Capital, a consumer’s preference will be the deciding factor here. For example, most users are accustomed to using traditional OTAs like MakeMyTrip or EaseMyTrip, and many will be using corresponding co-branded credit cards. In such a scenario, CRED may not expect significant cross-selling on Escapes, at least not initially. But even a small income will keep the vertical sustainable, as CRED will not acquire physical assets (like hotels) to keep it going. Instead, the platform hopes to drive Escapes engagements with rewards, vouchers and the luxury experiences it offers. 

Paliwal from PayNet assumes that CRED may attempt to cross-sell its new products to existing users and ensure that its acquired customer base uses its current offerings. (Data usage in such cases must comply with applicable privacy laws.) Presumably, the idea is to emerge as a one-stop shop for all things finance, from managing expenses to making payments to wealth management and more.

All these are for the top 1%, of course. But there could be exceptions.

Although the platform has set ‘Brand CRED’ apart as exclusive, it is now allowing certain acquisitions to run independently and making their offerings more inclusive to drive customer acquisition and build a large consumer base.

Interestingly, CRED struggled initially for keeping its offerings too limited, which did not resonate well with early users. Soon, however, it learnt to broaden its service horizon and introduced more substantial offerings, such as managing one’s entire bunch of bills more efficiently without missing a single payment date. In other words, it turned to ‘convenience’ to carve its niche despite the ‘exclusivity’ tag. Now, standing at the crossroads, is it taking a page out of its old playbook again to sprint ahead?     

“There seems to be a shift in the business approach compared to its original offering. Think of the first tagline – linked to a user’s creditworthiness. If CRED executes this phase well and becomes useful to customers [rather than being just another product in the market], its new tagline should be: Everyone must get it,” said Paliwal. 

Will There Be Hurdles Ahead As CRED Expands?

Whether it is Happay (a corporate expense management platform), or Kuvera, CRED is not only diversifying its revenue streams through multiple offerings but also allowing other brands to grow independently. This further ensures risk diversification, a necessity in a post-pandemic landscape impacted by a prolonged funding winter. 

Additionally, regulation and compliance issues continue to impact fintech platforms, and handling belligerent customers turns out to be difficult. Last year, when Happay corporate cards issued by SBM Bank (India) were unexpectedly blocked from the midnight of March 31, several users took to X (formerly Twitter) and criticised the business for its poor communication policy. However, the incident took place mainly because the bank failed to update its KYC details in sync with the RBI’s guidelines.

It did not impact Brand CRED, but it certainly revealed the kind of turbulence a fintech company might suddenly face. 

Under regulatory scrutiny, it may not be a smooth journey ahead for CRED. However, analysts believe that CRED is better equipped to tackle regulatory hiccups than Paytm, which slipped on KYC compliance. In fact, it is the sheer volume that often makes the difference. Paytm faltered trying to manage more than 300 Mn users. But for CRED, it will be just 15 Mn, a more manageable number.

Considering the impact of regulatory challenges on fintechs like Instamojo, Paytm, Slice and many others, would it also be an issue for CRED?

Bansal thinks fintechs must be ready to plug every possible loophole. “While building a fintech brand, you can’t shy away from regulators for long. It will not help the brand grow. It is only natural for CRED to seek regulatory compliance to incorporate more products and services and build user trust. Razorpay has also gone through similar cycles. So, regulatory compliance will be part and parcel of a business if it wants to be part of a new asset class. However, CRED has acquired a fresh set of businesses and managing them is easier said than done.”

As CRED strives to balance exclusivity, a broader customer base and a diversified product portfolio through strategic acquisitions, it has positioned itself as a versatile fintech company. However, the real test lies in preserving its premium brand identity while navigating the intricacies of regulatory compliance and diverse market demands.

[Edited by Sanghamitra Mandal]

Update | May 29, 2024, 13.40

The total number of CRED members has been updated based on further input from the company.

The post Decoding The CREDverse appeared first on Inc42 Media.

Bitcoin (BTC) made a stunning comeback at long last, hitting more than $73K in March 2024, soaring past its previous peak of almost $69K in November 2021 and clocking a 300% jump from November 2022, when it slumped below $20K. Given its remarkable rally, the combined market cap of the cryptocurrencies in circulation shot up to $2.5 Tn, just 10% short of the all-time high of $2.8 Tn, as per industry data.

Crypto enthusiasts across the globe are delighted. The tide has presumably turned after the 2022 downturn and a wave of bankruptcies following an elaborate scam by Sam Bankman-Fried’s FTX, the world’s third-largest cryptocurrency exchange by volume. Investors lost billions of dollars in bank-run-like situations at the time, and virtual digital assets (VDAs) appeared to be tainted for good. In the wake of the huge financial fraud, many central banks played the stern gatekeeper, safeguarding investor money from scams and manipulation.

Interestingly, crypto’s rapid rise might not have been possible without the launch of Bitcoin ETFs (approved by the U.S. SEC to ensure gains from price movements by trading ETF shares without owning the digital asset), the UK’s nod for crypto-backed exchange-traded notes (eETNs), and the phenomenal Bitcoin halving in April 2024 that would control its supply and push the price up. In fact, a few price prediction systems estimate BTC to breach $84K by October this year.

That is not to say that cryptos, in general, and BTC, in particular, have shaded their infamous volatility. By the time we are publishing this article, BTC has dropped $66K, and the flourish chart shows price fluctuations similar to standard stock markets. But unlike the previous bull run in 2021, primarily pushed by amateur traders looking to get rich overnight, the crypto market now has the imprimatur of financial regulators. 

This indicates the emergence of a mature landscape where stakeholders are ready to abide by more stringent policies and the market is no longer shunned by FIs and professional wealth managers. In the US alone, more than $7 Bn had been initially invested in new crypto products, according to Bloomberg data. The inflow will likely increase as the US Federal Reserve indicates interest rate cuts in H2 2024 and more investors turn to riskier assets for better returns.  

India Is Witnessing A Surge, Too; Will It Continue? 

In India, crypto exchanges have also witnessed a giant leap in trading volume despite existing hurdles and the absence of a well-structured regulatory framework. The latter has been a work in progress since 2021, although the country has set up a clear-cut tax structure and a well-defined registration-and-reporting framework, eliminating many of the ambiguities. This has helped build a more favourable regulatory climate, leading to a level playing field.    

According to the latest report by Hashed Emergent, a web3 venture capital firm, the country claimed the top spot for on-chain adoption in 2023 among 150+ nations, saw 1K+ Web3 startups (built on blockchain technology and user-controlled) thriving and set up more than 35 Mn crypto trading accounts on top Indian exchanges. 

India now ranks among the top five countries in peer-to-peer (P2P) crypto trading and 75% of Indian users opting for centralised exchanges (CEXs) are aged below 35, a demographic dividend no country can ignore. After all, the future can be all about decentralisation, whether it is currency or finance, and young Indians can easily leverage these benefits for a long time.

All this despite the overwhelming tax burden and the stringent regulations that India has imposed on the crypto industry in recent years. Since 2022, the country has levied a 30% tax on the earnings from digital asset transfers (including cryptocurrencies, non-fungible tokens or NFTs and more), a 1% TDS (tax deducted at source) on the buyer’s payment if it surpasses the threshold and no deduction is allowed except the acquisition cost. A person receiving crypto assets as a gift is liable to pay taxes, but a VDA loss cannot offset any other income.

The Reserve Bank of India also threw a spanner in the works in April 2018, prohibiting banks and other regulated financial entities from dealing with crypto exchanges. The Supreme Court set aside the RBI order in March 2020, but more than a dozen crypto startups had to cease operations by then.  

The latest mandate came in December 2023, when India banned nine offshore crypto exchanges citing ‘non-compliance’ with local tax and anti-money laundering laws. According to the Prevention of Money Laundering ACT (PMLA) 2002, VDA service providers must register with the Financial Intelligence Unit (FIU operates under the finance ministry), which acts as a reporting entity for the control, administration and safekeeping of VDAs.

The ban on these global platforms sent Indian users rushing to homegrown players like CoinSwitch and CoinDCX etc. In the absence of big names like Binance, Coinbase and KuCoin, Indian crypto exchanges were once again holding sway and business is booming (more on that later). 

Several exchanges such as Binance and KuKoin recently registered with FIU-India and received in-principle approval. The total number of VDA SPs has now increased to 47 and they adhere to the tax laws outlined in the Finance Act, 2022. However, the entire list has yet to be made public. 

The pecking order has also changed in recent years. Although most top exchanges remain operational, there has been a notable shift in market share. For instance, ZebPay, India’s largest crypto exchange (by users, volume) until 2018, slipped to the fourth spot in 2024. WazirX, in spite of its fallout with Binance and the ongoing probe by the Enforcement Directorate under FEMA and PMLA, it has retained the second spot (by userbase) in the Indian market. 

Inc42 spoke with nearly a dozen crypto platforms in India to comprehend the current landscape, the changes witnessed in recent years, upcoming trends and whether the industry may return to pre-taxation times.

From Recovery To Growth: The Crypto Industry In India Has Come A Long Way

Asked whether the enthusiasm around the recent surge in crypto could eventually collapse under the tax burden, Shivam Thakral, cofounder and CEO of BuyUcoin, said that the Indian crypto market went through a period of adjustment and adaptation after the tax laws came into effect in 2022 and heavily impacted the industry. Initially, these regulatory measures created uncertainties and cautious sentiment among market participants. 

“However, as regulatory clarity improved and users gained confidence in compliance frameworks, the market showed resilience and began to recover. This underscores the growing acceptance and integration of cryptocurrencies within the Indian financial ecosystem, paving the path for sustained growth and innovation,” Thakral told Inc42.

Most founders of crypto startups also believe that 2024 will mark the industry’s growth phase and may lure investors with new products like derivatives, spurring a further surge in trading activity. Even SEBI is now reportedly mulling to regulate the same. 

According to Edu Patel, founder and CEO of Mudrex, crypto trading volume in India peaked between 2019 and 2021 but saw a decline in the next two years due to three black swan events. 

Along with those came rising inflation, high interest rates (the RBI’s hawkish policy stance to keep inflation under control) and macroeconomic headwinds, leading to a global slump in trading volumes.

“However, there was a [more sustainable] surge in 2024, especially in March, when we recorded the highest trade volume. We have witnessed consistent growth ever since,” added Patel.

Rajagopal Menon, VP at WazirX, said the government’s mandate on territory-agnostic tax compliance and the ban imposed on overseas crypto majors created a level playing field. 

“Following the announcement, domestic exchanges witnessed a surge in volume. WazirX saw a 250% increase in deposits and a 100% rise in transaction value within a week. Subsequently, a few foreign exchanges have stepped forward to comply with Indian tax laws, which is a fair move,” he added.

The tax pushback initially landed local exchanges in deep trouble. According to a study released by the Delhi-based think tank Esya Centre, the heavy tax burden on all transactions of virtual assets saw a cumulative trade volume worth INR 32K Cr shift from Indian crypto exchanges to foreign ones between February and October 2022. 

Most Indian users shifted their base to international platforms like Binance, OKX, Kraken and Coinbase during that period. However, with the ban on global crypto exchanges and the inaccessibility of their apps and platforms, most active traders had no choice but to shift back to Indian platforms. 

ZebPay’s CEO, Rahul Pagidipati, also believed the second crypto rally would be more sustainable than before. “The previous crypto cycle saw a massive inflow of retail investors on ZebPay. It was primarily due to the rise in crypto exchanges and the positive market sentiment in 2020-2021.

Macroeconomic stimulus such as a reduction in interest rates during this period led to a rapid rise in participation in the financial markets sector. While the market corrected in the year 2021-22, we have seen a healthy rise in participation since then and we anticipate FY 2024-25 to be one of the best years in this market cycle,” he added.

Bitcoin Is No Longer The Big Boss Of Crypto In India

Could that be a landmark in the history of cryptocurrencies? Not globally, of course, and not right now. Bitcoin still accounts for more than 50% of the crypto market cap, and India is no exception. But a look at the major Indian exchanges (ZebPay, Mudrex, BuyUcoin and Unocoin) shows that BTC has traded at No. 2 on many occasions.

However, the price performances of the other two prominent altcoins – Ethereum and Ripple – have seen enough fluctuations and downturns. In fact, they have yet to make it to the top five most-transacted coins on WazirX.

Although WazirX did not provide year-wise details, Menon said that the top five tokens between 2019 and 2023 were Bitcoin, Shiba Inu, USDT, Dogecoin and WRX (the last one is the token introduced by WazirX).

Tether, a cryptocurrency stablecoin launched by the eponymous brand, is fiercely fighting Bitcoin. In the current calendar year (2024), the value of Bitcoin transactions on WazirX has reached $8.2 Bn, while Tether has clocked more than $7.7 Bn. Shiba Inu, Dogecoin and WRX recorded $5 Bn, $3.3 Bn, and $3.2 Bn, respectively.

According to Thakral of BuyUcoin, the Indian landscape featuring top-traded cryptocurrencies underwent significant changes during 2019-2023. In 2019, established cryptocurrencies such as Bitcoin, Ethereum, Ripple, Litecoin and Bitcoin Cash (BCH) dominated the market due to their global recognition and high liquidity. But the years that followed saw the rise of new contenders amid shifts in market narratives. 

