November 2024: it was a cool evening in Delhi, when the general partner of a Bengaluru VC firm frantically sought help to get a pizza from Leo’s delivered from one corner of the city to another.

It was an order that neither Zomato nor Swiggy could fulfil, so the VC turned to Borzo for help, finally receiving the order and carrying the pizzas back to Bengaluru on a night flight.

But before that happened, I asked him — what about Dunzo?

It was a tongue-in-cheek suggestion meant to evoke some kind of banter — this being a Bengaluru VC in Delhi. Besides, this is exactly what Dunzo did for years. But all I got was a smirk and waving of the hands: “Dunzo is done, bro!” said the curly-haired VC.

There’s no denying Dunzo’s journey has been remarkable, even if things have not gone as planned. So this Sunday, we see how Dunzo lost its edge and magic. And what next for founder Kabeer Biswas and employees left waiting for their final dues?

But after a look at the top stories from our newsroom this week:

• Netradyne’s Unicorn Run: India’s first unicorn startup of 2025 is looking to develop its own foundational models for its AI-powered fleet safety and video telematics solutions after raising $90 Mn in its Series D this week
• India’s AI Framework: In light of the Draft AI Guidelines, India’s AI industry stakeholders are cautiously optimistic, even as some worry that heavyhanded policy might end up stifling innovation. Here’s our deep dive into what the guidelines mean and what startups are saying
• Startups Eye Mahakumbh Gold: Mahakumbh 2025 is big business for startups, especially the burgeoning spiritual tech segment, which is looking to capitalise on a potential $1 Bn opportunity at the holy gathering over the next month

Dunzo: From Delivery To Disaster 

Some companies become bywords for their businesses — it’s usually a mark of success and brand equity. For years, Dunzo was considered a verb for hyperlocal deliveries, but today, it’s a mere shell of its former self.

The company reached a valuation of $744 Mn, but it grew its cult on the basis of word-of-mouth referrals and customer success when it launched way back in 2014. At that time, Amazon and Flipkart weren’t even thinking of quick deliveries — they didn’t care about bringing retailers online, but Dunzo did, and built a strong base of loyal customers in Bengaluru who swore by the service.

It also expanded to other cities such as Pune, Mumbai and Delhi gradually, creating a big buzz in all these markets as the only player offering hyperlocal deliveries.

In fact, quick commerce was not even coined, and Dunzo was delivering groceries and cigarettes in a matter of minutes before the pandemic. If anything, Dunzo gave everyone a taste of what Instamart, Blinkit and Zepto later offered.

It was on the shoulders of Dunzo that these giants created their playbooks to some extent. But as we have recounted several times in the past two years, the emergence of quick commerce as a category somehow created a panic within Dunzo. Even Reliance infusing $200 Mn into the company could not save it.

Despite many firsts to its credit and having raised nearly $450 Mn over its lifetime, Dunzo has struggled to stay afloat, is struggling to find a buyer and has left hundreds of employees and several vendors disgruntled over non-payment of dues.

CEO and cofounder Kabeer Biswas, has reportedly moved on to Flipkart Minutes, but is dealing with legal challenges from vendors and employees. The former have moved the NCLT to initiate insolvency proceedings against the company, while employees have filed police complaints against Biswas due to unpaid salaries.

Sources say that the startup has carried out as many as 12 rounds of layoffs in its entire lifetime, with most of the layoffs happening since 2022.

With over $70 Mn in financial liabilities, Dunzo’s potential sale looks impossible, several industry sources told us. “Unlike in 2021-2022, a business like Dunzo today can be built within a week. There is literally no distinction between the quick commerce businesses but their execution. Dunzo has majorly failed in its execution and missed the bus,” an industry player and a third party vendor with Dunzo told us.

The Gloom After The Golden Years 

Even before Dunzo, Kabeer Biswas had earned his entrepreneurial stripes with Hopper, a startup he sold to Hike before setting off on a new adventure.

Biswas, along with his friends Mukund Jha, Dalveer Suri and Ankur Agarwal, floated a WhatsApp group to organise and aggregate hyperlocal deliveries from retailers in select areas of Bengaluru.

This was when the CEO met Dunzo’s first investor Lightrock and its partner Sahil Kinney. Incidentally, this was also when India’s hyperlocal ecosystem was booming. Dozens of hyperlocal startups mushroomed up between 2015 and 2016, but no one survived the hype cycle like Dunzo.

By 2018, its model was unique in the Indian startup ecosystem, but after the pandemic, the likes of Zomato and Swiggy tried to ape Dunzo to deliver essentials. This was the precursor for the quick commerce wave that soon followed.

Between 2015 and 2022, Dunzo raised funds from the likes of Google, Lightrock, Lightbox, Alteria Capital, and of course, Reliance. Overall, Dunzo secured more than $450 Mn from equity and debt investors.

This despite the company not showing the kind of revenue growth that should be expected of a startup that has raised millions in funding.

In fact, Dunzo’s consolidated loss in FY22 widened 2X from FY21 to INR 464 Cr and total revenue stood at INR 67.7 Cr. And the losses only ballooned the next year (April 2022 to March 2023). The Bengaluru-based hyperlocal delivery startup’s loss surged to a staggering INR 1,801 Cr, but operating revenue only increased to INR 226.6 Cr.

The company has not filed audited financials for FY24, but it’s hard to imagine the financial situation improving after the downturn of 2023.

It was during the FY23 period that Dunzo made a big push for quick commerce with Dunzo Daily. It was not a mistake by any stretch of the imagination, but scaling up quick commerce  and maintaining presence with local retailers was a hard balance even for Dunzo.

Quick commerce — as evidenced by Zepto, Instamart and Blinkit — requires a singular focus, feet on the ground and more than enough traction to attract further capital infusion.

Dunzo on its part set up dark stores in Bengaluru, Delhi NCR and Mumbai and hired workforce for these stores and for delivery, and also started acquiring inventories from retailers. For the first few months everything was going fine.

Dunzo Daily kept pace with Instamart and Blinkit on delivery time, and was keeping up with the SKU build up. But scaling this up proved a bridge too far for Biswas and Co.

A partner at a Bengaluru-based VC firm and Dunzo investor told us, “The difference was that Zomato kept infusing money into Blinkit, Swiggy raised a billion dollars, Zepto convinced investors that it will play 15-minutes delivery in the long term. As for Dunzo, it offered quick deliveries, but was never among the top three players.”

The Reliance Factor

A senior industry player quoted above in the story mentioned that Reliance tried to add B2B deliveries to Dunzo’s bucket and pushed for JioMart partnerships, but this did not prove enough to keep the B2C operations going.

There was just not enough gas in the tank for Dunzo to accelerate. “The inability to scale its revenue in comparison to a much younger rival like Zepto in FY22 and FY23 cornered Dunzo. Reliance really doesn’t like to be the fourth or fifth player in any industry and its Dunzo bet did not pay off at all. It also made it difficult for the company to raise funds at a lower valuation,” a former Dunzo senior executive told us.

Sources added that Reliance had at one point offered to acquire Dunzo, but Biswas was not willing to exit at that point. In fact, most observers would agree that Biswas tried everything to keep the operations going even as other cofounders departed the company.

Cofounders Suri and Jha left at a crucial time, leaving Biswas to man the fort even as it seemed to be crumbling. One does wonder whether Biswas skipped a beat by turning down acquisition offers from Reliance and others, including Flipkart in 2024, as per reports.

Even before their departure, it was clear that besides Biswas, the other founders were left with very little equity in the company after diluting their stake over the years.

After infusing $200 Mn in the company, Reliance held more than 25% stake in the company, and Google owned close to 19%.

The next biggest investor was Lightbox which held 12%, while early investor Lightrock held 3.86% stake in Dunzo after the last round. That might seem small, but the three founders held a mere 3.95% stake in the company after that massive $250 Mn round, with Biswas himself owning about 3.6% equity.

Dunzo had the right idea — after all, the rise of Zepto, Blinkit and Instamart and the Cambrian explosion of quick commerce startups in 2024 is a validation of the business model.

But it failed in execution, even though it had a marked advantage when Covid hit. It was the only scaled up player on the ground for hyperlocal deliveries, but this first mover advantage was squandered.

If you ask any of the quick commerce platforms, the focus has been on growth and not profits. So Dunzo was not the only player to not have solid unit economics, but it failed to show the kind of progress on growth either that the likes of Zepto displayed.

Continuous investments are necessary in quick commerce today for customer acquisitions and engagement, adding to the SKU capacity and bolstering product assortment beyond groceries. Dunzo didn’t survive long enough in the game to come to this point in evolution.

Where To, From Here?

Even till the very end, Biswas held faith that things can be turned around. But with Dunzo’s website going down this week (and coming back up days later), the writing seems to be on the wall.

Employees are naturally irate over the situation after not receiving salaries for more than a year.

“Kabeer assured employees that he is trying to stitch together a funding round and this requires investors’ approval. This went on for nearly a year. Many employees quit on their own and there were also multiple rounds of layoffs. Talks with Flipkart were on for a long time, until we heard one day Kabeer is moving to join Flipkart Minutes. He stopped communicating with the employees towards the end of 2024,” a former employee who recently quit the company said.

Even as Biswas remains mum on the fate of Dunzo and whether he has indeed joined Flipkart Minutes, employees have lost patience and taken their complaints to the police.

Biswas happens to be one of the directors on the Dunzo board along with Hong Jin Kim, the managing director at South Korean firm STIC Investments. This makes the CEO accountable for fiduciary lapses, especially the non-payment of statutory taxes.

“It is hard to imagine Dunzo without Biswas. With him quitting the company, the revival looks bleak. It is an unfortunate saga of how we lost an iconic brand. Another case of investor-founder friction after the founders gave up their majority stakes and expanded too soon without a plan for the future,” the investor quoted above told us.

According to industry sources, the best Reliance can do now is acquire the Dunzo brand, which  still has some lingering value left among the ashes of the former giant. “The tech stack is a non-entity in today’s world where open source protocols are available and APIs can be built in no time. However, Dunzo’s user data in major cities could interest Reliance for its own ecommerce ambitions,” an industry analyst said.

There is also a remote possibility of Biswas convincing Flipkart Minutes to acquire Dunzo for a $10 Mn to $20 Mn deal in order to save his legacy. However, this would require Reliance as well as Walmart’s approval, which seems unlikely to come any time soon.

Which is why it’s looking like Dunzo is done, indeed.

Sunday Roundup: Tech Stocks, Startup Funding & More

• Blinkit Arms Up: Zomato has infused around INR 500 Cr (about $57.7 Mn) in Blinkit as the quick commerce vertical looks to expand its service base and category assortment.
• OYO’S Secondary Deal: Early backers of OYO, including Lightspeed Venture Partners, are reportedly in talks to sell a portion of their stake in a secondary sale likely to value the IPO-bound company at $3.9 Bn

• Policybazaar Dips: Shares of PB Fintech settled at INR 1,725.55 after falling as much as 6% on Friday, days after the company’s offices were raised by GST authorities
• Deeptech Fund: Speaking at the Startup Policy Forum’s inaugural event, former NITI Aayog CEO Amitabh Kant has called for a deeptech-focussed fund of funds (FoF) for startups

The post How Dunzo Lost Its Edge appeared first on Inc42 Media.

In 2024 the lines between edtech and offline education services companies became blurred more than ever. If we were talking about acquisition of schools, colleges and tuition centres by edtech startups in 2020 and 2021, the last two years turned the narrative — with edtech startups  on sale, looking to get acquired by offline education companies.

And this meant that the relevance of edtech was also up in the air for most of last year. Most edtech platforms had overlapping products and services and overestimated the total addressable market (TAM) particularly as the long-term impacts of the pandemic receded

The biggest impact was the downfall of BYJU’S, but ripple effects have been felt across the industry. Even as the investments in the edtech sector recovered to some extent in 2024 compared to a year ago, they were nowhere close to the peak of 2021 and 2022. And it’s been slow growing, which has impacted profitability as well. 

The disruption from GenAI is also yet to be felt fully in edtech, as use-cases are still evolving.

Even so, 2025 promises to be not as bleak as 2023 and 2024 for the edtech sector. The year may also throw some surprising trends for the sector including the first public listing, but the resolution of the various issues at BYJU’S and the future of the company will also be keenly watched.  

As we look ahead to 2025, here’s what investors, industry experts and edtech founders told Inc42 about the year ahead for India’s edtech industry.

The End Of The BYJU’S Saga 

The fallen edtech giant pretty much dominated the headlines in the edtech sector throughout 2024, but all for the wrong reasons. 

With numerous legal conflicts in the US and in India from creditors, investors and vendors, the edtech giant went into insolvency proceedings last year and this has diminished the hopes of a revival in 2025.

Even as CEO Byju Raveendran continues to talk about a comeback and with speculation about another education venture, the company seems to be on its last legs. 

Raveendran’s former close confidantes and BYJU’S investors say the chances of a comeback are slim to none.

“There are too many legal hiccups now in India. He has made enemies out of some of the biggest VCs and the legal authorities have already been after him. Even his impending arrest in case ED finds anything suspicious in the money laundering case is not ruled out. Hence at least in 2025, there is a limited chance of Raveendran’s voluntary arrival in India,” an investor in BYJU’S wishing not to be named told us.

The fate of the erstwhile $22 Bn company is the most pertinent question in Indian edtech today and could still spell more bad news for the ecosystem. 

The Supreme Court’s final decision on the petition filed by the US lenders is awaited. Plus, the NCLT’s earlier insolvency order against BYJU’S remains effective, and the possibility of the company being liquidated to recover debt and dues is high. 

In all likelihood, BYJU’S may be unable to find a potential buyer in the time that the resolution profession and the committee of creditors still has on their hands. And in this situation, any assets would be auctioned off by authorities, ending the tumultuous chapter of the edtech startup.

Do-Or-Die Battle For Unacademy 

The future of Unacademy comes up for debate every year, with speculation around a potential acquisition coming up in 2023 and also in 2024. 

Unacademy CEO and cofounder Gaurav Munjal had to deny reports about Unacademy’s acquisitions each time. However, according to multiple sources who have worked closely with Munjal, the company was unable to arrive at an agreement around the potential valuation of the deal with  K-12 Techno or Allen Careers Institute.

The test prep company, which once commanded a valuation of $3.4 Bn, was said to be in conversations with acquirers for a valuation of $800 Mn- $900 Mn.

“There were serious problems with Unacademy’s path to profitability and besides Unacademy Centres which contributed a majority of revenues to the firm, the online learning platform wasn’t exactly an industry breakthrough. The offer on the table was to merge with an offline education giant but with a steep valuation cut and that’s why the talks failed,” one of the sources quoted above added.

In December 2024, Munjal clarified on social media that Unacademy is not up for sale after the company saw a 30% growth in its offline learning business with unit economics improving considerably.

While the edtech startup witnessed a degrowth in its online test preparation business, unit economics of this vertical “improved significantly”, Munjal claimed.

Further, he said that cash burn at the group level has declined 50% this year and the company has a healthy cash reserve of $170 Mn with no debt and a runway of over four years.

However Munajl’s real test in 2025 would come how fast he is able to scale the Unacademy Centres which also had its share of problems in 2024 including teacher exodus and cutbacks. Besides this, the company has seen the exit of several key leaders in the past 18 months, which has put Unacademy in a leadership vacuum.  

Uncacademy as per our sources is now cutting costs and also strengthening its YouTube channel to improve acquisition of students. It is also training educators to meet the demands of the hybrid teaching model, where teachers are available both online and offline. Will these steps bring Unacademy back to its glory days? 

Physics Wallah’s $500-600 Mn IPO On The Cards 

Perhaps not surprisingly, Physics Wallah has emerged as the first among edtech companies in India to go for an IPO. 

