Inc42 Media News & Analysis on India’s Tech & Startup Economy Tue, 02 Jan 2024 08:18:36 +0000 en hourly 1 Inc42 Media 32 32 SoftBank Made $1.8-1.9 Bn By Offloading Shares In Four Listed Indian Startups Tue, 02 Jan 2024 07:53:53 +0000 Japanese investment major SoftBank, which has not been striking any funding deals in India lately and is drawing up to…]]>

Japanese investment major SoftBank, which has not been striking any funding deals in India lately and is drawing up to offload stakes in bourse-bound Ola Electric and FirstCry, still holds shares of $1.1-1.2 Bn in its listed portfolio companies here.

As per ET’s report, Softbank has sold stakes worth $1.8-1.9 Bn during the public offerings and through post-listing sales in four Indian startups — Paytm, Zomato, PB Fintech and Delhivery — that went public in 2021 and 2022. It had invested a total of $2.3-2.4 Bn in these four new-age companies.

Among the four listed companies, Paytm is proving to be a drag on SoftBank’s investments in India. In July, SoftBank offloaded over 2% stake in Paytm’s parent entity One97 Communications worth about $300 Mn. Earlier in May, SoftBank offloaded over a 2% stake in the company.

In December, SoftBank offloaded 2.53% of its stake in Gurugram-based parent of Policybazaar PB Fintech, through multiple block deals, amounting to a cumulative INR 913.7 Cr ($109 Mn).

Following the transaction involving 1.14 Cr shares, SoftBank now holds 83.23 Lakh shares in PB Fintech.

On December 8, SoftBank offloaded 9.35 Cr ($1.1Mn) shares of foodtech giant Zomato in an INR 1,127 Cr block deal. 

On November 17, approximately 1.8 Cr shares, constituting 2.51% of equity in Gurugram-based logistics firm Delhivery, were exchanged in a deal valued at INR 747 Cr ($89.6 Mn), with each share priced at INR 403.51.

SoftBank’s approach to reduce its holdings through secondary sales, while staying away from new investments is in line with most growth and late-stage investors who have slowed down on investments over the last 15-18 months. 

Having funded nearly a fifth of India’s 100+ unicorns (startups with valuations exceeding $1 Bn), SoftBank has invested a total of $15 Bn in the country. The SoftBank Vision Fund accounts for $11 Bn of this investment, with the remaining $4 Bn allocated to sectors like renewable energy and infrastructure.

SoftBank is the largest institutional shareholder of Ola Electric and FirstCry. Both the companies have filed draft papers for their initial public offerings last month.

As per ET, while Ola Electric is looking for a $7-8 Bn valuation in its public offering, FirstCry is estimated to be valued at around $4 Bn. At these valuations, SoftBank is expected to sell stakes worth approximately $180 Mn in FirstCry and $45-50 Mn in Ola Electric.

In Ola Electric, SoftBank will be selling 23.8 Mn shares, representing a 0.65% stake, while in FirstCry, it is planning to offload 20.3 Mn shares, or a ~4.5% stake, as per their draft IPO documents. After the IPO, it would still hold stakes worth an estimated $840-850 Mn in FirstCry and $1.4-1.6 Bn in Ola Electric, at IPO valuations.

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Reliance Jio Likely To Get IN-SPACe Nod To Launch Satellite-Based Gigabit Internet Tue, 02 Jan 2024 07:21:23 +0000 Reliance Jio may receive the landing rights and market access authorisations from the Indian National Space Promotion and Authorisation Centre…]]>

Reliance Jio may receive the landing rights and market access authorisations from the Indian National Space Promotion and Authorisation Centre (IN-SPACe) to roll out its satellite-based gigabit fibre services in India, ET reported.

According to the report, Jio has made all the necessary submissions to IN-SPACe, and the space regulator is expected to give the authorisation soon, which is mandatory for deploying global satellite bandwidth capacity in India.

The authorisations from IN-SPACe involve approvals at different levels from different ministries. 

“We don’t comment on the status of approvals of specific companies…all I can say is that several applications for IN-SPACe authorisations are in the pipeline,” said Pawan Goenka, chairman of IN-SPACe.

In October last year, the telecom giant introduced JioSpaceFiber, India’s first satellite-based giga-fibre service. The company said that the new service is designed to provide fast and reliable internet connectivity to remote and challenging-to-reach regions.

At the India Mobile Congress, Reliance said that plans are to make the giga-fibre service accessible nationwide at cost-effective rates. The company further added that the new service has connected remote locations like Gir in Gujarat, Korba in Chhattisgarh, Nabarangpur in Odisha, and ONGC-Jorhat in Assam. 

According to the subscriber data released by the Telecom Regulatory Authority of India (TRAI), the telecom major added 3.4 Mn wireless subscribers in September 2023. Reporting a growth of the total wireless telecom subscribers TRAI said that there had been a net addition of 1.7 Mn subscribers against 1.39 Mn in August 2023. Overall, the number of active wireless subscribers in September hovered around the 1.04 Bn mark.

Additionally, to boost the 5G availability in India, it also launched the Jio True 5G Developer Platform and the Jio 5G Lab. The company said that the idea is to enable startups and enterprises to develop 5G use cases on Jio’s 5G network.

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How HRtech Startup Erekrut Is Changing The Way Companies Hire, People Job-Hunt Tue, 02 Jan 2024 06:29:26 +0000 Hiring has been in a state of flux since the beginning of the Covid-19 pandemic. Recruiters have wrestled with evolving…]]>

Hiring has been in a state of flux since the beginning of the Covid-19 pandemic. Recruiters have wrestled with evolving options, from fully remote, tech-driven interviews to in-person interactions triggered by the current back-to-office mandates. Jobseekers, too, have seen tectonic shifts, as the ‘Great Resignation’ has given way to mass layoffs, with tech giants amid widespread cuts. But despite a volatile job market, getting suitable candidates through the door remains as challenging as ever. Consequently, companies and hiring managers want to future-proof recruitment and build a talent pipeline efficiently and cost-effectively.

A successful talent hunt has many components, from searching for the right candidate to building an engaging application experience to offering personalised growth plans. Moreover, staffing needs to be fast and scalable, or companies tend to lose out on top talent, revenue and brand credibility. In essence, nothing works better than swiftly finding best-matching candidates for job roles and getting tasks automated to stay ahead of the curve.   

Ajay Goyal, a fashion student at Amity University, saw the other side of the coin, though, when volunteering for his university’s campus-to-corporate programme in 2019. At the time, it was evident that traditional hiring would require fixing due to its lengthy cycles, delayed responses to candidates and overall impersonal approach that failed to attract or cater to top talent. 

Not one to let things drift, Ajay approached his father, Dr Ravinder Goyal, who had nearly three decades of professional experience in vocational training and placement. Together, they set up Erekrut in 2020, which uses advanced technology to connect recruiters,  jobseekers and campuses on a unified platform, automates tasks and streamlines the hiring and placement process to mitigate delays.

A key feature of this platform is a remote pre-hiring assessment tool that identifies the best-fit talent for a specific job role. A recruiter can customise the pre-employment test based on their requirements and quickly determine who has met the threshold, which will speed up their candidate search. The platform also uses ethical AI and data analytics to evaluate job applications and match those with suitable openings for bias-free candidate matching. Earlier, hiring teams had to sift through résumés manually for hours and might still miss an excellent candidate.  

Erekrut’s hiring tech solutions have resonated well with employers/recruiters (B2B segment) and jobseekers (B2C). It claims a talent pool of more than 4.6 Mn and has partnered with 1.7K+ companies, including industry giants like Paytm, Zomato, Amazon India, Swiggy, Myntra, Indigo and more. The startup has also onboarded 700+ academic institutions to facilitate campus recruitment. 

The startup focusses on several industry segments such as marketing and advertising, consumer service, human resources, programme development, sales and more. 

In May 2022, the startup raised INR 35 Cr in its pre-seed funding round, which included an INR 1 Cr fund infusion from its founders. 

As part of its ongoing bridge funding round, Erekrut plans to raise INR 2.5 Cr in the next two months and another INR 25 Cr in the next six months in its pre-series A funding round to scale and grow.

How HRtech Startup Erekrut Is Changing The Way Companies Hire, People Job-Hunt

How Erekrut’s Proprietary AI Tech Matches Employers With Top Talent

Using AI algorithms, Erekrut has developed its proprietary solution for precision-matching candidates with jobs that fit their skills and preferences. 

At the B2B level, access to these talent analytics is vital for companies and recruiters to ensure fast candidate screening and spearhead their organisations’ growth. They can customise the assessment process, guide candidates through different assessment levels. Additionally, one can manage candidate profiles using the platform’s application tracking system (ATS) and can effectively communicate via SMS and email by sending notifications using Erekrut tools. Erekrut has also set up a student and alumni management tracker system similar to ATS to enable hassle-free campus recruitment and placement. 

Here is a look at how jobseekers and recruiters can leverage the platform to make hiring easy.

A jobseeker’s journey on Erekrut: After signing up, one must create a detailed profile, which will feature qualifications, skills, experience, preferences, personality traits and learning styles. Next, they can explore the featured jobs and the pre-employment assessment tool on Erekrut helping jobseekers gauge their aptitude and benchmark their competence. When candidates write the pre-hiring test, their responses are automatically analysed, providing the recruiter insights into their skills and readiness for the job. This leads to a faster and more efficient hiring process.

Ajay claims that the startup’s integrated database has 102K questions customised for 1.29K distinct job roles to deliver comprehensive assessments. In the next four months, the startup aims to create another set of 80K questions for 1k job roles. The startup deep-dives into candidate data and uses analytics to provide a nuanced understanding of a candidate’s suitability, the CEO added. Using the premium features, candidates may even reach out to recruiters directly through SMS-to-Recruiter.

A recruiter’s journey: Recruiters must register and set up their profiles to post jobs on Erekrut. The platform offers an ATS to facilitate quick and efficient application screening while hiring professionals can customise pre-hiring assessments or add tests to conduct a thorough evaluation of candidates. The startup provides candidate data analytics to offer data-driven insights, enabling hiring teams to refine their strategies. Additionally, recruiters can use communication tools to interact with applicants and potential candidates for better reachout. Once the selection process is complete, a recruiter can extend a job offer by issuing a letter of intent (LoI) directly through the platform, expediting the hiring process.

The platform has also developed Campus Connect, a feature connecting recruiters with educational institutions for hiring freshers. Some of the features of Campus Connect are SMS and email notifications to connect with potential candidates, access to a vast pool of pre-hiring assessment questions (100k+), a library of 2500+ job description templates, advanced filters in ARDEX (advanced candidate database search) for precise candidate searches. 

Revenue generation: Erekrut generates revenue from B2B and B2C users – recruiters, campuses and jobseekers – through various subscriptions and service offerings. For recruiters, it offers four subscription plans: Amateur (free for 90 days), Startup (INR 8K for 365 days), Pro (INR 15K for 180 days) and Enterprise (INR 35K for 365 days). These plans enable job posting, email alerts, access to applicants/talent pool and other plan-specific features.

Campuses can use the Campus Connect tool for free or pay for a Pro plan (INR 25K for 180 days) to access limited company invites.

Jobseekers can opt for Pro Candidate (INR 300 per month) and Erekrut Premium (INR 500 per month). They pay for job applications, video resume uploads and contacting recruiters via SMS. 

Erekrut plans to earn from promotions and advertisements on its website, expanding its revenue channel.

From Initial Hiccups To Product-Market Fit: How Erekrut Hit Its Hiring Nous

Even before the beta version was launched in 2020, the Goyals were aware of the fundamental challenges the startup would face – namely, market penetration, rapid adoption of a tech-driven hiring process and creating brand credibility among corporate users and jobseekers. A lack of resources in terms of workforce and finances also hit them hard.

It meant that the new kid on the HRtech block had to be frugal and identify the areas that would yield the highest return on investments. Given the ground realities during the pandemic, Ajay knew that ‘online’ and ‘remote’ would be the buzzwords, at least for the next few years, and companies ready to recruit would prefer tech-driven platforms and automated tools to future-proof hiring. In essence, falling behind in technology could hinder Erekrut’s growth potential.    

Keeping up with the latest technology trends was a challenge in pandemic times. However, Ajay decided to counter it by instilling a culture of continuous learning within the organisation. This involved organising regular training sessions and workshops to keep the team up-to-date with the latest developments in the hiring sector and maintain a competitive edge in the market.

Building brand credibility was not easy, though, for a new player. But throughout Erekrut’s journey, its founders have focussed on a positive user experience and robust customer support to ensure operational excellence. The CEO recalled how customer care responded with a swift resolution as soon as a glitch occurred. 

“We want our users to have faith in our UX design. A smooth, seamless user experience keeps people engaged, leading to greater usage and adoption,” he added. 

Ajay is optimistic that Erekrut will scale up without compromising user experience due to increasing traffic. To ensure excellent UX even during traffic spikes, the startup has invested in robust backend infrastructure and adopted scalable cloud solutions. 

Achieving a successful product-market fit required strategic marketing campaigns, extensive digital outreach and constant product enhancement powered by feedback from Erekrut’s fast-expanding user base, according to Ajay. 

For instance, when the platform was in alpha, it started reaching out to corporations and campuses via digital giants like Google, Meta and the like. As technology increased its reach and fit as a hiring enabler, Erekrut saw daily registrations of jobseekers between 500 and 1K and more than 15K individuals started writing assessment tests.

How The Future Will Pan Out For Tech-Assisted Smart Hiring

In a global market flooded with HRtech/worktech solutions, technology is dramatically changing the entire hiring process, and the number of digital job searches is growing phenomenally. For instance, 61 Mn users look for jobs on LinkedIn every week and Erektut’ founder-CEO, Ajay Goyal, puts it at 300 Mn per month on Google. More importantly, almost all job search portals now offer premium services to corporate houses for screening and vetting candidates.

Globally, the online recruitment tech market is estimated to grow from $11.9 Bn in 2023 to $30.9 Bn by 2030. By that time, India will be home to 1 Bn working-age adults, according to an EY estimate, which is likely to drive tech-assisted smart hiring further.                

The Erekrut CEO thinks there will be excellent growth opportunities in the near future and has set his eyes on ambitious goals. By the end of Q4 FY24, the startup aims to reach 10 Mn jobseekers from the current 4.6 Mn, a 117% jump, and 100K daily visitors. It will also engage with 3K+ recruiters and 2K+ academic institutions for corporate and campus hiring. 

Additionally, it will expand its network through strategic partnerships, participate in career fairs and drive word-of-mouth marketing to effectively promote the platform among students, alums and campus hiring teams. These endeavours are part of Erekrut’s multifaceted strategy to drive growth.

Ajay thinks that in the next two to three years, the hiring landscape will witness significant transformation driven by next-generation AI/ML, virtual reality and augmented reality, which will enhance UX for jobseekers and recruiters. 

“Erekrut will further integrate various methods such as psychometric, adaptive and gamification assessments to improve its measuring standards,” he added.

Industry experts also believe that future focus will be more on the quality of automated solutions, and companies with limited resources may find it challenging to match up.