The Hashed Emergent report still rates Bitcoin and Ethereum as the most favoured assets among Indian traders. But altcoins like Chainlink (an Ethereum token), Matic (by Polygon), Cardano/ADA and Polkadot/DOT have gained prominence due to varied preferences and the need for asset diversification.

The latter half of 2023 saw the emergence of AI and GPU-based projects particularly Fethch.ai, Render, Akashnet, Bittensor, SingularityNet. These trends underscore the maturation and the speed of building in the blockchain industry, said Thakral.

The rise of meme coins like Shiba Inu and Dogecoin in India is surprising, too. Meme ‘stonks’ gained prominence in the heady days of 2021 when the YOLO mindset (and Covid subsidies) pushed newbie retail investors towards counter-intuitive risk-taking.

But the question is: Does the Indian crypto community really think these altcoins have good investment potential? Or is it simply indulging in these VDAs based on speculative anticipation? Getting rid of BTC may not be possible just yet. Meanwhile, celebrity advocates of meme coins like Elon Musk (he promoted Dogecoin several times to push its price) may try to make them worthwhile for investors looking at less-explored assets. 

Still, routinely investing in meme coins for good returns is a far cry. Right now, it is mostly wait-and-watch for retail investors. Although hero investors in meme coins like the Roaring Kitty are back on social media (a Fortune report says), will they be able to lead crypto’s comeback season and attract more altcoin believers?

Can Crypto In India Push Past Existing Hurdles To Kickstart FY25?

The Internet and Mobile Association of India (IAMAI), an industry lobby under which the Blockchain and Crypto Assets Council (BACC) operated since its inception in 2017, initially fought and won against the RBI gag order. However, in the face of mounting regulatory conflicts, IAMAI distanced itself and dismantled the crypto body in July 2022.

Undeterred by this setback, major crypto exchanges, startups and other stakeholders across the Web3 verticals banded together to form a new entity – the Bharat Web3 Association (BWA) – in November 2022. This new lobby is not only continuing the fight for the industry but also accelerating efforts to raise awareness, set industry standards, nurture the local talent pool and protect consumers’ interests in India.

In April this year, the  BWA took a significant step by introducing a set of guidelines for listing tokens on member VDA platforms. These address all aspects of VDAs — assets tokenised on existing blockchains or units of value generated on the blockchain or other distributed ledger technology (DLT) networks.

It is important to note that tokens involved in Airdrops (unsolicited deposits in numerous wallets for marketing), NFTs and ICOs/IEOs/IDOs (similar to IPOs in traditional financial markets), as well as standard disclosures outlining associated risks, fall outside the scope of these guidelines, showcasing the industry’s commitment to self-regulation.

Although the general elections are yet to be over, the BWA has put forward its recommendations for the upcoming Financial Bill in June/July 2024. Additionally, VDA platforms are expected to follow existing operational frameworks and protocols during the token listing, including announcement dates, comprehensive project disclosures, safeguards against market abuses, technical evaluations and thorough staging and testing before public offerings. 

Among the key recommendations are: 

• Recognising the Web3 sector under startup initiatives
• Forming a task force with members from the industry for regulatory requirements
• Reducing the rate of TDS on transfer of VDAs to 0.01% from 1%
• Re-examining the flat rate of 30% applicable to incomes from VDA transfers
• Allowing offsetting of losses

When asked about the potential impact of these guidelines, Sathvik Vishwanath, the cofounder and CEO of Unocoin, emphasised that regulatory clarity and investor confidence would be the key growth drivers in the crypto space. It will not only foster innovation and entrepreneurship within the industry but also pave the way for sustainable development. In fact, collaboration between industry stakeholders and regulatory bodies is crucial to create a conducive environment for growth.

Jyotsna Hirdyani, head of South Asia at Bitget, concurred, adding that the market is poised for expansion as institutional interest continues to grow and technological innovations advance.

As the Indian crypto community strides through regulatory hurdles and embraces innovation, collaboration between stakeholders and regulatory bodies remains critical for sustained growth and development in this dynamic ecosystem.

Can crypto in India overcome the hurdles after the recent rally and a modicum of stability gained over the years? Or will it continue to struggle as roadblocks get bigger? To change the fortunes of Indian cryptocurrency firms and millions of investors, the government must make a clear-cut policy decision without dragging its feet.

[Edited by Sanghamitra Mandal]

The post Is The Indian Crypto Community Coming Of Age? appeared first on Inc42 Media.

Autonomous driving is the future, says a McKinsey report, which claims self-driving vehicles would become a $300 Bn-$400 Bn revenue opportunity by 2035.

In fact, seven out of the top 10 companies by market cap  — Apple (till Feb, 2024), Microsoft, Nvidia, Saudi Aramco, Google, Amazon and TSMC — have been actively researching autonomous driving in some capacity. 

And that doesn’t even include automobile companies such as Daimler AG, Tesla, Volkswagen and Toyota, all of whom have eyes on autonomous vehicles. Indian OEMs including Tata Motors and Mahindra Auto have stepped into the entry levels of autonomous driving. 

But there’s a big chasm between these plans and making autonomous vehicles a reality. 

“Neither the technology nor the regulations world over pertaining to autonomous driving are ready. It will take at least 5-7 years for autonomous vehicles (Level 4 & 5) to become a practical solution especially for regions outside US & Europe,” claimed Ashutosh Agrawal, director of product development (AI for autonomous driving) at Bosch. 

The German engineering giant lends its autonomous driving-related products to many companies including Daimler AG, VW, etc. Agrawal believes that the entire ecosystem still lacks readiness to pull off fully autonomous vehicles. 

For instance, Apple, having spent over $10 Bn and a decade on its autonomous vehicle project, shelved it in February this year. And Bosch’s Agrawal believes that the size of the company does not matter, but rather the focus and expertise that is needed to make self-driving vehicles a reality.

And where the need is technology, startups are likely to have the edge. Despite Nitin Gadkari, the union minister of road transport and highways, stating that driverless cars will never come to India, a slew of Indian startups such as Minus Zero, Flux Auto and Swaayatt Robots are making a buzz, even at this early stage. 

The Hype For Swaayatt Robots

While the landscape is still evolving, if you ask industry experts, there is a lot of bullishness around what Swaayatt Robots is doing. The Bhopal-based startup has showcased over 80 demonstrations so far and many believe it is close to showcasing true L5 autonomous driving. Take the below demo, for instance, which drew plenty of media buzz and comparisons between the startup’s founder Sanjeev Sharma and Tesla chief Elon Musk.

What has grabbed the attention of observers is that Swaayatt’s demos are on Indian roads and in offroad conditions, where traffic and road infrastructure are simply not on par with the US or Europe.

For context, Level 5 AVs can run on their own without any humans behind the wheel, a feat which has not yet been achieved by Tesla or indeed any major automotive company. “None of them have been able to achieve what Swaayatt Robots has showcased so far,” added Deb Mukherji MD of Anglian Omega Group.

But Swaayatt and its founder Sharma have flown under the radar, relatively speaking. And given the tall claims by industry insiders as well as the praise from public figures, we wanted to see what the hype around Swaayatt Robots is all about. 

As per the Society of Automotive Engineers International, autonomous driving is categorised into six levels, ranging from Level 0 to Level 5. Swaayatt is going for Level 5 autonomous driving, like many other companies, but it is yet to publicly showcase the full capabilities it is trying to build.

Put simply, Swaayatt has demonstrated an autonomous vehicle that’s close to Level 5 in some ways. The company claims to have already tested for over 60,000 Kms across various terrains.  These tests were conducted with a human pilot, so there is still some ways to go before the company can claim full L5 autonomy.

Over A Decade In The Making

Sharma’s journey in the autonomous vehicle space began over 15 years ago. The inception of Swaayatt Robots dates back to January 2009, when Sharma was an engineering student at IIT-Roorkee.

“I was studying electrical engineering at that time and was greatly inspired by the videos of MIT’s team at the DARPA Grand Challenge. Those videos sparked a lifelong ambition within me. Solving autonomous driving in the world’s most challenging traffic scenarios became my goal,” he told Inc42. 

He began building the mathematical foundation that’s needed for autonomous driving and research towards motion planning, machine decision-making, reinforcement learning and other branches of machine learning.

After graduating in 2011, Sharma continued his research on motion planning (the process of breaking down a desired robotic movement task into discrete and sophisticated motions) and explored algorithms to enable autonomous vehicles and robots to navigate high-traffic environments at Ariel University’s Paslin Laboratory for Robotics and Autonomous Vehicles in Israel. 

Having pursued his PhD for almost a year at University of Massachusetts, Sharma deferred his PhD plans to full time pursue the project of autonomous driving.

Between 2011 and 2014, Sharma built a strong knowledge base at global engineering institutions and his research was also published in noted journals. “It was in 2014 when I became fully immersed in this project,” the founder recalled. 

From 2015 to 2021, Swaayatt operated on a bootstrapped budget, with Sharma investing INR 80 Lakh into the company. By 2017, the company had showcased almost 36 demos. 

The Tech Powering Swaayatt

What goes into building an autonomous vehicle? It comprises sensors, high-end CPUs and GPUs, algorithms that aid in motion planning and decision-making, machine vision capabilities, as well as radars for object detection and tracking, and LiDAR tech for 3D mapping and objection detection.

Swaayatt is using a combination of these sensors — primarily cameras and LiDARs in somecases — to aid in bidirectional traffic navigation, see through dense fog, and enable off-road and night driving.  

On the hardware side, Swaayatt has used one of the most cost-effective camera technologies for abstract imaging even as most competitors including Tesla deploy the more expensive LiDAR tech. 

It must be noted that Swaayatt has, however, used LiDARs for the 3D mapping and high speed driving algorithms that allow its vehicles to navigate through dense fog.

For years, it has been claimed that autonomous vehicles won’t work in India where road infrastructure is not the best, compared to the western countries. According to the many experts we spoke to, it’s easier to ‘train’ the car using predictive algorithms in the US, UK and parts of Europe given more stringent enforcement of driver safety norms, clear demarcation of lanes and other advantages of infrastructure. 

“Our goal is to enable vehicles to navigate not only structured environments and traffic dynamics typical of Western roads but also the chaotic traffic dynamics prevalent on Indian roads. Additionally, our research aims to enable vehicles to contextually understand their environment using only a cellular camera,” Sharma clarified.

Typically, predictive algorithms fail in India due to obstacles such as stray animals, proliferation of manually-operated rickshaws and unpredictability of drivers. 

Tesla uses auto regressive reinforcement learning, which relies on a system trained on driver data, which in turn trains the AI driving model. Keeping the Indian roads and traffic in mind, Swaayatt uses reinforcement learning along with human feedback to help vehicles navigate through the traffic without a driver. Sharma claims the company has developed nearly a dozen individual algorithms so far in this regard to aid in autonomous navigation.

“We are primarily an algorithms R&D company. We engage in research across various projects in theoretical computer science and applied mathematics, which are integral to AI,” Sharma added.

One of Swaayatt’s algorithms is the Ellipsoidal Constrained Agent Navigation or ECAN. This is an online path planner that allows solving the problem of autonomous navigation in completely unknown and unseen environments, while modelling the autonomous navigation problem, i.e., avoiding obstacles and guiding the agent towards a goal.

Computation happens on-the-fly as the agent or autonomous driver navigates in the environment towards a goal location.

“The demonstration on November 15, 2017, aimed to showcase our Level 5 automation capabilities. It illustrated the decision-making framework, which encapsulates all the necessary capabilities to ensure Level 5 negotiation,” explained Sharma.

Then, there is the DGN-I, another proprietary algorithm developed by Swaayatt Robots, that simultaneously detects obstacles and segments detected elements on the road, at a speed of 15.66 Bn floating point operations per second. 

The Autonomous Competition

Besides Swaayatt, multiple Indian startups such as Minus Zero and Flux Auto have been working on self-driving capabilities. Founded in 2021, Bengaluru-based Minus Zero claims to be close to developing self-driving vehicle platform.

Y Combinator-backed Flux Auto’s core focus is on commercial vehicles such as forklifts, which it enables through an autonomous driving kit.  

Globally, companies such as UK-based Wayve could also become formidable competition for Swaayatt in markets such as the US and Europe. 

Sharma claims that what sets Swaayatt apart is that it has invented the technology that will power L5 autonomous vehicles in the future, thanks to its approach of building the full stack in-house. He also said that Swaayatt’s vehicles will be capable of navigating freely and the tech can be applied to a range of vehicles. 

Sharma insisted that Swaayatt autonomous driving capabilities can work in various challenging scenarios, both on solid roads including narrow lanes and high traffic areas, as well as off-road operations. Further, the energy consumption by Swaayatt Robots are 80% less than that of the competitors, claimed Sharma.

So far, Swaayatt has demonstrated autonomous vehicle capabilities at a relative speed of 60 Kmph, but it is capable of even higher speeds, the founder claimed, adding, “While others have showcased their technology on empty roads, we’ve tackled real-world chaotic traffic situations.”