On the back of a fresh $210 Mn Series B funding in 2024, expansion of its offline centres and addition of new verticals, PW ỉs on track to make the most of the positive sentiment in the public markets. 

PW on its part has started the leg work and has Axis Capital, Kotak Mahindra Capital, Goldman Sachs, and JP Morgan as the investment bankers for its IPO. It converted into a public limited company in December 2024.

The startup also appointed former Blinkit CFO Amit Sachdeva as its CFO in November 2024, in preparation for this public listing journey. Having already converted to a public limited company, PW would be looking to raise $500 Mn-$600 Mn through the IPO at a nearly $5 Bn valuation.

Sources told Inc42 that the edtech company is in the process of completing third-party audits of its books post which it plans to file its DRHP papers with SEBI. “This will take at least six months and the listing is likely to happen towards the second half of 2025,” one senior executive at PW said.

However with PW slipping into losses in FY24  and in the wake of its IPO ambitions in 2025, sources also said that the edtech firm will be strictly on a cost cutting drive in the run up to the IPO.

Gen AI Disruption To Deepen

Generative AI is both an opportunity and a disruption for the edtech ecosystem in India, and thus far we have only seen a glimpse of both these aspects.

In 2024, edtech startups looked to increase their adoption of open source large language models (LLMs) to bring in personalised learning modules, improve content generation, create better course structures and to reskill the workforce.

Two of the biggest edtech unicorns in India — upGrad and Physics Wallah — are well on their way to adopt LLMs at various levels to enhance user experience and simplify their operations.

Mayank Kumar, cofounder and MD of edtech giant upGrad, earlier told Inc42 that the edtech startup has adopted AI to ensure learners understand fundamental concepts more effectively. The startup is using AI to create curricula and enhance the content experience of students. Incidentally, Kumar stepped down from upGrad in 2024 to launch a new venture in the upskilling and job placements category.

Similarly, edtech major PhysicsWallah introduced an in-house AI platform fashioned “Alakh AI” which it claims serves as a personal AI tutor and assistant for students, enabling personalised learning and testing.

Industry analysts say that the edtech companies will continue restructuring their business models in 2025 driven by deeper GenAI adoption, which could also result in workforce reduction for educators and course creators. 

“Customer service is a huge workforce area in edtech which is to some extent now being replaced by AI chatbots. Further, AI assistants also allow educators to create content swiftly, reduce turnaround time for assessments and feedback. It also enhances real-time interaction with students,” a Bengaluru-based founder of an AI-first edtech startup told Inc42. 

Moreover, the government’s push to enroll more school students for AI courses under National Education Policy (NEP) is also expected to generate demand for AI tutoring, create opportunities for edtech startups in the K-12 space to offer personalised learning in AI courses as the demand picks up in 2025.

Consolidation Wave Imminent In Edtech 

According to Inc42’s Indian Tech Startup Funding Report, 2024, the year gone by saw investments into the sector significantly improve to $568 Mn from $283 Mn. However what is more interesting is that the investments in 2024 spread over 29 deals, whereas the deal count in 2023 was 47.

This indicates that growth and late-stage deals and large ticket sizes became the driving trend in edtech in 2024, spearheaded by Physics Wallah’s $210 Mn raise.

As investors largely focussed on sectors like fintech, enterprise tech, AI and ecommerce in the seed to growth stages, early stage edtech investments remained muted.

Investor caution was apparent throughout 2024 as the VCs wanted edtech founders to continue the push for stronger unit economics and path to profitability.

In terms of the M&A activity too, 2024 was a slow year, with Genius Teacher’s acquisition by Schoolnet India and Adda 247’s acquisition of test prep platform Ekagrata Eduserv being the only prominent deals.

“Investor sentiment in India’s edtech sector is shifting toward companies that exhibit resilience and sustainable growth. There has been a broader trend in the market, where investor caution has led to a preference for larger, fewer funding rounds, driven by the same focus on quality and stability in a challenging macroeconomic environment,” Ashwin Damera, founder and CEO of Peak XV-backed Eruditus, told Inc42.

However, industry watchers expect more M&As to get through in 2025 as smaller startups become streamlined thanks to the adoption of AI models and after cost-cutting in key areas. 

Analysts say that the bigger companies may keep an eye out for acquisitions in niche verticals as expansion will play out majorly in 2025. However, valuations may continue to see a big downward correction, relative to 2021-2022 numbers. 

“Investors are now looking for real growth metrics in any edtech up for sale instead of vanity metrics like MAUs, DAUs. They also need a track record of financial discipline over the last couple of years rather than a sudden dip in costs,” commented a veteran partner at an early stage VC firm.

Study Abroad, Upskilling To Shine Bright

Despite some headwinds in the edtech industry after the pandemic, some verticals have shown strong growth momentum including study abroad, education financing, upskilling and reskilling. That’s in addition to the persistent traction for test prep in India ever since edtech emerged in 2011-2012.  

According to government data, the number of Indian students studying abroad has significantly grown over the past few years from 907,404 in 2022 to 1.33 Mn in 2024 with Canada, US and UK as popular study destinations.

As per data collated by Prodigy Finance, engineering and MBA streams are extremely popular choices for Indian students going abroad, but as the education landscape evolves, many students are exploring courses beyond traditional STEM and MBA.

“2024 has been a pivotal year for the study abroad sector, driven by shifting global trends and evolving student priorities. Sustainability, digital tools for personalised guidance, and emerging non-traditional destinations have reshaped international education. Students increasingly seek interdisciplinary programmes aligned with global challenges like climate action, healthcare innovation, and tech-driven solutions,” Daljeet Sandhu, CEO of study abroad platform Dalton AI Portal said.

However, within this segment, challenges such as fluctuating visa policies and rising education costs are growth hurdles. Startups also need to capitalise on the hybrid learning opportunity in the global market. 

With AI/ ML continuously evolving the landscapes of different industries, upksilling and reskilling platforms will continue to show traction and grow in adoption. 

“In 2025, upskilling and reskilling will drive India’s edtech landscape. As AI, machine learning, and other cutting-edge technologies continue to disrupt industries, the demand for a highly skilled workforce is only set to surge. According to the Workplace Learning Report 2024 by LinkedIn, 4 in 5 people want to learn more about how to use AI in their profession which indicates an unprecedented need for AI-focused upskilling,” Eruditus’ CEO Damera said.

He added that the edtech companies will have to step up and offer tailored courses to fill an increasing demand supply gap in fields like data science, cyber security and AI.

[Edited By Nikhil Subramaniam]

The post Edtech In 2025: The Rise After The Fall? appeared first on Inc42 Media.

Reliance Retail, the largest shareholder in troubled hyperlocal startup Dunzo, has written off its $200 Mn investment in the company, multiple sources privy to developments told Inc42. 

Reliance is also not involved in any talks to infuse funds into Dunzo or acquiring it in a distress sale after the company’s cash crunch and retreat from quick commerce in the past 24 months.

Meanwhile, Dunzo cofounder and CEO Kabeer Biswas according to our sources is leading talks with high net worth individuals and family offices for an acquisition deal that would value the startup at INR 300 Cr ($25 Mn-$30 Mn).

“Reliance has assured Biswas that they will be supporting him to salvage Dunzo. But they are not interested in buying Dunzo. They had made a buyout offer 2-3 years ago offering to buy the hyperlocal startup at a near unicorn valuation, which Biswas declined. But after quick commerce startups entered the industry and Dunzo’s inability to scale beyond a few cities, Reliance had absolutely no interest in Dunzo,” one of the sources quoted above said.

Notably, Reliance Retail senior executives Ashwin Khagiwala and Rajendra Kamath had stepped down from Dunzo’s board along with the representatives of other investors including Lightrock and Lightbox in 2023.

If the company is acquired for the reported price of $30 Mn, it would be a staggering discount on the $770 Mn valuation commanded by Dunzo during its last funding round, when Reliance infused the funds. 

Biswas has reportedly also held talks with Flipkart, Swiggy, Tata Group and Zomato for a buyout, but has failed to secure any success. 

Queries sent to Reliance Retail and Biswas did not elicit any response at the time of publishing this story. The story will be updated as and when they respond.

Sources added that although Dunzo is still operational in parts of Bengaluru, it has shut down in other cities. Currently, the company is sticking to its older model of connecting local retailers to online consumers. 

Earlier this week, it was reported that Biswas is close to quitting the company and has communicated his decision to investors. The CEO intends to step out after seeing through any potential acquisition deal.

How Reliance’s Biggest Startup Investment Tanked

In January 2022, Dunzo raised a $240 Mn funding round in which Reliance Retail invested $200 Mn. This was Reliance Retail’s largest investment in the Indian startup ecosystem. 

The other notable investments from Reliance Industries include the INR 1,340 Cr deal to acquire edtech startup Embibe, as well as the acquisitions of Clovia (INR 950 Cr) and NetMeds (INR 620 Cr).

At the time, it was seen as something of a strategic investment. Dunzo and Reliance intended to enter into partnerships, where the former would enable hyperlocal logistics for Reliance’s retail store network as well as JioMart. 

While Dunzo had survived the hyperlocal boom and busy cycle of 2015, by 2022, the game had changed. Quick commerce was well and truly in fashion and Dunzo’s model was feeling antiquated. While the startup launched Dunzo Daily to compete with Blinkit, Instamart and Zepto, it just couldn’t scale it beyond Bengaluru, Mumbai and Delhi. 

In hindsight, it’s clear that the $240 Mn infusion was not enough to tap the quick commerce opportunity, but the rapid rise of Zepto had created a third challenger in the race against Zomato’s Blinkit and Swiggy-owned Instamart. Dunzo was just not able to capitalise on this opportunity like Zepto did. 

Given Dunzo’s problems, Reliance Retail is looking to explore the quick commerce opportunity with JioMart. And for the past two years, Dunzo’s cash situation has worsened, leading to severe cutbacks, a lengthy list of dues to vendors as well as the exit of founders and key leaders. 

Dunzo saw its losses widen over 3X to INR 1,801 Cr in FY23 from INR 464 Cr in the preceding fiscal. The financial turmoil caused delays in salary payments for both current and former employees, as well as outstanding dues to vendors.

The startup did secure $6.2 Mn in debt funding and shifted focus from 15-20 minute deliveries to 60-minute deliveries to cut down costs.

However, Dunzo’s total debt including those of its vendors and outstanding tax as per sources could be in the range of INR 80 Cr which Biswas hopes to clear if the company manages to get a buyout deal.

[Edited By Nikhil Subramaniam]

The post Exclusive: Reliance Retail Writes Off $200 Mn Dunzo Investment appeared first on Inc42 Media.

PhonePe is already acting like a public limited company.

In 2024, PhonePe released its annual report sharing its consolidated, standalone financial numbers, publicly announcing the valuation at which it raised the last funding round and most importantly its profitability figures excluding ESOP costs. 

This is unusual for any privately held company, but the Walmart-backed fintech major is clearly changing its tune. And it’s about time too.

After raising more than $1 Bn in 2023 and continuing to retain the UPI market share lead, PhonePe was able to cross the INR 5,000 Cr revenue milestone in FY24, eclipsed only by Paytm in the fintech space.

And while Paytm had its own shares of troubles in 2024, PhonePe ended up going from strength to strength — not only adding to its fintech super app, but adding the Indus App Store and making key changes to the Pincode app. 

The core payments business drove 90% of its revenues in FY24, but it’s also becoming evident that PhonePe is diversifying quickly and hedging itself against potential disruptions to its UPI-centric payments empire. 

To be sure, PhonePe is wary of the changing regulatory environment when it comes to the booming digital payments market in India especially the UPI where it now has nearly 50% market share.

Some of the new verticals PhonePe entered into like digital commerce or the app store are not exactly fintech businesses or PhonePe’s strengths, however, these could become a key to growing both topline, improving the bottomline, by leveraging the fintech platform’s extant 530 Mn users.

For venture capital backed companies these days, an IPO is the next big target, and after redomiciling to India in late 2022, PhonePe has been on the IPO course as well.

“PhonePe has two things going in its favour in the run up to the IPO. Unlike Paytm where the leadership board was restructured several times before and after listing, PhonePe has had a stable board and its leadership. Secondly they have smartly avoided the regulatory axe until now by not going aggressive on lending or other businesses and increased their dominance in UPI,” a fintech unicorn CXO turned investor told us. 

And while PhonePe CEO Sameer Nigam recently ruled out rushing to an IPO due to underlying regulatory concerns on UPI transaction share, every development in 2024 took PhonePe closer to this. 

PhonePe’s Payments Lead: Going Beyond UPI 

PhonePe’s efforts in securing payment aggregator, account aggregator licenses as well as the wallet and bill payments licenses earlier continued to bear fruit in 2024, with the standalone payments business reaching INR 4,910 Cr in FY24.

Despite the zero merchant discount rate or MDR in UPI payments, PhonePe has navigated this challenge by being able to cross sell products that have an attached MDR, including bill and credit card payments, mobile recharges, travel bookings, in-transit payments on its core payments app. This cross-selling forms the lynchpin of the company’s super app play. 

Within bill payments, for instance, PhonePe has a 50% market share by value and volume terms far ahead of rivals like Google Pay, CRED, Paytm and Amazon Pay. This enabled PhonePe to collect commissions from service providers while utilising its current monthly active user base of 200 Mn as of FY24.

PhonePe has also tied up with various online ticketing platforms like Goibibo, EaseMyTrip, Redbus,ixigo to enable its existing users to book air, train and bus tickets directly from the app under which it charges a commission from the ticketing platforms. 

PhonePe’s move to sell insurance products in health, travel, motor insurance within the app. PhonePe has reportedly directed a bulk of its investments (nearly INR 1000 Cr) towards insurance distribution services. 

Industry analysts have been bullish on the underpenetrated insurance sector for a while now, however, PhonePe’s insurance products in partnership with insurers are micro offerings with small value premiums and therefore low revenue upside.

PhonePe claims to have sold over 9 Mn insurance policies since 2021, yet most of the income it earns is a percentage of the premiums paid by consumers to insurance companies. For long the company has looked to expand this play and add to this distribution revenue, but competing with existing aggregators is not easy, especially because insurance is not the only focus area for PhonePe.

“In a way this resonates with PhonePe’s existent user base with 80% UPI users coming from tier 2, 3 towns If they are able to crack insurance business in these markets where the niche insurtech players are finding it difficult to reach, this would significantly shore up revenues unless no stifling regulations come into play,” a founder of an early stage insurtech platform told Inc42.

Within the payments business, PhonePe’s move to tap the overseas markets like Singapore, UAE, Sri Lanka has come at a time when these geographies are increasingly looking to digitise payments with the support of Indian fintech startups. Notably fintech companies  like Razorpay, Pine Labs and others are already present in some of these geographies.

In 2024, PhonePe entered these markets, tying up with local financial service institutions to add to the international payments on UPI. Now, the fintech firm is also reportedly eyeing a payments license in a few countries to set up retail payments operations there. 

“PhonePe is already offering solutions to the Indian users and travellers in these geographies and could possibly be looking at providing payment gateway services to local merchants and payments apps. However, this also depends on passing the regulatory hurdles in each of these geographies,” source close to the PhonePe management told us. 

Digital lending is a big cross-selling point for PhonePe. The fintech giant launched secured lending products in May 2024 and put a halt on small ticket loans disbursal.

“It only made sense for Nigam and team to capitalise on Paytm’s lost trust factor and losing merchant base by launching these products. They have so far not gone aggressive on lending and cautiously navigated all regulatory hurdles,” commented the investor quoted above.

The products launched under secured loans offering included gold loans, mutual funds, auto loans, home and education loans. In October 2024, PhonePe also launched credit on UPI offering in partnership with ICICI Bank which offered ICICI’s pre-approved customers to avail loan of up to INR 2 Lakh instantly on PhonePe app.