“Think of the era of print resumes and how candidates thrived on years of experience. Now it is all about skill acquisition and problem-solving, how fast new skills are acquired and contextually used,” said the senior manager of a Pune-based HRtech firm. 

“Similarly, companies specialising in hiring tech will need to track not only a candidate’s competence and aptitude but also their potential cultural fit. The use of new-age tech like generative AI can play a pivotal role here.”        

Emerging at the forefront is an overarching trend where big players with deep pockets are creating unified platforms for finding jobs and hiring talent – all in one place. Competing with the likes of LinkedIn, Indeed, Glassdoor, or Naukri could be tough for Erekrut, ZingHR, HYRGPT, CredoHire and the rest of the innovative startups trying to reimagine recruitment as we know it.

Can they emerge as powerful disruptors?  

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Meesho’s Early Investors Consider Secondary Sales At $3 Bn-$3.5 Bn Valuation Tue, 02 Jan 2024 05:03:56 +0000 Angel investors and early institutional shareholders of ecommerce unicorn Meesho are reportedly in discussions with potential investors to divest their…]]>

Angel investors and early institutional shareholders of ecommerce unicorn Meesho are reportedly in discussions with potential investors to divest their stake. WestBridge Capital and Norwest Venture Partners are reportedly among the investment firms engaging in discussions with Meesho’s early investors.

As per ET’s report, talks are underway for a transaction at a valuation ranging between $3-$3.5 Bn, but this figure may change. The publication further said that WestBridge has expressed interest in acquiring more shares in Meesho, while Norwest Venture Partners has also participated in the discussions.

The ongoing conversations primarily revolve around the negotiation of deal pricing, with early investors expressing their desire to exit the investment at this juncture.

It is to be noted that investment firm WestBridge Capital acquired a stake in the ecommerce unicorn in a secondary transaction from its early and long-term backer Venture Highway in October. Venture Highway sold a part of its stake in the ecommerce startup to earn over 50X return.

Venture Highway is reportedly considering the sale of its remaining 1% stake in Meesho during this round of transactions.

Founded in 2015 by Vidit Aatrey and Sanjeev Barnwal, Meesho is backed by other marquee investors such as SoftBank, Peak XV, Fidelity Investments, Prosus & Naspers, and Meta.

The startup, once hailed as the poster child of social ecommerce, made a strategic pivot in 2022 to become a marketplace. This move places the company in direct competition with industry giants such as Flipkart and Amazon. The company is best poised to disrupt the duopoly of Amazon and Walmart-owned Flipkart, as per analysts.

As we reported this week, analysts believe Meesho’s zero commission model for sellers who offer unbranded products targeted at consumers from middle-low income households has worked for the Bengaluru-based ecommerce unicorn which has captured 7% of the ecommerce market share in India.

The ecommerce major was the brightest star in Prosus’ India portfolio in the first half (H1) of the financial year 2023-24 (FY24). As per half-yearly financial data released by Prosus, Meesho clocked an internal return rate (IRR) of 32% for the investor.

Meesho reported an operating revenue of INR 5,735 Cr in FY23, a 77% increase over INR 3,232 Cr in the previous fiscal year, it said in a blog last week.

Fashnear Technologies, the parent entity of Meesho, reported a net loss of INR 1,675 Cr in FY23, a 48% drop from INR 3,248 Cr in the previous year.

However, Meesho is yet to file its financial statements for the financial year 2022-23 (FY23) with the Ministry of Corporate Affairs (MCA).

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Here’s Everything That You Need To Know About KYC Tue, 02 Jan 2024 02:30:44 +0000 What Is Know Your Customer (KYC)? Know Your Customer (KYC) is a process used by businesses, especially in the financial…]]>

What Is Know Your Customer (KYC)?

Know Your Customer (KYC) is a process used by businesses, especially in the financial industry, to verify and authenticate the identity of their clients or customers. It involves gathering specific information about individuals to curb illegal activities like money laundering, fraud or terrorist financing.

What Are The 3 Components Of KYC?

The three primary components of KYC are:

  • Customer Identification: Gathering relevant information about the customer’s identity using official documents like IDs, passports, or utility bills to verify their identity.
  • Customer Due Diligence (CDD): Conducting a risk assessment by evaluating the customer’s background, financial activities, and potential risk associated with their transactions. This includes understanding the nature of their business, source of funds, and risk profile.
  • Ongoing Monitoring: Continuously monitoring customer transactions and activities to identify any suspicious behaviour or changes in their behaviour that might indicate a potential risk.

How Can Businesses Verify A Customer’s KYC?

Businesses use various methods to verify a customer’s identity and perform Know Your Customer procedures. Here are some common methods:

  • Government-issued IDs: Requesting customers to provide a copy of their government-issued identification documents, such as a driver’s license, passport, or national ID card and cross-referencing the information provided with the official records.
  • Address Verification: Verifying a customer’s address by requesting utility bills, bank statements, or other official documents that confirm their residency.
  • Biometric Verification: Employing biometric data such as fingerprints, facial recognition, or voice recognition for authentication purposes.
  • Database Checks: Employing third-party services or databases to verify customer information against public records, credit bureaus, or watchlists for any suspicious or illegal activities associated with the individual.
  • Video Verification: Conducting live video sessions or video calls to confirm the customer’s identity in real-time.
  • Transaction Monitoring: Monitoring a customer’s transactions for unusual patterns or behaviours that might indicate fraudulent activity.
  • Customer Interviews: Conducting interviews or surveys to gather additional information or to confirm details provided by the customer.
  • Digital Identity Verification Services: Using specialised third-party services that specialize in identity verification by analyzing multiple data points and employing AI-driven algorithms to authenticate customers.
  • Blockchain Technology: Leveraging blockchain technology for identity verification by creating a decentralized, secure system that stores and verifies identities.
  • Compliance Regulations: Ensuring compliance with legal and regulatory requirements specific to the industry or region regarding customer identification and verification.

Why Is KYC Important For Businesses?

For businesses, KYC is important for the following reasons:

  • Compliance: Meeting legal and regulatory requirements is essential for businesses, particularly in industries like finance, banking, and insurance. KYC helps companies comply with anti-money laundering (AML) laws, counter-terrorist financing (CTF) regulations, and other financial crime prevention measures mandated by authorities.
  • Risk Mitigation: KYC procedures aid in assessing and mitigating risks associated with fraud, money laundering, identity theft, and other financial crimes. Verifying customer identities and understanding their financial activities helps businesses identify and prevent potential risks.
  • Maintaining Reputational Integrity: Effective KYC practices safeguard a company’s reputation. By preventing involvement in illicit activities or unwittingly assisting criminal enterprises, businesses can maintain trust with customers, partners, and stakeholders.
  • Preventing Financial Losses: By identifying potentially risky or fraudulent customers early in the process, businesses can avoid financial losses associated with fraudulent transactions, regulatory fines, or legal liabilities.
  • Enhancing Customer Trust: Implementing robust KYC measures instills confidence in customers by assuring them that their sensitive information is protected, and the business is committed to safeguarding against fraud and maintaining security.
  • Improving Decision Making: Understanding customers’ backgrounds, financial behaviors, and risk profiles through KYC processes enables businesses to make informed decisions regarding service provision, credit extension, or risk management strategies.
  • Facilitating Better Customer Relationships: KYC practices, when executed efficiently, can streamline onboarding processes, making them more user-friendly and efficient for customers. This can lead to improved customer experiences and stronger long-term relationships.
  • Supporting Global Expansion: Adhering to know your customer standards is often a prerequisite for entering new markets or partnering with other businesses, especially in international operations, as different jurisdictions may have specific regulatory requirements.

What Are The Norms For KYC?

Here are some key aspects and updates related to KYC norms in India:

  • Digital KYC: The RBI introduced guidelines allowing regulated entities like banks, financial institutions, and fintech companies to undertake remote or digital KYC for customer verification using Aadhaar-based e-KYC services. This aimed to simplify the customer onboarding process and enhance convenience.
  • Video KYC: The RBI introduced guidelines for Video-Based Customer Identification Process (V-CIP), allowing regulated entities to perform customer identification through video calls. This method was designed to enhance the efficiency of KYC while ensuring authenticity.
  • Central KYC Registry (CKYCR): The CKYCR was established to centralize KYC records of customers across various financial entities. This repository aimed to streamline the KYC process by allowing institutions to access and verify KYC information without the need for repeated submissions by customers.
  • Aadhaar Authentication: While Aadhaar-based authentication was widely used for KYC, the Supreme Court of India had set limits on its use, restricting private entities from mandating Aadhaar for customer authentication.
  • Periodic Updating of KYC: Customers were required to periodically update their KYC details with banks and financial institutions to ensure the information remains current and accurate. This was crucial for maintaining compliance with regulatory requirements.
  • Enhanced Due Diligence (EDD): Financial institutions were expected to conduct enhanced due diligence for high-risk customers or transactions, which involved more rigorous scrutiny and monitoring.
  • Third-party KYC Service Providers: The RBI permitted the use of third-party entities for KYC verification, subject to compliance with regulations and ensuring the security and confidentiality of customer data.

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Unlocking Growth: How Tapping Trade Credit Will Enhance Financial Fluidity In B2B Operations Tue, 02 Jan 2024 02:30:37 +0000 Within India’s ever-evolving business landscape, micro, small and medium enterprises or small and medium enterprises (MSMEs/SMEs) are pivotal drivers in…]]>

Within India’s ever-evolving business landscape, micro, small and medium enterprises or small and medium enterprises (MSMEs/SMEs) are pivotal drivers in propelling the country’s economic growth.

With a sprawling network of more than 32 million units, the MSME sector serves as a major employer, creating jobs for around 70 million individuals and manufacturing an impressive array of over 6,000 products. The sector’s impact is notable, contributing approximately 45% to the manufacturing output and influencing about 40% of the country’s exports, both in direct and indirect capacities.

As a country that is advancing in MSME financing, there has been a growing concern of inherent security associated with the underlying business-to-business transactions. Trade credit as a tool plays a crucial role in driving these payments for a more flexible and sustainable growth.

The Canvas: How Trade Credit Is Effective In Amplifying Economic Resilience

According to a recent data, there are more than 10 million registered MSMEs and SMEs, which clearly demonstrate the sector’s liveliness. The substantial sway of trade credit becomes evident, indicating that a considerable portion of these businesses actively employ this financial strategy.

The data indisputably illustrates that a noteworthy percentage of companies opt for trade credit, adeptly handling the intricate network of B2B transactions and emphasizing its indispensable role in bolstering economic resilience.

Challenges Ahead: Dealing With Complexity

Nevertheless, behind this tale of achievement, there are obstacles that require careful consideration and well-thought-out remedies. The dynamic nature of the business environment poses challenges for the optimal utilization of trade credit by MSMEs and SMEs.

An evident obstacle is the insufficient understanding among firms on the complexities of trade financing, particularly among smaller enterprises. The lack of knowledge leads to inefficient use and missed chances for expansion.

Another obstacle is in the intricate network of regulations that control trade credit, which presents difficulties for businesses aiming to navigate efficiently. The simplification and optimization of regulatory procedures are essential to enable MSMEs and SMEs to access trade financing without excessive bureaucratic burdens.

Advocacy & Solutions: Charting The Path Ahead

When confronted with difficulties, it is crucial to advocate for and implement proactive solutions that empower firms to fully utilise the potential of trade credit.

Multiple strategic actions can cultivate an atmosphere in which MSMEs and SMEs efficiently employ trade credit to promote growth.

Let’s take a look at them:

1. Knowledge Empowerment Programs: By initiating focused awareness campaigns and training programs, the knowledge gap is narrowed, enabling enterprises to acquire the necessary insights to efficiently utilise trade credit. Partnerships among industrial associations, financial institutions, and government agencies promote the spread of knowledge.

2. Adopting Regulatory Reforms: It is of the utmost importance to encourage various regulatory reforms that would streamline the processes that are related with trade credit. In order for businesses to safely traverse the legal landscape, it is necessary for them to engage with legislatures in order to develop a regulatory environment that is favourable.

3. Embracing Technological Innovation: Technology becomes a transformative force. The digitization and automation of payment processes have several benefits, including boosting revenue, lowering reconciliation expenses, enhancing productivity and efficiency, delivering an enhanced payment experience for clients, and significantly saving time and costs. Moreover, the utilization of a centralized platform allows users to monitor cashflows with greater efficiency.

4. Collaborative Platforms and Networking: Creating platforms that unite enterprises, financial institutions, and trade credit experts promotes an atmosphere conducive to collective knowledge exchange. Networking possibilities offer significant insights and mentorship, facilitating the efficient navigation of complications related to trade finance.

5. Encouraging Financial Literacy: Programs for MSMEs and SMEs help business owners make trade finance decisions. These specialised programs cover trade credit, financing and risk management beyond general training. Practical application and theoretical understanding are emphasised to help MSMEs and SMEs develop sound financial strategies adapted to their needs. These programs improve business owners’ financial literacy, enabling them to trade more confidently. This information infusion helps MSMEs and SMEs thrive and survive in competitive business environments.

In Conclusion: Developing A Strategic Plan For Achieving Economic Stability And Adaptability

India’s MSMEs are currently facing a crucial moment in terms of their economic expansion. The strategic application of trade financing can act as a catalyst for their capacity to endure adversities and attain success. Addressing barriers head-on and advocating for solutions maximises the potential of trade credit in B2B transactions.

It entails developing a well-thought-out strategy that allows companies to thrive and have a substantial impact on the nation’s economic environment. Through the integration of cooperative initiatives, marketing efforts, and strategic planning, trade credit acts as a beacon, guiding micro, small, and medium enterprises (MSMEs) towards sustainable growth and financial resilience.

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.

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8 Ecommerce Predictions For 2024 Tue, 02 Jan 2024 00:30:28 +0000 India’s $100 Bn+ ecommerce market has seen a slew of changes in 2023, ranging from the entry of new players,…]]>

India’s $100 Bn+ ecommerce market has seen a slew of changes in 2023, ranging from the entry of new players, the expansion of the Open Network for Digital Commerce (ONDC) going live and D2C brands exploring the omnichannel path for revenue growth.

While Walmart’s infusion of $600 Mn into Flipkart as a part of its mega $1 Bn round hogged the limelight towards the end of the year, Amazon put a pause on its spending in India and streamlined its workforce in line with global strategy.

The past year also saw MamaEarth, become the first publicly-traded D2C brand in India, with IPO subscribed 7.6 times amid a spiked interest from the institutional investors. 

India’s two largest conglomerates, Reliance Industries and Tata Group, are also rewriting their playbooks to grab a major chunk of the burgeoning online retail industry, with the focus now shifting to clock revenues from beyond metros and Tier 1 cities. 

At the same time, the government has lent its support to the ONDC to check the dominance of large players in the aggressively growing ecommerce market. The year 2024 promises to bring many of these factors into play.