In comparison with the global counterparts, Randheer Singh, former director of NITI Aayog said, “Swaayatt’s technology is designed for high variability in road and traffic conditions, potentially giving it an edge in environments where other systems like Tesla’s FSD or Google’s Waymo might struggle due to their reliance on well-marked, predictable settings. Waymo, however, excels in urban environment navigation and has reached Level 4 autonomy in limited areas.

Waymo generally leads in terms of navigational accuracy in its operational domains, due to extensive testing and refined sensor fusion technologies. Tesla’s FSD has faced challenges with regulatory scrutiny and reliability concerns. Swaayatt’s accuracy in diverse conditions remains a critical area for observation as they scale.”

Of course, these are still early days in the autonomous vehicle space in India and there’s no certainty around which model is best suited for success. Companies also need to continuously refine their go-to-market strategy and B2B adoption is seen as the primary channel for these early movers.

Swaayatt has also been developing its own map eliminating any dependency on external providers such as Google Maps, HERE or TomTom.

The Roadblocks For Autonomous Vehicles 

Just a few months ago, Musk said in a Twitter Spaces interaction that to make fully self-driving tech, companies have to essentially build a rudimentary Artificial General Intelligence (AGI) which is then integrated into a car. Sharma seconded Musk on this.  

“You build autonomous driving, you essentially build AGI. This isn’t just my opinion; it’s widely recognised among those who delve into theoretical science and mathematics,” he explained. 

But there are multiple challenges that need to be hurdled. This includes technological and regulatory gaps.

For instance in the state of California, driverless cars and robotaxis are allowed basis of permits basis, but the state is mulling stricter norms. This comes after a robotaxi from Alphabet’s Waymo was torched by angry members of the public after a collision with a cyclist. This followed another major incident from earlier where a robotaxi hit a pedestrian and dragged them for six metres before stopping.

A fully autonomous system has to account for all possibilities, including what pedestrians are wearing. A Google Waymo vehicle for instance, stopped, after looking at a pedestrian with a ‘STOP’ symbol on their T-shirt.  

Hallucinations on ChatGPT, Google Gemini and other chatbots are alarming, but potential incidents or accidents with driverless vehicles could cost real human lives. 

Bosch’s Agrawal said that despite having attained Level 4 autonomous driving, some of the key players went back to ‘Level 2.5’ because of the high costs involved in developing LiDaR-based systems.

Even Tesla is said to have been teaching its algorithms using LiDAR; however, the company might not install LiDAR in the production-ready AVs but would use the learnings only. 

The availability of hardware capabilities for L5 AV technology also needs to be proven. Ajesh Saklecha, cofounder of Ozone Motors and TRiDE Mobility said, “So far we have seen multiple demonstrations across the world. These were strictly in lab conditions. Can the same hardware operate for at least 10-12 hours continuously with the same set of performance?” 

And then there is the business side of things. There have been umpteen instances of startups getting the tech right but not able to sustain a business, due to failure on the go-to-market side or getting the timing wrong.

Swaayatt will need to answer these questions in the long run, but for now, Sharma is eyeing a fresh fundraise to further improve the technology that allows driving through fog and in rainy weather. The company also has plans to introduce its product in the North American market markets first, where the competition is undoubtedly high and the standards for automotives is far different than in India. 

So far, the startup has raised $3 Mn funding at a valuation of around $90 Mn. Sharma claimed that Swaayatt Robots is in advanced stages of talks for a Pre-Series A round worth $10 Mn from Indian and US-based investors. It also plans to finalise a Series A round of $1.5 Bn by the end of FY25, however, a lot has to go right before that happens. 

The first product from Swaayatt’s stables is likely to hit the market by the end of 2025, Sharma claimed. The company is targeting OEMs as well as consumers, for whom it is looking at launching an after-market accessory that can be integrated with existing vehicle models. 

According to Mukherji and others we spoke with, Swaayatt Robots will be the ChatGPT moment for autonomous vehicles as soon as it launches in the US. As for when the tech will be ready for launch in India, that’s a question no one can answer right now.

[Edited By Nikhil Subramaniam]

The post Swaayatt Robots: Is This Autonomous Driving Startup Just Hype Or The Future Of Vehicles? appeared first on Inc42 Media.

Koo, the Indian microblogging app once seen as a rival to X (Twitter), has stopped paying salaries to all its employees from April 2024 onwards citing financial constraints.

Multiple Koo employees had raised concerns about salaries being halted from April, and the company confirmed the development in an emailed response to Inc42. 

A Koo spokesperson said, “We are in talks with strategic partners for Koo. This is taking longer than expected. In order to get the partnership through we have ploughed in substantial personal funds also to meet past salaries. Salaries will continue to be paid post the conclusion of the partnership since this partnership also includes a fresh capital infusion into Koo.” 

As per sources in the company, employees were informed about the changes on a Zoom call earlier in April 2024. One employee told Inc42 there was no prior communication about the pause in salaries and no response from their managers or the HR team for questions raised after the announcement. 

Another employee claimed that no formal emails were sent to employees to explain the disruption in pay. Incidentally, Koo is stopping short of laying off employees, despite a severe reduction in headcount since 2022. 

Layoffs typically involve severance pay and in Koo’s case, the company would have had to compensate employees being let go with an amount equivalent to salary of one or two months, one employee told us.  

“There have been no new layoffs. Koo was and will remain operational. We are still in talks with strategic partners and will announce details at the right time,” the spokesperson added.

Koo’s statement added that in the interest of transparency, the news was communicated to all employees well in advance. “They’ve been extremely patient and supportive throughout our journey and they need to know. There’s nothing we wouldn’t do to help them. The most important thing for the company’s long term success is the partnership and we want to see that through. Our employees understand that. Our operations continue as is and don’t get affected by this delay,” the spokesperson added. 

Last week, Inc42 reported that the company had reduced its workforce by over 80% since June 2022, resulting in a headcount of just 60. This has now dropped further to around 50. Additionally, those employees that have been retained have seen their salaries slashed by up to 40% since October 2023.

A slew of senior employees left earlier this year, after a significant cut in their pay. “For employees having salaries higher than INR 30K, there was a salary cut of up to 40%. This was significant for many,” said one of the employees.  

Although the app will remain operational, questions are being raised about Koo’s ability to maintain the tech platform and support users.

Despite backing from notable investors like Tiger Global, Accel, 3one4 Capital, Kalaari Capital, and Blume Ventures, Koo struggled to establish a sustainable revenue model and failed to secure Series C commitments.The company has raised approximately $50 Mn to date.

With an operating income of only INR 14 Lakh and a staggering INR 197 Cr loss in FY22, the company struggled to establish a viable revenue model and heavily relied on burning cash to acquire new users. The startup has thus far not filed its audited FY23 financials.

Koo halted all customer acquisition campaigns from June 2022, leading to a decline in active users. The number of active users plummeted from 7.2 Mn in June 2023 to a mere 2.7 Mn, marking a 62% drop in the past nine months, according to data sourced from Data.ai.

Over the past year, the company has been seeking a strategic partner and exploring acquisition options. Despite months-long discussions, including potential acquihire deals, the situation seems to have taken a negative turn. According to unconfirmed reports, Dailyhunt is said to be in talks to acquire Koo.

The post Exclusive: Koo Halts Salary Payments Amid ‘Talks With Strategic Partners’ appeared first on Inc42 Media.

As Bitcoin block no. 839729 is currently being mined at the time of writing this article, we’re just a day away from reaching block number 840,000. This milestone will automatically reduce the mining reward by 50%, decreasing from the current 6.25 to 3.125 Bitcoins.

For those new to the concept, this event is known as Bitcoin halving, a pre-programmed occurrence after every 210,000 blocks, cutting the Bitcoin mining reward in half.

Since the genesis of the first Bitcoin block on January 3, 2009, we’ve experienced three halving events so far. The initial reward of 50 Bitcoins per block has gradually decreased, and post the next halving, it will further reduce to 3.125 Bitcoins per block. 

But this time around, leading up to the fourth halving in April 2024, the crypto landscape is unique. 

For instance, Parth Chaturvedi, investments lead at CoinSwitch Ventures, noted that prices surged to unprecedented levels just before the event, adding an intriguing dimension to post-halving market dynamics. The introduction of spot Bitcoin ETFs in the US has attracted institutional players to the crypto ecosystem, enhancing market credibility and stability. 

Besides this, unlike previous halvings, the current ecosystem is more mature, with increased nuances and complexities. 

Sidharth Sogani, founder and CEO of blockchain analytics firm CREBACO, believes that geopolitical events like the Iran-Israel conflict could destabilise matters. He added that the bull run, which is usually triggered by the halving event, has been triggered by the ETF approvals. So the cycle has been left-translated this time. Sogani expects the full impact to reveal itself by the end of May 2024.

The recent influx in its price underscores Bitcoin’s evolving role in the global economy, paving the way for increased demand and utility. With Hong Kong’s recent approval of spot Bitcoin ETFs, analysts anticipate a rise in global wealth managers’ exposure to Bitcoin as an asset class, particularly as investment managers look for an edge within their clients’ portfolios.

Where Will Bitcoin Price Go Next?

In a conversation with Inc42, Sumit Gupta, cofounder of CoinDCX, said that historically Bitcoin halvings have correlated with price surges. These increases are driven by a reduction in the supply issuance rate, emphasising Bitcoin’s scarcity, which in turn could drive up demand, prices, and trading activity.

The first halving in November 2012 saw the block reward decrease from 50 BTC to 25 BTC. In the year following this event, Bitcoin’s price soared from around $12 to over $1,000, marking an approximate 83x increase. Similar trends were observed after subsequent halvings. 

Following the July 2016 halving, where the reward was slashed from 25 BTC to 12.5 BTC, Bitcoin’s price surged from approximately $650 to a peak of around $20,000 in just 18 months, a nearly 30x increase, Gupta noted.

Defining the short-term impact, Jyotsna Hirdyani, South Asia head at Bitget, also pointed out that typically six to 12 months after a halving, there’s a surge in price, leading the crypto market out of the medium and long-term bull market.

“The most recent halving occurred in May 2020, reducing the reward from 12.5 BTC to 6.25 BTC. Although the immediate impact on price was less pronounced compared to previous halvings, we saw a steady upward trajectory in the following months. By early 2021, Bitcoin had reached new all-time highs, surpassing $60,000 per coin, marking a 5x increase from the pre-halving price around $12,000,” CoinDCX cofounder Gupta added.

However, this time, opinions diverged among over a dozen crypto founders and experts Inc42 spoke to, with some highlighting different trajectories this time, attributing significance to other factors. 

According to Shivam Thakral, founder and CEO of BuyUcoin, the upcoming halving could have dual effects on the Indian market: a surge in prices due to decreased supply as coins become scarcer for mining, and short-term volatility due to anticipation and excitement surrounding the event. Traders could potentially buy in anticipation of price increases.

Thakral also noted that the predicted price increase of Bitcoin may entice new investors, consequently increasing the daily transaction volume. Thakral also highlighted the potential for increased adoption by Indian enterprises to drive up daily transactions.

According to various research reports, each of the Bitcoin halvings in the past was followed by three stages — a one-year bull market,  a one-year bear market, followed by a two-year stagnation.

However, the stance of the Indian government on cryptocurrencies could potentially temper investor enthusiasm, thereby affecting both price and transaction volume. 

Will The Halving Boost Altcoins? 

Bitcoin, as the foundational cryptocurrency, has been instrumental in shaping the entire crypto ecosystem. Hence, the impact of halving won’t be confined solely to Bitcoin but will extend to altcoins and other products like future ETFs and spot ETFs.

Sogani believes that the altcoin markets will also experience an upsurge post-halving, given that Bitcoin’s dominance stands at around 53% of the total market cap. 

When Bitcoin prices rise, investor attention is solely on Bitcoin, causing its dominance to climb to 56% to 70%. However, this dominance eventually stabilises as traders start capitalising on their Bitcoin gains, divesting some profits into altcoins. 

This shift usually occurs after Bitcoin hits an all-time high. As the market has matured, this transition to altcoins can occur concurrently to a certain extent. Moreover, this trend could gain further momentum with the introduction of Ethereum ETFs, followed by potential offerings for other cryptocurrencies like Solana.

In addition to the potential impacts on altcoins, Bitcoin futures, and related products, new financial products are likely emerging in response to the dynamics surrounding the Bitcoin halving. 

Dhruvil Shah, SVP of technology at Liminal Custody Solutions, believes that just as spot ETFs launch globally, innovative financial instruments may emerge, providing investors with alternative pathways to access digital assets.

Crypto Spring In India?

Gupta of CoinDCX asserts that India is leading the charge in crypto adoption. The upcoming halving event has ignited excitement within the crypto community, prompting us to closely monitor market movements. The impact of the halving on Bitcoin’s price and daily transaction volume in the Indian market hinges on various factors, including regulatory developments and investor sentiment.

The Bitcoin halving in April 2024 will slash block rewards from 6.25 BTC to 3.125 BTC, reducing daily new Bitcoins from 900 BTC/day to 450 BTC/day. Gupta notes that this reduction may intensify competition among miners, potentially leading to consolidation as rewards decrease while operational costs remain high.