On the merchants lending side, PhonePe is reportedly disbursing INR 300 Cr worth of merchant loans every month, with annual disbursals now close to INR 4,000 Cr, for a total merchant base of 40 Mn.

The Wealthtech Bet: Share.Market

Wealthtech has perhaps been one of the brightest spots in the Indian fintech story so far catalysing the success of the likes of Zerodha, Groww, Upstox and others. PhonePe forayed into wealthtech with the launch of standalone Share.Market app in 2023. The app has clocked 2.5 Mn registered users and 200,000 active investors since its launch in August 2023.

In 2024, the company invested over INR 287 Cr into Share.Market, introducing features such as futures and options trading, and AI-powered intelligence.

“PhonePe decided to go for a separate wealth tech app because the target market here is much more niche, which also relies heavily on in-app intelligence tools. However the market here is different from the payments market and it is almost difficult to onboard users from a rival platform unless PhonePe offers a unique consumer experience. Remember the Zerodha glitches and simpler UI/UX of Groww which helped the latter attract new-to-market consumers. Now PhonePe has to find a sweet spot between offering a superior experience and charging consumers at the same time,” a wealth tech consultant told Inc42.

During Share.Market’s launch in 2023, Nigam and team did not outline any targets or metrics for this app, but this seems to have changed. This is naturally because leaders like Zerodha and Groww that have overachieved in terms of revenue, profit, user base milestones for the past two years 

Wealthtech is becoming a crowded space. Only few rivals have been able to onboard more new active investors like Share.Market, which does give an early edge. But analysts say that without being able to scale up the investor base especially in F&O, intra-day trading, PhonePe will find it difficult to compete for the same set of investors who now have multiple options to choose from. 

Aiming To Be India’s App Store 

PhonePe also managed to do something that Paytm had tried and failed. An app store to challenge Google’s Play Store dominance. The launch of the Indus Appstore in 2024 represents a major transition for PhonePe, from a fintech company to a tech company. 

This is a big bet for PhonePe, especially after some of the oldest apps in India found themselves delisted from the Google Play Store in 2024. Soon afterwards, PhonePe looked to sign deals with OEMs to get Indus Appstore preinstalled on devices. 

The store’s big USP is zero commission from developers for the first few years, allowing real money gaming apps, and the option to implement any billing system the developer chooses, unlike Google Play. Starting from January 2025, Xiaomi will be replacing its own app store with Indus Appstore, which today hosts more than 2 Lakh apps across 45 categories and 12 languages.

The fintech giant has already entered into strategic agreements with OEMs like Nokia and Lava, and the company expects to have more than 150 Mn active users on its app store by 2025. 

According to Counterpoint Research, smartphone brands like Xiaomi, Samsung, Vivo, Oppo, Realme constituted 90% of the market in India, but most of them are reliant on Google Play Store. PhonePe’s entry does disrupt this space, but whether PhonePe has the scale to compete with Google is still open for debate. 

The year 2025 will test PhonePe’s network prowess, as well as the experience app developers and users will have with Indus Appstore which started off on a positive note. And a lot 

PhonePe’s Spin On Quick Commerce And Pincode 

One of the most surprising announcements that came from the PhonePe group in the last few years was  its foray into digital commerce via a separate app. More so because Walmart already had ecommerce  giant Flipkart under its belt. But PhonePe took on the bet for localised ecommerce through ONDC. 

Pincode was originally conceived for ONDC food and non-food deliveries, but in 2024, it looked to move away from the open network. Pincode eventually stopped delivering non-food products via ONDC due to weak demand, hassles with third-party logistics players, and overall subpar customer experience. 

According to our sources within PhonePe, the company is pumping in investments  into Pincode especially for its quick commerce offering in late 2024. Through this, it will branch out into non-grocery items from local kirana stores with the help of logistics partners Shadowfax and Loadshare .

This model is different from asset heavy, dark store models of Zepto, Swiggy Instamart or Blinkit, and could reduce the overall costs for PhonePe. Whether this model can be scaled up enough is another question, as this is not the first startup to attempt to aggregate retailers for digital commerce. Read: Dunzo

However partnership with third party logistics players for 10 minute deliveries which is a fairly new concept might be challenging especially since capital heavy players have in-house logistics.

Given PhonePe’s success with many existing businesses in the past, one cannot write off CEO Nigam’s team entirely, especially because quick commerce has started to make a real dent in India’s ecommerce market and is growing aggressively across the country. 

Looking at 2025, one cannot help but feel that PhonePe’s next big growth phase will come from outside fintech — whether it is the app store or the digital commerce play is yet unclear, but both of these have deep links to the fintech product as well. 

In this regard, 2024 was all about PhonePe making sure that its super app play gets more fleshed out and diversified than any of the competition. We have written about the great fintech convergence in the past, but no one is pushing the boundaries of what a super app is more than PhonePe. And a lot of that was evident in the year gone by. 

[Edited By Nikhil Subramaniam]

The post PhonePe In 2024: On The IPO Trail With INR 5,000 Cr Revenue appeared first on Inc42 Media.

Just days before Swiggy’s $1.3 Bn IPO, cofounder and CEO Sriharsha Majety responded calmly to a question about what Swiggy wants to see in the year ahead. 

The emphasis was on user retention and engagement across all verticals. “The target is really to see 110 Mn active users who transact at least 15 times a month across food delivery, quick commerce and other verticals,” Majety told Inc42. 

The seemingly plain remark underscored Swiggy’s transition from a food delivery app to — soon — pretty much everything an individual needs at a short notice. All this in the push towards maximising the share of the consumer’s wallet — whether it is good ol’ food delivery, an Instamart order or indeed a concierge service. 

This after the transition of the last 24 months to cater to the quick commerce boom, which has already changed the company’s approach to delivering convenience.

The quick commerce opportunity allowed Swiggy to see the bigger picture at the end of that road, and even as it has dedicated most of its time and energy in 2024 to the IPO, we are starting to see a glimpse of this bigger picture too. 

In the year ahead, Swiggy might change even further if the company’s plans take off — and we will come to those — but for now, it’s time to bask in what was a monumental 2024 for the company. 

Swiggy’s $1.3 Bn public listing is one of the largest among new-age tech companies in India, and while it did eventually arrive at the end of the year when there was already plenty of buzz for startup IPOs, this was not the case at the beginning of 2024. 

Swiggy’s Road To The IPO 

By the time, Swiggy had made its confidential filing with SEBI for an IPO in early 2024, Zomato had already reported three consecutive quarters of profits. So naturally, even before Swiggy’s financial state was clear, there were comparisons to Zomato’s bottom line/

As per its last financial statement, Swiggy was loss-making and at the time, the company had claimed some degree of profitability in food delivery, but nothing close to Zomato. 

Naturally, there was uncertainty on whether Swiggy could sway the public markets with its scale alone. So the company focussed on cutting its cash burn earlier this year, became leaner and limited marketing expenses. 

It began the year by laying off 400 employees in January 2024. Sources told us that these cutbacks targetted those with high paying roles in tech, marketing and business roles. With Swiggy investors such as Invesco and Baron Capital marking down the value of their investment in the company, much of the bullishness around a Swiggy IPO was waning.

Besides cutting costs, the company focussed heavily on revenue from the food delivery business. The platform fee addition in 2023 had helped to a large degree, but Swiggy also doubled down on ads for its restaurant partners and its going-out vertical Dineout. 

A former senior marketing executive at Swiggy told Inc42 that the company halted many of its experiments at the time, as Majety clearly wanted to take the company public by the year end and that meant focussing on the bottom line. 

“He [Majety] could not stretch the timeline because of investor pressure. And at the same time the company went conservative when it comes to expanding businesses despite Zomato and Zepto sitting on heavy cashpile and eyeing expansion,” the executive said.

Competition with Blinkit and Zepto was already heating up for Swiggy’s Instamart, and it became clear that the company had to dedicate resources for scale on quick commerce. 

In fact, Zomato-owned Blinkit was close to reaching breakeven by the end of FY24, whereas Swiggy was still saddled with losses. 

Then there was Zepto which raised  billions of dollars to press ahead with the revenue advantage. 

It’s not surprising then that there was nervousness around Swiggy’s IPO fortunes, and the confidential filings didn’t help soothe these nerves. 

Some of those concerns were allayed when Swiggy backer Prosus which held a 31% stake in the company pre-IPO said that the company had hit the INR 10,000 Cr revenue mark in FY24. This was the first major positive sign for the IPO-bound company.

Confidential filings allow the company documents to remain private until the company receives a SEBI nod and finally plans to go ahead with the IPO.

“Swiggy was the first tech startup to go public via the confidential route. There were concerns about the confidential filing route especially when Zomato, Zepto were in headlines for a major part of the year. The revenue scale gave confidence to institutional investors, family offices which were looking to invest in the company before the IPO,” a partner with a brokerage company based in Bengaluru said.

Stabilising Food Delivery

Post March 2024, Swiggy’s focus was completely on maximising the profitability of its verticals. Food delivery was the first on the table.  

The core food delivery business has remained a cornerstone in the company’s quest to attain profitability. Pretty much every new feature introduced by the company this past year has been in search of increasing either order volume or order value. 

Swiggy Food CEO Rohit Kapoor claimed that food delivery will continue to be Swiggy’s forte for the foreseeable future, and the company has set a target of 5% EBITDA margin for this segment in the next few quarters.

“It is an underestimation that there may be saturation in the food delivery market in India currently. Food delivery services are built on top of the restaurant sales. And it is a fact that restaurant penetration in India is still very low compared to those economies where the food delivery market is huge,” Kapoor told Inc42. 

He expects the next phase of growth to not be limited to metros or Tier 1 cities, but these will be the primary markets for the company. 

One new addition to the food delivery plate is Bolt, Swiggy’s 10-minute food delivery service. The company is especially proud of the fact that it is not relying on pre-made food and heating up packets to fulfil this service. 

Sources close to the management believe that bringing the entire restaurant industry on the same page to achieve 10-minute delivery will be a bigger feat than anything else tried before on this front. 

Food delivery CEO Kapoor revealed that Bolt now constitutes 5% of overall food delivery volumes and this will be expanded to 400 more cities.

“We are building Bolt for the long term and this is based on the demand we have seen being generated in the market for such deliveries. It should be emphasized that faster food deliveries are not necessarily based on cloud kitchen models which many are assuming. At Swiggy we are in fact working with branded restaurant chains for Bolt and making it operationally efficient. You are going to see many such Swiggy’s partnerships with existing and new restaurant partners announced soon,” he added.

It was also the year when Swiggy revamped its loyalty programme. In a bid to further shore up its revenue, the company launched an invite-only membership programme One BLCK in December at INR 299 for a three-month plan.

“Swiggy One BLCK is the business-class equivalent for our customers—refining the aspects that matter most to premium users: speed, reliability, and personalised care. With this launch, we’re setting a new benchmark for premium memberships in the industry,” Swiggy cofounder and chief growth officer Phani Kishan said at the time of the launch, indicating that One BLCK would stretch beyond food delivery and tie into other verticals. 

Indeed, restricting any Swiggy analysis to food delivery is missing the point, so what happened with Swiggy Instamart in 2024? 

Instamart’s Changing Colours 

Even while Swiggy remained conservative in its approach in the first half of 2024 in its preparations for the IPO, Instamart’s expansion was the prime focus of the company. In fact, many of the personnel changes over the past year hint at the close eye on the leadership for Instamart.

In Q2 FY25, Swiggy’s Instamart business has grown impressively by 114% to touch adjusted revenue mark of INR 513 Cr while its GOV zoomed by 76% YoY to INR 3,382 Cr. This is roughly half of what Swiggy earned in all of FY24. 

Even so, this pales in comparison to Zomato’s Blinkit, which has 2X higher revenue, or Zepto, which has 4X higher revenue. 

This is not a worry for Swiggy given the transitions in the quick commerce space and the fact that new competition is emerging. A lot of this early revenue accumulation by Zepto and Blinkit will eventually be distributed among the competition. 

For Swiggy, the focus is on mixed deliveries to cater to the transition in quick commerce from grocery to non-grocery. This the company believes will unlock profitable growth in the long run. The next big focus for Swiggy is on megapods or large dark stores where the company is looking at a mixed assortment of products, and staggered delivery timelines depending on the product category. 

Crucially, megapods enable Swiggy to enter new categories at scale, if the management deems it necessary. The success of the recent pharmacy launch in Bengaluru could more quickly be replicated in other large dark stores in Delhi or Mumbai, for instance. 

At a time when ecommerce giants Flipkart and Amazon India are making a foray into quick commerce, Swiggy’s management is unfazed. In fact, Swiggy CEO Majety has gone on record saying that assortment of categories and SKus, and quality will take precedence over speed in the long run.

With everyone having enough capital, the success factor will come down to product and consumer experience. Swiggy CFO Rahul Bothra told Inc42 earlier that discounts will not be a key lever to attract or retain consumers in the long run. 

”We don’t think it will be a duopoly like food delivery. However, we have been able to scale our quick commerce rapidly from 30 minutes to 10 minutes delivery within a year, and we are not deterred by the entry of ecommerce giants. These players have operated in different market conditions and will need to first establish dense networks of fulfilment stores. Some of them tried their hands at 30-minute deliveries, but could not succeed,” Bothra told us earlier.

Then Came The IPO And Fat Returns For Investors 

In the run up to its mega $1.3 Bn IPO Swiggy drew unique interest from Bollywood actors, sportspersons and other celebrities for its pre-IPO shares.  

“The participation of celebrities including Amitabh Bachchan, Madhuri Dixit, Rahul Dravid, Zaheer Khan among others also intrigued the public markets working in Swiggy’s favour. They also priced the IPO right. An IPO of this size needed a modest valuation and Swiggy did just that which made it sail through,” the brokerage analyst quoted earlier in the story added.

According to BSE data, the issue received the highest interest from qualified institutional buyers (QIBs). The QIBs bid for 52.3 Cr shares against the 8.69 Cr shares on offer, translating to 6.02X subscription.

This was the sign of a premium listing, if not a blockbuster IPO. Early investors and Swiggy employees were sitting on potential blockbuster returns from listing, and it delivered. 

Investors like Prosus which had already cashed out more than $1.5 Bn while paring down its stake in Swiggy made $500 Mn during IPO. Notably, Prosus had invested a cumulative $1.3 Bn in Swiggy for 31% stake. It still has a 24.7% stake in Swiggy worth more than $3 Bn at the current market price. 

This has been a landmark for Prosus which also had to write off big cheques in BYJU’S in the same year.

Swiggy’s mega IPO returns in fact has given Prosus new zeal to write big ticket cheques for other new age companies in India, something which the company had eased off on earlier. 

Fabricio Bloisi, chief executive officer of Prosus, earlier said that Swiggy is on a strong growth trajectory as a public company after having diversified into new categories and expanding into new cities.

“India remains a key growth market for Prosus given the country’s impressive digital transformation in the consumer and enterprise sectors. We are excited about the region and see huge opportunities for value creation including a strong IPO pipeline within our current portfolio,” he added.

In addition, we also saw investors like Accel, Tencent, Norwest sitting on pretty gains on their early bets.

Swiggy’s employees led by its leadership including Majety, and cofounders Rahul Jaimini and Nandan Reddy have also made a fortune from the company’s November listing.

“It’s been a long phase of sinking in for me and today is just another day of that sinking in. The last few months have been preparing for this day and what comes after and here we are,”Majety said during the Swiggy’s listing ceremony.

Besides this, 500 Swiggy employees who were allotted stock options across various tranches over the past few years, realised $1 Bn in gains from the listing, with many choosing to sell their shares and becoming millionaires overnight. 

Truth be told, there was plenty of nervousness about a potential dud listing for Swiggy, which might have dented the company’s momentum, but despite stiff competition and some much-needed cost correction, the company is stepping into 2025 with plenty of enthusiasm, and big plans. 