The 8 Biggest Ecommerce Trends To Expect In 2024

8 Ecommerce Predictions for 2024

Amazon-Flipkart Duopoly Likely To Weaken With Rise Of Meesho & Co

Despite a challenging regulatory environment, the strengthening of the D2C ecosystem and ONDC’s foray into digital commerce, marketplace giants Amazon India and Walmart-owned Flipkart have managed to capture more than 90% of the total gross merchandise value (GMV) during the peak festive sales in 2023. 

Even as these giants are building strategies to operate in a far more regulated environment than before, analysts believe that the marketplaces will continue to leverage the first-mover advantage, scale in terms of user base, and distribution channels in 2024, giving them an edge over the competition. 

Except for SoftBank-backed Meesho, which has made surprising leaps in terms of average month-on-month user growth, analysts predict other players will not dent the current ecommerce revenue share of Amazon and Flipkart. 

D2C players or ONDC will have some impact in 2024, but only Meesho is in the position to challenge the duopoly. In April 2023, equity research firm Jefferies said that Meesho is growing faster than the overall growth rate of the ecommerce industry in India.

 “Meesho had an impressive 120 Mn average monthly active users on its platform during CY22. Over the last two years, Meesho added ~100 Mn MAUs, much higher than additions by peers. Meesho scores well on all stages of an online purchase journey, including awareness (measured by app downloads), consideration (measured by MAUs) and transaction (measured by MTUs),” the Jeffries report added.

Other analysts believe Meesho’s zero commission model for sellers who offer unbranded products targeted at consumers from middle-low income households has worked for the Bengaluru-based ecommerce unicorn which has captured 7% of the ecommerce market share in India.

However, the larger question is how these giants will move beyond Tier 1 cities and metros, which have driven a majority of the revenues so far. Meesho and even the likes of JioMaart or TataNeu will have to capture underpenetrated markets, a top ecommerce industry analyst told us.

“This is especially true since Amazon and Flipkart do have control over large inventories earlier in the form of companies like Cloudtail, Appario and now private label brands. With time, if the regulators do not put an end to this structure through definitive laws, Amazon and Flipkart will build on the market duopoly,” an ecommerce analyst added.

National Ecommerce Policy Will Disrupt Best-Laid Plans

The year ahead is also expected to see the announcement and implementation of the much-awaited ecommerce policy after years of battles between India’s retailer body, the Confederation of All India Traders (CAIT) and the marketplace duopoly.

Sources told us that the announcement of the ecommerce policy was deferred since both Amazon and Flipkart have had several rounds of discussion with the Union Commerce Ministry expressing contentions over the various provisions of ecommerce consumer protection rules (2020).

Sources told us the policy builds on the ecommerce consumer protection rules (2020) and will incorporate strict adherence to local data storage, consumer interest, the counterfeit policy of marketplaces, marketplace linkages and ownership of sellers, predatory pricing, forced discounting and flash sales.

The ecommerce policy, as per several reports, will not see further revisions or drafts made publicly. 

Amazon and Flipkart are particularly in a tight spot since they are owned by foreign entities and have been alleged to have violated FDI and FEMA rules in past. As such, the upcoming ecommerce policy is expected to impact them the most, especially since both have aggressively expanded in having partnerships and tie-ups with private-label brands over the past few years. 

There have also been allegations of both using the data of the most popular products being sold on the platform to build their private labels. “It will be interesting to see what the regulations hold in place for advertising on ecommerce marketplaces since that is where Flipkart and Amazon draw a majority of their revenues now,” Prem Bhatia, CEO of ecommerce tech company Graas, told Inc42.

ONDC Penetration To Grow

ONDC made a big foray into India’s digital commerce sector in 2023, the first of its kind initiative in the world to transform the digital trade and ecommerce landscape. Although ONDC began by disrupting food delivery, the fact remains that the open protocol is yet at a very nascent stage. 

ONDC is still building its network and hence would need aggressive seller onboarding, awareness campaigns and investment in marketing to make a dent in the online retail industry as it is.

CBO Shireesh Joshi told Inc42 that in 2024, ONDC’s focus will be further expansion into cities and vertical expansion. 

“We are focussed on expanding our services to many cities with a wider range of products and services. A case in point will be for instance we are devising this product of sachet loan products for street side vendors at a very low interest rate against their sales history. The target is becoming accessible and penetrating to remote markets,” he added.

Notably large players such as Snapdeal, Amazon’s logistics arm Amazon Transportation Services (ATS), BigBasket, PhonePe, Paytm, and Ola have joined the network, showing the network’s growing presence and stature.

ONDC will continue to function as a not-for-profit entity and may eventually charge small fees from sellers but that will happen several years down the line. On the discount/incentive side, the ONDC CBO maintained that the buyers may expect some discounts slashing around Q1 2024. 

Sources have informed us that the big ecommerce players have largely stayed away from ONDC which again puts a question on the scalability of the open protocol. “That is a larger question which should be posed to Amazon and Flipkart,” Joshi said in response.

Reliance, Tata’s Acquisition Appetite To Grow

Despite the ecommerce industry’s explosive growth over the past few years, the $100 Bn+ industry is still very small compared to the $1.5 Tn retail industry which is where the biggest conglomerates of India like Reliance Industries, Tata Group, and Aditya Birla Group have a huge edge over the ecommerce players. 

Reliance and Tata have unshakeable dominance in the retail industry of India on top of which they have built JioMart, TataNeu as well as other platforms. 

Industry sources revealed that the next leg of growth for these conglomerates will come from digitising their thousands of offline stores, bringing their brands into the digital sphere and acquisitions. 

“In a way, Tatas and Reliance will have different playbooks. Reliance eyes acquisitions and distress deals to strengthen its presence in any industry. We may expect Reliance’s Jio to acquire more brands across fashion, grocery, pharmaceuticals, and apparel, verticals. For Tatas, their loyalty programmes, super app ambitions and infusion of capital to build a good tech stack, expand to multiple categories would be priorities,” an industry analyst said.

While Amazon and Flipkart’s dominance has been in online retail across selected markets, Reliance and Tata are bringing in organised retail models which will be integrated with their digital presence. 

Omnichannel Plays Will Dictate D2C Brand Success

Is the party over for the D2C ecosystem? Mostly, Yes. 

The D2C brands were cashing on the lower interest rates globally as a result of which the VC money aided the quick expansion of the digital-first brands. However post-pandemic, a realisation has dawned upon the D2C startups that they will have to build an omnichannel strategy to cater to offline markets and still depend on third-party marketplaces to sell online. 

“In future, omnichannel strategies will become even more essential for the success of D2C brands. For a seamless customer experience, brands need to integrate online and offline channels as new technologies continue to redefine consumer interactions,” Ashish Dhuwan, Vice President, beatXP, an online store for health products said. 

Personalised experiences across channels will be provided through data-driven insights, making personalisation essential. New technologies, such as artificial intelligence (AI) and augmented reality (AR), will further enhance the omnichannel play of D2C brands.

Success in the D2C is accelerated by omnichannel integration, which simplifies and streamlines the customer experience across multiple platforms. Online platforms, social media, and retail stores are just a few of the channels that D2C brands can integrate to create an easily accessible customer journey, he further said.

Graas’ Bhatia said that the D2C brands will have to cut down on their marketing, and advertising spending in 2024 while adopting a wait-and-watch strategy for capital to flow into the markets before they go into expansion mode.

“In general, I don’t think that the first few months of 2024 will be an easy market for D2C brands. On the positive side, some of the Indian D2C brands which have good products can explore Southeast Asia, the Middle East and other geographies as markets,” Bhatia added.

D2C House Of Brands, Roll-Ups Will Begin To Fold

Amazon brands aggregator Thrasio’s meteoric rise and fall perhaps now serves a lesson or two for many of its clones in India. 

The ‘house of brands’ ecosystem in India that mushroomed in the past few years has more or less subsided. The likes of Mensa Brands, Goat Brand Labs, Upscalio, and Globalbees raised millions of dollars in quick succession, going on an acquisition spree.

But industry players believe these acquisitions happened at fairly high valuations, and the fact that many ‘house of brand’ platforms raised venture debt, means they now find themselves in a difficult spot when it comes to long-term survival.

“Even the large fundraise for house of brands involved a heavy debt component and now the cost of the repayments has increased which has impacted their growth prospects,” an industry insider said.

The year ahead will see further consolidation and mergers in this space with the likes of Aditya Birla-backed TMRW, Wipro Consumer Care or even Reliance acquiring a few such startups.

“Even if the distressed sales happen in the first half of 2024, as soon as the interest rates lower globally and VC money flows, we can expect some of the roll-ups to raise capital again but till then it will be a matter of withstanding challenges,” the founder of a Bengaluru-based D2C brand said.

Vertical Ecommerce In For Consolidation

Category-specific ecommerce marketplaces or vertical marketplaces have made significant strides over the past couple of years with the likes of publicly listed companies like Nykaa and CarTrade even achieving profitability, while Urban Ladder attracted Reliance’s eye. 

This is at a time when horizontal marketplaces like Amazon and Flipkart are yet to reach profitability despite a majority share in the industry. 

The upcoming FirstCry IPO will serve as an important metric for the success of vertical ecommerce marketplaces in 2024 as per analysts.

Nykaa, Cartrade or FirstCry will set the benchmarks for vertical ecommerce in the country. Since these are publicly listed companies the focus will also be laser-sharp on achieving and maintaining good unit economics, a market analyst said.

We have also seen Reliance acquiring Netmeds, Urban Ladder, and Tata acquiring 1MG, and CaratLane in the past few years. 

Experts are also expecting privately held vertical ecommerce marketplaces will land more funding and acquisition opportunities in 2024, given the success of category-specific market leaders

How Will B2B Marketplaces Fare? 

While most of the focus in ecommerce is on marketplaces, B2B ecommerce has grown tremendously in the past half-decade. However, market analysts expect their growth to be dependent on capital access given the cost of acquisitions of materials and maintenance of warehouses is capital intensive. 

Even as B2B unicorn Udaan announced a mega fundraise, the reports mentioned that it was a mix of equity and debt which was a down round. Udaan’s revenues have also fallen considerably in FY23 even as it looked to pare down costs. 

The smaller B2B ecommerce marketplaces are now challenged with reducing the acquisition/ purchase costs of raw materials and finding buyers who they can sell at a reasonable price.

“Essentially the discount party that the B2B marketplaces had to offer to buyers is over. And now, we will only see the market leaders surviving the storm,” an agritech marketplace founder said.

In addition, exploring markets beyond India may prove to be more difficult given the geopolitical tensions in the Middle East, Russia and the US. 

“The B2B marketplaces will have to reduce their dependencies on asset-heavy models and focus on India as a geography in 2024 to become cost-effective and generate revenue,” the founder quoted above said.

[Edited By Nikhil Subramaniam]

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Zomato Hikes Platform Fee To INR 4 Per Order Across Major Cities Mon, 01 Jan 2024 16:19:15 +0000 Listed food delivery platform Zomato has increased the platform fee to INR 4 per order across key markets from INR…]]>

Listed food delivery platform Zomato has increased the platform fee to INR 4 per order across key markets from INR 3, according to information on its app.

The new rates are effective from January 1.

According to sources cited in an ET report, New Year’s Eve saw platform fees temporarily upped to as high as INR 9 per order in certain markets.

“These are business calls which we take basis various factors from time to time,” a Zomato spokesperson was cited by ET as saying on the platform fee hike.

Incidentally, Sunday (December 31) was also when Zomato saw its order volume during New Year’s Eve shoot up to all-time high levels. Taking to X, CEO Deepinder Goyal noted that the number was bigger than the combined number of orders the food delivery platform had clocked for New Year’s Eve over the past six years.

Platform Fee Driving Revenue In Food Delivery

Zomato started charging a platform fee on orders on its platform in August last year, starting with INR 2 and increasing to INR 3 across major markets. Zomato’s closest rival Swiggy began charging an INR 2 fee as well, which was later hiked to INR 3.

The two platforms are charging a platform fee beyond the delivery charge, which is waived for customers of their respective loyalty programmes. The platform fee, however, applies to Zomato Gold and Swiggy One members as well.

Incidentally, Zomato’s quick commerce arm Blinkit also charges an INR 2 platform fee per order.

While it might not be a popular decision among users, platform fees have improved the revenues of food delivery startups. For instance, in its July-September quarterly results, Zomato attributed an improvement in the percentage of what it makes (also called a take rate) on each food delivery order to the platform fee.

According to a November research note by Jefferies, Zomato’s take rate in the September quarter of FY24 was 24.1%, improving 28 basis points (0.28 percentage points) from a year earlier and 32 basis points from the previous three-month period.

Platform fee is also being talked about as a major factor in Zomato turning its fortunes around and becoming profitable over the past two quarters. It reported a profit after tax of INR 36 Cr during the quarter ended September 30, 2023. In the April-June quarter, it had reported a net profit of INR 2 Cr.

Shares of the foodtech giant ended trading 0.7% higher at INR 124.50 on the BSE on Monday (January 1).

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Pristyn Care’s FY23 Revenue Inches Closer To INR 500 Cr Mark, Loss Jumps To INR 383 Cr Mon, 01 Jan 2024 10:20:29 +0000 Delhi NCR-based healthtech unicorn Pristyn Care’s operating revenue increased 45% in the financial year ended March 31, 2023. The Peak…]]>

Delhi NCR-based healthtech unicorn Pristyn Care’s operating revenue increased 45% in the financial year ended March 31, 2023. The Peak XV Partners-backed startup reported an operating revenue of INR 452.8 Cr in the financial year 2022-23 (FY23), an increase of 1.4X from INR 312.7 Cr in the previous fiscal year.

Founded by Harsimarbir Singh, Dr Vaibhav Kapoor, and Dr Garima Sawhney in 2018, Pristyn Care offers advanced secondary care surgeries through its network of more than 200 clinics, 700 hospitals, and a team of 400+ in-house super-speciality surgeons across 40 cities in India.

Including other income, the startup’s total revenue rose 45.6% to INR 493.7 Cr in FY23 from INR 338.9 Cr in the previous fiscal year.

Despite the increase in its top line, Pristyn Care’s net loss surged 38% to INR 382.5 Cr during the year under review from INR 277.1 Cr in FY22.

Pristyn Care’s FY23 Revenue Inches Closer To INR 500 Cr Mark, Loss Jumps To INR 383 Cr

Where Did Pristyn Care Spend?

The startup’s total expenditure increased to INR 876.8 Cr in FY23, a rise of 42% from INR 616 Cr in the previous year.

Advertising Expenses: The startup’s advertising expenditure was one of the biggest expenses during the year under review. Pristyn Care spent INR 219.9 Cr under the head in FY23, an increase of 17% from INR 187.8 Cr it spent in the previous fiscal year.

Employee Benefit Expenses: Pristyn Care spent INR 198.5 Cr on employee salaries and other benefits during the year under review, up 36% from INR 146.3 Cr in FY22. 

Surgery Expenses: The startup’s expenses under the head grew 30% to INR 133.4 Cr in FY23 from INR 102.3 Cr in the previous fiscal year.