Echoing Gupta’s sentiments, Hirdyani of Bitget anticipates a surge in trading volume fueled by positive sentiment towards crypto. “With the growing interest in cryptocurrencies in the country, we may witness increased trading activity and price appreciation, especially if Bitcoin continues its global trend of reaching new all-time highs,” she stated.

In contrast to previous instances, exchanges are refraining from aggressive advertising during the IPL season. This suggests that the observed growth is genuine and organic, albeit modest. CREBACO’s Sogani added, “While we lack concrete data for India, it’s apparent that exchanges aren’t as aggressively promoting during the IPL or through traditional media channels compared to the previous cycle in 2021. Hence, while growth is expected, it may not match the levels seen in the past.”

The total Bitcoin supply is capped at 21 Mn, and it’s estimated that there will be around 33 halving events in total. The idea behind halving was to limit the supply and keep pushing the value of Bitcoin. Out of 21 Mn, 19.685 Mn Bitcoins have already been mined. 

It’s no surprise, then, that halving events has a knock-on effect on Bitcoin’s price. While the miners will have lower profitability due to fewer blocks, increased competition, and transition to renewable energy and may have to bear an estimated loss of $ 10 Bn, the current Indian crypto community is battle hardened and remains vigilant. 

Whether it’s the surge in altcoin interest, the emergence of innovative financial products, or the evolving trading landscape in India, one thing is certain: the halving’s ripple effects will continue to shape the future of digital finance.

The RBI’s CBDC is just one example for now, believes the industry. 

The post Bitcoin Halving: The Ripple Effects On Indian Crypto Ecosystem appeared first on Inc42 Media.

Just last year, Bengaluru-based Koo claimed to be the world’s second-largest microblogging platform, after X (formerly Twitter). This claim was short-lived, however, as Meta launched Threads which garnered 100 Mn users within just five days. 

Even if we overlook Threads, a look at Koo’s financials and user metrics paints a completely different picture, which is more in line with reports over the past two years about layoffs, multiple revenue experiments and growth bottlenecks.

Koo may claim to be the world’s third-largest microblogging app, but this is not an enviable third place by any means, especially because it has not resulted in any business growth.

What we can see from the numbers is that Koo has gradually receded from the social media landscape in India, and even around the world. Its product launches for Brazil and Nigeria, though initially promising, have also begun to falter.

Even through its various marketing campaigns — remember ‘Vocal for Local’?  — media collaborations, monetisation experiments such as Koo Premium and Koo Coin, and engagement efforts like daily jackpots, Koo has not made a major dent.

Plus, the startup has not taken any significant strides towards reaching milestones such as 100 Mn users by 2022, which are very vital in the social media game.

In fact, Koo has had to cut customer acquisition costs (CAC) and has witnessed a decline in active users since then. The number of active users has plummeted from 7.2 Mn in June 2023 to a merely 2.7 Mn, representing a 62% drop in the past nine months, according to data intelligence firm Data.ai. 

With a meagre operating income of INR 14 Lakh and a staggering INR 197 Cr loss in FY22, the company has struggled to identify a revenue model and heavily relies on cash burn to acquire new users. The startup’s FY23 numbers are not yet out, but we cannot imagine a major change given what has been reported in the past year.

According to a current employee who prefers to remain anonymous, the company has laid off over 80% of its workforce since June 2022, resulting in a headcount reduction to just 60 employees. Additionally, salaries for existing employees have been cut by up to 40% since October 2023.

So much so that speculation is the company is about to be acquired by VerSe Innovation. Unable to secure substantial funding after its Series B round in 2021, Koo is said to be in advanced acquisition discussions with the media company that operates the news aggregation platform Dailyhunt and video social media app Josh.

While this may not constitute a complete acquisition, sources close to the development suggest that it would involve a majority of stocks, likely in a combination of cash and stock.

Despite support from notable investors like Tiger Global, Accel, 3one4 Capital, Kalaari Capital, and Blume Ventures, Koo has faced challenges in arriving at a steady revenue model. 

So what exactly went wrong after the initial euphoria? And is Dailyhunt the right partner to steer Koo back on track —  if indeed, it can be steered back?

From Vokal To Koo

Serial entrepreneur Aprameya Radhakrishna sold his startup TaxiForSure to Ola Cabs for $200 Mn in 2015 and then teamed up with Mayank Bidawatka to launch Vokal, a platform similar to Quora but in key Indian languages, in 2017.

Despite attracting key educators from across the country and claiming to have built a community of 15 Mn users by 2020, the startup did not gain revenue traction. The startup did not manage to generate any income from these millions of users and had zero operating revenue for three straight years, leading to mounting losses.

Clearly, investors were unwilling to tolerate losses without a clear path to revenue. But by 2020, there was a renewed wave of attention for the Indian social media apps. There was a constant tug of war between the Indian government/state governments and X on multiple fronts.

Global social media giants such as Facebook and Twitter (aka X) were under fire for not complying with local regulations. Tiktok was also banned in India. 

Sensing the clear market opportunity for an Indian social media app, founders Radhakrishna and Bidawatka swiftly pivoted from Vokal to Koo and built a Twitter rival that allowed users to post up to 400 characters at once, compared to Twitter’s limitations of 280 characters at that time.

Radhakrishna highlighted the existing gap, stating, “Almost a billion people in India do not speak English. Instead, they speak one of India’s hundreds of languages. With access to smartphones increasing, they desire internet content in their own language. Koo aims to amplify the voices of these Indians.”

Amid the Covid-19 pandemic, the Indian government focussed on self-reliance or Atma Nirbharta as a mantra for all products and services, including digital ones. 

While Twitter squared off with the Indian government over many crackdowns and policies, Koo quickly gained attention, with Prime Minister Narendra Modi also mentioning the app as an iconic ‘Made in India’ product. Shortly after its launch, Koo also won the government’s Aatmanirbhar Bharat App Innovation Challenge’.

And when Twitter suspended multiple influencer accounts for policy violations, Koo became the immediate go-to alternative. By February 2021, Koo crossed the 3 Mn mark, claimed cofounder Bidawatka.

Koo: Building The Brand 

To start with, Koo went after the hot categories to start to stimulate advertisers and marketers. For example, cricketers and cricketing authorities were a major target. 

Platforms such as Koo are horizontal social media apps. Users are spread across various interest areas and communities. In such a scenario, Koo marketers faced challenges to lure advertisers. The simplest way to ensure this is to add to users and to accomplish this, Koo went after Indian celebs aggressively. Even though this meant burning cash on user acquisition, amid a competitive market. Besides this, it went after accounts that have large regional language followers.

The app initially partnered with the Tamil Nadu Cricket Association for the Fifth edition of the Tamil Nadu Premier League (TNPL). Under the agreement, TNPL provided live updates on Koo through its official handle. It added engagement features and unique contests with TNPL merchandise as rewards.

In October 2021, at the start of the T20 World Cup, Koo collaborated with Ogilvy India to launch a mega TV campaign under the tagline #KooKiyaKya.

Similar to the Ask Me Anything (AMA) sessions on X or Reddit, Koo also began hosting AMA sessions in local languages, targeting specific segments to enhance engagement. A host of celebrities and influencers also acquired stakes in Koo.

Politicians and government institutions were also big targets for Koo. It brought on ministers from the union cabinet, state governments of Uttar Pradesh and Telangana, institutions such as Central Institute for Indian Languages and several others to trigger organic user acquisition. 

Between July 2021 and July 2022, Koo organised over a dozen major campaigns to increase user numbers, engagement, and consequently attract more advertisers. It also recognised over 8,000 individuals as ‘people of eminence’ on Koo. 

In October 2022, Koo also launched a loyalty programme called Koo Coin rewarding users for spending time using Koo consistently. 

Several brands, including Groww, UCO Bank, Droom, Snapdeal, Amul, HDFC Securities, Bajaj Group, and Fortis Healthcare were on Koo running ads. But this was the golden period for apps like Koo and soon, big tech returned to dominate social media advertising.

Like platforms such as Sharechat and Trell, Koo struggled to retain advertisers like Twitter and Instagram could. 

A former senior employee attributed this to two major factors: the slowing down of digital marketing and advertising budgets by large brands after the pandemic and a relatively small user base. 

“Brands wanted to reach out their targeted segments. Koo’s user base was diverse and not concentrated as required by most of the brands. There wasn’t a specific user demographic that could dominate and appeal to advertisers across the board,” a former employee added.

Inc42 spoke to one advertiser who echoed similar sentiments about the platform. Despite the relatively low rates of advertisements on Koo, the ads themselves did not garner the expected level of attention or impressions. Koo did not establish the ecosystem necessary to attract advertisers effectively, we were told. 

From the user perspective, Koo failed to offer any competitive advantage over X. Besides advertisements, the introduction of subscription models like Koo Premium (priced between INR 6 and INR 30 per month) also proved insufficient to offset its accumulated losses.

Nishant Mittal, a serial entrepreneur who had earlier founded a social media platform Cread, points out, “The biggest issue with Koo is that it does not offer any differentiation nor it wants to be, but simply a copy of X. This could be a good college project, not a serious business to count on.”

Other analysts wondered why would brands spend more money on another platform when Twitter offered better analytics, performance monitoring and has a bigger network? This led to challenges in growth and scaling up.

Layoffs & Growth Pains

Before the ecosystem-wide layoffs in 2022, Koo had a total workforce of almost 400 people. Since then, the company has let go of employees in multiple waves and its team strength now is just 60 employees. 

So why did the company suddenly hit the brakes? Simply put, the returns on marketing and advertising spending were not good enough, leading to high cash burn and barely any growth on the revenue side.

By May 2021, the company had raised $30 Mn and then another $3.5 Mn round followed in December 2021 and another $6 Mn in December 2022.  Despite nearly $40 Mn in funding, the company was reporting merely a few lakhs of rupees in revenue.

For instance, the T20 World Cup campaign, which was very expensive, showed below-par results. Most advertisers didn’t stick to Koo over several months, which meant that revenue would dry up in certain months, one former employee added. 

The company failed to secure Series C funding commitments from investors as the financials were ‘not impressive enough,’ an existing angel investor told Inc42.

In October 2023, Bidawatka said in a LinkedIn post that Koo was caught in a sour market and had to switch its focus from growth to generating revenue. Easier said than done.

“With just six months more on our trajectory, we would have beaten Twitter in India. But we had to become more efficient by curbing expenses and start generating revenue. It takes years to build a globally competitive microblog. Even Threads, from the Godfather of social platforms, is taking time to build basic features. Over the last few years, we have invested heavily in building a microblog to global standards with very sophisticated algorithms, processes, policies and engines,” the cofounder claimed.

But this shift in focus did not necessarily move the needle.

No Revenue To Speak Of  

Whether it’s Vokal’s story or Koo, Bombinate Technologies and Radhakrishna have not been able to figure out the revenue challenges. 

For the first four years, revenue was at flat zero. In FY21 and FY22, the company registered INR 8 Lakh and INR 14 Lakh, respectively, as operating income. Even the growth rate is not impressive. No investor wants to see less than 50% growth after the first revenue year. 

Total expenses and losses simply surged exponentially by 715% and 462% respectively in the first two revenue years. 

“Look at Koo. It’s a clone of (erstwhile) Twitter. Twitter’s logo is a bird (blue & flying), while Koo’s logo is also a bird (yellow & not flying). There’s absolutely no product differentiation. None,” Mittal commented.   

Given this, how was Koo going to make a dent on Twitter’s unfathomably strong, global network effects? And forget about network effects. 

Despite being around since 2006, Twitter is itself a small business in India with INR 157 Cr in revenue (and losses of 32 Cr). Where is the TAM that justified Koo’s $50 Mn in funding and $275 Mn in valuation, Mittal wondered.

Plus things have worsened for Koo. The entire platform is currently on auto pilot, with very few employees, as per another former employee.

In the last nine months, the number of active users has been on a decline of 62% from 7.25 Mn in June 2023 to 2.7 Mn in February 2024. There are no active campaigns on the customer acquisition side, which means this decline is very likely to go on for a few more months. 

Given the lack of revenue and unjustifiable valuation, experts believe the Dailyhunt M&A, could be a distressed sale. Incidentally, this is not the first acquisition report around Koo.

A Checkmate Situation For Koo

The problem with Koo is deep but also simple to understand. Even the market is not ready to accept the alternatives. Even Threads, a formidable competition of X from Meta is biting the dust, said a former director of KPMG India. Engagement on Threads reduced by 50% after the highs of the first week, which shows that perhaps there just isn’t enough room for a Twitter rival that does the same thing.

“Even Twitter’s revenue has just gone down by 50%. However, this was precisely due to Elon Musk’s factor,” the former KPMG director said, adding that had Koo arrived a few years earlier, such as in 2017 or 2018, things could have been different.

Moreover, many of the opportunities that Koo looked to tap in the early days soon disappeared. The startup did not capitalise on the momentum it saw in late 2020 and early 2021.

When Twitter was facing government action, pro-government accounts quit Twitter to join Koo and many of those blocked from Twitter also jumped ship, but soon after taking over Twitter, Musk unblocked most of these accounts, and these users were back on X. 