Testing New Waters 

If the beginning of the year was about Swiggy taking cautious approach and not approaching much in the run up to its IPO, the company made some bold bets in the latter half of the year especially post IPO. 

“There is a marked difference between how a VC funded company and a public limited company operates. These companies, although accountable to retail, institutional investors are not under pressure to give exit to VCs. That gives the company’s leeway to expand into new business verticals and experiment with new products. Majety, although a very careful leader, also has to try different revenue streams when disposable incomes are also growing in India,” said a former Swiggy executive, who worked in famed ‘M team’ led by Majety. 

That’s the team that makes the key decisions around the verticals. And it’s been a busy few months for the M team. 

Besides Bolt and pharma deliveries, which we touched on earlier, a big push has come on the going-out front. Swiggy is adding Scenes, a ticketing and events platform to the Dineout mix, as it looks to take on Zomato’s District. 

Swiggy Food’s Kapoor emphasised that Swiggy’s dining out business model is working along the expected lines and that the company expects this to be profitable by next year. Besides dining out is expected to be even a bigger business with expansion into ticketing, events business through Scenes.

Unlike Zomato, which spent INR 2,048 Cr to acquire Paytm Insider, Swiggy is not looking at acquisitions just yet. Kapoor told Inc42, “The idea definitely is to make each business operation a sustainably profitable business for the long term as good public companies do.”

Another big bet is Rare Life, Swiggy’s concierge service, which is currently in pilot for the past two months, and is likely to be a major focus for the company given the revenue upside. Swiggy Rare Life membership begins at INR 50,000 per year for now, but more details on this will emerge in 2025 as the service makes an official launch.

Then there’s Yello, where we don’t quite have a clear picture, but it’s akin to Yelp in the US, where consumers can book and review service providers around them. Unlike Urban Company, Swiggy is staying true to its aggregator roots with Yello.  

These are not exactly industry first bets but Swiggy has a reputation for being conservative with experiments. The Swiggy in 2025 might just surprise many. 

The Big Target: Profitability

Undoubtedly, now that it has hit the IPO milestone, Swiggy will be gunning for profits. Zomato reached there more than a year after it got listed. 

Swiggy Food CEO Kapoor told Inc42 that the company also expects to post a profit on a consolidated basis in the next 4-5 quarters.

In its last earnings report, Swiggy said that it expects its business to achieve adjusted EBITDA profitability on a consolidated level in the third quarter of FY26.

While Majety led firm said that the food delivery business is already profitable and its going out business is expected to be profitable by the end of FY25. The big burden is on Instamart.

Karan Taurani of Elara Capital said Swiggy can reach breakeven at a consolidated level in next two years, even though Instamart is still posting a loss. As a result of the competitive intensity, Swiggy’s execution has improved, he believes.

When it comes to the public markets view, Swiggy still has a lot of room for growth in valuation. The company may see a 20% valuation discount to Zomato by the time it reaches profits, due to the relatively lower scale of revenue. 

Swiggy has said Instamart is still in its investment phase, and has outlined a target of FY27 for standalone profit in this vertical. But considering Zomato’s Blinkit is almost near breakeven, a stretched timeline between the profitability of two rivals which are also public limited companies now can impact its market cap.

Going public means Swiggy has to work under a bigger spotlight than ever before. Naturally, Zomato has set a benchmark when it comes to scaling up a consumer services company, but Swiggy is going for a completely different approach, looking to add hundreds of millions of engaged users across several verticals —creating a consumer services stack, in some ways. 

Theoretically, this is a great strategy to boost profitability in any business if each vertical has scale by itself, but Swiggy also has to invest in growth for each vertical over the next few years to truly unlock the profits. This will be a bit of a tightrope walk.   

And for much of 2025, till at least the food delivery vertical turns profitable, Swiggy has to manage this balancing act. 

[Edited By Nikhil Subramaniam]

The post Swiggy In 2024: IPO Delivered, Profitability Next? appeared first on Inc42 Media.

Zomato is the new steel. It’s not often that a 15-year-old food delivery company dethrones a four-decades-old steel giant from the BSE Sensex, one of the biggest economic indicators in India. 

This is India, after all, where steel has been a major industry for a century, but now is Zomato’s turn. 

Zomato’s emergence as India’s largest consumer internet company with a market cap of nearly INR 3 Lakh Cr is one of the overarching themes of 2024. And naturally, Zomato’s story has become the benchmark in the Indian startup ecosystem — the question today is not about building a unicorn, but another Zomato. 

While the company showed a glimpse of its potential with profitability in 2023, by far, 2024 is arguably the year when Zomato cemented itself as an Indian tech giant. Reporting profits of INR 351 Cr in FY24, Zomato also stayed ahead of its rivals in food delivery and quick commerce businesses (well, except Zepto), while continuing its profitable streak in FY25. 

And we also got another look at Zomato founder and CEO Deepinder Goyal’s unconventional approach towards understanding the operations as well as key hiring — not to mention, several TV appearances. 

Industry watchers, brokerages maintain their optimism on Zomato in 2025 with two major verticals (food delivery and quick commerce) already profitable and the company well capitalised with an INR 8,500 Cr Qualified Institutional Placement round recently. 

The year ahead, however, will test Zomato again. With a few bold experiments in the pipeline for District and perhaps even for other services, Zomato finds itself in a different place than 2023. 

Now, Swiggy is also a public company and the pressure from its biggest rival will not exactly be easy to deal with. Plus, Zepto has stepped up the revenue pressure on the quick commerce front. 

So even as we review Zomato’s year gone by — as part of our 2024 in Review series — this is as much a preview of 2025 for the delivery giant. 

The Next Stop For Zomato Food Delivery

Food delivery has always been the core revenue driver for Zomato, and this year, the company managed to outpace rival Swiggy in terms of market share and profits. More than half of Zomato’s revenue in FY24 came from food delivery, and this trend is unlikely to change in the next year. 

Despite some headwinds, Zomato sits pretty on the top of the food delivery market of India grabbing a 58% market share according to a report by Motilal Oswal. Notably Motilal Oswal’s fund was a lead investor in Zomato’s recent $1 Bn QIP funds raise.

But while market share has grown, the user base and order volume have not exactly kept pace. Zomato focussed on improving the margins on food delivery by increasing platform fees, pushing partners for more ads, commissions on restaurant partners and reducing delivery costs. 

As per a note by Elara Capital, Zomato’s food delivery business growth over the last three quarters was slowest at 21.4% YoY with 30% revenue growth because of stagnation in take rates.

But margins on GOV went up to 3.5% in Q2 FY25 from 2.6% in Q2 FY24, showing that the company has managed to improve its unit economics even though growth has remained lacklustre.

Karan Taurani of Elara Capital believes the key forward will be to increase the number of monthly transacting consumers and increase the frequency of orders on the platform. He sees the margins on food delivery business stabilising at 4-5%. “If at all Zomato further increases its platform fees further that can improve the profitability, however the company has not implemented the hike in platform fees across all Indian cities which could be a deterrent,” Taurani added.

Will Blinkit Boom Continue? 

Even if Deepinder Goyal faced criticism for Blinkit’s costly acquisition, no one has any doubts now. 

The highlight of Blinkit’s success in 2024 was a substantial increase in revenues which is adding to Zomato’s revenues, however the quick commerce business is yet to achieve net profitability. And competition is only growing in the quick commerce space, making it much harder for Zomato to continue to press forward in the same manner as late 2023 and early 2024. 

Blinkit revenue grew by 129% YoY in Q2 FY25 reaching INR 1,156 Cr, which is just about half of what the company reported in all of FY24. That’s the pace at which quick commerce is growing. 

However, the fact that a four year old Zepto has outpaced Blinkit would possibly be a big red flag for investors. The questions on Zomato shareholders’ minds will be split between Blinkit’s profitability and the revenue growth. Balancing both will be a tricky challenge for Blinkit CEO Albinder Dhindsa and Zomato’s Goyal.

An analysis of Zomato’s FY24 annual report and Zomato’s management commentary during the recent earnings call reveals that Blinkit revenue growth has been driven by substantial increase in GOV, just like in the old days of food delivery. How long can this momentum be sustained before Blinkit hits a growth wall in 2025 — whether due to competition or due to a saturated market. 

Instead, Zomato and Blinkit are now focussed on building the quick commerce business through introduction of more categories, assortments with increase in profitability. The recent launch of Blinkit Bistro is one example of how Zomato is pushing for this change, but again, these are experiments that may not pay off for Blinkit. 

Despite so much bullishness around quick commerce, Blinkit is in a precarious position of being the middle of the pack. It cannot rest easy for a number of years and will have to continue to invest heavily for growth and market share. For instance, as per Zomato’s admission, the gross order value in Delhi-NCR has fallen from 47% to 40% because of the entry of new competitors.

Currently, Blinkit has dark stores across 40 locations in the country. Zomato management said that expanding this to more cities will be margin dilutive in the medium term. 

In terms of its planning of dark stores expansion, Zomato management said that it will focus on owning only a few stores whereas the rest will be operated on a franchise basis, which could relieve some cost pressure, but there is a risk of execution failure. 

Even as Blinkit managed to ride the hype wave for most of the year, the end of the year has not been very rosy for the quick commerce giant, especially with everyone having their eyes on the 10-minute delivery race. 

Hyperpure: Zomato’s Silent Performer 

On the other hand, Zomato’s B2B supplies vertical Hyperpure has little competition to be worried about and a captive network of customers. Revenue has nearly doubled every year, strongly adding to Zomato’s topline.

In Q2 FY25, Hyperpure’s revenues grew by 17% QoQ to INR 1,473 Cr, whereas adjusted EBITDA loss was INR 21 Cr. The vertical is on the brink of profitability and will see further investments from Zomato for food processing and manufacturing plants. 

These could be the lynchpins for Zomato’s push into private labels for HoReCa customers in the future. Market analysts say that the revenues of Hyperpure have grown steadily particularly after Blinkit acquisition since Zomato additionally is also supplying raw materials to retailers and Blinkit sellers.

“Zomato’s own delivery fleets coupled with building infrastructures in densely populated geographies where Blinkit demand is coming from will also grow its Hyperpure business. Furthermore, the businesses partnering with Hyperpure are offered incentives, given preferences to list on Zomato platforms just like the eateries/ restaurants Zomato was earlier partnering with,” commented an FMCG wholesale distributor based in Bengaluru.

Notably, Zomato CEO Goyal had said earlier that Hyperpure’s extension of service to Blinkit is a key revenue opportunity for the future. However, industry watchers are skeptical whether supplying to grocery and non-grocery retailers will be as profitable as supply to restaurant partners because the latter is a low-margin business with less AOV.

Plus, with the changing mix of categories on Blinkit, how much will Hyperpure have to change from its food-first approach to non-food categories? 

District Makes An Entry 

If your interest in live musicals, concerts and comedy shows has peaked in the last one year, Zomato may be partly responsible for the same. 

It is no secret Goyal is going aggressive on the going-out business and challenging the market leader  BookMyShow. Acquiring Paytm Insider for INR 2,048 Cr is a pretty big signal. But if anyone doubts Zomato’s ability to make that seem like a paltry amount, just look at Blinkit. 

“It has become crucial for any consumer internet company to diversify its revenue streams and Zomato is building up on the same. Zomato’s target market comprises mostly millennials and GenZ Indians, and now besides food and daily needs, the company is also catering to entertainment and activities. We will see a lot of overlapping consumers who will use one or all these apps.This Zomato universe will be tough to challenge especially by any one vertical specific company/ business because of the massive consumer base Zomato has,” a Gurugram-based events company manager told Inc42.

A March 2024 EY-FICCI report claims the live events and ticketing business in India grew by 20% in 2023 to reach a market size of INR 8,800 Cr and is expected to touch INR 14,700 Cr by 2026. 

Analysts say that while there are only two big online competitors right now in the business, the offline events management and marketing companies will also be up for M&As and there is a likelihood of other consumer internet companies entering the space just like Zomato did.

Taking on its arch rival, Swiggy has also rolled out Scenes, a section within its app to cater to ticketing and events booking. The company is also focussing on managing its own set of events for Scenes as well as its Rare Life membership club. 

By this time next year, we might well be talking about the going out verticals with the same heightened revenue expectations of quick commerce. 

Zomato’s Brave New World

Three years after its listing, the Zomato we know today is totally different from the one that public markets investors backed in the IPO. At that time, Zomato was just purely food delivery, trying other things. In 2024, those experiments have matured and bloomed. 

In the next two years, it tried grocery but couldn’t hack it and instead acquired Blinkit in 2022. It tried nutraceuticals and 10-minute food delivery, but that didn’t go anywhere. Now in late 2024, instant food delivery is part of Blinkit, and perhaps a lot more fleshed out than before. 

One could even say the timing for this product launch is better than when Zomato first tried it in early 2022. 

Another example is District, which is an extension of Zomato’s first event Zomaland in 2018. This pre-IPO push for the Zomato brand gives us a clue as to what Zomato is planning with District. The first Zomaland seemed like any other event, but with District, Zomato will look at the possibility of scaling this up even more efficiently. 

The one big curveball for Zomato is the potential changes to the quick commerce game due to regulations, and concerns around the impact on small retailers. As the market matures and the regulations evolve, 

Zomato will have to carve out new ways to balance the surging profits and the concerns of the regulators. 

After all, it would want to maintain the position it gained in 2024 — becoming India’s largest publicly listed consumer internet company.

Edited By Nikhil Subramaniam

The post Zomato In 2024: When Deepinder Goyal’s Co Became The North Star For Startups appeared first on Inc42 Media.

February 22, 2024 — Headlines around India revealed an Enforcement Directorate lookout circular against BYJU’S founder and CEO Byju Raveendran. 

After months of turmoil at BYJU’s — starting in June 2023 — the spotlight was again on Raveendran, but an entirely different kind of spotlight. 

Raveendran would have been used to the pressure of running an edtech empire, a $22 Bn company with business interests in India and the US, but this was one of India’s premier investigation agencies asking authorities to be vigilant of his movements. 

Of course, the BYJU’S CEO and his family including cofounder Divya Gokulnath and brother and director Riju Ravindran were already out of India by the time the ED circular was issued. 

Everyone in the ecosystem knew Raveendran had left India for the UAE, even as he was battling shareholders and allegations of financial misappropriation by lenders. 

“Raveendran always had UAE as his second home. Besides, he kept shuttling between India, US for the past few years. But no one had spotted him in Bengaluru as well where the company’s lavish headquarters were,” a former senior manager at BYJU’S told Inc42. 

In fact, Raveendran has not stepped back into India since leaving it at the end of 2023, much before BYJU’S came crumbling down. And now one year later, the future of the once-mighty edtech company hangs in the balance.  

As we recap the year gone by — in our signature Year In Review series — it would be a huge oversight to not look back at what happened at BYJU’S over the course of the last 12 months. Here’s the BYJU’S story from 2024 

Problems From The Very Beginning

The year began with general counsel Roshan Thomas quitting the company, which spelt an ominous time ahead for BYJU’S in terms of its legal entanglements. 

Soon after this, BlackRock slashed the value of its investment in BYJU’S by 95%, which led to the company now being valued at $1 Bn as opposed to $22 Bn till a few months ago. 

The mark down in valuation would have mattered little had BYJU’S managed to show improved financial performance in FY22, the results for which were delayed by nearly two years by this time. 

But that was not the case either. Consolidated net loss surged 81% to INR 8,245.2 Cr in FY22 from INR 4,564.3 Cr in FY21. This staggering loss of close to $1 Bn meant that BYJU’S was worse off than many believed. 

The only silver lining was the profits for Aakash in FY22, but since then BYJU’S has lost majority control of Aakash after splurging nearly $1 Bn to acquire it. 

Such was the state of the company that it did not have enough money to clear dues for vendors or employees, and naturally several challenges were raised in the NCLT regarding the near-insolvency situation. 