It is pertinent to note that Pristyn Care added new surgical categories, including dental procedures, knee replacement, and weight loss surgeries, in FY23. It also expanded the availability of some of its categories such as ophthalmology, gynecology and urology beyond the major metro markets.

Earlier this year, the startup also began operations in Bangladesh, establishing a presence in Dhaka and Chittagong. 

Pristyn Care has raised $177 Mn across multiple funding rounds till date. The startup entered the coveted unicorn in late 2021 after raising $96 Mn in its Series E round from Peak XV Partners (then Sequoia Capital India), Tiger Global, Winter Capital, Eriq Capital and Hummingbird Ventures at a valuation of $1.4 Bn.

The startup competes against the likes of Practo, PharmEasy, and MediBuddy.

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Tech Startups In India: A Driving Force For Economic Growth And Employment Mon, 01 Jan 2024 08:30:12 +0000 In recent years, India’s startup ecosystem has undergone a remarkable transformation, securing its place as the third-largest startup hub worldwide.…]]>

In recent years, India’s startup ecosystem has undergone a remarkable transformation, securing its place as the third-largest startup hub worldwide.

This burgeoning sector not only revolutionises the country’s technological landscape but also serves as a crucial catalyst for driving employment and economic growth. 

Current State Of The Indian Startup Ecosystem

India’s startup ecosystem boasts over 1,00,000+ startups. The capital invested between 2014 and 2023 surpasses a staggering $146 Bn, signifying a robust financial foundation for innovation and growth. 

Moreover, the presence of more than 20K+ active startup investors and 112 unicorns with a combined valuation of $500 Bn+ solidifies India’s status as a global hub for entrepreneurial endeavours.

The Future of Jobs Report 2023 by the World Economic Forum anticipates positive developments in jobs and skills over the next five years. While most technologies are projected to positively impact employment, about a quarter of jobs are expected to undergo changes, driven by various factors, including the green transition.

Young Firms And Their Crucial Role In Economic Growth

The up-or-out dynamics of young firms are identified as crucial for economic growth. Experimentation with novel business concepts, inherent to startups, contributes significantly to technological advancements. 

Success results in improvements in technology, thereby promoting economic growth. However, failure is an intrinsic part of the experimentation process, and startups disproportionately contribute to this cycle.

Job Creation: Addressing Unemployment Concerns

Tech startups are emerging as powerful engines of job creation in India, directly employing over 10.34 lakh individuals in 2023. This number is expected to soar in the coming years, providing a substantial solution to the nation’s growing unemployment concerns. 

The rapid growth of tech startups generates a plethora of new employment opportunities, particularly benefiting India’s young and tech-savvy workforce. These opportunities span diverse domains, including software development, data analytics, marketing, and customer service.

Skill Development And Upskilling: Nurturing A Future-Ready Workforce

Beyond job creation, tech startups are actively contributing to the development and upskilling of India’s workforce. Engaging in training and skilling programs, startups are equipping their employees with the latest technological advancements and industry-specific knowledge.

This focus on skill development is crucial for preparing India’s workforce to meet the demands of the ever-evolving digital economy.

Innovation And Entrepreneurship: Catalysts For Economic Transformation

Tech startups are at the forefront of innovation, continually pushing the boundaries of technology and introducing disruptive solutions across various sectors. This spirit of innovation is driving economic transformation, fostering the emergence of new industries, and enhancing India’s global competitiveness.

Simultaneously, tech startups are cultivating a culture of entrepreneurship, inspiring more individuals to pursue their ventures and contribute to India’s economic growth.

Global Recognition And Foreign Investment Influx

The success of Indian tech startups is gaining global recognition, attracting significant foreign investment and fostering international partnerships. This influx of capital is fueling the growth of India’s startup ecosystem, enabling startups to expand their operations, reach new markets, and further contribute to the country’s economic development.

Challenges And Opportunities: Navigating The Path Forward

Despite the remarkable progress, the Indian tech startup ecosystem faces challenges such as funding accessibility, particularly for early-stage ventures, and the need for a supportive regulatory environment.

However, the opportunities for growth far outweigh these challenges. Government initiatives, such as the Startup India program, provide crucial support to the sector. Additionally, the increasing adoption of technology across industries is creating a fertile ground for startups to thrive.

Conclusion: Shaping India’s Economic Destiny

In conclusion, tech startups are undeniably playing a pivotal role in shaping India’s economic future. Their contributions to job creation, skill development, innovation, and attracting foreign investment are driving economic growth and transforming the country’s employment landscape.

As India continues its journey towards becoming a global economic powerhouse, the tech startup ecosystem is poised to assume an even more significant role in shaping the nation’s destiny. The collaborative efforts of entrepreneurs, supported by government initiatives, are laying the foundation for a future where innovation thrives, jobs abound, and India stands as a beacon of global technological prowess.

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Zomato In Hot Soup, Gets GST Demand Notice Of INR 4.2 Cr Mon, 01 Jan 2024 08:10:35 +0000 Fresh tax trouble has mounted for foodtech giant Zomato as tax authorities have now slapped a notice of INR 4.2…]]>

Fresh tax trouble has mounted for foodtech giant Zomato as tax authorities have now slapped a notice of INR 4.2 Cr on the startup for alleged short payment of goods and services tax (GST).

This comes close on the heels of the Gurugram-based listed foodtech giant receiving an INR 401.7 Cr show cause notice from the Directorate General of GST Intelligence, Pune Zonal Unit, over unpaid tax on delivery charges collected from the customers last week.

Zomato has received three orders from Sales Tax Officer, Ward 300, Delhi and Deputy Commissioner, DGSTO-4, Bengaluru, Karnataka alleging short payment of GST along with applicable interest and penalty under Section 73 of the Central Goods and Services Tax Act, 2017 (‘CGST Act, 2017’), Delhi Goods and Services Tax Act, 2017 (‘DGST Act, 2017’) and Karnataka Goods and Services Tax Act, 2017 (‘KGST Act, 2017’), with an amount totalling to INR 4.24 Cr, the company said in an exchange filing.

“The authorities in Delhi and Karnataka seem to have issued the above orders dated December 30 and 31, 2023 without giving due consideration to our response submitted earlier. We believe that we have a strong case on merit and the company will be filing appeals against the orders before the appropriate appellate authorities,” Zomato said in the filing.

The company’s shares opened at INR 124.65 apiece during Monday session, up 0.77% compared to its previous close at INR 123.7.

Earlier also, reports surfaced that the food delivery giants Zomato and Swiggy reportedly received notices for a cumulative goods and services tax (GST) worth INR 1,000 Cr, as the tax authorities now view delivery charges collected by these platforms as their revenue.

It is important to note that in January last year, the Centre added ‘restaurant services’ and cloud kitchens under the purview of Section 9(5) of the CGST Act, 2017, which led to the likes of Swiggy and Zomato paying 5% GST on ‘restaurant services’ they offer.

However, it continued to remain unclear whether delivery services and fees collected from that would also be taxed.

The delivery fees charged by both Swiggy and Zomato have consistently been a subject of debate, drawing controversy from various viewpoints.

In 2016, Swiggy started the practice of implementing food delivery fees. Subsequently, Zomato followed suit by introducing its delivery charges.

Having set a standard for delivery fees, Zomato then introduced a loyalty programme, now acknowledged as Zomato Gold. Under this programme, customers can circumvent delivery fees by subscribing to a monthly plan, which also offers additional perks.

Similarly, Swiggy introduced Swiggy One, adopting the concept of exempting delivery fees through a subscription model and accompanying it with supplementary benefits.

Zomato and Swiggy deliver 1.8 Mn to 2 Mn orders per day across the country. The introduction of a new Goods and Services Tax (GST) could potentially disrupt their cash flow.

Meanwhile, both platforms have started imposing a platform fee on orders, with charges varying between INR 2 and INR 5 per order. Notably, this fee applies universally to all customers, irrespective of whether they are subscribed to any specific loyalty programme.

Zomato reported its second consecutive profitable quarter, with profit after tax surging to INR 36 Cr during the September quarter of the financial year 2023-24 (FY24). This was an 18X jump from PAT of INR 2 Cr in the preceding quarter.

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IPO-Bound Ola Electric Becomes First Indian EV Company To Get PLI Nod Mon, 01 Jan 2024 06:51:37 +0000 IPO-bound Ola Electric has become the first Indian electric two-wheeler (e2W) company to become eligible for the government’s production-linked incentive…]]>

IPO-bound Ola Electric has become the first Indian electric two-wheeler (e2W) company to become eligible for the government’s production-linked incentive (PLI) scheme.

The Ministry of Heavy Industries (MHI) has given its approval after a four-month-long process.

While there has been no official confirmation from either the government or Ola Electric, it is worth noting that other major players like Hero MotoCorp, TVS Motor Company, and Bajaj Auto have also applied for the PLI scheme.

As per Moneycontrol’s report, citing an official close to the matter, Ola Electric has successfully met the scheme’s eligibility criteria, such as minimum 50% domestic value addition in its vehicles. 

“For e2W startups, fresh investment of Rs 1,000 crore is required to avail of the PLI scheme, while OEMs must have a minimum revenue of Rs 10,000 crore,” the source further added. 

Meanwhile, industry experts are of the view that the incentive payout under the PLI scheme will be up to 18% of the sales value.

The electric scooter maker has already filed a red herring prospectus with the markets regulator Securities and Exchange Board of India (SEBI) for an INR 7,250 Cr initial public offering (IPO). According to media reports, in total, the public issue will comprise an OFS component of up to 9.5.1 Cr shares. 

Last year, the company, along with Reliance New Energy Ltd and Rajesh Exports, signed a contract with the MHI under the PLI scheme for the manufacturing of advanced cell chemistry (ACC) battery manufacturing.

Back then, the government said that as a part of the contract, the companies would receive incentives under the INR 18,100 Cr PLI scheme. In addition, the government the expectations that three companies would set up a manufacturing capacity of around 95 GWh to be set up by these companies.

Earlier this year, the company announced that it had already started the construction of the country’s biggest gigafactory in Tamil Nadu. Ola Electric reported that during FY23, its sales were at INR 2,630.9 Cr, a 605%, an increase from INR 373 Cr in FY22. 

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Dealing With Credit Risks, In B2B Transactions Mon, 01 Jan 2024 06:30:57 +0000 In the changing world of business-to-business (B2B) transactions it is crucial to handle credit risks to maintain stability and foster…]]>

In the changing world of business-to-business (B2B) transactions it is crucial to handle credit risks to maintain stability and foster long term partnerships.

As businesses increasingly rely on credit-based transactions it becomes essential to evaluate and address the challenges that arise from credit risks.

Increased Risks: Financial Fluctuations, Economic Contractions And Market Volatility

The primary concerns are the heightened risk associated with unsecured retail lending, the strain on profit margins caused by funding costs, the growing demand for personal loans, difficulties in monitoring the purpose of funds for unsecured loans, the potential indirect exposure to banks through the NBFC route.

Certainly, managing credit risks in B2B transactions often involves considering contingencies for potential payment failures. One effective strategy is to incorporate terms related to debt or collateral in agreements, providing a layer of security in case payments do not materialize as expected. This can act as a protective measure and help mitigate the impact of non-payment, enhancing the overall risk management approach.

Additionally, there is an increase in the expenses associated with lending to individuals, as well as a quick expansion in the amount of money being distributed. This also pertains to personal loans, which are seeing much greater instances of uncollectible debts, with an anticipated loss rate of 3-5 percent.

Important Monitoring: Credit Ratings, Industry Updates, & Market Movements For Commitment Evaluation

Credit risks in B2B transactions pertain to the losses a business may encounter when their counterparties fail to fulfil their obligations. These risks are amplified by factors such as market volatility, economic downturns, and changes in the counterparty’s health. Efficiently managing credit risks do not safeguard a company’s cash flow and profitability. Also contributes to maintaining a flourishing business environment.

Micro, Small, and Medium Enterprises (MSMEs) at the forefront, which are commonly regarded as the foundation of the economy, frequently encounter significant credit risk difficulties. Due to their limited resources, they are susceptible to the domino effect resulting from delayed or defaulted payments, which puts pressure on their capacity to fulfill financial responsibilities.

Economic Consequences: The aggregate impact of credit risks in the MSME sector transcends individual enterprises, exerting influence on the overall economy. Within a networked company environment, the domino effect can decelerate economic activity, which in turn affects employment and innovation—the fundamental basis of MSMEs’ contributions to economic expansion.
Credit risk mitigation strategies: Perform comprehensive credit screens and due diligence on prospective clients. Gaining insight into the creditworthiness of business associates facilitates the process of making well-informed decisions.
Transparent Credit Terms and Policies: Create explicit credit terms and policies, encompassing specific due dates, consequences for delayed payments, and relevant interest rates.
Customer base diversification: Relying too much on a small number of clients exposes organizations to concentrated credit risks. Expanding the range of customers aids in distributing risk.
Illustrations from actual experiences: Let’s consider a micro, small, and medium enterprise (MSME) operating in the manufacturing sector. This MSME specializes in selling components to a bigger assembly unit. In the event that the assembly unit experiences payment delays as a result of financial limitations, the MSME may encounter difficulties in settling its obligations to suppliers, thereby impacting the entirety of the supply chain.

In a different situation, an MSME operating in the service sector may have difficulties if a corporate customer fails to fulfil their payment obligations, resulting in disruptions to business operations.

Approaches For Optimal Credit Risk Management

Ensuring trustworthiness in financial transactions involves a comprehensive evaluation, examining the counterparty’s credit history, financial documents, and market reputation. Continuous monitoring of counterparties’ financial health is crucial for anticipating and mitigating potential risks. Staying informed about the latest market news, changes in credit ratings, and industry events is essential to gauge a counterparty’s ability to meet commitments.

Diversifying the loan portfolio across businesses and geographical locations is a risk management strategy, considering varying sector responses to economic changes. Determining credit limits and conditions based on each counterparty’s risk profile, whether through negotiations or limiting credit for higher-risk counterparts, is part of the process. Implementing security instruments such as letters of credit, guarantees, or trade credit insurance enhances security if a counterparty can’t fulfil obligations.

Ensuring explicit agreements specify credit transaction conditions, penalties for late payments, and criteria for altering or cancelling credit provides clarity. Utilising technology and automation is key to enhancing precision and effectiveness in monitoring and evaluating credit management risks.

Credit Leadership: Crucial For Gaining Competitive Edge In A Changing Corporate Environment

Ultimately, effectively managing credit risks in business-to-business transactions is essential for the long-term expansion of MSMEs and the overall economy.

Businesses can reduce credit risks and enhance the strength and prosperity of the business ecosystem by implementing strategic credit management procedures, completing due diligence, and promoting transparent communication.

In the current dynamic corporate environment, maintaining a leading position in credit risk management is not only a need but also confers a competitive edge.

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Here’s How Top Startup Sectors Performed On The Funding Front In 2023 Mon, 01 Jan 2024 05:00:07 +0000 Standing on the precipice of 2023, we took note of some of the most concerning funding trends in the world’s…]]>

Standing on the precipice of 2023, we took note of some of the most concerning funding trends in the world’s third-largest startup ecosystem.