A similar situation was seen in Nigeria, where the government banned access to Twitter and many Nigerians opened accounts on Koo. However, as soon as the ban was lifted, these users were back on X and their Koo handles became dormant.

Losing these organically acquired users was a big loss for Koo. The app also failed to position itself as a neutral platform, which is crucial for social media. “Despite posing an alternative to X, Koo also failed to attract global advertisers who left Twitter due to Musk’s takeover and was only chiefly targeting the Indian market,” said another angel investor in Koo.

When Koo became a sensation among users, its UI and UX were not good enough to retain those users as more active users. “Most of the users see the interface as a copy of Twitter. Despite catering to the same audience, Koo was supposed to offer a better experience whether it’s the user experience, products within. Sadly, Koo failed on both of these accounts,” the angel investor told Inc42.

The investor quoted above added that there are a few clear areas where Koo could have done better. It needed a calculated and strategic approach to growth. Just because the word ‘Koo’ is a joke in Brazil, and helped the app gain some traction, was not enough, for instance.  Secondly, Koo failed to identify areas where Twitter is weak in India, and could have focussed there for organic growth.

Can Dailyhunt Turn Koo Around?

So is an acquisition the right path for Koo at this time in its journey? Can the Dailyhunt and Josh parent company offer whatever it takes to rebuild Koo?

Back in October 2023, Bidawatka stated that Koo was looking for strategic partners. He said that the next phase for Koo is to build scale and that will happen with either funding or through a strategic partnership with someone who already has scale.

With the current reality of the funding winter, the best way forward is to partner with someone who has the distribution strength to give Koo a massive user impetus and help it grow. 

“With a platform that’s scale-ready, Koo can outshine competitors with the right push on growth. While we talk to the right partners to build this out, we urge and request our well-wishers and friends in the media to stop speculating and be patient till we have something concrete to announce. All we can tell you is that, with all these changes, Koo will be much stronger as an organization and will make all of us proud!” wrote Bidawatka in his LinkedIn post.

Multiple analysts and experts Inc42 spoke to pointed out that like Twitter, Koo and other horizontal social media apps will take at least a decade to succeed, irrespective of the strategic partnerships. 

While Koo declined to respond to specific questions around the acquisition, the company cited Bidawatka’s LinkedIn post as its statement.

VerSe has some experience on the social media side, despite Dailyhunt primarily being a news app. With short video app Josh, VerSe has been in the social media space for some time now and there is a probability that Josh could add a Koo-like experience to give its existing users new ways to interact.

However, the reality is that VerSe is also a loss-making company. Its FY23 losses amounted to a whopping INR 1,900 Cr. The company won’t even be able to break even within the next 2-3 years, by most estimates, unless there is a complete change in strategy or a big revenue-generating product. Koo is not that product, at least going by the track record.

So one might also wonder what exactly is VerSe buying? Koo is not among the headlines any more (except for the wrong reasons), the product itself is inadequate as its own investors have told us, and there is no growth to speak of. Dailyhunt and Josh have a bigger user base than Koo, they have the brands and advertisers too that Koo failed to retain. So what is the big upside for VerSe in this deal?

That’s the $275 Mn question in the case of Koo, a valuation that seems almost surreal at this stage.

[Edited Nikhil Subramaniam]

The post How Tiger Global-Backed Koo Lost Its X-Factor appeared first on Inc42 Media.

The maker of BharatGPT and one of the leading players in the Indian conversational AI space, CoRover.ai, will be shuttering its US and UK businesses to focus on India ops. Speaking at Inc42’s GenAI Summit, the founder & CEO of CoRover.ai, Ankush Sabharwal, said that the company is closing its US and UK subsidiaries to keep their focus on India for now.

Announcing the closure of its US, UK subsidiaries, Sabharwal said, “We had opened up a company in the US and UK. Today, we are closing, literally. We have requested our partners, the legal handling in this regard. While our plan is to cater to the US and the UK markets in the long term, currently, we are getting a huge demand here in India and want to prioritise the Indian market first.”

Sabharwal said this while talking about the GenAI India opportunity during a session moderated by the MD of Pi Ventures, Roopan Aulakh, on GenAI Adoption Among Startups And Enterprises.

The session was also attended by Khadim Batri, founder & CEO, Whatfix, and Souvik Sen, technical cofounder and head of engineering, Ema Unlimited.

Founded in 2016 by Ankush Sabharwal, Kunal Bhakhri, Manav Gandotra and Rahul Ranjan, CoRover.ai is a conversational AI-based startup that has built an LLM called BharatGP.

The startup offers AI virtual assistants (chatbots, voicebots, videobots) to its clients, including IRCTC, LIC, IGL, KSRTC, Indian Navy (GRSE), Max Life Insurance, NPCI, BHIM-UPI, Mahindra, and Government of India, among others. These bots can take command and respond in over 14 Indian languages. The startup claims to have a user base of over 1 Bn.

According to Inc42’s latest ‘India’s Generative AI Startup Landscape, 2023’ report, the country’s GenAI market is expected to grow exponentially in the next few years, surpassing $17 Bn by 2030 from $1.1 Bn in 2023, growing at a CAGR of 48%.

The post CoRover.ai To Shut Down Its US, UK Subsidiaries To Focus On The India Market appeared first on Inc42 Media.

Founders of cryptocurrency exchange CoinSwitch – Ashish Singhal, Vimal Sagar Tiwari and Govind Soni – have launched stock investment platform Lemonn under the umbrella brand PeepalCo.

Licensed under the name Nu Investors Technologies Pvt Ltd for stock broking services, Lemonn is the second independent company under PeepalCo after CoinSwitch. 

Lemonn is offering zero brokerage fee for three months and curated industry-based stock offerings, and aims to simplify stock investing for Indians.

Last month, Inc42 reported that CoinSwitch founders were aiming to launch an investment platform in the next quarter. 

Speaking on the launch announcement, PeepalCo cofounder and group CEO Ashish Singhal said, “Millions of Indians find stock markets complicated even today. Despite the post-pandemic growth, only about 6% of Indians invest in stock markets. We aim to bridge this gap by making stock investing engaging, informative, and effortless.” 

It is pertinent to note that CoinSwitch unveiled the umbrella brand PeepalCo in December last year to house all its business verticals.

Lemonn Plans To Disrupt Indian Investment Tech Space

Lemonn, which would take on established brands like Groww and Zerodha, currently offers only stock investment. PeepalCo aims to incorporate other products, such as mutual funds, futures and options, IPO investments, on the platform going ahead.

Lemonn is currently offering the following features: 

• Zero brokerage fee for three months and zero fees for account opening
• Curated industry-based stock offering
• A detailed glossary explaining all financial and market-related terms

Lemonn does not have an advisory licence currently and hence will not offer stock suggestions, Singhal said.

About 100 employees are currently working on the platform, housed as a separate business division with its own managing and operations teams. Devam Sardana is the business head of Lemonn and is leading the team. 

“Devam has actively worked towards the launch of Lemonn right from day one from when it was just an idea on paper to a reality now,” said Singhal. 

On Lemonn’s revenue model, Sardana said all options, including subscription and brokerage commission, will be considered. 

CoinSwitch has over 20 Mn users. While the company may advertise Lemonn on the CoinSwitch app, there will not be any data transfer and auto-KYC for the crypto exchange’s users, said Singhal.

The existing users will have to download the Lemonn app and follow the entire KYC process separately, he added.

CoinSwitch is backed by a slew of reputed investment firms, including Andreessen Horowitz, Tiger Global, Sequoia Capital, Ribbit Capital, Paradigm and Coinbase Ventures. The company has raised more than $300 Mn since its inception. It was valued at $1.9 Bn+ in its last funding round in 2021. 

Since Lemonn has been using the same funding, Singhal clarified that CoinSwitch investors will continue to hold similar stakes in the stock investing platform. 

With the launch of the stock broking platform, PeepalCo is eyeing to capture market share in India’s burgeoning investment tech market. Valued at over $9.2 Bn in 2022, the investment tech market is estimated to reach a size of over $74 Bn by 2030 at a 30% CAGR.

The post CoinSwitch Founders Launch Stock Investing Platform Lemonn To Take On Groww, Zerodha appeared first on Inc42 Media.

In spite of economic headwinds and a global funding freeze, Bengaluru remained the country’s topmost startup hub in 2023, recording 249 funding deals and raising $4.2 Bn. Delhi NCR emerged a close second, securing $2.7 Bn from 241 deals.

The slowdown took its toll, though. According to an Inc42 report, this marks the lowest funding Bengaluru startups have seen since 2017. The highest was recorded in 2021 at $22 Bn, followed by $11 Bn in 2022.

Karnataka has now adopted a support-and-collaboration approach so that startups across the state can hit their stride and bottlenecks can be removed.

In an exclusive interaction with Inc42, Karnataka IT & BT, Rural Development and Panchayati Raj minister Priyank Kharge underlined the government’s efforts beyond funding, such as providing plug-and-play infrastructure, enabling access to global markets and supporting emerging technologies.

“In the last six months, we disbursed more than INR 50 Cr as grants and supported 208 startups,” he added. 

Not the one to shy away from tough talks, Kharge delved deep into several concerns, including the water scarcity in Bengaluru, startup brain drain and more.

Here are the edited excerpts from the interview.

Inc42: You initiated many startup programmes, such as Elevate and Grand Challenges, during 2016-18. So, what’s different now?

Priyank Kharge: The challenges we face now are bigger and tougher due to significant shifts in the startup landscape. New technologies have come in various sectors, fostering innovation, and the ecosystem has matured substantially. Also, last year [2023] was challenging for the VC fraternity and we felt the lingering effects of the Covid-19 pandemic. 

Nevertheless, we see a resurgence in entrepreneurial spirit and the government must provide support. With the China narrative declining, attention is increasingly turning towards India. As a result, we have repositioned ourselves not only as an innovation and invention hub but also as a major player specialising in scaling, incubating and nurturing leadership. 

Innovation is vital, but we are also focussing on building a robust entrepreneurial foundation through comprehensive skill development initiatives.

Inc42: How would you meet funding requirements across startup stages?

Priyank Kharge: For the first time, the government is engaging directly with VCs to discuss seed capital, later-stage funding, exits and more. We already had two meetings with them and the most recent one took place a couple of months ago. During these interactions, we asked VCs what steps we should take to ensure better collaboration and support for startups. It may require bringing them together on a single platform for assessing ideas or providing mentorship and networking opportunities beyond just funding. 

We are actively working on solidifying this collaboration and expect to announce a new framework within the next few months after the Lok Sabha polls are over. Of course, we can’t compel VCs to fund our startups, but we can present these ventures, thus reducing the time it takes to gain recognition and support. 

However, our support is extended beyond funding. We offer access to overseas markets through initiatives like the Global Innovation Alliance-Market Access Programme (GIA-MAP), provide opportunities for pilot projects and have a public procurement policy in place for sourcing from startups. We view startups as partners and aim to provide a comprehensive ecosystem to support their growth and success instead of merely facilitating transactions.

Inc42: With artificial intelligence emerging as the fastest-growing technology, how would you strengthen the AI ecosystem in Bengaluru?

Priyank Kharge: Several measures are crucial for success when we consider investing in emerging technologies like AI. First, we must ensure that people are adequately reskilled and upskilled to understand AI and become employable. Second, we must set up incubation centres or centres of excellence for widespread AI utilisation and leverage the existing infrastructure wherever possible. Third, we have to look at the broader policy framework to determine where the technology is headed, what actions are being taken and whether fresh regulation is required. 

Collaboration with industry leaders and policymakers is essential here. In addition, we have partnered with the World Economic Forum to establish its only AI Centre of Excellence (CoE) in India, underscoring our commitment to industry excellence. We aim to achieve the highest standards in AI implementation by focussing on vertical-based strategies. Another example is the GIA-MAP, which helps our startups enter the global market.

Inc42: What about the competition from other startup hubs like Delhi NCR or Hyderabad? Will that hinder Bengaluru’s growth?

Priyank Kharge: Yes, other ecosystems are emerging, but Bengaluru has consistently held the top position, pioneering innovation and continuing to do so. Our agility sets us apart – no other ecosystem in India matches our pace. It is not just about the number of startups [roughly, 13K DPIIT-registered in Karnataka]. It is also about the value they bring. 

Think of the funding the startups from this state have secured. Out of the total funding raised by Indian startups, Karnataka startups account for approximately 60%. These are impressive numbers, indicating their value. Also, consider what contributions we are making to the job market and the overall valuation of the startup ecosystem. These are the metrics that truly matter.     

Inc42: Bengaluru has been grappling with challenges like traffic, floods and groundwater depletion. How would you fix these and how can startups help?

Priyank Kharge: Our primary responsibility is to address these problems, but every growing city faces these issues. Doesn’t Mumbai face traffic congestion or commuting problems? Again, Delhi grapples with pollution, high crime rates and safety concerns for women. Globally speaking, Paris, Los Angeles, Silicon Valley and others have their challenges, from flooding to homelessness and rising crime. 

The aspirational allure of cities like London and Berlin leads to rapid growth, often outpacing government efforts. However, we proactively build new infrastructure to tackle these issues, a marked improvement compared to previous administrations.