And we hadn’t even left January yet. Before the end of the first month, BYJU’S announced a contentious plan to raise money via a rights issue. The company was seeking to raise $200 Mn at a staggering 99% haircut. 

But a key group of investors at BYJU’S including the likes of Prosus, Peak XV Partners, Sofina, General Atlantic called for an Extraordinary General Meeting (EGM) seeking to oust Raveendran as the CEO and put in place a new management as well as governance structure to take the company forward, in case there is a rights issue. 

This really put the conflict between the BYJU’S investors and the founders out in the open and was a clear cut indication that India’s once most valued startup is witnessing a disgraceful decline. 

“These clutch of  investors who together had lower stake in BYJU’S than the founders alleged that Raveendran has not been transparent in his dealings and management of the company. However, the cracks in the company were already evident when it was without a CFO from 2021 to 2023. And there were repeated delays in submitting annual reports. One can say there was complacency on the part of investors in putting these systems in place,” said a partner at a VC firm that had invested in BYJU’S. 

Cash Crunch And The Investor Meltdown 

The rights issue was a big thorn for investors. Raveendran had sent communications to all shareholders urging them to participate in the rights issue in order to maintain their stake in the company. 

It was a cramdown round, which meant that those shareholders that don’t subscribe to the rights issue will see their stake effectively diluted to zero. 

For instance, Prosus which had invested $500 Mn in BYJU’S over multiple rounds, was at risk of having all its equity wiped off if it didn’t subscribe to the rights issue. 

While investors urgently called for an EGM in February 2024 to prevent the rights issue and remove Raveendran, the BYJU’S CEO decided to go ahead with it and moved the Karnataka HC alleging the EGM was invalid. 

That is when a group of investors led by Prosus moved the NCLT alleging shareholder oppression and mismanagement. Once again, there was a call by investors to oust Raveendran and put new management in place, and one did wonder whether the company could have a future without its eponymous founder.  

Even though BYJU’S and Raveendran managed to get the rights issue off the ground, legal challenges meant that the company could not touch these funds till courts and the NCLT had ruled on it. 

BYJU’S tried to initiate another rights issue, but this too was blocked by courts, leaving the company to fend off bankruptcy challenges with whatever funds it had at the time.

Raveendran on his part has written emotional letters to his employees appealing them to stand united against investors and ‘foreign lenders’ who sought to bring the company down according to him.

He claimed that he had borrowed money personally to pay employees salaries and that if the company goes insolvent, it will be because of the investors and it will hurt employees. 

Despite these overtures and the company’s efforts to get leaner — after layoffs and scaling down — BYJU’S was in a Catch 22 situation. 

On the one hand, keeping the operations going required funds, but on the other, the funds would have only come had Raveendran stepped aside. Given that the latter was not happening, it seemed that the company was going to hit a dead end very soon. 

At this time, BYJU’S was a shadow of its former self — it had relinquished offices in Bengaluru, moved employees to remote working, and had taken its foot off the online learning model. Now, the focus was squarely on the offline tuition centres, but this vertical was also hanging by a thread. 

And by the end of February, the ED lookout circular put Raveendran in a bind. It would seem that despite assurances from him, the company was deeply mired in issues. Naturally, these governance issues had dented BYJU’S standing among customers and teachers. 

Even as early as the second month in the year, it was becoming clear that the era of BYJU’S was coming to an end. 

BYJU’S Edtech Business In Doldrums

In August, Inc42 exclusively reported that BYJU’S had more or less pulled the curtains down on its offline vertical. Landlords had locked over 120 tuition centres across the country over non-payment of rent, electricity and water dues.

Employees — teachers and those on the operations side — had also not been paid in months, but they could not take any action against the company, except approach the Ministry Of Labour. Even then, many of their concerns fell on deaf ears. 

In fact, the situation was such that even if BYJU’S had somehow managed to get money to keep the company afloat, it was not a guarantee that employees would be paid. 

“We were assured of our salaries by our senior managers, but little did we know that they were actually asking the last 5,000 employees to leave. The company had almost shut 80% of its operations by August,” said a former senior manager at operations who left the company in August. 

Despite Raveendran’s show of solidarity and promise that employees would be paid, the company’s many issues created a ripple effect within the industry. “The employees who were laid off by BYJU’S took up jobs at 30%-50% lower salaries. This shook up the recruitment for the entire edtech industry as there was a huge pool of unemployed edtech workers. The other edtechs also slashed their salaries drastically since the supply was greater than the demand,” a rival edtech founder told Inc42.

But these issues — serious as they were — paled in comparison to the major allegations against Raveendran and BYJU’S from its creditors in the US. 

Chief among the allegations was the contention that BYJU’S and Raveendran had syphoned off $533 Mn from the $1.2 Bn term loan B raised in 2021. 

In the months to follow, the entire focus would shift from the Indian operations to the US creditors and their battle with the company and by the end of the year, there would be more grave allegations against Raveendran as well as indications of foul play in the US in an effort to thwart the lawsuits by its creditors. 

US Lenders Come Knocking 

One can even say that the $1.2 Bn Term B which the edtech firm availed in November 2021 has become the strongest roadblock for Raveendran. 

In 2023, creditors alleged that the company had not paid dues for 17 months and had failed to come to any kind of negotiation on restructuring the loan. Creditors also accused Raveendran of syphoning off funds in contravention to the loan terms. 

The group of creditors moved bankruptcy courts in the US and sought to enter BYJU’S-owned US companies Epic and Tangible Play into insolvency to recover the funds.

These creditors, represented by Glas Trust, also moved the NCLT in Bengaluru seeking initiation of insolvency proceedings against BYJU’S. By then NCLT was also hearing several cases including the Board For Control Of Cricket In India’s (BCCI) appeal against BYJU’S for non-payment of INR 158 Cr. 

As it turned out, this case was the one that brought BYJU’S to its knees, and was the reason for the NCLT allowing insolvency proceedings to go ahead against the edtech giant. 

“Raveendran on his part kept organising select press conferences, wrote emailed communications to employees to demonstrate that he will not concede defeat. But the odds were stacked against him,” Sriram Subramanian, founder and MD, InGovern Research told us.

Another edtech investor spoke about rumours about Raveendran starting another edtech venture with the cash he earned from secondary share sales at BYJU’S. 

“On one hand thousands of employees have not been paid for months together, then investors are accusing him of hiding money and then there were reports of another venture. It did not seem ethical despite Raveendran’s appeals,” the edtech founder quoted above added.

The Brouhaha Amid The Insolvency Process

After months of back and forth, including a feud with investors and the tussle with creditors in India and abroad, the NCLT officially initiated insolvency proceedings against BYJU’S in July 2024. 

This was an unprecedented event for an Indian startup of BYJU’S magnitude. The NCLT appointed an insolvency resolution professional to manage the day-to-day operations of BYJU’S and form a committee of creditors to settle the various claims against the company. 

Ordinarily, this would have resulted in some clarity on what happens to the company under insolvency, but BYJU’S is no ordinary company when it comes to such matters. 

This process as per Insolvency and Bankruptcy Code (IBC) of India allows the committee of creditors 330 days to find a buyer for the company. In case the CoC is unable to find a suitable buyer, the creditors are allowed to liquidate the company assets. 

Thus far though, the committee of creditors and the insolvency professional have been accused by US-based creditors of colluding with the company, and allegedly blocking the possibility of the US-based creditors being made whole after the insolvency. 

The question now is whether the US-based Glas Trust will actually get a fair hearing in India for the insolvency. The NCLT’s Bengaluru bench has questioned the resolution professional Pankaj Srivastava’s decision to not include Glas Trust and Aditya Birla Finance (ABF) in the committee of creditors (CoC). 

Glas Trust and ABF believe that the resolution professional is looking to shut them out and has colluded with the company to get BCCI to withdraw its insolvency plea. This would block any attempt to recover the amount lent to BYJU’s by Glas or ABF. 

The last hearing on this matter was on December 11, 2024 and nearly six months after the company went into insolvency proceedings, things continue to be murky for BYJU’S.

Can BYJU’S Actually Bounce Back In 2025?

While these proceedings are likely to continue for most of next year, one does wonder whether BYJU’S and Raveendran can bounce back. For his part, the CEO has claimed multiple times that BYJU’S will come back stronger and will continue to disrupt the education industry. 

But things could not be any bleaker for Raveendran and the company he founded. 

Historically, in India, companies in asset-heavy industries are able to bounce back from insolvency proceedings since they have assets to sell off. However, in BYJU’S case, there are no such assets and it would be a tall ask for the company to make its creditors whole. 

InGovern’s Subramanian sees very little chance of BYJU’S being rescued.

“The liquidation process being seen over by NCLT can also involve settlement of corporate debts. In this case the corpus of debt is huge and the promoters have been unable to negotiate settlement in earlier talks. It also looks unlikely that they are able to find a buyer of the company since it is an asset-light business model and the demand for edtech products remains low. Furthermore, the company’s reputation has suffered a serious dent which also impacts any chances of the business revival,” he added.

What makes matters worse for Raveendran is that he’s fighting off insolvency proceedings in two geographies. In September 2024, even the Delaware Supreme Court in the US ruled in favour of Glas Trust stating that BYJU’S defaulted on the loan payments along with interests amounting to $1.5 Bn, and that the lenders were entitled to take the requisite action against the company.

This effectively meant that Raveendran had lost control of US-based subsidiaries Epic and Tangible Play’s Osmo after acquiring them for a cumulative $900 Mn.

BYJU’S also wrote off White Hat Jr after acquiring the coding startup for $300Mn, and its core test prep business in India was also reeling after scaling back in 2024. “The offline model was thought of as a saviour but education is a capital intensive market which requires asset ownership and payment of timely salaries. The working capital issues plagued BYJU’S for months, and then NBFC partners cut off ties with the company, which further worsened the issues around student enrollment” a former BYJU’S senior executive explained.

Finally after splurging $1 Bn to acquire Aakash, BYJU’S lost control of the offline learning giant after failing to meet the terms of the acquisition. Manipal Education And Medical Group’s Ranjan Pai is now the leading shareholder in Aakash after coming in as a white knight earlier this year. 

As for Great Learning, while it achieved profitability in FY24, the company also revealed that it is being run by a group of creditors since October 2023. BYJU’S was reportedly looking to sell Great Learning to settle its debt obligations with US-based creditors, but was unable to find a buyer and as a result lost control of Great Learning as well.

Raveendran’s efforts to sell a part of his stake in Aakash was blocked by the Supreme Court of India. Both the US-based lenders as well as Blackstone (which holds a stake in Aakash) have opposed any changes to Aakash’s structure which could strip them off their investor rights.

Will Byju Raveendran Return To India?

Finally, this is the most important question for BYJU’S — reputation-wise, Raveendran returning to India could solve a lot of the issues that could be perceived as problematic. 

If indeed the company goes under water, one expects Raveendran to stand up and take accountability for this disaster. 

Instead, the CEO has resorted to attacking investors. There was also troublesome testimony in the US related to Raveendran resorting to shadow tactics to get witnesses to not testify in court or coercing them to take potentially illegal steps to avoid an adverse verdict. 

So the question of Raveendran’s potential return to India will probably not be answered in 2025, if at all. 

As optimistic as the BYJU’S CEO sounds in recent media interactions and despite saying that he is not hiding from anyone, his claims have found few takers in India.

“When you have several governments probing your business models, the ED after you, foreign and domestic creditors who feel cheated, it is not only unethical but also unrealistic for him to return. I don’t know how he is asserting this with full confidence,” a VC fund manager who was a former partner at a Big Four told us.

Like this fund manager, others have told us over the past few weeks that the harm caused to the edtech industry in India due to BYJU’S will also make it difficult for Raveendran to step foot in India again. His acrimonious fallout with investors and customers is also likely to prevent his return.

Legal experts we spoke to said that Raveendran’s extradition to India and even his arrest could only be possible if there is a clear cut verdict from the Supreme Court on the same. However in absence of any criminal litigation and with the settlement of dues still possible, Raveendran may plan a gradual return to India in a few years if not in 2025. 

Indeed it is a sad turn of events for the entrepreneur, once known to have filled up entire stadiums with students. These days it’s hard to find any audience with Byju Raveendran.

[Edited By Nikhil Subramaniam]

The post BYJU’S In 2024: How The $22 Bn Company Crumbled appeared first on Inc42 Media.

India’s edtech startups have been stuck in an existential crisis for the past two years. From unicorns to the early stage ecosystem, almost every edtech company in the country has faced upheaval during this period.

The only exception to this seems to be Physics Wallah, which has raised millions of dollars and expanded in the last three years. Mostly everyone has suffered since late 2021.

Economists and analysts talk about global economic cycles of hypergrowth followed by price corrections and resets. 

In the case of edtech, the distribution model shift from online to offline has been the biggest pain point for founders, and there’s something to be said about their vision as well. 

Most founders jumped at the opportunity to cater to the online learning wave amid the pandemic, but the subsequent downfall indicates that many did not have a long term vision that is especially critical in edtech. 

One edtech investor recently told Inc42, “It’s something anyone should have seen. I think VCs made the mistake of not asking what after the pandemic. And the founders didn’t think they needed the answer for this question.”

This meant that there were too many niche business models during the peak funding period that didn’t survive after the pandemic. Some of them got snapped up by edtech unicorns in 2020 and 2021. 

But in the aftermath of the lockdowns, startups realised that the education sector in India is capital intensive, which either requires healthy cash flow or constant access to VC money. Many of them burned their capital on acquisitions or expansion of products and verticals. The end of the pandemic’s restrictions on schools scuppered these plans.

“The 2020-21 edtech bubble was built on VCs showering money on edtech companies who had no unique problem solving solutions but were copying each other’s business models,” Monica Malhotra, managing director at publishing house MBD Group, told Inc42.

She also agreed that founders and investors underestimated the market requirements in the education sector, which although huge, is also diverse and one-size-fits-all solutions never work. 

This coupled with aggressive sales and commodifying the social sector like education led to the industry’s downfall, Malhotra added. 

Despite the headwinds in the industry, the downfall of one-time market leader BYJU’S, the silence of other unicorns such as Unacademy and Vedantu, some believe edtech is on the right path. 

This year, for instance, also saw big ticket raises after a dismal 2023, when YoY funding nosedived by 88%. 

Alakh Pandey-led test prep giant Physics Wallah raised $210 Mn in a Series B funding, while higher education startup Eruditus bagged $150 Mn in a Series F funding round led by TPG’s The Rise Fund. Skill development startup upGrad also raised $60 Mn funding from Temasek in late October. 

But the number of company shutdowns, unreported number of job losses, corporate governance issues, cash flow concerns have dented investors’ faith in edtech as a sector. In particular, we are seeing founders move away from test prep and online learning as focus areas, and towards the skill development and higher education segment, which seems to have come out relatively unscathed after the pandemic. 

So now the question is: will edtech bounce back after this period of misplaced optimism and where are the startups that are catering to this new reality? 

More precisely, we are asking: where are the founders of the doomed edtech startups, or indeed CEOs of unicorns that are still alive, or the founders whose startups were acquired for millions during the funding rush? 

To answer these questions, Inc42 tracked some of the founders of once-prominent startups that made up India’s vast edtech ecosystem in 2020 and 2021

What’s Happening With Unicorn Edtech Founders? 

Let’s talk about the big league first or the unicorn CEOs who raised millions and billions of dollars with the promise of cracking India’s $117 Bn education sector. Many of these founders are now operating under the radar or are fighting grave legal battles from outside India.

Unlike fintech, ecommerce or SaaS unicorns, there was always something more grandiose about edtech founders. 

Some edtech CEOs had a larger-than-life image in the mainstream and were seen as social heroes, others had a celebrity-like appeal among the ecosystem and were seen as visionaries by investors, even before they created a sustainable business. 