According to Inc42’s annual ‘Indian Tech Startup Funding Report 2023’, Indian startups secured just over $10 Bn in funding until December 25 this year, down 60% compared to the $25 Bn raised in 2022.

Not just this, deal count, too, withered 40% YoY to 897 as the investor appetite waned due to several startup misadventures during the year. Historically, Indian tech startup funding hit a seven-year low, plummeting even below the $13 Bn raised in 2019.

However, despite the massive shortfall, the likes of fintech, ecommerce and enterprise tech continued to lead the funding scenario in the Indian startup ecosystem.

According to Inc42, these three sectors accounted for more than two-third of the total funding raised by Indian startups in 2023. Interestingly, the sectors also contributed to more than half of all startup funding deals that took place in the homegrown startup ecosystem in 2023.

As the three sectors continued to dominate the startup food chain in the country, let us take a look at what the funding scenario looked like in different sectors in 2023.

top 10 most funded startup sectors in 2023

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Fintech: The Shining Jewel in India’s Startup Crown

In 2023, as many as 129 fintech startups cumulatively raised $3.02 Bn, according to Indian Tech Startup Funding Report 2023. 

Even though the figure was down 37% compared to the $4.8 Bn raised a year ago, fintech remained the shining jewel in India’s startup crown as the most funded sector.

In the fintech realm, lending tech was the top choice of investors, as nearly 40% of all fintech funding ($1.2 Bn) went to lending tech startups. Subsectors like banking and fintech SaaS bagged $971 Mn and $348 Mn, respectively, during the year.

Looking at stagewise funding, early stage fintech startups saw the worst year-on-year decline in funding at 54%. Meanwhile, growth and late stage startups also saw a funding meltdown of 33% and 36%, respectively.

Ecommerce Held Its Ground

Given India’s rapidly rising population of online shoppers, it is no surprise that ecommerce remains one of the top-funded startup sectors. However, investors’ second-most favourite sector, too, could not escape the chills of the funding winter.

Until December 25, 2023, as many as 192 ecommerce startups ended up securing $2.6 Bn in funding in 2023, down 32% YoY compared to $3.2 Bn in 2022. The three subsectors within the ecommerce realm that took the most sectoral funding were D2C, B2C and B2B. Meanwhile, D2C startups attracted $1.4 Bn in 2023. 

In terms of stagewise funding split, seed stage startups suffered greatly and could only raise around $89 Mn in 2023, down 65% YoY. 

Enterprise Tech Takes A Deep Plunge Over The Years

As the Indian startup ecosystem moves towards correction, businesses across sectors, from manufacturing to finance, are increasingly relying on tech solutions for automation, efficiency, and growth. This has created a steady (and unsurprising) demand for enterprise tech products and services.

This made the sector the third most funded sector in India’s vibrant startup ecosystem. Yet, the enterprise tech space witnessed a significant jolt in 2023, as more than 150 startups raised a mere $1.3 Bn compared to a whopping $4 Bn in 2022 and $3.7 Bn in 2021.

Several factors conspired to temper investors’ enthusiasm for this space. The global economic slowdown cast a shadow, raising concerns about return on investment and prompting VCs to tighten their purse strings. 

Deeptech Flourished As The Dark Horse In 2023

On the contrary, deeptech emerged as the dark horse of the year that was otherwise infested with dying investor trust. 

The sector raised $496 Mn in 60+ deals, mirroring a rise of 50% from $397 Mn raised in 2022 and a 105% increase from $242 Mn raised in 2021.

As AI became an inevitable part of daily consumption habits in 2023, VCs and PEs started attaching their investments to startups disrupting established industries and solving complex problems.

Furthermore, the Indian government’s push for indigenous technology development created fertile ground for Deeptech startups to flourish. Initiatives like the National Mission on Quantum Technologies, the draft deeptech policy, Atal Innovation Mission, and the Prime Minister’s Science, Technology and Innovation Advisory Council (PM-STIAC) are further set to provide crucial support in this arena.

Beyond AI, other deeptech sub-sectors like robotics, biotechnology, and materials science are also expected to see significant traction going ahead. 

The potential for these technologies to revolutionise industries and improve lives is drawing increasing attention, attracting both domestic and international investors. Yet, the sector has its challenges. Long development timelines, high investment requirements, and the absence of a quality talent pool cannot be ignored.

Despite the roadblocks, the sector is well poised to play a pivotal role in India’s economic growth.

Other Key Sectors On The Tenterhooks, Too

While the Indian startup economy maintained its momentum, specific sectors found themselves in the passenger seat despite being in the top 10 checklist of investors.

Edtech, once the poster child of startups, faced a harsh reality check in the year of the extended funding winter. Layoffs created sombre headlines as demand crumbled. Parents, previously enthusiastic about filling every learning gap with online courses, tightened their belts amid economic uncertainty. 

The initial frenzy subsided, leaving many startups scrambling for viable business models. Amid all this, investors infused only $283 Mn into fewer than 50 startups. This capital infusion into the sector was down 88% YoY and more than 94% from 2021.

Similarly, the media and entertainment space was also impacted significantly — falling from $3.8 Bn+ raised in 2021 to a mere $285 Mn raised in 2023.  

Moving on, consumer services, a sector catering to several needs, felt the pinch of consolidation. Dominating players captured an outsized share of the market, squeezing smaller providers. Demand congregated in specific subsectors, leaving others neglected. 

Unfortunately, the sector witnessed a 90% decline in funding from $3 Bn+ raised in 2021 to $385 Mn in 2023.

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Startup Funding — Outlook For 2024

Overall, the dip in the funding of the Indian startup ecosystem shouldn’t be misconstrued as a decline, experts suggest. The current slowdown is being viewed as a necessary correction and a sign of maturing growth. The initial exuberance has given way to a more measured approach, where investors favour proven business models and sustainable traction over speculative leaps.

sector-wise funding over the past three years

Moreover, startup fundamentals have only started to get stronger. While the year proved to be a litmus test for many Indian startups, it also nudged the erring players to focus on the right set of metrics, rooted in hard facts and beyond vanity metrics. 

Even though startup funding levels are at their seven-year low, experts believe this is only a temporary setback, which could pave the way for a more resilient and thriving startup landscape. Meanwhile, notwithstanding the funding chill of the past two years, the ecosystem has much to look forward to in 2024.

[Edited by Shishir Parasher]

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The post Here’s How Top Startup Sectors Performed On The Funding Front In 2023 appeared first on Inc42 Media.

Future-Proofing Loans: The Crucial Role Of Data Analytics In India’s Lending Revolution Mon, 01 Jan 2024 03:30:55 +0000 Amidst the recent buzz about RBI increasing the risk weights for unsecured loans, one simple fact is hard to ignore.…]]>

Amidst the recent buzz about RBI increasing the risk weights for unsecured loans, one simple fact is hard to ignore. It’s that lending—especially through digital channels—is growing at a rate that’s hard to keep track of. The rise of advanced analytics fuels this along with automated workflows, making it easier for customers and lenders to avail and disburse credit in almost real-time. 

A FACE-equifax report on fintech lending trends reported that Fintechs disbursed loans worth INR 92,267 Cr in the year ended March 2023, a 21% year-on-year increase. The number of loans grew by 49% year-on-year from 47.7 Mn to 71 Mn. At the heart of this tech-propelled growth is pre-underwriting backed by data analytics. 

What Is Pre-underwriting?

Pre-underwriting is the preliminary assessment of the borrower to determine an applicant’s creditworthiness. The process is generally done during user onboarding, as opposed to underwriting, where (a more thorough) assessment is done after KYC to draw the final loan terms. 

Pre-underwriting isn’t new to lenders. However, with the rise of embedded credit in various apps and the proliferation of alternate data, pre-underwriting or pre-qualification has become the differentiator between good lenders and great ones. 

How Does Pre-Underwriting Work Today?

Pre-underwriting in digital lending involves two stages:

Pre-qualification: Data-driven pre-underwriting starts with pre-qualification of potential borrowers. Lenders use readily available data from their database to reach out to potential borrowers across channels like cold calls and SMS. 

Alternatively, applicants can be pre-qualified when submitting their basic details while exploring a loan product. 

The data received at this stage contains essential information, typically furnished by the applicant. They include personal identifiers and estimates of income and obligations.

Pre-approval: A more definitive assessment of creditworthiness, the pre-approval stage sees lenders perform a more thorough check of the applicants’ financials. The process involves checking borrowers’ bank statements, determining their financial prudence using consent-driven device data, and checking their credit history through soft bureau checks. 

It’s important to note that digital pre-underwriting today takes mere seconds to minutes.   

How Has Pre-Underwriting Transformed The Lending Landscape?

Traditionally, loan applications were ridden with paperwork, making the experience time-consuming and cumbersome. But lenders today can disburse loans in minutes to days (depending on the type of credit product). And this is all thanks to advancements in data analytics and AI. 

Here’s how data analytics-based pre-underwriting has shaped the progress of India’s lending landscape:

Customer-friendly onboarding: The adoption of data analytics has made loan products largely paper-free. Moreover, the optimum use of the data furnished at each pre-underwriting stage has cut down onboarding redundancies. This has led to low-documentation onboarding and faster application processing at the back end. 

Accurate assessment: Soft bureau pulls, bank statement analysis and alternate data give lenders a 360-degree view of the borrowers’ financials, leading to more precise lending decisions. Pre-underwriting accuracy also helps lenders catch fraud from the get-go.

Faster disbursals: Although pre-underwriting involves several assessment steps at the back end, the process itself only takes minutes. This means shorter application-to-disbursal cycles. 

Precise customer segmentation: As digital pre-underwriting involves accurate data from several sources, lenders can segment their customers into precise borrower cohorts. This means applicants are offered products that best suit their financial needs, enabling better conversion. 

Efficient cross-sell: Lenders can leverage the borrower data to offer other products that may suit their needs. For example, lenders can assess borrowers’ repayment discipline on existing credit and offer pre-approved products that can step up disbursals or credit product maturity.   

The fuel behind India’s digital credit rocketship is advanced analytics. With the proliferation of smarter modelling and workflows, lenders are set to usher in a new wave of dynamic products that work for the borrower, in a tailored and seamless manner.

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Here’s Everything You Want To Know About Cross-Border Bill Payments Mon, 01 Jan 2024 02:30:02 +0000 What Are Cross-Border Bill Payments? Cross-border bill payments refer to the process of paying bills that are due to a…]]>

What Are Cross-Border Bill Payments?

Cross-border bill payments refer to the process of paying bills that are due to a recipient in a different country. This process typically involves converting the payment from the payer’s currency to the currency of the recipient. It’s commonly used by individuals and businesses for various purposes, such as paying for services, subscriptions, or products that are provided by entities in another country.

Cross-border payments are made by individuals, companies, and even governmental entities. These payments can range from an individual sending money to family members abroad, a company paying an overseas supplier for goods or services, to governments engaging in international transactions. Each entity may have different reasons and mechanisms for making cross-border payments.

What Are Cross-Border Payouts?

Cross-border payouts are transactions where funds are sent across national borders from one party to another. These payouts can be for various reasons such as remittances, employee salaries if they are working overseas, vendor payments, or even for investment purposes. These payouts often involve currency exchange and are subject to the regulations and financial systems of the countries involved.

How To Accept Cross-Border Payments?

Accepting cross-border payments usually requires a business to have an international payment gateway or a bank account that can accept foreign currencies. Payment solutions like PayPal, Stripe, and other fintech platforms facilitate this process by allowing businesses to accept payments in multiple currencies and from different countries.  

How Do Cross-Border Payments Work?

Cross-border payments are transactions where money is transferred from one country to another. These payments work through international banking networks, wire transfer services, or digital payment platforms. The process involves converting the currency from the sender’s country to the currency of the recipient’s country, following regulations set by both countries and possibly involving intermediary banks or services for the transaction.

What Are The Different Types of Cross-Border Payments?

  • Wire Transfers: Traditional bank-to-bank transfers.
  • Electronic Funds Transfer (EFT): Digital transfer of funds between financial institutions.
  • Mobile Payments: Payments made via mobile apps or services.
  • Digital Wallets: Services like PayPal or Alipay that store and transfer digital currency.
  • Cryptocurrency Transactions: Utilising digital currencies like Bitcoin for international payments.

What Kind Of Cross-Border Payment Solutions Do Banks Need?

Banks need robust, secure, and efficient cross-border payment solutions to handle international transactions. These solutions should include:

  • Currency Exchange Facilities: Efficient mechanisms for currency conversion.
  • Regulatory Compliance Tools: To adhere to international financial laws and anti-money laundering regulations.
  • Security Protocols: To protect against fraud and cyber-attacks.
  • Integration With International Payment Systems: To facilitate smooth transactions across borders.
  • Real-Time Transaction Processing: For faster and more efficient transfers.

How Does a Company Make A Large Cross-Border Payment?

A company making a large cross-border payment typically does so through wire transfers or electronic funds transfer services provided by banks or financial institutions. These transactions require the company to provide detailed information about the recipient, adhere to international financial regulations, and possibly negotiate currency exchange rates. For very large payments, companies may also engage in hedging strategies to protect against currency fluctuations.

Why Is Cross-Border Payment So Important?

Cross-border payment is crucial for global economic integration. It facilitates international trade, allows businesses to expand into new markets, supports the global workforce by enabling overseas salary payments, and helps individuals transfer funds across countries. Efficient cross-border payment systems increase the speed and reduce the cost of these transactions, thereby promoting global economic growth and stability.

The post Here’s Everything You Want To Know About Cross-Border Bill Payments appeared first on Inc42 Media.

Inc42’s Indian Tech & Startup Predictions For 2024 Mon, 01 Jan 2024 00:30:58 +0000 With each passing year — and we have had 10 years of recaps and predictions — the future of technology…]]>

With each passing year — and we have had 10 years of recaps and predictions — the future of technology seems less and less certain. But despite the nature of ever-evolving technology, we try to predict where the Indian tech and startup ecosystem is heading.

And so it is in 2024, after the past year that has had its fair share of challenges, success stories and everything in between. We have, of course, taken a look at how the key sectors will look in the new year in our Indian Tech Outlook 2024 series, but there are still some bigger questions to answer:

  • Are startups and IPO-bound companies ready for geopolitical headwinds and setbacks?
  • Will policies and laws around emerging technologies hold back innovation or spur it?
  • Which sectors will face the biggest test with the rise of emerging technologies and regulations around these new areas?
  • How will generative AI change the game in 2024 — not only for startups but also for tech behemoths?
  • How will the focus on profitability and sustainable models impact Indian VCs, startups and listed tech cos?
  • How will the corporate governance debacles of the past two years impact VCs and founders?

We made 24+ predictions last year, and roughly 50% of them were on the mark, while a fair few were just shy of hitting and might come to happen this year. But this time we have eight major predictions for the Indian tech and startup ecosystem for 2024 — along with nine micro-trends that we foresee.