Today, Bengaluru benefits from dedicated leadership, with the deputy chief minister DK Shivakumar overseeing its development. Although challenges will persist and rise again in the future, we will remain prepared.

Initiatives like Grand Challenges and innovation at the grassroots will nurture greater engagement with nimble startups, often outpacing the government in terms of experimentation and agility. We also welcome innovative solutions from startups for addressing pressing societal issues. 

Our public procurement policy prioritises startups registered with the government or involved in various government programmes. 10% of the procurement is reserved for startups with no prior experience, turnover requirements so that we can support entrepreneurial endeavours. We pride ourselves as problem-solvers and startup customers, demonstrating a level of government engagement uncommon elsewhere.

Inc42: Amid semiconductor, AI, EV and other fast-emerging sectors, is there a specific area under focus?

Priyank Kharge: We cannot afford to look at a particular sector, as our primary focus encompasses all. Owing to the state’s overall development, the government has this broad appetite for growth across industries.

Our numbers also justify this. Karnataka accounts for 60% of biotech production and exports in India, and we have a 40% share in electronics design, 52% in tool manufacturing and 65% in aerospace and defence manufacturing. Currently, we export $4.52 Bn worth of electronic components. Bengaluru is home to one-third of the country’s tech talent and around 43 unicorns, with 47 more in the pipeline.

Given our substantial presence and massive potential across sectors, focussing solely on one area won’t be practical. Consider this. Bengaluru is the fifth largest city in AI skill availability globally and we also dominate in aerospace with 65% of India’s market share. Therefore, the government’s focus extends to every sector, supported by dedicated working groups, to ensure we capitalise on growth opportunities across the board. 

Whether AI, space technology or manufacturing for SMEs/MSMEs, we are committed to enabling growth in all areas. Our leadership history in ITeS, KPO and BPO further highlights our strong alignment with global capability centres (GCCs). Ultimately, we aim to leverage Bengaluru’s strengths across diverse sectors to drive comprehensive growth and development.

Inc42: Tell us more about Beyond Bengaluru. How have you progressed so far?

Priyank Kharge: A programme called Beyond Bengaluru has been there for quite some time. It aims to attract investments outside the state capital, do away with congestion and create value-added opportunities by setting up mini tech hubs across the state.

Unlike previous programmes, Beyond Bengaluru provides additional incentives and subsidies to encourage investment beyond the Karnataka capital. We are actively developing ecosystems and fostering specific sectors outside Bengaluru. 

For instance, in Mangaluru, we are focussing on attracting GCCs, ITeS, fintech and animation companies. In Hubbali/Dharwad/Belagavi (Belgaum), we emphasise manufacturing electronic components, ML and AI and providing incubation support. Similarly, in Kalaburagi (Gulbarga), we are prioritising skill development in sectors requiring technical skills. In Mysuru, plans are underway to set up a semiconductor industry hub.

This sector-oriented approach allows us to delve deeper into each region’s potential, hone relevant skills and attract investments. Additionally, we are committed to building the necessary infrastructure to facilitate seamless business entry and ensure a plug-and-play environment conducive to growth.

Inc42: You have been vocal about ride-hailing platforms like Ola and Uber not complying with regulatory requirements. Where are we falling short?

Priyank Kharge: The issue lies in outdated policies that must catch up with tech advancements. I am not saying that services like Ola and Uber are illegal. It is the inadequacy of existing policies to address modern technologies. 

For instance, our transport regulations date back to the 1960s, ’70s or even the ’80s, long before concepts like surge pricing, ride-sharing and aggregators emerged. The rapid evolution of technology often outpaces regulatory frameworks, leaving policies to play catch-up. 

Take AI, for example. Many countries discuss AI policies, but AI has already advanced beyond regulatory frameworks. This highlights the need for policies developed in consultation with industry experts to understand where technology is headed, determine if regulation is necessary and establish appropriate frameworks. Creating sandboxes could be essential to foster innovation while policymakers work on effective policies.

Inc42: Are you planning to create a sandbox for certain emerging technologies?

Priyank Kharge: I think we can take a more focused approach after the Lok Sabha polls.

Inc42: Unlike PhonePe and Razorpay which relocated their headquarters to Bengaluru, many founders still register their parent companies overseas and stay there. How do you perceive this trend?

Priyank Kharge: Startups are taxed more heavily in India than anywhere else in the world. This is a critical issue that the central government must address, especially if it is serious about positioning India as an innovation hub. 

It is also essential to reconsider the entire tech stack and avoid burdening any particular industry or sector. Even VCs, seed capital providers and startup founders are not advocating for zero taxation. They understand the need for regulation and taxation. However, it is crucial to recognise that startups also create jobs. Therefore, imposing excessive taxes without considering the impact could drive them away, eventually harming the innovation ecosystem. Unfortunately, this issue has not received sufficient attention.

The post Govt To Introduce A ‘Single’ Platform For Startups, VCs To Ensure Better Collaboration: Priyank Kharge appeared first on Inc42 Media.

In the tumultuous period of 2019-2020, social media was ablaze with allegations against BYJU’S, accusing the edtech giant of employing ‘predatory’ tactics and misselling. Reports surfaced, suggesting that BYJU’S utilised dubious methods while marketing consumer loans of its partners, cleverly disguised within its educational courses and bundled with Chinese tablets. 

The company faced further scrutiny for silencing critics on social media by invoking ‘copyright’ violations, which resulted in the removal of numerous posts and videos from platforms like Twitter, LinkedIn, and YouTube. 

Dr. Aniruddha Malpani, an angel investor and physician with a substantial following, found himself at the centre of the controversy, as his critical stance against BYJU’S led to the removal of his content and suspension from various social media platforms. It’s worth noting that BYJU’S was also one of the leading advertisers on these platforms.

Fast forward to June 2023, and the narrative takes an unexpected turn and it’s been a year where the company has only found itself among the headlines for the wrong reasons. 

First up is a fight against lenders who accused the company of improperly using funds and breaking loan covenants. BYJU’S retaliates by filing a counter lawsuit against its creditors in a New York Court, accusing them of adopting ‘predatory’ practices. Simultaneously, the creditors initiate proceedings at the National Company Law Tribunal (NCLT) in Bengaluru, seeking to commence the insolvency process against BYJU’S to recoup their investments.

However, the challenges don’t end there. There’s also a fight with investors on the cards. 

The company, once valued at $22 Bn, now faces a staggering 99% devaluation, plummeting to $225 Mn. Even friendly investors, once allies, turn adversaries, citing corporate governance mishandling and exiting the board. Legal troubles pile up, with the investors, Enforcement Directorate (ED) issuing a show cause notice for Foreign Exchange Management Act violations, and the Board of Control for Cricket in India (BCCI) filing an insolvency petition against BYJU’S for defaulting on INR 158 Cr after unilaterally terminating the Team India jersey contract.

BYJU’S is fighting over a dozen cases amounting to over $1.5 Bn. The question is will the right issue of over $200 Mn, which it can’t use until the High Court says so, be enough to meet the needs even in the short term? 

As the company grapples with these challenges, including cofounder and group CEO Byju Raveendran resorting to mortgaging his home to pay employees’ salaries with February salaries of some of the employees still due, the question looms: Can BYJU’S navigate through this complex legal terrain and emerge unscathed?

Investors Fighting To Oust The Founder

The unofficial war between BYJU’S promoters — Byju, brother and director Riju Ravindran, and cofounder Divya Gokulnath got official after the the representatives of Prosus, Peak XV Partners and Chan Zuckerberg Initiative resigned from the board in June 2023.

Since then, despite constituting a board advisory committee (BAC) to provide strategic advice to the CEO on matters related to the governance structure, the gap between the investors and the promoters has only worsened. 

To the extent that investors on February 23, 2023 called for an EGM and passed a resolution seeking the resignation of Byju Raveendran as the CEO. This was after BYJU’S announcement to raise $200 Mn through rights issue at $25 Mn valuation.

However, anticipating this to happen, BYJU’S had filed the petition under Section 9 of The Arbitration and Conciliation Act, 1996, arguing that certain investors, including General Atlantic, Chan Zuckerberg Initiative, MIH EdTech Investments, Own Ventures, Peak XV Partners, SCI Investments, SCHF PV Mauritius, Sands Capital Global Innovation Fund, Sofina and T. Rowe Price Associates, had violated the Articles of Association (AoA), the Shareholders’ Agreement (SHA), and the Companies Act, 2013 by calling for an EGM.

High Court, while Green signalled the EGM, put the EGM resolution on hold until the next hearing.

Speaking to Inc42, one of the advocates representing BYJU’S in the Karnataka High Court said that there are multiple grounds to assert that the EGM called by the investors on February 23 was not legal. 

For instance, the notice was not served to the promoters as mandated under the Companies Act. Secondly, as per the Article of Association (AoA) and the shareholding agreement, promoters need to be present during the EGM. 

Three days after the EGM, investors went to the NCLT, Bengaluru, seeking resolution under the Companies Act. In their petition, investors alleged:

• The rights issue in excess of the Authorised Share capital of the Company is not allowable under the Companies Act
• There are various irregularities against the Company and the matter is also under investigation before the Enforcement Directorate(ED)
• Fundraising plans via rights issue without increasing the company’s authorised shares capital violates Section 62 of the Companies Act
• The Company had committed to giving the information/documents within a period of the next five business days, however the same was not given
• No financial audit has been done for the financial year 2022-23; earlier also such audits were substantially delayed
• The company did not share information regarding financial irregularities, the ongoing ED investigation, IBC proceedings and other litigations, a direct violation of Article of Association Article 121 and 197

The Investors demanded an interim order seeking: 

• To maintain the operation and effect of the rights issue 
• Let EGM be held and resolutions passed to be accepted 
• Clarify the purpose of the rights issue and how the funds will be utilised

At the last hearing on the validity of the EGM on March 13, 2024, the Karnataka High Court extended the stay on the implementation of the resolutions passed by the investors till March 28.

It must be noted that during the EGM last month, the company’s investors passed a total of seven resolutions, including those calling for a change in the board structure of the embattled edtech giant and removal of founder and CEO Byju Raveendran, cofounder Divya Gokulnath and director Riju Ravindran from their respective management roles.

BCCI Insolvency Case Against BYJU’S 

“We’ve all grown up watching cricket, cherishing our association with the Men in Blue with immense pride. Partnering with the BCCI for the Indian Team Jersey was a dream come true,” BYJU’S Group CEO Raveendran said soon after the collaboration with the BCCI.

Nobody could deny that this was a major coup. 

BYJU’S, in August 2019, achieved the status of the official partner of Team India for the next three years, concluding in March 2022. As part of this agreement, the company’s logo adorned the shirts of Indian players across all formats for both men and women’s teams. 

The edtech giant had committed to paying around INR 4.61 Cr per match for certain matches and around INR 1.51 Cr per match for others. 

In March 2022, BYJU’S also requested an extension of the contract till November 2023 and reached a deal with BCCI at INR 457 Cr ($55 Mn). 

Beyond cricket, the company secured a contract with FIFA for the football World Cup in Qatar in 2022 at $40 Mn and signed the renowned football player Lionel Messi in 2022 as a brand ambassador for its foundation arm, despite laying off over 2,500 employees for cost-cutting reasons.

Troubles for BYJU’S began surfacing in November 2022, leading to the abrupt termination of its contract with BCCI in January 2023.

Post-termination, BCCI sent an email to BYJU’S, requesting the remaining payment of INR 158 Cr. However, even after 10 months, BYJU’S failed to comply. Consequently, BCCI filed an insolvency petition against the company under Section 9 of the Insolvency & Bankruptcy Code 2016.

Current Status: In a fresh application, BYJU’S has sought arbitration through NCLT to resolve the financial dispute with BCCI, and the NCLT is likely to pronounce the order by next week.

Prashant Shivadass, Partner, Shivadass & Shivadass Law Chambers, told Inc42, “BCCI should have gone for the arbitration first. That’s the established way, if a contract of such nature goes wrong.”

BYJU’S argued that the BCCI did not render any service post the culmination of the contract between the two parties. Thus, the BCCI’s claims of pending dues to the tune of INR 158 Cr from BYJU’S cannot be considered as an operational credit, as per sources close to the company.

The Curious Case Of The $1.2 Bn Term Loan B

How often it happens to you that you go to a supermarket to buy things worth INR 5,000 but you end up buying INR 10,000. In the case of BYJU’S, the loan shopping in the US meant, it went looking for a $500 Mn loan but instead the deal was upsized by $700 Mn.

In 2021, BYJU’S secured a $1.2 Bn loan to support its business growth needs till 2026. Investment bankers such as Morgan Stanley and J P Morgan drove this deal which had certain terms or covenants: the loan had a fixed interest rate (L+550, with a minimum interest rate of 0.75% Libor), and it was issued at a discounted price of 98.5. 

BYJU’s parent company, Think & Learn, was supposed to get a credit rating from at least two of S&P Global Ratings, Moody’s, or Fitch within nine months, failing which the interest rate on the loan will increase to L+600.

Due to the delayed financials, BYJU’S could not secure a credit rating either from Moody’s or from S&P, which set off a chain of events that compelled lenders to move courts. 