The likes of Byju Raveendran, Unacademy’s Gaurav Munjal and Roman Saini, Physics Wallah’s Alakh Pandey, Vedantu’s Vamsi Krishna and WhiteHat Jr’s Karan Bajaj come to mind. 

In many cases, these were educators who had turned into startup founders, and therefore they were expected to be driven by motivations other than commercial success—or at least that’s the image that was created.

Students and parents knew them as teachers and problem solvers rather than CEOs. Thousands thronged stadiums and auditoriums when Raveendran took the stage, even before the likes of Munjal, Pandey and Krishna entered the limelight. 

The rapid customer acquisition, augmented by the pandemic’s restrictions, brought unprecedented success and the reputations of founders burgeoned. Many floated ambitious plans to hit the public markets. 

Billions were poured into BYJU’S, Unacademy and Vedantu alone — and neither of these companies is living up to the rich unicorn valuation, according to several who have invested in them. 

End Times At BYJU’S 

Everyone knows the state of BYJU’S today, but it’s quite hard to imagine how the company blew through $6 Bn in funding and is now staring at bankruptcy. This was in addition to the claims that BYJU’S would list on the New York Stock Exchange. 

“Raveendran’s envious business and political connections were the talk of the startup ecosystem in 2020 and 2021, and he was single-handedly raising more money than all other rivals combined. Byju is his own man. Although very calm and poised from outside, he has very few advisors which included his wife [and cofounder] Divya [Gokulnath], former CEOs Mrinal Mohit and later Arjun [Mohan],” a Bengaluru-based fund manager privy to BYJU’S operations told Inc42. 

Raveendran and his family shifted base to Dubai just before India’s Enforcement Directorate issued look-out notices against the BYJU’S founder for alleged money laundering activities. But his so-called inner circle are on separate journeys.

“Raveendran has hired the best legal teams to assist him in fighting disputes in India and the US. He also has a few consultants in India but will not be shifting back anytime soon,” the source quoted above said.

Meanwhile, former BYJU’S India CEO Mrinal Mohit is reportedly rolling out an offline education venture, which is in line with Byju’s Tuition Centre-like model. 

Another former CEO, Arjun Mohan, who spearheaded the troubled BYJU’S ship for a brief time earlier this year, is now authoring a book that delves into India’s edtech industry, according to his LinkedIn profile. 

Besides this, Mohan is also an investor and independent consultant with a few edtech and fintech companies, given his experience with unicorns upGrad and BYJU’S. 

Unacademy Hit By A Leadership Churn

Then there’s Unacademy, the second-largest edtech company by valuation and in funding after BYJU’S, which has seen a slew of exits at the leadership level since last year. 

At one time, Unacademy group CEO Gaurav Munjal even had to deny speculation of the exit of cofounder Roman Saini, who was instrumental in building the startup’s test preparation platform.

While Munjal has been able to expand the business, Saini’s popularity with students and his domain knowledge have been crucial to Unacademy’s growth, as per those close to the company.

Sources added that Munjal has spent a large amount of this time in recent months in the US. Meanwhile, Unacademy is said to have held talks with other players for an acquisition. 

At one point, the company was reported to be looking at a merger with K-12 Techno Services Private Limited (K-12 Techno). As Inc42 later reported, the deal did not go through, as Unacademy’s shaky unit economics made it unattractive to K-12, according to sources. 

Incidentally, like its rival BYJU’S, Unacademy also went on an acquisition spree in 2021 and 2022. However, the company’s revenue needle did not move significantly as a result of these deals. Its top line has remained flat for FY24, despite a 60% reduction in loss, mainly through cuts in employee and marketing costs. However, these measures have not been enough to turn things around at Unacademy.

Many in the Bengaluru edtech ecosystem acknowledge the fact that Munjal is open to a merger or even an acquisition by big educational services companies. However, striking a deal will not be easy, given Unacademy’s high valuation and profitability concerns. 

“This [K-12] was projected to be the edtech’s biggest deal till now, much bigger than the BYJU’S-Aakash acquisition. However, Munjal and his team are having a hard time convincing buyers why they should spend a couple of billion dollars on a company where only a few verticals are making money,” a CEO of an educational services company privy to deal talks told Inc42. 

Where’s Vedantu?

Among the ‘older’ edtech unicorns, the third startup is Vedantu. Its K-12 business tanked severely after the pandemic, and it has struggled to regain relevance in the test prep arena, especially as competition intensified in the offline space. 

Having seen a revenue decline since FY23 and with profitability nowhere in sight, Vedantu’s future,too, appears bleak. The company acquired Deeksha in 2022 for $40 Mn to push into offline learning. However, it’s unclear whether the deal has brought the revenue upside that Vedantu needed. 

“Vedantu founder and CEO Vamsi Krishna, again a former educator, did not go on an aggressive sales drive like Byju Raveendran nor is he as assertive as Munjal,” a former Vedantu executive claimed. 

The executive added that Vedantu’s K-12 model was very similar to BYJU’S, but it did not have the mammoth sales team that Raveendran could afford. 

Ultimately this business model failed when offline learning made a strong comeback. “Krishna did try to raise debt and go for a buyout but there were no takers,” a former Vedantu senior executive said, a claim corroborated by several other investors in the edtech space. 

Inc42 has previously reported how it’s difficult for edtech companies to raise funds to pivot to offline learning without a proof of concept. This is one of the reasons why Physics Wallah’s recent deal took months to be completed. 

Vedantu CEO Krishna has also set his eyes on expansion in the offline segment and teaching in vernacular languages. But it remains a challenging task, given the paucity of funds.

Why PW Seems Unaffected

Talking about edtech unicorns and missing Physics Wallah would be a blunder. 

PW has been a shining spot in the otherwise gloomy edtech story. The only profitable edtech unicorn in FY22, it slipped into losses in FY23 and FY24, but PW cofounder Prateek Maheshwari is confident of turning profitable in FY25. 

Commenting on PW’s advantages, a CEO of a growth-stage edtech startup said the company’s strong offline centre network (built on a franchise model and asset heavy PW Centres) is one of the reasons why VCs are bullish on this company. 

Even though PW has stepped into online courses in a major way in the last year, the emphasis is on offline growth. A PW CXO said the dynamics between the cofounders Pandey and Maheshwari are clear. 

“Maheshwari has been on top of the business expansion, steering growth in financials, whereas Pandey who is the face of the company focusses on product, policy and student connect. Both are imperative for running the business.”

We were told that Pandey is keen to connect with students, teachers and parents, as that’s his style of operating.  

The Fate Of Edtech’s Biggest M&As

According to Inc42 research and data collated from Tracxn, the edtech sector has witnessed more than 100 acquisitions between 2014 and 2024.

Notably, a majority of these acquisitions have happened in the 2020-2022 period when the valuations were sky high and big startups like BYJU’S, Unacademy, upGrad, and Physics Wallah were ready to splurge to foray into different verticals.

Some, such as PW, have continued their acquisition spree even in 2023 and 2024. But what’s happening to some of the founders who sold their companies to unicorns, especially those who made a windfall? 

The most prominent exit was of WhiteHat Jr, which was acquired by BYJU’S in 2020 for $200 Mn. Founder Karan Bajaj, who sold his startup after just 18 months of operations, joined BYJU’S and led WhiteHat’s transition into the BYJU’S empire. 

He quit exactly one year after the deal was announced. In 2022, he was appointed as special advisor to Goa chief minister to advise on social initiatives. 

However, according to Bajaj’s website, he is currently exploring geographies outside India, has written a few books and is also open to the adaptation of his books into movies. Bajaj likes to call himself a yogi and claims to be helping aspiring authors publish a book in 12 months through some free courses.

WhiteHat Jr does not seem to have fared as well as Bajaj. The company has been all but written off by BYJU’S after years of underperforming and failing to find a product-market fit in the post-pandemic world. 

BYJU’S made another costly acquisition of Toppr, a $150 Mn deal signed in 2021, to strengthen the company’s presence in the class 5-12 segment. 

Zishaan Hayath, cofounder of Toppr, exited the startup in July 2021 and was in the news last year for buying a sea-facing real estate property in Mumbai for INR 40 Cr. Though Hayath is yet to announce his next venture, he often pens down his travel diaries on Twitter and Instagram.

Incidentally, BYJU’S has stepped out of the K-12 vertical completely, and as a result, the Toppr acquisition did not exactly pan out for the edtech giant either. 

Another noteworthy acquisition in the edtech space was Unacademy’s deal for Handa Ka Funda in 2021. Handa later went on to join Unacademy as a content sales director before quitting in 2022. 

Handa, who later announced early retirement, is a well-known commentator and personality on X (Twitter) and often shares ideas about investments, stock markets and early retirement planning.

There have been other notable acquisitions as well. In December 2022, Physics Wallah made an acquisition of iNeuron in a $30 Mn deal to foray into tech-focussed upskilling. 

iNeuron’s founder, Sudhanshu Kumar, is on a professional break now and has taken to podcasting to talk about life, success mantras, and more.

“Typically, the companies that got acquired by the corporates or large startups have these CEOs and founders heading a business unit, and they report to the board once a month. The acquirer also deploys its workforce to oversee the operations of the acquired company,” Arun Prakash, CEO of GUVI App acquired by HCL Technologies told Inc42, explaining why founders typically move on after a period of transition. 

Unacademy, of course, acquired the likes of TapChief, Mastree, and PrepLadder among others in 2020 and 2021. Many of these products have been shuttered due to scaling up challenges. 

However, TapChief cofounder Shashank Mural continues to be a part of the Unacademy Group. He’s currently the CEO of Relevel by Unacademy, the startup’s jobs-focussed vertical. The other two TapChief founders have moved on, with Arjun Krishan joining Google’s product team last month.

Other examples of founders persisting in the acquiring companies after the deal include Doubnut’s cofounder Aditya Shankar, who continues to be the CEO of the company, even after Allen Career Institute acquired it for $10 Mn in 2023. 

The Edtech Startups That Tanked

Edtech has the unenviable record of having the most shutdowns and layoffs in the past two years. Several founders stepped away from the sector and ventured into new territories. Will these experienced and battle-hardened entrepreneurs return to the edtech fold in the years to come? 

This may well be the key to reviving the edtech sector. As per Inc42’s data, five out of the eight shutdowns recorded in 2022 were from the sector, while in 2023, three more joined the list. In 2024, we saw BlueLearn and Stoa shut shop and BYJU’S being forced to scale back its entire offline learning ops.

Inc42 spoke with industry experts and analysts to understand why edtech suffered the worst of the downturn in the past two years. What we were told makes for ominous reading, but it does show that the shutdowns were largely a result of products failing or bad market timing, rather than bad leadership. 

“It is a fact that any edtech company with a revenue less than INR 1 Cr has shut shop. They were waiting to get access to funds, find product-market fit; however, it has been too long a wait. VC money especially in early-stage edtech startups has dried up,” a growth-stage edtech founder from Bengaluru said. 

Edtech’s Reputation Dented

One of the prominent examples of a promising edtech startup shutting down is Lido Learning. The online learning platform raised $32 Mn in its lifetime and filed for bankruptcy in September 2022 after laying off its employees and unable to pay off debts. Lido Learning employed 1,100 employees at one point. 

Lido Learning founder Sahil Sheth, a serial entrepreneur who sold his earlier venture Infinite Student to BYJU’S in 2015, found himself in the middle of employee accusations and complaints. 

It is not clear whether Sheth returned the funds raised to Lido investors, and the entrepreneur is yet to launch a new venture after the Lido experience. 

On the other side of the spectrum are founders who earned some goodwill by publicly explaining why their business models failed, and some even returned investor funds while shuttering down their ventures. 

Take Ishaan Preet Singh, founder of FrontRow, a celebrity-centric skilling and hobby development company. The startup raised $17.5 Mn in total and shut operations in 2023. 

Singh is now an investor at VC firm Lightspeed India and focusses on deals in consumer internet and AI segments. 

“We definitely had blinders on, and went into all-out growth mode. We did honestly believe a) we could rapidly improve operations and margins while growing, and b) that a large top line would enable us to raise the next round, and do even more. I’d let myself get carried away and focus on external metrics, despite knowing the pitfalls fully well,” Singh said in his farewell message as the FrontRow founder.

Another example is Goa-based Bluelearn, which shut operations in July this year. Having raised $3.5 Mn in three years of operations, founder Harish Uthayakumar revealed on social media that the startup would shut down and he planned to return 70% of the money raised to investors. 

He also documented the last meeting at Bluelearn and is now working on some side projects on coding and design as claimed on his Youtube channel. 

Yet another example is Gurugram-based Udayy, which closed down in June 2022 after raising $10.5 Mn.

Udayy founder Saumya Yadav was open about why her startup couldn’t take off, stating that the post-pandemic situation resulted in bad unit economics and poor monetisation. “We also evaluated partnering with schools and realised that schools looked at edtech companies as their competition rather than a supplement.” 

Yadav, unlike many edtech founders, was candid about the fact that her venture was a pandemic baby, which could not survive the shifts in the market after the pandemic restrictions were lifted. 

Competition from good old schools and traditional coaching institutes was too tall to be surmounted, even with $10 Mn. 

Who Will Bring Edtech Back?

Yadav’s anecdotes perfectly encapsulate what went wrong with the edtech industry overall. The highs and optimism of 2020 and 2021 were never going to last. The end of that hype cycle crushed companies that were even born before the pandemic. 

In fact, things look bleak for Unacademy and Vedantu, but the fact that they have managed to come through this period without a more adverse result is arguably commendable. The same cannot be said for BYJU’S. 

The failure of BYJU’S and fall from grace for its founder and leader Byju Raveendran has tainted the image of the sector. 

It’s perhaps one reason why some edtech founders — especially those with a track record of multiple startups in this sector — have not returned to the edtech fold. The scathing experience of the past two years has created a paucity of entrepreneurs willing to solve the problems in education, or, perhaps, they are waiting for the arrival of patient capital. 

Education as a sector is arguably an impact investment area. It’s not possible to build a sustainable business without the patient capital that impact investing brings. 

India’s impact investment space is rapidly growing, especially as more and more domestic limited partners and HNIs are backing impact funds. This domestic capital could very well refuel the hopes of India’s edtech ecosystem in the next couple of years. 

In the past, we have written about why second-time founders and serial entrepreneurs are key for India’s startup and tech ecosystem to mature. Being a repeat founder is a major advantage since such entrepreneurs come with deep insights into the industry and have tried to solve problems in the past. 

In many cases, they already have the faith of investors and pass due diligence easily at the seed stage because of their domain knowledge. Due diligence is thin in the case of early stage investing, but gets even thinner in the case of a notable founder. 

Investors also claim that past experience reduces the chances of failure in many cases, particularly in terms of unit economics and product-market fit.

The edtech industry has undergone a huge reset, and getting things back on track or reviving the value will not be easy. Today, it looks like the future of edtech is about painting within the lines drawn by traditional and legacy coaching players. 

Offline coaching is the only game in town that’s getting funds. Changing this requires new energy and fresh ideas, perhaps even more first-time founders. But a lot of the onus will lie on those who have already tried their hands and burnt their fingers in the cauldron. Will these edtech founders rise to the challenge?

[Edited By Nikhil Subramaniam]

The post India’s Edtech Reset — The Aftermath Of The Golden Age appeared first on Inc42 Media.

After all the buzz around the fight between ecommerce marketplaces and quick commerce giants, how did Amazon India fare in the 2024 festive season sales? 

For the US-based ecommerce giant, the Great Indian Festival, which ran throughout October this year, the biggest takeaway is that Indian online shoppers are rapidly moving towards premiumisation, and of course, want the convenience of same-day or next-day deliveries. 

Kishore Thota, Director for shopping experience (India & Emerging Markets) at Amazon India, told inc42 that the demand for premium product categories has unlocked a new insight for the ecommerce marketplace about where the Indian market is heading. 