Consumer Services — Get Ready To Pay More For Streaming, Deliveries, Mobility

Platform fees became a thing in 2023 and they are unlikely to be phased out, especially given the clear revenue spike these fees have given to the likes of Swiggy and Zomato.

While Zomato reported two profitable quarters in FY24, Swiggy is also said to be on track to hit the milestone of profitability sometime in 2024. What’s more — both are now charging restaurants a per-order fee as well. So, in some ways, the food delivery giants are turning into double-sided marketplaces.

Quick Commerce Joins Fee Spree: When it comes to quick commerce, similar fees are being tacked on to every order under various names such as handling charges or packaging charges, so expect big announcements from Zepto, Blinkit and Instamart about unit economics improvements.

Ride-Hailing’s Revenue Thirst: On the mobility side, the drive for revenue has resulted in new models such as Ola Prime Plus or Namma Yatri’s subscription plans for driver-partners.

Essentially, the discounts and rebates that were used to grow the user base have given way to the most active users paying a small fee per transaction, or sometimes even for basic services like no cancellations.

Uber, which is striving to turn profitable in India, is also likely to follow suit with such plans in the next year.

OTT Hikes Looming? These platforms are banking on the fact that the most active users will continue to transact, even if other users might drop off. That’s also the rationale that the likes of Netflix and Amazon Prime are likely to use to hike their prices, to defend against the potential threat from a JioCinema-Disney+ Hotstar merger.

Can ONDC Fix Fee Anxiety? The X-factor is ONDC, which could create a new market for the users who grow weary of platform fees. The open network is already bringing some relief to consumers through its seller apps for food delivery and mobility, as we have written in the past year. Expect more such disruptions in 2024.

VC Ecosystem — Consolidation, New Thesis, Partner Rejigs

Partner exits, new fund managers, new funds and old funds slowing down or exiting India altogether —  as we said in our recap of the year for VCs, it wasn’t an easy year, and 2024 is unlikely to come as a relief.

AI Bets With Eye On Exits: The focus on early-stage investments will continue with AI startups getting a bigger chunk of the seed money, but investors are more likely to back those startups that have products and business models ripe for acquisitions by big tech giants.

Deeptech and AI will become a key thesis focus for VC funds as they look for early-stage bets.

After the low returns on existing capital deployed, VCs will prioritise exits in 2024. The movement towards exits began in 2023 when 56% of the investors surveyed by Inc42 reported exits in their portfolio in the year. But it won’t be easy to find the right early bets in GenAI.

Portfolio Consolidation On The Cards: Given the upheaval at VC firms such as Lightbox and Omidyar Network India, we can expect their portfolio companies to face fundraising challenges in 2024. Consolidation of portfolios between firms is also on the cards given that many key partners are looking at new thesis areas.

One also cannot rule out Sequoia-like restructuring when it was rebranded to Peak XV Partners. Foreign funds are definitely watching the regulatory situation closely to restructure their partnerships.

Dry Powder At The Late Stage: Of course, the elephant in the VC room is the dry powder they are holding, and all indications are that this capital will be deployed in pre-IPO rounds or in late stage companies that are set for IPOs in 2025. Investors and startups are anticipating public listings of tech companies in FY25 from the April-June quarter onwards.

As Inc42’s Indian Startup Investor Ranking & Sentiment Survey, 2023 indicates, 38% of investors active in India failed to deploy even 50% of their allocated budget into startups in FY24. Smaller funds will continue to look for early-stage bets to exhaust this dry powder.

In larger funds, the need to deploy this capital will shift focus to late-stage rounds, unlike the past two years when seed was the preferred stage. There is likely to be more pressure on VCs to deploy capital from funds that are running close to expiry.

Big Tech’s Comeback As Investors? Moving on, our conversations with VCs indicate that fundraising will be a struggle for firms as LPs continue to question the ongoing corporate governance debacles.

As a result, big tech companies are slated to once again return to the investment fold after a quiet few years. This is in line with the focus on generative AI startups and AI models emerging in India, which will become attractive acquisition targets for tech behemoths such as Google, Facebook, OpenAI and others.

Inc42’s Indian Tech & Startup Predictions For 2024

Fintech — Super App Platforms Will Face The Jio Financial Services Test

If 2023 was the year of super apps, 2024 will be the year of Jio Financial Services (JFS) as Mukesh Ambani’s grand plans in the BFSI space will be seen taking shape.

Jio Wants It All: Already, there are murmurs of Jio disrupting spaces such as consumer durables, merchant lending, personal loans and more. And with the Jio Payments Bank licence, the company is also in the fray to push its payments business which has been lagging behind the competition for many years.

Of course, the likes of Paytm, PhonePe, CRED, BharatPe, Groww and others are unlikely to watch JFS eating their lunch. Expect several new products from these unicorns and listed giants as they push to improve their revenue mix and capitalise on their user base, particularly the ones that are eyeing IPOs in 2025.

Paytm’s Crunch Year: After going through an up-and-down year, Paytm will likely focus on merchant acquisitions in a bigger way as indicated by CEO Vijay Shekhar Sharma, especially given its new lineup of payments devices. This is the best approach for the company, which had to scale back its consumer lending play in late 2023.

Acquisitions On The Card: Of course, one cannot rule out JFS taking the inorganic route to expansion and growth. Reliance Jio and Reliance Retail have banked on high-profile acquisitions in the past few years and this playbook has worked out well for both giants. The fintech landscape’s diversity offers JFS the chance to become the acquisition king in 2024.

Corporate Governance — Serious Consequences For Founders Caught In Legal Probes

Startup founders are used to being in the headlines but not in the way that we saw in 2023. From Ashneer Grover and Rahul Yadav to GoMechanic’s four cofounders and Byju Raveendran, the cofounder and CEO of India’s highest-valued startup (at least till a while back) — many found themselves caught in legal tangles for various reasons.

Lawman Knocking: Some of these founder-related issues are more serious than others with fraud allegations being investigated by the Economic Offences Wing and the Enforcement Directorate. These investigations and inquiries will run their course in 2024, but corporate governance and fraud issues often go under the radar for months before surfacing.

Will many more unicorns and high-profile founders find themselves caught in the legal net? That’s uncertain, but there is a growing concern that a lot of issues have been swept under the rug, and the rejig at VC firms will likely unearth many more cases where founders are hit by fraud allegations.

Erosion Of Trust: “VCs didn’t realise the amount of risk and liability that they are subject to, because they trusted a lot of founders,” at least one early-stage investor told us earlier this year, adding that as this trust erodes there will be more cracks that appear in the woodwork.

However, despite these measures, the sentiment among founders is that investors are not doing enough to improve their role in corporate governance. As Inc42’s Annual Funding Report, 2023 showed 54% of the surveyed Indian founders rated corporate governance measures by investors as moderately or barely effective.

Fate Of IPOs — Geopolitical Tensions Will Complicate Funds Inflow

Ola Electric, Awfis, Firstcry — and a slew of other startups — are lining up for the public markets in 2024. But these best-laid plans could face a curveball with geopolitical conflicts raging in Europe for the past couple of years, in the Middle East and even closer to home in Asia.

A recent EY report looking ahead to 2024 said, “Current events muddy the geopolitical outlook and raise the risk of more significant conflict escalation in the year ahead. But what is crystal clear is geopolitics has become a multiverse: a complex mix of alliances and rivalries, with overlapping bilateral, regional and other types of institutional groupings.”

War, Everywhere: India and Japan are wary of China’s transgressions, while North Korea is reported to be increasing its war-readiness in light of what it believes are US-led confrontations.

For instance, the domestic markets saw some negative sentiments in early October as the Israel-Palestine conflict escalated.

According to investment advisory CapitalMind, “Geopolitical risks create uncertainty, which weighs on economies and equity markets as investors become more risk-averse. This can lead to lower stock prices, especially in the short term.”

Covid Fears Are Back: To make matters worse, there are fears of another wave of Covid hitting big economies — signs of which are already becoming apparent in India. While optimism is high among IPO-bound companies about 2024, they cannot afford to overlook the macroeconomic impact of these conflicts.

The Influence Of Polls: The fact that both India and the US are set for major elections does not make the situation any easier for companies eyeing public markets. In the Indian context, the General Elections will influence market activity and investor confidence to a great extent.

Lightspeed Venture Partners’ managing director Anuj Bhargava believes that generally investors are more cautious and wait for big political events to take shape. “When you have something this substantial coming up, I think people normally like to wait and see the outcome before they make big decisions and IPOs are normally very big decisions… Investors also wait on the sidelines.”

GenAI Revolution — Global AI Regulations; New Realities For Startups

There’s little doubt that 2023 was the year of GenAI and it has already become a crutch that startups and listed companies are relying on to reduce overheads, human resource dependency and more.

But one aspect of the GenAI revolution will become more prominent in 2024 — the push for global or universal regulations to tackle the rise of inauthentic or AI-generated content, ethical AI, deepfakes and other unsavoury aspects in this context.

New Roles, Bigger Budgets: Startups and enterprises will also have to deal with new realities that emerge with the rise of generative AI. For one, we are likely to see more and more companies appoint Chief AI Officers to tackle organisational readiness for emerging technologies.

At least 84% of Indian chief executive officers (CEOs) are raising new capital or reallocating budgets to invest in generative AI, compared to 70% globally, the EY CEO Outlook Pulse 2023 report said.

India-First Models: Startups in LLM ops, AI training, vertical generative AI and localised LLMs will also become more prominent in the year ahead, with India-specific models coming to the fore.

We saw some signs of this in 2023, with the likes of Sarvam AI bagging large early-stage rounds and startups such as Giga ML while the launch of Bhavish Aggarwal-led Krutrim SI was also widely followed by those in the ecosystem.

Early Bets, But Which Ones? The focus of early-stage accelerators is squarely on AI and deeptech too, and in 2024, we are likely to see generative AI become more horizontal than ever before as adoption grows across sectors — even if some of these will largely be experiments for the most part.

Companies are still figuring out how to leverage AI beyond increasing efficiency and reducing turnaround times for customer support, content creation and user experience features.

Peak XV managing director Rajan Anandan told Inc42 in October that India is witnessing the incredible growth of AI and deeptech innovation, as well as the abundant talent in these sectors. “It seems that more and more companies are AI companies today,” Anandan added about the latest cohort of Peak XV’s Surge accelerator.

That said, many investors also acknowledge that early bets can be hit or miss and there is a risk of spray-and-pray in generative AI investments.

Ecommerce — Amazon-Flipkart Duopoly To See Cracks

For years now, ecommerce in India has been all about Amazon and Flipkart. Snapdeal, Paytm Mall and a host of other marketplaces fizzled out, but the two giants have continued to grow larger.

Meesho’s Time To Shine? Between 2019 and 2021, D2C brands tried to shake off the duo but realised they could not afford to ignore their reach and scale. But in late 2022, Meesho looked to break this duopoly, and in 2023, the company claims to have done just that.

While Meesho’s financials are not yet out, the Bengaluru-based unicorn claims to have crossed INR 5,000 Cr in revenue in FY23 and cut its losses by 50%. Meesho’s focus has been on small sellers and low-ticket-price items, which dot India’s unorganised retail channels.

Digitising this class of merchants has seemingly worked out for Meesho, even though Amazon India and Flipkart still have a significant revenue and logistics advantage. In 2024, Meesho is likely to focus on the latter to unlock more efficiencies.

Everyone Joins The Ecommerce Race: Beyond Meesho, Amazon and Flipkart have to deal with Reliance’s JioMart, TataNeu as well as the rapidly-growing quick commerce platforms which have creeped into the marketplace territory with their dark store models. Blinkit sells books and electronics; Swiggy Mall (formerly Maxx) has Dipak Krishnamani, a former Amazon marketing executive, leading the business.

In other words, the duopoly of Amazon and Flipkart has never looked shakier, and 2024 promises to revive the ecommerce royal rumble again. Walmart-owned Flipkart is readying a war chest of $1 Bn to get set for the battle and also take it through to the public listing, similar to what PhonePe did in 2023.

There was some speculation that Meesho might once again revisit its live commerce and social commerce thesis in the near future, through acquisitions of short video platforms. Social platforms such as Josh, Sharechat, Roposo and others have struggled to maintain the momentum they once saw and could become acquisition targets for Meesho and others

Policy Headwinds — New Challenges For Edtech, Ecommerce, Fintech, Big Tech

Continuing on the ecommerce theme, there is another potential headache for the marketplace giants. The Indian government has already stated that the National Ecommerce Policy is coming in 2024, and besides this, the social security code for gig workers could also see the light of day after years of delay in its implementation since the initial announcement.

Rules Of The Ecommerce Game: The ecommerce policy is widely expected to be in favour of small sellers and could further complicate the holding structures of marketplace giants and the alleged preferential treatment for some large sellers. Besides this, discounting and predatory pricing are two other points where the policy could disrupt the existing incumbents, allowing room for more players to break through.

Will Gig Workers Get Their Due? With issues in gig economy platforms persisting in 2023, the social security code could be a much-needed relief for part-time delivery workers and mobility partners. In particular, startups and platforms would have to allocate a portion of their revenue for gratuity, pension, provident fund contributions and insurance of gig workers.

In this context, the rising reliance on platform fees also makes sense. The logic being that companies would charge consumers to pay for workers. How this impacts the profitability of platforms remains to be determined.

The Question Of Data: Another key piece of the policy puzzle is the Digital Personal Data Protection Act and the much-discussed National AI Policy. The former is expected to give a few headaches to fintech, social media, enterprise tech and services companies, while the AI policy is likely to mandate stricter rules to deal with AI-generated content in media.

We have covered the contours of the DPDP Act, which brings clarity to users on how their data can be used by companies and also informs tech startups on how they must deal with users’ personal data, and consent. But, as we reported, many entities have highlighted that the law falters on aspects like implementation and a few other parameters.

All-Important AI Regulations: There is far less clarity on what a potential AI policy might entail, but if recent statements by the government are any indication, there is some momentum on this front as well. In the inaugural statement at the virtual G20 summit, PM Narendra Modi called for using technologies such as AI in a responsible manner.

Union IT minister Ashwini Vaishnaw is said to have discussed the issue of inauthentic content such as deepfakes with representatives of social media platforms in November. Which direction will India’s AI policy take and how significant will India’s mass of users prove in negotiations for global AI regulations, even as big tech companies such as Google, OpenAI, Facebook and others dominate this space. Expect more clarity on this in 2024.

…And Nine Other Trends (Very Briefly)

  1. Casual & Mid-Core Gaming To Change The Game As RMG Fades Into The Background 
  2. More Unicorns Eyeing India IPOs Will Look To Reverse Flip 
  3. Green Hydrogen, Circular Economy Will Take Climate Tech Beyond EVs
  4. Mid-sized IPOs To Be The Theme Of 2024 In The Public Markets
  5. Generative AI Will Be The Latest Reset In Edtech After Hybrid Models
  6. Kirana Tech Wave Of 2020 Will Die Down, Acquired By Quick Commerce Leaders
  7. Geopolitical Tensions Will Clip Global Ambitions Of B2B Players
  8. Social Media Platforms Will Bank On GenAI To Fill Creator Gap
  9. Generative Coding Will Change Cybersecurity Game — For Attackers And Defenders

The post Inc42’s Indian Tech & Startup Predictions For 2024 appeared first on Inc42 Media.