The loan was supposed to be used for various general company needs, mainly for business growth in North America and potential strategic opportunities. 

After BYJU’S failed to secure a rating, the loans by original creditors are believed to have been sold to others at 20-35% discounts.

In May, 2023, Glas Trust acting as an administrative agent on the behalf of 37 creditors sued BYJU’S Alpha, BYJU’S SPV in the US, its director Riju Raveendran, brother of Byju Ravindran in the Delaware Chancery Court for not meeting the two technical requirements as per the Term sheet.

BYJU’S could not get RBI’s approval for Whitehat Jr as guarantor nor was it able to share audit reports in a timely manner, as a result of which, the unrated loan price in the market had gone down by 35%.  

Creditors had meanwhile also removed Riju Ravindran from BYJU’S Alpha, Inc. and had made Timothy Pohl, the representative appointed by the lenders, as the sole director.

This was approved by the Delaware Court. “WhiteHat’s failure to accede as a guarantor constituted an event of default, entitling Glas to send a default notice. It follows that Glas’s and Pohl’s actions were valid unless one of the defendants’ defence succeeds,” judge Zurn ruled.

In response, BYJU’S skipped the $50 Mn as part of loan repayment in June, 2023 and filed a countersuit in New York Court.

BYJU’S in its countersuit, made a few points:

• The default claims of the creditors are ‘bogus’
• The company is ready is raise the loan rate as per the term sheet
• The creditors are using predatory tactics to make BYJU’S go bankrupt

In September 2023, Glas Trust escalated the situation by filing a fresh complaint in a Florida court alleging that BYJU’S Alpha transferred $533 Mn to Camshaft Capital Fund, a Miami-based hedge fund, with the intention of hiding the cash’s whereabouts. This case is ongoing.

When asked that Camshaft return the money to creditors, David Massey, a lawyer representing Camshaft wrote in a letter dated 4 December stating BYJU’S Alpha is a former limited partner of Camshaft Capital Fund, LP, and was never a limited partner of any other Camshaft entity.

“As such, BYJU’S Alpha’s demand for books and records is rejected because BYJU’S Alpha has no statutory right or standing to demand books and records from Camshaft Capital Fund, LP (or any other Camshaft entity identified in your letter). Nor does BYJU’S Alpha have any rights under the Limited Partnership Agreement between BYJU’S Alpha and Camshaft Capital Fund, LP, as a former limited partner with a zero-balance capital account,” the letter reads.

While the New York court and Florida court’s hearings are still pending, the creditors have now approached the NCLT Bengaluru to speed up the solvency process. The case was registered on February 22, 2024  and the NCLT has issued notice to BYJU’S. The next hearing is on April 3, 2024.

While a US bankruptcy court ordered the arrest of a hedge fund manager on March 14, 2024, for allegedly helping BYJU’S hide $533 Mn, the edtech major shot back a day later. The company accused TLB lenders of being opportunistic and building fake narratives in the media to tarnish its image. BYJU’S also claimed that the judge quashed the lenders’ request seeking the deposit of the $533 Mn with the court.

ED’s Notice For INR 9,000 Cr FEMA Violations

On April 27 and 28, 2023, the Directorate of Enforcement (ED) conducted searches and seizure action at Byju Raveendran’s residence and two of the company premises in Bengaluru under the provisions of Foreign Exchange Management Act (FEMA). 

The ED seized various incriminating documents and digital data. In a statement, the apex agency stated that the company received foreign direct investment to the tune of INR 28,000 Cr during the period from 2011 to 2023. 

Further, the company also remitted INR 9,754 Cr to various foreign jurisdictions during the same period in the name of overseas direct investment. The company booked around INR 944 Cr in the name of advertisement and marketing expenses including the amount remitted to foreign jurisdiction. 

The agency also claimed that before the search and seizure conduct, several summons were issued to CEO Raveendran, however, he is said to have remained evasive and never appeared during the investigation. 

After an initial investigation, in November 2023, ED issued show cause notices to BYJU’S and its CEO alleging violations of FEMA, 1999, amounting to INR 9,362.35 Cr. 

The company was accused of significant foreign remittances and investments abroad, allegedly breaching FEMA, 1999, resulting in a loss of revenue for the Indian government. ED had also recorded statements from CFO and Raveendran among other leaders of the company. 

And, it concluded that BYJU’S and Raveendran violated FEMA provisions by not submitting documents for imports against advance remittances, not realising proceeds from exports made abroad, delaying filing documents for FDI, not filing documents for remittances made abroad, and not allocating shares against FDI received.

After the show cause, BYJU’S also issued a statement and said that the queries in the notice are mainly technical.

The technical issues mentioned in the notice revolve around the delay in filing Annual Performance Reports (APRs) related to compliant Overseas Direct Investment (ODI) of approximately INR 8,000 Cr, resulting from a delayed statutory audit for the fiscal year 2022. 

Current Status: The ED has not filed the chargesheet yet. Meanwhile, since the show cause notice, BYJU’S has filed the financials for FY22 and has yet to release them for FY23. As reported exclusively by Inc42, the edtech giant is expected to report total revenue of around INR 6,500 Cr for FY23, 23% higher than FY22. 

An ED source informed Inc42 that the ED is looking into the details. Prima facie, there seems to be discrepancies while matching the account statements and the revenue declared. However, an official statement will be released only after it arrives at the conclusion. 

Savitri Srirangam Vs BYJU’S

In January 2024, Savitri Srirangam had filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 citing a lease deed dated November 24, 2021. 

As per the lease deed between Srirangam and BYJU’S, a property spread in 840 sq yards belonging to the former was leased out to BYJU’S for a period of five years and was set to expire on November 23, 2026. The lease had a lock in period till July 23, 2023.  

Srirangam had sent an email dated April 6, 2023 asking BYJU’S to vacate the premises after the lock-in period that is by July 24, 2023.

Thereafter, on July 27, 2023, another reminder was sent. However, BYJU’S declined to vacate the premise stating that it had not defaulted on any contractual obligations and that the matter ought to be referred to arbitration.

Matter will now be heard on April 1, 2024.

Fab Hotels vs Think And Learn Pvt Ltd

BYJU’S has even defaulted on its travel subscription agreement. 

In November, 2023, Fab Hotels had filed a petition under the Arbitration Act in Delhi High Court seeking to appoint an arbitrator to adjudicate disputes arising between Fab Hotels and BYJU’S. Fab Hotels had earlier sent a legal notice to BYJU’S on July 20, 2023 to make payment for the sum of INR 21.74 Lakhs and interest thereupon. 

However, BYJU’S didn’t respond to the legal notice. 

Hearing the case on January 9, 2023, the Delhi High Court referred the case under the aegis of Samadhan, Delhi High Court Mediation and Conciliation Centre. The Court ordered the parties to appear before the Centre. If the dispute is not resolved through mediation, the case will be handed over to the Delhi International Arbitration Centre of the Delhi High Court. 

Karnataka State Employees Union Vs BYJU’S

The timeline traces back to October 2022 when the Karnataka State IT/ITeS Employees Union (KITU) lodged an industrial dispute against the BYJU’S management, accusing them of pressuring employees into resigning.

According to KITU general secretary Sooraj Nidiyanga, BYJU’S allegedly used intimidation and coercion tactics to compel its employees to resign.

KITU has formally raised the industrial dispute with the Deputy Labour Commissioner, Bengaluru Division-2, seeking the reinstatement of the dismissed employees along with their back wages, continuous service, and associated benefits. The union has issued a call for solidarity among all IT/ITeS employees to support their cause.

In September 2023, The KITU filed a petition under the Industrial Disputes Act in a Bengaluru District Court.

Surfer Technologies Vs BYJU’S

Not just Fab Hotels, BCCI, BYJU’S defaulted on a slew of vendors too. Surfer Technologies, a company that helps companies by generating leads for them, claimed to have not received INR 2.3 Cr due from BYJU’S.

On January 9, 2024, Surfer Technologies filed an insolvency plea with NCLT praying to order BYJU’S return the INR 2.3 Cr, as admitted by BYJU’S. 

Teleperformance Vs BYJU’S

BYJU’S has allegedly also not paid INR 3 Cr to another vendor France-based Teleperformance and terminated the contract unilaterally. Teleperformace was working closely with BYJU’S India for various customer service functions and sales operations. According to reports, it also helped the edtech major to onboard new students for courses. 

The French company also filed an insolvency petition on November 4, 2023 and was registered on January 25, 2024.  

Can BYJU’S Survive The Legal Battle? 

What started as delayed financial audits went on to become a big issue in terms of corporate governance and plenty of concern around what will happen to the company which was once the poster child of Indian tech startups. 

The question is can BYJU’S investors really shy away from all the wrongdoings that occurred at BYJU’S? Can the entire blame be put on CEO Byju Raveendran and the higher management? 

It must be noted that investors on the company board exited only when the ship hit the rocks, and as some sources have indicated to us, this was largely to avoid liabilities that come with having invested money in a company which is suspected to be hiding facts and figures. 

Investors on the board were supposed to alarm the founders in time if the business was going off track, but instead they let the company go haywire and secure loans without a concrete plan. Many of them continued to invest again and again despite lack of disclosures on the companies part, which has  now turned into litigation. 

Another investor in the company told us that Raveendran did not share most of the issues with the board. There was hardly any transparency. As per the article of association and SHA, the company was bound to share the details pertaining to ED raids, MCA notices and delay in financials, for instance.

Besides this, they have raised other red flags such as defaulting on loan covenants and investing $534 Mn in a hedge fund where the company is the beneficiary.  “We were told things like it would happen soon or that issues, if any, will be sorted out. The management promised financials will be out soon or that they are being delayed because of ongoing acquisitions. There were a number of excuses.”

Corporate governance, a critical aspect for any company, was clearly compromised in BYJU’s aggressive expansion phase. 

The emphasis on hyper-scaling, extensive advertising, and multiple acquisitions without a robust governance framework has directly led to the current predicament. The lack of oversight and checks on the company’s trajectory has led to financial mismanagement and legal entanglements. Here, investors cannot wash their hands off their responsibilities either, despite claiming that the company was dishonest in its disclosures. 

The many legal skirmishes threaten to end the journey and promise of BYJU’S. The response to these legal battles and the leadership’s ability to navigate the complex terrain will shape its future. The ED show cause notice and the fight with government authorities adds another layer of complexity.

Even as cofounder and CEO Raveendran has claimed to have resorted to personal sacrifices to meet payroll obligations, the fate of BYJU’S hangs on its legal disputes and not its business or innovation. 

[Edited By Nikhil Subramaniam]

The post BYJU’S In A Legal Web: Can The Edtech Giant Fight Off Bankruptcy Risks, Angry Creditors? appeared first on Inc42 Media.

Days after CoinSwitch became the first Indian crypto platform to hit 20 Mn registered users on its app, the founders have revealed plans to launch an investment platform for retail investors by June 2024.

Speaking with Inc42, cofounder Ashish Singhal said, “Currently, we are doing beta tests of these products and hope to launch these products in the next quarter.” 

“…we will be able to showcase what we have learned in the last few years, solving for the stock market, mutual fund, or any other product that we will be launching next quarter,” Singhal added.

Founded by crypto traders and ethical hackers Ashish Singhal, Govind Soni and Vimal Sagar Tiwari in 2017, CoinSwitch is backed by a slew of reputed investment firms, including Andreessen Horowitz, Tiger Global, Sequoia Capital, Ribbit Capital, Paradigm and Coinbase Ventures. The company has raised more than $300 Mn since its inception. It was valued at $1.9 Bn+ in its last round in 2021. 

The crypto unicorn unveiled its umbrella brand, PeepalCo, in December last year to consolidate all its business verticals to foray into the wealthtech space. 

Highlighting the strategic significance of PeepalCo, Singhal said that the move will help them transition from a single-product company to a multi-product company. 

PeepalCo Includes:

• CoinSwitch and CoinSwitch PRO
• A soon-to-be-launched platform featuring new investment classes — mutual funds, equities,
• A wealth-management division catering to High Net Worth Individuals (HNIs)

Thus, whether it’s CoinSwitch, CoinSwitch Pro or its foray into the Indian equities, mutual funds and HNI wealth management space – all verticals will be housed under one corporate brand — PeepalCo.

According to Singhal, the new umbrella structure has been designed to unlock the full potential of the organisation and align the company’s resources more effectively.

At the group level (PeepalCo), Singhal has assumed the role of Group CEO, while Tiwari and Govind have assumed the roles of Group COO and Group CTO, respectively. Each business segment will be led by independent business heads.

Besides, CoinSwitch Ventures, currently overseen by the PeepalCo Group leadership, will be merged with PeepalCo later. However, this will not have any major impact on CoinSwitch’s core functionality and offerings, Singhal added.

Taking On The Existing Players & Sailing The Regulatory Maze

In the Indian market, whether it’s investments in equities, mutual funds or other asset classes, there’s already a plethora of players, which range from established legacy institutions like banking groups to rapidly emerging tech companies like PhonePe and Paytm Money.

In such a crowded landscape, how does PeepalCo plan to compete with well-funded and rapidly growing tech players?