Plus, given the prominence of quick commerce today, Amazon India also invested heavily in the delivery experience, which seems to have paid off for the company during this festive season. 

What Worked For Amazon India? 

A Datum Intelligence report claimed that ecommerce GMV for the festive season crossed the INR 1 Lakh Cr mark ($12 Bn) in 2024, as against INR 81,000 Cr in 2023 and INR 69,800 Cr in 2022. 

This massive leap over 2022 and 2023 shows that even if the total audience base for ecommerce has shrunk (as indicated last year), these customers are making larger purchases and paying premium prices for products in the same categories as compared to last year. This is further validated by the fact that Tier II and III cities led the surge in demand for premium products, according to Datum’s report. 

For instance, smartphones and mobile devices accounted for 60% of the festive season sales this year, which is much higher than what was seen in the last two years. 

Both Flipkart and Amazon said in an earlier statement that premium smartphones were in demand with people looking for AI-embedded features in the latest smartphones for brands such as Samsung, Google Pixel and Apple.  

Thota added, “This festive season, Amazon saw several key trends emerge. Non-metro cities played a significant role, with over 85% of customers and nearly 70% of Prime members hailing from tier 2 and 3 cities, highlighting the growing reach of ecommerce across India’s heartland. “

Amazon India’s Thota said that premium smartphones, large TVs and home appliances were hugely popular for Amazon customers, and this was largely fuelled by EMI, no-cost EMI options especially for Tier II towns and beyond. .

“Electronics saw strong demand, particularly in laptops, where both non-gaming and gaming variants saw up to a 30% increase in sales, with Intel-powered laptops and premium Intel i7 gaming laptops witnessing substantial growth. Audio products also gained traction, with truly wireless earphones and Bluetooth speakers growing over 50% year-on-year,” the Amazon India director told Inc42. 

Sellers See Festive Riches

Amazon India Marketplace ‘s FY24 revenue saw a 14.4% YoY jump to INR 25,406 Cr as against INR 22,198 Cr in FY23. The marketplace got an INR 2,500 Cr infusion from its US parent as it looked to strengthen its festive season play, particularly related to fulfilment centres and warehouses. 

The ecommerce giant relied heavily on the festive season sales this year to scale its revenues and losses still touching INR 3,469.50 Cr in FY24.

Cost cutting is a big focus for Amazon India in the run up to next year. The ecommerce giant is reportedly shifting its headquarters in India to a new location in Bengaluru, as part of a cost reduction strategy.

The company also saw a leadership change this year with Manish Tiwary stepping down from his role and Amazon India veteran Samir Kumar named as the new country manager for India. There’s some scrutiny on the seller side, but for Amazon, the biggest takeaway has been the diversity of sellers on the platform.

Thota said seller success was a big outcome for Amazon India and something the company has chased in the past year, as this goes a long way towards establishing it as a channel for merchants. 

This year, the company claimed to have seen a 70% increase in the number of sellers surpassing INR 1 Cr  in sales, and more than 42,000 sellers achieved record single-day sales. 

Small businesses, including local artisans and entrepreneurs, also saw significant demand from both urban and rural markets, Thota claimed, backed by Amazon Pay and EMI options for customers. 

In particular, categories such as home and kitchen, household appliances, fashion and beauty drove the business for sellers. Within fashion and lifestyle, for instance, the premium segment saw a 400% increase in sales, driven by watches, fragrance, and jewellery.

“Customers enjoyed 60% higher exchange discounts compared to last season, with some discounts as high as INR 80,000. This provided shoppers with significant savings on high-ticket items, especially in categories like electronics, large appliances, and fashion.”

Taking On Quick Commerce

With quick commerce also entering these categories, the game has shifted to fast deliveries. Amazon is mulling an entry into this space later this year or in early 2025, but it’s not clear what the model will be like. 

Flipkart Minutes, for instance, has blended learnings from running a marketplace with lessons from quick commerce, and has a hybrid delivery model ranging between 5 minutes to 30 minutes. Others such as Swiggy Instamart are moving in this direction. 

Thota claimed that Amazon’s commitment to fast and reliable delivery was clearly demonstrated during the festive period. In the run-up to the festive season, the company partners with India Post to boost its last-mile logistics play. 

“Over 3 Cr products were delivered within the same day or next day,especially to Prime members. Significantly, Prime members across more than 9,000 pin codes in India received their deliveries within 48 hours of placing their orders.”

According to Thota and indeed other analysts in the ecommerce space, one of the advantages for ecommerce marketplaces is the service capacity they have built up over the years. Services such as warranty claims, replacements, installations are not yet up to par on quick commerce platforms yet. 

Thota added that Amazon’s end-to-end solutions, including installations and extended warranties on appliances, were made available across over 400 cities with instant installation at delivery offered in 55 cities. 

These are moats that marketplaces such as Amazon India can count on for the time being in the fight against quick commerce giants Blinkit, Swiggy and Zepto. How long will this advantage persist?

[Edited By Nikhil Subramaniam]

The post How Amazon India Leveraged Premiumisation To Script Festive Season Win appeared first on Inc42 Media.

All eyes are naturally on Swiggy given its massive IPO, but there’s another mega plan brewing in Bengaluru, with Swiggy Instamart in mind.

The consumer services giant is looking to catch up with quick commerce rivals by expanding the size of its Instamart dark stores to deliver a wider assortment of products in 10 to 20 minutes. 

Chief financial officer Rahul Bothra told Inc42 that Swiggy is in the process of operationalising ‘mega dark stores’ with an area of 8,000-10,000 sq ft in several pockets of Bengaluru. He added that quick commerce is currently contributing 40% to Swiggy’s consolidated revenue, and the focus is on increasing this share in the near term. 

“The dark stores we are now opening will ideally have an area equivalent to 2-3 of our current dark stores. This will not only increase our SKU coverage, but also support assorted deliveries — i.e we can deliver some products in 10 minutes and others within 20 minutes,” the Swiggy CFO added.  

Swiggy cofounder CEO Sriharsha Majety added that while speed is essential, having the right assortment of products and SKUs will be a key differentiating factor in the quick commerce space. 

The CEO believes that the quick commerce industry is going through a hyper growth cycle, where the assortment factor will trump speed of deliveries. 

While increasing the delivery seems contrary to the quick commerce model, Bothra said that as per Swiggy’s consumer behaviour research, the need for 10-minute deliveries is specific to only grocery and essentials, while consumers are adapting to waiting for deliveries of non-grocery items. 

More and more quick commerce platforms are looking to extend delivery timelines for certain categories and bulk orders. Bothra added that Amazon, for instance, offers staggered delivery times for a large order or when combining products from multiple categories. 

“For instance, consumers can today get a delivery of plain white bed sheets within 10 minutes, but when Swiggy Instamart offers a catalogue of bedsheets in 15 colours, consumers are okay with waiting for 20 minutes,” Bothra added. 

Swiggy Instamart 2.0 & Mega Dark Stores

Swiggy’s ‘mega dark stores’ for Instamart will cover a radius of 2 Km, and these stores will increase the SKU selection without compromising on the quick commerce customer experience. The idea is to cater to the quick commerce 2.0 moment, where it’s not just groceries and essentials that consumers are ordering. 

While establishing mega dark stores will indeed be capital intensive and an asset heavy move, this is a necessary step for quick commerce platforms looking to increase the average order value and offset the cost of deliveries as well as the tech and infrastructure costs. 

Swiggy’s key rivals Blinkit and Zepto are already pumping in millions of dollars to set up larger dark stores and add to the SKU count and product assortment. 

CFO Bothra anticipates a 70:30 revenue split between grocery and non-grocery categories in the near future. 

According to Swiggy’s pre-IPO filings and an investor presentation seen by Inc42, the company is aiming to expand its dark stores network in existing and new cities, and also onboard more brands to offer a broader product selection. Another big focus area is improving fulfilment efficiencies, under which the mega dark stores will play a big role. 

“The share of non-grocery items on Instamart has increased from 18.20% in FY22 to 25.28% as of June 30, 2024, indicating a growing consumer preference for online purchases in this segment,” Swiggy’s investor presentation said. 

Adding to the SKU count is critical for the most scaled up quick commerce platforms, especially as the likes of Flipkart, Tata-owned BigBasket, Amazon, JioMart and others are looking to enter this space with a full arsenal of products. 

Speaking about the competition, Bothra said that the quick commerce industry looks ripe for at least 5-6 players. He also believes the customer acquisition in quick commerce will depend on the convenience, assortment of products and customer experience. And this he believes will be Swiggy’s edge. 

”We don’t think it will be a duopoly like food delivery. However, we have been able to scale our quick commerce rapidly from 30 minutes to 10 minutes delivery within a year, and we are not deterred by the entry of ecommerce giants. These players have operated in different market conditions and will need to first establish dense networks of fulfilment stores. Some of them tried their hands at 30-minute deliveries, but could not succeed,” the CFO added. 

Swiggy’s B2B Play 

Swiggy intends to supplement the revenue push on the consumer front with a B2B distribution and supply chain platform for FMCG retailers and wholesalers. 

“We are growing fairly in B2B business where we help retailers and wholesalers strengthen their supply chain, provide them with tech capabilities, infrastructure and access to brands,” Swiggy CFO Bothra added.

Notably in July 2023, the company acquired LYNK logistics to enter the food and grocery retail supply business.

LYNK leverages a proprietary, integrated technology platform to power the retail distribution value chain across warehousing, inventory management and logistics operations. Its client portfolio includes Hindustan Unilever, ITC, Tata, Lakme, PepsiCo, Britannia, among others.

Swiggy management said that the company has acted as technology enabler for small and medium retailers and is also assisting in improving supply chain efficiencies between FMCG brands and retailers.

The Swiggy Walled Garden

For CEO Majety, Instamart is a big focus area, but it’s just one of the many verticals for the consumer services giant. In some ways Swiggy is a super app, and Majety is targeting 110 Mn active users who transact at least 15 times a month across food delivery, quick commerce and other verticals. 

Swiggy’s investor presentation claims order frequency has increased by 70% in the last 6 years whereas average spends have almost tripled during the same time period.

More than 27% of Swiggy’s user base uses more than one of its services placing three orders on average per month. 

In terms of average order value, Swiggy Instamart has seen a significant growth from INR 398 in FY23 to INR 460 in FY24. On the other hand, in the food delivery vertical, the AOV has only seen a moderate increase from INR 416 in FY23 to INR 428 in FY24.

Wealth management and investment advisory Deven Choksey believes Swiggy’s growing engagement can be attributed to the company’s unified app, its expanding service offerings, and a robust partner network.

But there’s little doubt that quick commerce and Instamart is the lynchpin for the super app service, as this is where usage frequency will be highest. 

And this means that the biggest challenge for CEO Majety & Co will be capitalising on the quick commerce funnel and bringing more consumers into Swiggy’s walled garden. . 

[Edited By Nikhil Subramaniam]

The post Inside Swiggy Instamart’s ‘Mega Dark Store’ Plan appeared first on Inc42 Media.

It is not unreasonable to say that quick commerce has changed the face of ecommerce in India. From Swiggy moving in first to Zepto’s rapid rise to Blinkit’s improving profitability and now to just about everyone trying their hands on quick deliveries.

Just four years after becoming a viable business model in India, the dynamics of quick commerce in India seem to be changing at a faster pace than the deliveries themselves. 

And from online grocers for the Indians in metros and Tier 1 cities, quick commerce platforms now want to do it all, and all over India. Zepto cofounder and CEO Aadit Palicha believes the time is not far when the grocery and non-grocery revenue mix becomes a 50-50 split. 

“Right now, around 70% of our demand centres on fruits and vegetables. We’re recognised as a top platform for quality produce, but we see this evolving into a more balanced 50-50 split between grocery and other emerging categories like beauty, personal care, home appliances, apparel, and electronics in the near future,” Palicha told Inc42.

The Zepto CEO wouldn’t put a timeline on it. He said that currently grocery contributes up to 70% to the GMV, but quick commerce consumer behaviour is rapidly changing since they want delivery of beauty personal care products, home appliances, consumer electronics and all instantly. 

It’s not just Zepto of course. The entire industry is bulking up the SKU count and the recent launch of iPhone16 deliveries in 10 minutes across all quick commerce platforms shows that everyone is watching everyone.

So how exactly will companies set themselves apart as they look to push beyond groceries and essentials? 

Zepto Goes From Grocery To Everything

The quick commerce creep into ecommerce marketplace territory began last year, but that was just a hypothesis or a dip in the pool for Blinkit, Zepto and Swiggy Instamart. 

That changed late last year when some experiments seemed to pay off for Blinkit, Zepto and the likes — particularly related to home decor and lifestyle products. This broadened in the summer of 2024 when large items such as air coolers and today, one can find everything to stock an entire kitchen at Zepto, Blinkit and Swiggy Instamart. 

Last year, Zepto invested in a farmer engagement app to streamline fresh produce supply, but now the quick commerce tune has changed. All platforms are eyeing bigger targets, higher order values and more revenue per user. 

It’s not like this was an easy transition. In some ways, the push for higher order value is linked to the fact that scaling up quick commerce in new cities or even new stores in existing cities is cost-intensive and requires patience. 

Instead, Zepto, Blinkit and others want to cover the most active user base first and widen themselves horizontally to become a lightweight version of Amazon India or Flipkart. 

A Mint report earlier stated that Zepto is planning to set up separate storage facilities for non-grocery items in addition to its existing 400 dark stores that primarily cater to grocery and FMCG products. Palicha said that the startup plans to take the dark store count to more than 700 by FY25.

Multiple industry analysts have underlined the fact that although grocery makes up for a significant portion of quick commerce GMV currently, the vertical runs on thin margins and the quick commerce platforms need to crack categories with higher margins including fast fashion, smaller home appliances to increase average order value.

It’s not just Zepto that will have to strategise non-grocery deliveries to match what marketplaces offer. Industry watchers say that speed is one thing, but managing returns, refunds and enabling EMIs and more payments related features is essential. 

Some like Blinkit have enabled EMIs, but this is rather limited right now. Zepto is reportedly piloting 72-hour returns in the fashion segment, which is matched by Blinkit. But the product selection on the fashion and apparel side is rather limited right now. Enabling exchanges or even trials, which are common in fashion, at scale will be a challenge. 

It took the likes of Myntra years to execute and build the service base needed for such features. Quick commerce platforms certainly don’t have this luxury, but they have momentum on their side

Zepto, on its part, has already announced tie-ups with sports and apparel brands including Decathlon, US Polo Assn; beauty brand Mila Beauté, luggage brand Wildcraft among others signalling serious moves to enter the non-grocery categories. 

Bullish On Private Labels

The other big move for Zepto is the private label push. This is another measure to maximise its take rates and reduce procurement costs for sales. 

Currently, Zepto has two private labels — Relish for eggs, seafood and meat, which was launched in October 2023 and Daily Good for kitchen and household staples which was launched six months ago. 

Palicha is bullish on growing both and is also optimistic about the revenue targets set for Relish earlier this year. He claimed that Relish is already an INR 500 Cr business aiming to reach INR 1,000 Cr in the next 18-24 months. 

Nearly half of this is from sales of eggs, as per an earlier clarification provided by Palicha to Moneycontrol. 

“We launched Daily Good about six months back which complements our goal to offer high-quality essentials at great value. As for Relish, we remain optimistic about the targets we set earlier this year and are focused on its growth,” he added.

Relish is up against dominant players like Licious which has seen its growth plateau in FY24, but last reported more than INR 800 Cr in revenue. 

Licious is present on Blinkit, Swiggy Instamart, Tata-owned BigBasket and other quick commerce players, but Zepto could potentially undercut competitors on its own platform, and could even become a brand on other platforms in the future. 