The Investor’s Handbook: Navigating Legal Landmines In Private Equity And Venture Capital Sun, 31 Dec 2023 15:30:39 +0000 When it comes to the dynamic landscape of finance, venture capital (VC) and private equity (PE) have emerged as potent…]]>

When it comes to the dynamic landscape of finance, venture capital (VC) and private equity (PE) have emerged as potent tools driving innovation and growth across various industries. 

Navigating the complex terrain of these investment strategies requires not only financial acumen but also a keen understanding of the legal intricacies that can significantly impact the success of ventures. 

A clear knowledge of the essential legal considerations for savvy investors aiming to make informed and strategic choices can be really helpful as well as keep the investors safe from the risks of investment.

Let’s explore the different facets of these two types of funds—VC and PE—and find out some legal must-knows for smart investing and reducing risks:

Venture Capital Vs Private Equity Funds

Before diving into the legal landscape, it’s crucial to understand the diverse nature of VC and PE funds. 

Venture capital funds typically invest in early-stage startups with high growth potential. On the other hand, private equity funds target more mature companies, aiming to drive operational improvements and increase profitability. 

Within these broad categories, there are various specialised funds, such as seed-stage funds, growth equity funds, and buyout funds, each catering to specific investment objectives.

Process Of Investing

The investment process in VC and PE involves rigorous due diligence, negotiations, and strategic decision-making. Legal considerations begin at the outset with the drafting and negotiation of term sheets, outlining key terms and conditions. 

The due diligence phase involves a comprehensive legal examination of the target company, assessing issues such as regulatory compliance, intellectual property rights, and contractual obligations. 

Negotiating definitive agreements, including shareholder agreements and purchase agreements, is a critical legal step in finalising the investment.

Associated Risks and Rewards

While VC and PE investments offer lucrative returns, they are not without risks. Legal due diligence is essential to identify potential legal pitfalls that could impact the success of an investment. 

Regulatory compliance, contractual obligations, and intellectual property-related concerns are among the key legal risks. 

On the flip side, successful navigation of these risks can lead to substantial rewards, including capital appreciation, significant equity stakes, and active involvement in the strategic direction of the invested companies.

Smart Investing With Legal Must-Knows

To ensure smart investing in VC and PE, investors must be well-versed in the legal considerations that underpin these transactions. Here are some crucial legal must-knows: 

  1. Regulatory Compliance: Understanding and navigating the regulatory landscape is paramount. Compliance with securities laws and other regulations governing investments is critical to avoid legal complications.
  1. Due Diligence: Thorough legal due diligence is non-negotiable. Investors must scrutinise contracts, regulatory filings, and potential legal disputes to assess the legal health of the target company. It is paramount to assess whether the investee companies have complied with the applicable laws related to their business operations.
  1. Contractual Agreements: Well-drafted and negotiated contractual agreements, including term sheets, shareholder agreements, and purchase agreements, are the bedrock of successful investments. Clarity on rights, obligations, and dispute resolution mechanisms is vital.
  1. Exit Strategies: Developing and understanding exit strategies is integral to the investment process. Whether through an initial public offering (IPO) or a strategic acquisition, legal considerations play a pivotal role in successful exits.
  1. Intellectual Property Protection: Safeguarding intellectual property is crucial, especially in technology-driven industries. Investors must ensure that the target company has robust IP protection measures in place.

In the fast-paced world of investments, smart investing goes beyond financial calculations. It requires a comprehensive understanding of the legal landscape that surrounds these investments. 

From regulatory compliance to meticulous due diligence and well-crafted contractual agreements, legal considerations are integral to mitigating risks and unlocking the full potential of VC and PE investments. 

For investors aiming to navigate this intricate terrain, partnering with a reputable law firm with expertise in private equity and venture capital is not just a wise choice; it’s a strategic and legal risk-mitigating imperative. 

With a solid legal foundation, investors can embark on their journey towards smart and successful investments in the ever-evolving world of finance.

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Why Digital Banks Encounter Challenges And Failures? Sun, 31 Dec 2023 13:30:35 +0000 Digital banks are reshaping the financial service industry with a promise to make banking more accessible and customer-centric.  They leverage…]]>

Digital banks are reshaping the financial service industry with a promise to make banking more accessible and customer-centric. 

They leverage cutting-edge technology to offer services such as instant account opening and immediate credit approvals, focusing on making them accessible round the clock.

Fee-Based Versus Credit-Based Revenue Models

Digital banks aim to provide banking services that are low in friction and high in transaction volume. They typically focus on generating revenue through credit-based services, fee-based income, or a blend of both. 

Utilising advanced technology, these banks deliver digital services designed for instantaneous fulfilment, such as on-the-spot account openings and rapid credit approvals, intending to make these services accessible at any given time from any location.

Credit-focused digital banks look to serve markets where access to credit is sparse, particularly due to the absence of traditional credit assessment data. To innovate in this space, banks like Biz2Credit in India have devised alternative credit models using non-traditional data sources. 

For example, Biz2Credit assesses micro-SMEs’ working capital requirements through analyses of bank statements and employs AI to develop dynamic credit assessment frameworks.

Conversely, fee-based digital banks earn revenue from high volumes of transactions, especially payment and transaction services. A prime example is Revolut, which offers its customers an FX Debit Card that provides optimal foreign exchange rates without additional fees, charging users a transaction fee only after exceeding a specified free usage limit.

Digital banks and fintech institutions that have a clear focus on target markets, client segmentation, and compelling product value propositions have been able to scale their operations and achieve profitability. Yet a significant number of these ventures have not reached their potential, failing to fulfil their promises to investors.

Among the unsuccessful are digital banks and fintech entities with specialised service offerings but limited scalability. These entities, such as the personal financial management solution Cardeo, which utilises open banking data aggregation, often face the challenge of rapid scaling, which is vital for those dependent on fee-based revenues. 

While Revolut managed to acquire a substantial customer base with its specialized product for a distinct segment, Cardeo and other fintechs tasked with personal financial management like StatusMoney and Mint could not reach the scale necessary for long-term viability, resulting in operational shutdowns due to funding and growth challenges.

Role Of A Parent Company Or Partnership

The advantage of having a robust parent or partner ecosystem cannot be overstated. Early digital banking business models underestimated the costs associated with client acquisition, which are not confined to digital onboarding but extend to marketing expenses and promotional campaigns. 

By leveraging an existing customer base or forging strategic partnerships, banks like Airtel Bank in India have effectively bypassed the hefty costs of standalone customer acquisition. This symbiosis can be seen in Unobank’s partnership with GCash in the Philippines, enabling it to offer streamlined and cost-effective services.

Adjusting To Shorter Funding Horizons

Previously, it was common for digital banks to reach profitability within a 6-7 year timeframe. Today’s investment climate is far less forgiving, with a notable shift towards expecting profitability much sooner, often within two to three years. 

This impacts banks with longer-term growth plans, leading to reduced valuations and sometimes even a dearth of subsequent investment rounds, as demonstrated by the plight of HM Bradley, which faced a down round and had to close its retail division due to funding constraints.

Heightened Competition Amongst Rate Wars And Lending Risks

The race to garner customers by offering attractive deposit rates has resulted in an intense competitive environment, squeezing credit product yields. 

Banks adventurous enough to explore new customer demographics face the added peril of credit risks, particularly if their risk assessment frameworks are untested. 

As witnessed by Yelo Bank’s credit loss debacle in India, delving into new markets requires a granular, methodical approach to piloting financial products, along the lines of Open Bank’s cautious expansion strategy.

Securing A Future Amidst Regulatory Challenges

Digital banks are also contending with an increasingly complex regulatory environment that demands rigorous compliance while navigating technological advancements. The fast pace of innovation comes with the dual challenge of ensuring customer data protection and adhering to stringent financial regulations, which vary significantly across jurisdictions. 

Entities like Monzo in the UK, which have successfully scaled, demonstrate the importance of building robust compliance frameworks as part of their growth strategies. Additionally, integrating new technologies, such as blockchain and cryptocurrencies, presents both opportunities for differentiation and the necessity for prudent risk management. 

Moving forward, digital banks that strategically embrace regulatory frameworks and lead in technological adoption are anticipated to not only survive the fierce competition but also to set new norms for the banking industry’s future. 

With these continual adjustments and a proactive stance on regulatory compliance, digital banking pioneers can lay down a resilient foundation for sustainable growth and industry leadership.

Moving Forward In A Competitive Ecosystem 

Adding to the previous insights, a forward-thinking strategy for digital banks involves calculated risks and continuous evolution. They need to not only introduce disruptive technologies and idiosyncratic financial products but also ensure that their growth is supported by a sustainable customer acquisition model and strategic partnerships. 

Moreover, the agility to respond to market conditions and investment trends, adapting promptly to investor expectations and funding landscapes, is crucial. 

Digital banks must strike a balance between managing risks, especially in providing credit and engaging in competitive deposit rate offerings, all while remaining vigilant to maintain capital health. 

Ultimately, the winners in the digital banking space will be those who maintain a delicate equilibrium between innovation, scalability, and financial resilience in the face of ever-evolving market dynamics.

The post Why Digital Banks Encounter Challenges And Failures? appeared first on Inc42 Media.

Venture Capital Trends In India In 2023 And The Outlook For 2024 Sun, 31 Dec 2023 11:30:24 +0000 India’s economic landscape remains robust, showcasing a GDP growth hovering around 7%. The country’s allure as an investment destination has…]]>

India’s economic landscape remains robust, showcasing a GDP growth hovering around 7%. The country’s allure as an investment destination has strengthened, drawing attention from global investors eager to capitalise on the nation’s economic potential.

While 2022 and a significant part of 2023 witnessed a sluggish pace in venture capital activity, recent indicators suggest a positive turn. The robust subscription rates of Initial Public Offerings (IPOs) and the buoyant stock market have injected optimism into the investment ecosystem.

In 2023, Indian venture capital saw a measured deployment of approximately $10 Bn. This slowdown, however, played a pivotal role in instilling discipline within startups, putting an end to the funding bubble that had sustained weak business models. 

The influx of capital in 2020 and 2021 may have exceeded the absorption capacity, leading to a more discerning investment environment.

Capital Crunch For Growth And Late-Stage

The year 2023 experienced a scarcity of capital for growth and late-stage funding, with only 17 rounds exceeding the $100 Mn mark. However, a silver lining emerges in the form of an emerging trend among early-stage founders. 

Those with prior experience in scaling startups are entering the arena with a focus on judicious capital utilization, setting a positive tone for the coming years.

As crossover venture capitalists retreated, domestic VCs and family offices stepped up their involvement. The most promising companies are still receiving competitive bids for their equity, signalling a shift in the dynamics of venture capital funding.

India’s Digital March

The digital transformation in India continues unabated, characterised by a widening internet user base and the rapid scaling of digital transactions. The lingering question of monetization is finding robust answers, especially in the realm of content apps. The burgeoning consuming class in India is enthusiastically embracing new-age brands, resulting in accelerated growth for many startups.

The tipping point has been reached, with well over 50% internet penetration. This milestone paves the way for indigenous models to take centre stage, led by founders seasoned in the crucible of scaled startups.

Diversification In VC Funding

In contrast to the United States, where venture capital funding in 2023 leaned heavily towards sectors like Gen AI, India’s funding landscape has been more evenly distributed across a wide set of sectors. This diversification points towards a balanced and adaptable approach to investment, fostering a more resilient ecosystem.

The Road To 2024

The lead-up to 2024 appears promising. The recent resurgence of the IPO market and the anticipation of global interest rates decreasing set the stage for a favourable investment climate. 

The retrospective view of 2023 suggests a strong vintage has been birthed, with a pragmatic take on building with capital efficiency to eventually list in India.  

The opportunity set in India whether to enable business efficiency or to cater to consumer aspirations continues to grow. 

We expect to see more and more startups building for India from India and also find footing in global markets.  To the venture capitalists, I would only say “Feel the fear and do it anyway.”

The post Venture Capital Trends In India In 2023 And The Outlook For 2024 appeared first on Inc42 Media.

Here Is Everything You Need To Know About E-Wallets Sun, 31 Dec 2023 10:09:24 +0000 What Is An E-wallet? An electronic wallet, commonly known as an e-wallet, is a digital system that enables users to…]]>

What Is An E-wallet?

An electronic wallet, commonly known as an e-wallet, is a digital system that enables users to store, manage, and transact money electronically. It serves as a virtual substitute for physical wallets, allowing users to perform various financial activities such as making payments, transferring funds, and storing payment card information securely on electronic devices like smartphones, tablets, or computers.

As an individual, your e-wallet is a digital repository that securely stores your payment information, credit or debit card details, bank account information, and sometimes even cryptocurrencies, for seamless transactions through supported platforms or applications.

What Are The Objectives of E-Wallets?

The primary objectives of e-wallets are convenience, security, and efficiency. They aim to simplify financial transactions by eliminating the need for physical cash or cards, offering swift and secure payment options, and streamlining the overall payment process.

What Is A Valid Example Of An E-Wallet?

An excellent example of an e-wallet is Paytm. It allows users to link their bank accounts, credit cards, or debit cards to their PayPal account, facilitating transactions for online purchases, money transfers, and even in-person payments at select retailers.

Another example is Google Pay. It enables users to make payments, store payment information securely, and send money to others using their smartphones or other compatible devices. It supports various payment methods and is widely accepted across numerous online and physical stores.

What Is A QR Code Payment?

QR code payment is a contactless payment method that utilises Quick Response (QR) codes to facilitate transactions. Users scan the merchant’s QR code using their smartphone camera or a dedicated app, which then initiates the payment process by securely transferring funds from the payer’s account to the merchant’s account.

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India’s Gaming Landscape: Monetisation Trends And Evolving User Dynamics Sun, 31 Dec 2023 09:30:28 +0000 “Games are a serious business”. This was the opening phrase of a 2018 article I wrote on the scale and…]]>

“Games are a serious business”. This was the opening phrase of a 2018 article I wrote on the scale and opportunity in the gaming industry, which since then has more than doubled to a revenue of $396.13 Bn in 2023 as compared to $116 Bn back in 2017 – more than the combined movies, OTT and music industries globally. 

Traditionally the largest contributors to this growth have been the US and China. But over the last five years, India has started to emerge as a key player. With over 568 Mn gamers in FY23 and 15.4 Bn mobile game downloads in the same year, India is emerging as one of the fastest-growing mobile gaming markets in the world. 

Fueled by the country’s burgeoning digital consumption, India has rapidly established itself as a global hub for consuming world-class games. At the same time, we see an increase in monetisation as well. With a market size projected to reach $7.5 Bn by FY28, let’s take a look at some key trends driving monetization in the country.

In-App Purchases And In-Game Ad Monetisation Fuelling India’s Gaming Sector

In India today, $1.1 Bn comes from in-app purchases and ad revenue in casual and mid-core games, and this is expected to grow to $5 Bn by FY28, fueling a substantial upsurge in monetisation. 