Singhal illustrated their approach with a crypto analogy. He highlighted that neither they were early entrants in the crypto space nor well-funded, and despite this, they became one of the largest crypto players in the country.

“Crypto was our initial focus because we had years of experience in the field and had already developed solutions tailored for Indian retail users, making their experience simple and accessible. While addressing crypto, we expanded our scope to include other asset classes. We observed that existing platforms were user-friendly, yet a significant portion of the population, less than 3%, invested in fixed deposits. Users lacked guidance on when to enter or exit investments, and existing platforms didn’t address this effectively,” Singhal explained.

He emphasised that the decision-making processes in the industry are currently flawed and need to be addressed, and this is what PeepalCo Group aims to resolve.

Entering the mainstream investment and wealth management market requires PeepalCo to obtain SEBI’s licence. However, it’s still uncertain whether the company has applied for a new licence or plans to acquire a company in the segment to pursue its wealthtech ambitions.

Regarding concerns about regulatory issues, particularly given past skepticism from regulators about companies associated with crypto, Singhal explained, “We are adopting a strategy similar to other players in the industry — creating independent companies and operating them separately from each other. Just as PhonePe and Paytm have done, we are establishing separate entities with dedicated teams to manage different asset classes and apps, thereby avoiding any overlap.”

Meanwhile, the strategic shift of the founders towards the wealthtech space has come at a time when the future of crypto in India seems bleak. For one, the Union finance ministry isn’t too keen on promoting crypto in the country, and the message is loud and clear in the form of a 30% crypto tax and a 1% TDS on transactions above a certain threshold. 

Amid adverse regulatory sentiments, CoinSwitch’s expansion and restructuring is seen as a prudent move by many. However, the company’s decision to step into uncharted territories to take on behemoths like Zerodha and Groww may take some time to yield results.

The post CoinSwitch Founders To Launch Investment Platform By June appeared first on Inc42 Media.

Paytm is caught in an unprecedented crisis and if it seeks a journey to emulate, the fintech giant should look no further than Uber. 

In May 2019, Uber — once valued at $120 Bn by Wall Street analysts — suffered the largest first-day dollar loss in US IPO history. Its value plummeted to about $69 Bn, just over half of its lofty IPO expectations.

Then, the Covid-19 pandemic hit and dented Uber further. It closed offices worldwide, including its Mumbai and Los Angeles support offices, and fired more than 7,000 employees globally, including 600 in India. Another 200 Indian employees were then let go as the cutbacks continued in the aftermath of the pandemic.

Fast forward to 2024, Uber has turned profitable, generating over $1.9 Bn in profits worldwide. The company is standing tall at a $160 Bn market valuation.  

In India, the company anticipates reaching breakeven by year’s end, thanks to a clear roadmap for the market. More than anything, Uber has figured out a place for India in its global business. 

Having previously lost its ground in China, India has become the critical battleground for Uber. Establishing its first and largest engineering centre in Asia in Bengaluru, Uber is developing products in India, tailored for global consumption.

If ride-hailing arch rival Ola, being a home-grown startup has been counting on the PM Modi-led campaign AtmaNirbhar Bharat or  “Vocal for local” campaign, Uber is countering the narrative with its Indian tech and engineering team, and a “Local for Global” approach.

Even global CEO Dara Khosrowshahi called India “the gateway to the world” for Uber on his recent visit, where he also raised some eyebrows with his comments on the price-sensitive Indian market. 

But as Ola looks to improve its mobility game, and in the face of competition from Rapido, BluSmart, Red Taxi, Namma Yatri and others, what’s Uber’s strategy for India’s rapidly evolving market? 

Uber’s playbook for India hinges on green mobility, digital public infrastructure, and partnerships with industry giants. Each of these is a critical pillar for Uber to make the most out of its investment into India in the long run. 

Building The Green Ecosystem From The Scratch

The Indian automobile industry as well as the government has set targets for transition from internal combustion engines to electric vehicles with 30% EVs on the road by 2030 for passenger vehicles and 70% for commercial vehicles. 

As they push towards this target, OEMs such as Tata and Mahindra have set EV sales targets and so has Uber. While in the US and Canada, Uber has aggressively set the transition deadline of 2030, it is looking to deploy a full EV fleet in India by 2040. 

This might seem like an ambitious target, but it also shows Uber has long-term plans for India. 

To start with, Uber has launched Uber Green in Delhi, Mumbai, and Bengaluru. The new business allowed passengers to opt for all-electric, zero-emission vehicles through the app, marking a significant step towards on-demand EV mobility in India. 

Through strategic partnerships and initiatives, Uber is not only tripling the number of electric vehicles on its platform but also connecting millions of riders with electric rides annually, earning recognition from the Science Based Targets Initiative for its science-based emissions reduction targets. 

To bolster EV growth, Uber is expanding its fleet partner network. Collaborating with Lithium Urban Technologies, Everest Fleet Private Limited, and Moove, 25,000 electric vehicles will be deployed across seven major cities, accelerating the transition to electric mobility. This effort builds upon previous partnerships, such as the MoU with Tata Motors in February.

In the two-wheeler segment, Uber has partnered with Zypp Electric to deploy 10,000 electric two-wheelers by 2024 under the UberMoto category, enhancing sustainable mobility options. Already, over 1,000 Zypp Electric two-wheelers operate on UberMoto in Delhi.

To facilitate EV adoption, Uber has inked an MoU with the Small Industries Development Bank of India (SIDBI), making INR 1,000 Cr in low-interest loans available to fleet partners for EV and CNG vehicle purchases.

Furthermore, Uber is spearheading EV charging infrastructure development. Partnering with BP pulse and JioBP, as well as GMR Green, it aims to provide high-speed charging facilities for Uber EVs across India.

With big players like Uber entering India’s EV ride-hailing market will create a long-lasting positive impact on clean mobility and a big boost to the infrastructure. Speaking to Inc42, serial entrepreneur Ajesh Saklecha, cofounder of Ozone Motors and Tride Mobility said that one of the biggest issues with EVs is that driver-partners may face financial constraints however, with fleet operators and Uber entering the segment, the initial cost could be easily tackled, including the fast charging infrastructure they are setting up.

“Once the issue is tackled, the lifetime cost of the vehicle could easily be earned back within two years increasing individual drivers’ income & ROI since the average running cost of the vehicle is INR 1 per Km, for the operators it could vary INR 3-5,” said Saklecha.

Saklecha’s Ozone Motors is an E4W OEM that developed an agile and affordable Modular born smart electric platform that could fit a body style of a four door Car, seven seater shuttle or even cargo ev.

Building On India’s Digital Public Infrastructure  

During his recent stop in Bengaluru, CEO Khosrowshahi oversaw Uber’s partnership with the Open Network For Digital Commerce (ONDC). 

The digital commerce network offers a set of specifications designed to foster open interchange and connections between buyers, platforms, and sellers. While ONDC has brought on Namma Yatri, Ola and others as mobility partners, Uber is the latest major player to come on board. 

Like UPI, ONDC is the latest piece of India’s digital public infrastructure and Uber is looking to capitalise on the DPI wave for its next leg of the India journey. 

Ola joined ONDC last year, initially to test its food delivery services for select users. On the other hand, Uber is exploring the full gamut of mobility services ONDC can unlock.

This collaboration would help Uber gain more users by improving the availability of Uber services on ONDC buyer apps. From the point of view of competing with Indian ride-hailing companies, this is a cost-effective strategy. 

Plus, it helps Uber gain a share of the public transport usage in the world’s most populous country. For instance, in multiple cities, it has already integrated public buses on its app, and ONDC is the pipeline to get into other states and cities as well. 

Uber is thus considering new services like intercity bus and metro rail ticket bookings in India through a partnership with ONDC.

Explaining how Uber could leverage India’s DPI, CEO Khosrowshahi told Infosys chairman and Aadhaar architect Nandan Nilekani in a fireside chat that payments and UPI  was the first step. 

UPI Lite, which is like a predefined wallet linked to UPI accounts for low-ticket purchases would make the transactions more seamless and easier. According to reports, Uber is also planning to introduce Uber Money to India. The idea is to float similar products like Ola Financial does for Ola Cabs. Besides, Uber Money could also offer co-branded credit and debit cards.

Secondly, the digital KYC verification system is both for drivers as well as for car registrations. Driver verification has become more efficient through Aadhaar KYC and Digilocker, reducing verification costs for both drivers and vehicles. 

Thirdly, the widespread adoption of FASTag on highways has minimised the waiting times at toll gates, and improved the efficiency of intercity and intracity movement, which Uber has leveraged for newer services. 

Fourthly, the integration of AI in Indian languages means that driver and rider communication has improved. 

As for the ONDC framework, Khosrowshahi believes the network offers a standardised platform for services, ensuring interoperability and accessibility for all players. 

Nilekani also suggested that Uber should re-enter the food and grocery delivery segment in India via ONDC. “The system is waiting for who could do it at scale and speed. And, you guys do it very well,” remarked Nilekani.

But while that may not be on the cards any time soon, Uber is focussing heavily on building financial services and its tech stack in India. 

Forging Big Partnerships

When it comes to long-term expansion in India, Ola plans to go solo as far as possible with Ola Electric and its inhouse infrastructure for charging and manufacturing. However, Uber is busy forging big partnerships. This includes deals with Tata, Reliance and Adani, the three biggest corporate houses in India.

Uber-Adani: During his India trip, Khosrowshahi has also explored a potential strategic partnership with Adani. This collaboration would entail integrating Uber’s services into the Adani One mobile app, enabling customers to book airport transportation conveniently.

According to reports, Uber and Adani could forge a JV to speed up the green infrastructure around mobility. This includes plans to procure electric vehicles and brand them under its name. These branded vehicles will then be deployed on Uber’s ride-hailing platform.

Uber-Tata Partnership: Besides having ordered 25K vehicles worth around INR 300 Cr, Uber is also said to be in talks with Tata Digital for the Tata Neu platform. Tatas are reportedly looking to integrate Uber app within the Superapp to anchor customer acquisition and engagement. Uber has also onboarded Tata AIG for the insurance of its driving partners as well as riders.

Uber-Reliance: Uber has a global mobility agreement with BP pulse which will also be enforceable in India in partnership with JioBP for fast-charging Uber EVs and also tying up with GMR Green to further enhance the changing infrastructure network for Uber EVs. 

“Besides, Adani’s which is yet to be formed, most of these partnerships are generic and there is not much to be expected from them. For instance, before Tata Digital and Uber, a similar partnership was announced between Jio Money and Uber. It didn’t work. While Uber has been open to forging partnerships, particularly in India, most of these didn’t turn as projected,” said a mobility advisor who did not wish to be named.

Here it must be noted that partnerships do not always align and germinate as intended or signed initially. Uber’s partnerships with Yulu, Bajaj and Mahindra did not exactly fall in line as initially envisioned, thanks to Covid.

Some of the partnerships such as with Tata Motors, JioBP and Adani could go well beyond the Indian market as well, but it’s critical for winning in India.

Why Uber Wants To Win In India

In the fireside chat with Nilekani, Khosrowshahi said, “India is one of the toughest markets out there. The Indian customer is so demanding and doesn’t want to pay for anything. If Uber can make it in India — and I think that our team is making some great things here — then India is the gateway to the world for us.”

The company’s Bengaluru and Hyderabad development centres handle 13 critical technology functions for Uber globally, including the Rider app, Uber Eats, Uber’s fintech risk and payments solutions, the maps services and solutions, Uber for Business, adtech and more. 

Will the Uber India team move the extra mile to offer Uber Pay as its own UPI payments and wallet, as Ola does with Ola Money? The company did not respond to this. 

Now, with ONDC and Uber Green, Uber sees its India playbook contributing to its global business. “If the product works in India, it will work in other developing markets as well.”  

While India is the tech playground for Uber, it’s also shown signs of becoming a breakeven market.

While globally, Uber has turned profitable raking almost $2 Bn in profits, in India it recorded INR 311 Cr in loss in FY23, slightly higher than INR 216 Cr in the previous year. But this is still lower than the loss it suffered in FY21 soon after the pandemic. 

Operational revenue surged by 6.5x to INR 2,666 Cr in FY23, which shows the company seems to be on the right track. 

And while Khosrowshahi did not respond to Nilekani’s remarks about Uber Eats, selling the business to Zomato seems to be paying off for Uber India. 

In January 2020, Uber India sold UberEats business to Zomato in an all-stock transaction, which gave Uber India 9.99% ownership (preferred shares) in Zomato.

In July 2021, Zomato listed publicly and by December 2021, Uber India was sitting on an unrealised gain of $991 Mn on this investment. This has now grown to $1.3 Bn as Zomato’s share price has boomed in the past three-four months.

While UberEats seems to have been a missed opportunity, ONDC opens the door for Uber to take another punt at food and grocery delivery. In fact, ONDC can enable Uber to become the everything app for Indian internet users. 

Uber took a long while to figure out what India means to the company, but it looks like eventually it has managed to do that.

[Edited by Nikhil Subramaniam]

Update: March 12, 2024 | 10.47 AM

[The story now incorporates a graph detailing Uber’s financials.]

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