In FY23 alone, the Indian gaming market witnessed significant growth in in-app purchases (IAPs) and advertising revenues. Leaving aside the predicted fall in IAPs due to the ban on popular titles pioneering in-game monetisation like BGMI and Free Fire, IAP revenue outside these two games grew a remarkable 37% Y-o-Y. 

This reveals growing experimentation for more diverse IPs by Indian gamers. This IAP revenue will play a key role in revenue growth for the industry with a projected CAGR of 46% CAGR till FY28, especially with the rise in monetisation in casual and mid-core games. 

Advertising revenue also continues to be an important anchor when it comes to the overall growth of the industry. With aggregate e-cpm’s in India now over $1, in-game ad revenue is projected to grow at a steady 23% CAGR to reach $1.7 Bn by FY28. 

User Evolution And Its Impact On Monetisation

In our research, we see a 25% conversion of gamers to paid users. The ARPPU (average revenue per paying user) reached $19.2 in FY23, growing nearly 10x since FY19. 

While we’ve mapped the revenue trends, there is much to talk about the evolution of these users, which has driven monetisation with it. From 2022, the average time spent on gaming has increased by 20%, to 10-12 hours per gamer per week. 

In the Lumikai Annual State of India Gaming report for FY23, in partnership with Google, we also find that there’s an increased affinity towards casual and mid-core gaming especially from non-metro cities which has contributed to the steady increase in monetization in such games. 

In a proprietary Lumikai survey of 2,300 users, 41% of gamers said they now play all kinds of games versus just casual genres, indicating a healthy diversity of play styles. The survey also revealed that 23% of the users who used to play games for free have now started spending money in games. 

UPI has been a game changer for the industry. 62% of gamers surveyed prefer UPI as a payment method, versus 7% for credit cards. The top games that gamers are spending money on include BGMI, Free Fire, Ludo King, Candy Crush, Clash of Clans, Carrom King with MPL, and Dream11 being recent additions to the Play Store. 

These games span various genres, including casual, mid-core, and real money gaming (RMG) indicating that gamers are willing to invest in an increasingly diverse range of gaming experiences. 

This combination of macro-tailwinds around gaming usage, ease of payments, growth in in-app purchases, and an increasingly diverse and engaged user base continue to drive monetisation upside across gaming in India and indicates significant headroom for growth ahead for the sector.

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Is It Time To Put Your Startup On The Global Stage? Sun, 31 Dec 2023 07:30:35 +0000 The journey to globalise your startup brings forth an array of prospects and complexities. From regulatory landscapes to nuanced compliance…]]>

The journey to globalise your startup brings forth an array of prospects and complexities. From regulatory landscapes to nuanced compliance requirements, the pathway to international business expansion demands a meticulous understanding of legal frameworks. 

The allure of reaching foreign markets is undeniable, yet it hinges on addressing pivotal compliance considerations adeptly. 

In this article, we will delve into understanding whether your startup is ready to step onto the global platform and what that entails. 

International Investment Regulation Compliance

Ensuring adherence to diverse investment regulations and bilateral agreements forms the cornerstone of venturing into foreign territories. Understanding the legal frameworks, bilateral and multilateral agreements, and foreign investment policies is crucial. 

For instance, exploring the nuances of regulations that promote and safeguard foreign investments, such as the Foreign Direct Investment (FDI) policies in various countries, becomes imperative. An in-depth analysis of how different governments incentivise or regulate foreign capital inflow is vital for startups eyeing international expansion. 

Recent directives, such as India’s allowance for public listings in foreign markets, spotlight the pivotal role of compliant investment structuring. The case of CapOne Research underscores the significance of leveraging alternative ecosystems for seamless growth.

Intellectual Property

Protecting intellectual property demands a nuanced comprehension of patents, trademarks, and copyrights across different jurisdictions. Startups must comprehend the intricate landscape of patents, trademarks, and copyrights, which often vary significantly between countries.

Initiatives like trademark incorporation in North America by renowned startups exemplify the strategic leverage of international recognition, as well as setting an example for pre-empting and protecting against potential IP infringement claims which can arise when entering new markets and jurisdictions. 

For example, while you may have registered your IP in India and even become a known brand name in your industry, you may find that a similar business is operating with a similar brand name in your country of choice while globalising. 

This makes IP diligence and trademark registration an early step in globalization which can save a lot of time and expense down the line.

Data Protection And Policy 

Data protection is a paramount concern in today’s interconnected world. Navigating varying data protection regulations across borders mandates a vigilant approach. 

Embracing cutting-edge technologies like blockchain and AI for payment systems necessitates stringent adherence to global privacy standards, epitomised by the EU-GDPR. 

The strides taken by Indian startups like Paytm underscore the pivotal role of data welfare in international ventures.

Human Resources And Labour Law Compliance 

Expanding into new markets necessitates a deep dive into local labour laws and cultural nuances. Crafting meticulous employment contracts and embracing anti-corruption policies are pivotal. 

Additionally, acknowledging and adapting to cultural differences in communication and working styles is pivotal for fostering a productive work environment. 

The utilisation of ‘floating employee’ arrangements – a network of consultants and independent contractors – echoes the adaptability required to align with diverse labour regulations. 

Tax Obligations 

Navigating through multifaceted tax landscapes underscores the need for astute management and engagement with legal experts. Understanding tax laws, deductions, and compliance obligations specific to foreign markets is crucial. 

Maximising tax structuring opportunities and timely compliance with varying taxation methods is imperative for sustainable global operations. These help reduce tax obligations while scaling their international operations, benefitting the startup. 

Acquisition Opportunities, Joint Ventures, And Cooperative Relationships 

Exploring collaborations or acquisitions in foreign markets can be instrumental in navigating regulatory complexities and establishing a foothold. 

Examining how strategic acquisitions within similar industries facilitate global expansion provides insights into leveraging existing market expertise and overcoming regulatory hurdles. 

The strategic acquisitions by Indian startups exemplify the strategic advantage of tapping into existing market expertise. 

Summing up 

The realm of international business expansion beckons with promise but demands meticulous planning. Each of these facets underscores the intricate legal landscape that startups must navigate when considering international business expansion. Understanding and adeptly addressing these legal considerations are pivotal for startups to thrive in global markets and mitigate potential risks.

The post Is It Time To Put Your Startup On The Global Stage? appeared first on Inc42 Media.

Who Won The EV Two-Wheeler Game In 2023? Sun, 31 Dec 2023 07:30:12 +0000 At a time when the entire world is focussed on the usage of green energy in a bid to reduce…]]>

At a time when the entire world is focussed on the usage of green energy in a bid to reduce its carbon footprint, India, too, isn’t far behind. The country is seemingly doing everything in its power to meet its net zero emission goals. 

The endeavour is visible in the fact that the electric vehicle (EV) adoption in the country has grown about 50% this year. According to Vahan data as of December 29, the registrations of EVs in the country rose to 15.13 Lakh units in 2023 from 10.25 Lakh units in the previous year.

Within the EV segment, two-wheelers continue to lead the space. The registrations of two-wheeler EVs in the country grew 34% year-on-year (YoY) to 8.49 Lakh units in 2023.

This increase happened despite over a dozen companies in the category getting involved in FAME-II controversies and the government slapping crores of fines on original equipment manufacturers (OEMs). As such, the increase in sales could have been even higher if the FAME-II fiasco had not taken place.

Meanwhile, the year 2023 also saw a major consolidation in the segment.

EV registrations 2023

A Trend Shift?

Though electric two-wheeler sales increased, only a handful of players – either legacy automotive manufacturers or deep-pocketed startups – ruled the space this year.

For instance, Bhavish Aggarwal-led IPO-bound Ola Electric witnessed around a 140% surge in its vehicle registrations in 2023 to 2.62 Lakh units from 1.1 Lakh units last year. 

Similarly, Ather Energy, which raised around INR 1,000 Cr this year in fresh funding, witnessed an over twofold rise in its vehicle registrations to 1.04 Lakh units.

On the other hand, legacy two-wheeler player TVS Motors emerged as one of the key names in the EV segment this year, with its vehicle registrations increasing 250% YoY to 1.65 Lakh units in 2023. Hero MotoCorp and Bajaj Auto also saw a big increase in their EV registrations. 

While some of these top players of 2023 were also embroiled in FAME-II controversies and saw a muted start to the year, they managed to regain momentum by August.

BGauss, iVOOMi Energy, Kinetic Green, Lectrix EV, and Okaya were among the other names that saw a rise in sales on a YoY basis. 

However, the most prominent players of 2022, including Okinawa Autotech, PureEV, Hero Electric, Ampere, and electric motorcycle manufacturer Revolt, lost much of their charm this year.

Let’s take a look at the performance of some of the most prominent electric two-wheeler players in 2023 and their month-on-month performance over the last three months:

ev registrations 2023

However, despite the electric two-wheeler segment selling a record number of vehicles this year, the pace of growth clearly slowed down. Last year, the electric two-wheeler registrations had jumped over 300% YoY to 6.31 Lakh units. In 2021, the jump was over 400% YoY.

Some experts Inc42 spoke to are also of the opinion that the FAME-II subsidy issue was a major setback for India’s EV growth story this year. 

For instance, Vinkesh Gulati, chairman research & academy, Federation of Automobile Dealers Associations (FADA), had told us earlier this year that in a country like India, which is largely dependent on imports of batteries and cells for EVs due to scarcity of resources, raw materials, and infrastructure, adhering to localisation norms is very difficult.

“FAME-II scheme was the best catalyst to increase sales, but as of now, it is a deterrent for some of the manufacturers,” Gulati had said.

However, some industry players also said then that the industry cannot grow by depending on subsidy alone and there was a need to crackdown on the EV players that functioned more as assemblers of imported parts rather than manufacturing them as per India’s road and climatic conditions.

The FAME-II Controversy & The Path Ahead 

The root of the problem was a series of EV fire incidents that grabbed the headlines in the summer of 2022. Ola Electric, Okinawa Autotech, Jitendra, and multiple other players found themselves surrounded by controversies due to the fire incidents – a few of which also claimed lives.

With the rise in such incidents, the government initiated a probe into the matter. The investigation revealed problems associated with the batteries used in these vehicles – either their battery management system (BMS) lacked certain basic safety features or the batteries were of inferior quality. 

In any case, it was evident that many electric two-wheeler players were using batteries manufactured in other countries that were not built for India’s climatic conditions. Besides batteries and cells, some players allegedly imported most other parts used in their EVs. 

Soon after, the Centre started doubling down on domestic value addition by EV OEMs. It also tightened the battery testing norms. 

Following these measures, a dozen two-wheeler EV manufacturers, including Okinawa Autotech, Revolt, Hero Electric, and Ampere, came under the government’s scanner for allegedly claiming subsidies under FAME-II without adhering to the minimum localisation norms prescribed under it.

Starting with holding back the release of some FAME-II subsidies, the ministry of heavy industries (MHI) took multiple steps which slowed the sales growth of these players. The ministry put an embargo on some of the manufacturers from listing their sales on the official National Automotive Board (NAB) portal, slapped heavy penalties, and issued notices to the OEMs to return the subsidy amounts, among others.

Meanwhile, another problem was brewing, which involved Ola Electric, Ather Energy, TVS Motor, and Hero MotoCorp. A whistleblower alleged that these players were selling their chargers and proprietary software separately at an extra price to keep the vehicle prices under the INR 1.5 Lakh cap to avail subsidies under the FAME-II scheme. They were also penalised by the MHI but the adverse impact did not last long.

Many of these players increased their vehicle prices as FAME-II incentives were slashed. 

These controversies also resulted in significant volatility in two-wheeler registrations throughout 2023. Starting with 64,693 units of registrations in January, the volume peaked at over 1 Lakh in May but slumped again and remained volatile. After rising more than 22% month-on-month (MoM) to 91,718 units in November, two-wheeler EV registrations fell over 23% to 70,206 units in the last month of 2023.

Meanwhile, the FAME-II scheme is expected to end in March 2024. While there have been demands for the extension of FAME-II and reports around the launch of a new FAME-III, the government hasn’t confirmed either of the developments, officially. Recently, a media report also claimed that the government is considering an extension of the existing scheme till FY25.

 However, an industry source told Inc42 that it is highly unlikely that the government would further invest in it right now, particularly with FAME-II being a major “mess”. 

“Also, the most important thing is the matter is now in the court. The MHI has erred in many ways, it has been withholding money that it had promised to give the OEMs… and just squeezed out some OEMs for no reason. I doubt the government would add money to the coffers of any ministries’ activity unless it’s clear which way the court decides,” said the person. 

“If the court decides that the MHI was completely wrong, then the INR 1,200 Cr that has been held back has to be paid to the OEMs along with the INR 500 Cr claimed from some of these OEMs,” the person added.

It is pertinent to note that the MHI disbursed INR 5,228 Cr in subsidies till December 1, 2023, supporting 11.5 Lakh EVs sold. 

At the time of its announcement, the scheme had an outlay of INR 10,000 Cr with an aim to support  7,090 ebuses, 5 Lakh electric three-wheelers, 55,000 electric four-wheeler passenger cars, and 10 Lakh electric two-wheelers. 

Will 2024 Accelerate The EV Growth Story?

Rising awareness about the need to combat pollution, improvement in technology, and the government’s promotion of EVs are expected to lead to further increase in EV sales growth in 2024.

Amid these, deep-pocketed players who can survive without government subsidies, are expected to emerge as winners. Besides, the private funding for EV OEMs could also witness a decline with the sentiment now shifting towards supporting the other sub-segments.

According to industry experts Inc42 interacted with throughout the year, the electric two-wheeler market, which is currently cluttered with around 200 players, will witness consolidation going forward as the technology matures and people opt for superior quality products. 

Meanwhile, there is an increasing number of electric motorcycle players that have started entering the electric two-wheeler market now, which is also likely to push up two-wheeler EV sales in the coming years. 

While established names like Royal Enfield are working on EV launches, many startups are also trying to disrupt the Indian motorcycle market.

Ultraviolette, Orxa Energies, Matter, Oben Electric are among the several VC-backed startups that are expected to start the deliveries of their EV motorcycles in 2024 or scale up deliveries further. Ola Electric also aims to launch its electric bikes next year.

Speaking to Inc42, Mohal Lalbhai, founder and CEO of Matter, said that there is a rising demand among motorbike riders to go electric but there is a supply crunch of affordable and decent mass-market products. 

“The motorcycle market is where consumers have been desperately waiting for the supply of a product which is affordable, has a decent range and performance… without these aspects, you will not see enough growth in the electric motorcycle segment. It’s honestly because of the lack of options that consumers are sticking either to ICE or other options,” he said, adding that it is the largest untapped market as far as the two-wheeler EV space is concerned.

As such, the Indian two-wheeler EV market seems well poised for rapid growth over the next few years. However, it remains to be seen how the regulations for the sector evolve and how OEMs deal with them.

[Edited By Vinaykumar Rai]

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