Having a catalogue brimming with private labels allows Zepto to adhere to ecommerce norms more closely, including disclosures around manufacturing date, expiry date and other compliance requirements. Currently, quick commerce platforms lack these for a number of products, and regulators are not happy about this. 

Quick Commerce Vs Kirana Stores

The growing buzz around quick commerce platforms has dealt a blow to the kirana store landscape, which had just emerged from the pandemic disruption. 

Palicha categorically stated that Zepto will always be a digital-first company and does not have plans to launch convenience stores like 24-Seven or 7-Eleven in the near future.

“I firmly stand by what I said a few years back that we want to build a world-class Internet Company out of India that compounds cash flows over the long-term, benchmarked to Amazon, Mercado Libre, Meituan, Coupang etc. We stand behind that ambition today and we intend to build towards it for the next few decades to come”.

As of 2024, India’s metro cities have contributed to more than 90% of sales on quick commerce platforms according to Redseer. But now as instant delivery companies swiftly move to penetrate deeper into Tier II and II towns, analysts are predicting a bigger hit on kirana stores which still dominate the retail landscape in these markets. 

Zepto recently launched its services in Nashik and Ahmedabad, while Swiggy Instamart, the first mover in the quick commerce space, introduced its service in smaller cities including Udaipur, Warangal, Salem, Amritsar, and Kanpur.

Palicha claimed stores in new cities hit 1,000 daily orders faster than many of the stores in metros such as Mumbai and Bangalore, where it took a few months to reach similar numbers. 

“This shows there’s significant demand in tier 2 cities and we are looking to end this FY with an overall presence in 20+ cities, where users are underserved. Our model scales well because our sellers bring together selection, quality, and convenience. We tailor our approach to meet local needs, which helps us resonate with a broader audience,” the 21-year-old added.

Satish Meena, partner at research firm Datum Intelligence, believes that quick commerce platforms penetrating deeper into the heartland of India could be a potential inflexion point and could disrupt the $600 Bn retail industry housed in these markets.

 “However, if the government decides to put brakes on quick commerce expansion since this may hit more than 13 million kirana stores, it could also play a spoilsport to the quick commerce party,” he added.

Building Up To The IPO

But even outside of these smaller towns, the quick commerce opportunity is massive. Zepto founders Palicha and Kaivalya Vohra are akin to the poster boys for this space, where the company has definitely caught the attention of investors. 

Quick commerce’s explosion and the company’s single-minded execution in this space is why Zepto was able to raise more than $1 Bn in 2024 so far — to put things in context, this is roughly a tenth of what all startups have managed this year. 

Palicha claimed the company is aiming to touch $3.5 Bn in sales by December 2025, which would be close to its current valuation of $5 Bn. “We’ve had an exciting journey, and while there’s a lot of speculation, we’re focused on keeping a healthy balance sheet. We have ambitious targets, and we’re optimistic about reaching them,” the Zepto CEO added.

Zepto saw its operating revenue surge 14.3X to INR 2,024.3 Cr in FY23 from INR 140.7 Cr in FY22.However the  startup reported a net loss of INR 1,272.4 Cr in the financial year 2022-23 (FY23), an increase of 226% from INR 390.3 Cr in the last financial year. 

The Zepto CEO claimed earlier this year that 75% of its stores had achieved full EBITDA positivity as of May 2024.  The company also claimed new stores are achieving profitability in an average of six months up from 23 months until last year. 

“We plan to continue operating with fiscal discipline as we scale from 350 stores to 700 stores by reinvesting the capital generated from mature stores back into the business. If we are able to achieve this while continuing to delight customers, I believe we will be ready to go public relatively soon,” he added.

Zepto is reportedly in talks with the high profile Indian family offices to get them on the cap table before an IPO likely to happen in 2026. Palicha declined to comment on the timeline set for the IPO. 

But the IPO, when it comes, will be a test for quick commerce itself. Indeed, there are no precedents in the Indian market or globally for this business.

Earlier this year, investment bank Goldman Sachs said that quick commerce contributes more than 50% to the $11 Bn online grocery market in India. And so far all platforms have indexed more heavily towards the grocery segment — the transition to a wider ecommerce play is likely to boost this opportunity significantly. 

By contrast, quick commerce has barely made a dent in the US and Western markets, where a handful of players continue to bank on this model. 

According to Palicha, quick commerce has found a unique fit in India.

“First, the density of urban areas here makes it feasible to set up hyper-local fulfilment centres that allow us to deliver within minutes. In India, there’s also a high demand for convenience, and many customers rely on quick commerce for daily essentials due to the lack of large, easily accessible grocery chains in some areas,” he added. 

It’s hard to fault this logic, but now quick commerce platforms want to extend this to all products and all needs. There is some scepticism and some feel this might be a bridge too far, even for a startup like Zepto which has so far shown no intent to curb its ambitions.

[Edited By Nikhil Subramaniam]

The post Zepto’s 50:50 Bet: Can It Balance The Quick Commerce Scale? appeared first on Inc42 Media.

Razorpay cofounder and CEO Harshil Mathur believes regulations are good for the fintech industry. 

Earlier this year, the Razorpay CEO told Inc42 that RBI’s guidelines in each fintech vertical are better for the overall ecosystem. It seems like an unusual statement by a fintech founder when many of his counterparts are deriding regulators such as SEBI or the RBI for disrupting established startup models. 

But Razorpay’s Mathur and co-founder Shashank Kumar don’t have a choice. 

For over a decade, the fintech unicorn has operated in a tightly regulated payments business, where the RBI and NPCI are watching its every move. In some ways, Razorpay made its bed when it chose to enter the payments space. 

India’s fintech startups are going through a challenging phase with the regulatory eye hovering over all operations, especially because of the maturity of some of these startups. Many of them have built an audience of tens and hundreds of millions over the past decade but, in the process, have arguably strayed from the guidelines set by the regulators. 

Regulatory troubles have a real impact — take the case of ZestMoney, which had turned to small-ticket digital loans and BNPL for survival but had to shut down due to RBI’s changes to the risk weights in November 2023. 

Others had to completely rewire themselves due to regulatory changes, as we noted in our deep dive into Instamojo’s pivot from payments. Besides this, we have seen the likes of Jupiter, Slice, PayU, and others suffer disruptions. 

Throughout this, Razorpay has managed to survive and remain profitable — at least as of March 2024. The fintech company said that its PAT has grown 4.7x in FY24 to INR 34 Cr from INR 7 Cr in FY23. 

The startup is looking at a big tax outlay for its redomiciling to India from the US, and several of RBI’s new rules for the payments industry came in after FY24, so the profit growth, while commendable, does come with some caveats.

Either way, one thing is clear, for Razorpay and other fintech giants, profitability involves walking the fintech tightrope set by the regulators. And that’s not always ideal, so can Razorpay balance itself for the long haul? 

Razorpay’s Revenue Depth

The company claims to be processing transactions with a total payment volume (TPV) of $150 Bn. 

As per industry watchers, this is among the highest in India’s payments gateway and payment aggregator market. “Only CCAvenue and PayU come close to this scale,” a rival fintech startup’s founder claimed. 

To put this in context, digital payments transactions saw a 44% CAGR increase from 2,071 Cr in FY18 to 18,592 Cr in FY24 as per government data. The total value of these transactions have grown to INR 3,658 Lakh Cr in FY24. 

Today, Razorpay is a full-stack payments solution platform, but it built its reputation in the payments gateway space. In the early days of digital commerce, around 2015 and 2016, payment gateway were vital partners for marketplaces and online stores, but over the past eight years, there has been a rapid evolution. 

The first phase of the evolution saw payment aggregators come into the picture, which collected payments from users and settled them en-masse with merchants and marketplaces, rather than processing each payment individually. 

Razorpay entered the PA space with in-principle approval from the RBI, but in December 2022, the RBI banned companies from onboarding new users before getting full approval. This threw a spanner in Razorpay’s well-built machine. 

In some ways, this could be seen as a blessing, because even the commerce ecosystem — particularly Razorpay’s D2C brand partners — was moving from online-first to omnichannel mode. Today, the payment aggregator (PA) business is the mainstay for Razorpay. Today, Razorpay claims to have 5 Mn businesses on board.

The company has built solutions for the wider ecosystem too, catering to problems such as tracking fraudulent ecommerce orders using customer insights, payroll disbursement, offline payments as well as cross-border payments. 

However, any dissection of Razorpay’s business model has to start with the payment aggregator business.

Payment Aggregator Reality: Thin Margins, High Compliance

The payment aggregator model is an evolution of the payment gateway business. As the name suggests, a payment gateway is just a window through which an online transaction occurs. 

A payment aggregator, on the other hand, collects payments from multiple users and then settles it en masse with the merchant or the marketplace involved in the transaction. 

This key difference is also why the payment aggregator system has two layers — an online licence and an offline licence. In most cases, fintech startups want both licences so that they can cater to omnichannel operations. 

Razorpay began setting up the PA business towards the end of 2021, and in July 2022, received an in-principle approval from the RBI for a PA licence. This was meant to be a major boost for Razorpay, but by December 2022, the RBI barred the startup along with the likes of Cashfree, Stripe, Paytm and PayU among others from signing up new users. 

The central bank wanted these companies to get their full licence before going ahead with new user onboarding. It was only in December 2023 that Razorpay received the go-ahead along with others and since then the company has ramped up its merchant acquisition. 

In Mathur’s own words, Razorpay was charged up since payments remained the core business, but while the RBI’s embargo was active, the company focussed on new products. 

Even though companies had to jump through hoops to get the PA licence, many in the industry believe this business is more hype than substance. Challenges include wafer thin margins for PAs and other revenue sharing agreements between partner banks, telecom companies and other entities using the payment aggregator.  

For instance, a former BharatPe CXO claimed that fintech startups cannot fully rely on the PA business to earn profits, even though it will help in driving revenue growth. The key aspect here is the merchant discount rate or MDR, which is zero for most UPI transactions. 

“UPI is the most dominant digital payments mode in India. However, the share of small ticket transactions is close to 80%, even though volumes have soared. This doesn’t help payment aggregators as they cannot charge MDR on any UPI transaction under INR 2000. For higher value transactions, the aggregators will have to share revenue with the banks in the form of transaction fees. This is usually a 50:50 split,” the executive added.

All PAs have to tie up with banks to set up escrow accounts and enable the PA system for merchants. Hence, payment aggregators have to pay banks for transactions, depending on the value of the transaction and the mode of payment. In this case, MDR is higher for netbanking transactions and credit cards as opposed to debit cards or UPI.

The GST Council on the other hand is reportedly considering levying 18% GST on below INR 2000 transactions via debit, credit cards on payment aggregators. There was no GST levied earlier from PAs for such transactions. This could further impact margins on the PA side. 

Razorpay’s PG business saw a 24% YOY growth in FY24 at INR 2,068 Cr. The overall revenues rose by a modest 9% to INR 2,501 Cr in FY24  compared to INR 2,293 Cr in FY23.

The Payment Aggregator Rush

Any payment aggregator with Razorpay’s scale has to rope in mid-cap and large-cap enterprise clients besides SMEs or startups, according to Rohit Taneja, CEO and founder of Decentro, an API platform for lending, payments and banking. Incidentally, Decentro also received the PA licence from RBI earlier this year. 

This healthy mix is critical for transaction volume and higher margins. “With large enterprise clients including corporates and startups, the payment aggregators generally move towards an annual or quarterly revenue share model depending on the transaction value and volume,” Taneja added.

To break this down, if an aggregator helped a large business process transactions worth INR 13,000 Cr in a quarter, the aggregator will charge 0.5% to 1% commission or roughly INR 65 Cr to INR 130 Cr.

Industry analysts say Razorpay, to an extent, has succeeded in roping in big clients for tapping this revenue source. According to sources close to the company, Razorpay has been able to secure the likes of Tata Consultancy Services (TCS), Meta, Airtel, Swiggy, Indian Oil among others as clients. 

A former Razorpay employee working for the PA business unit said that this business does ensure growth in margins, however many enterprises are also cutting costs by building in-house payment aggregator systems which could be a future challenge. 

This is immediately apparent when we see the array of players in the payment aggregator space, and many of these have received licences just this year. 

Since December last year, the RBI has approved the PA applications or has given in-principle approval to Zoho, Juspay, Decentro, CRED, PayU, Enkash, Pine Labs, Amazon Pay, Innoviti, Groww, Worldline Global, Razorpay, CC Avenue, Cashfree, Tata Pay, Google Pay, Infibeam Avenues, Mswipe, among others.

When we covered this PA rush in May this year, the primary challenge was around the high compliance bar for some of these players. 

In earlier conversations with Inc42, industry insiders said that PAs in India will have to increase the strength of their in-house teams for customer verification purposes, since the RBI has called for physical verification of merchants and businesses empanelled. Some PAs could be compelled to empanel agencies and outsource the verification.

“This might be cheaper than hiring staff to conduct the verification in-house, but also opens up risks of inadequate checks by agencies that are dealing with large volumes. At the end of the day, the burden to ensure that the verification is done in the right manner still falls on the PA,” said another industry insider and cofounder of a digital KYC solutions company that works with a number of such payments companies.

Combined with the thin margins and high competitive intensity, even those companies operating at Razorpay’s scale do not have clarity on how a PA licence contributes to profitability. 

Razorpay’s PoS Battle

The PA licence is not just for online transactions. Even offline digital payments through point of sale devices, some QR code devices among others are governed by the RBI’s licensing rules for payment aggregators. 

In the offline space, Razorpay is counting on its PoS business — built on the Ezetap acquisition from August 2022 — but there’s more than stiff competition from the likes of Paytm, PhonePe, Google Pay, Pine Labs, BharatPe, Amazon Pay and banks. 

In December 2023, Razorpay claimed that it saw a 60% growth in its POS business in FY23, and the company expects this to contribute 20%-30% of the revenue in the next couple of years.

A former Razorpay exec believes it will be an uphill climb for the company since the advantage continues to be with UPI platforms like PhonePe, Google Pay, Paytm, CRED and others. “These companies have been sitting on mammoth data of the users, merchants due to the UPI transactions volumes and were probably the earliest entrants in this ecosystem. So the challenge will be up against such players especially when it comes to small merchants, businesses,” the executive said. 

In addition, PAs are also expected to ensure merchant transactions are in line with their business profile — this means continuous monitoring to identify red flags, if any. Payment aggregators are also mandated to have risk-based payment limits for merchants.

 Razorpay’s revenue expectations from the PoS and offline payments business have to be tempered with this compliance burden. 

The Cross-Border Opportunity

One trump card could be the cross-border payments business, where Razorpay competes with Cashfree, CCAvenue, PayU, Instamojo among others. 

Razorpay received a cross-border payments licence from RBI in June 2023. “After reaching a TPV scale like Razorpay has, cross-border payments or international payments seem to be the natural avenue for diversifying business streams,” Decentro’s Taneja said.

Once again, this is a tightly regulated space where companies have to comply with ever-changing Foreign Exchange Management Act (FEMA) guidelines, the Liberalised Remittance Scheme (LRS) and Payments and Settlements Systems, 2007, in addition to any RBI guidelines. 

Industry analysts say payment aggregators have simplified cross-border payments to a large extent compared to traditional banks by offering easy integration solutions through APIs without the need for extensive paperwork. 

Furthermore, startups also charge lower transaction fees (1%-4%) and currency conversion fees while processing payments faster. “This space is gaining traction and because of the higher transaction values, it does offer better margins to PAs. Also as ecommerce builds up and more D2C brands cater to users outside India, this vertical shows a lot of promise for growth,” a senior fintech executive added. 

Taneja highlighted that challenges in cross-border payments involve complex processes for onboarding merchants, especially large enterprise clients.

But Razorpay is swerving and catering to the masses. For instance, in June this year, Razorpay announced the MoneySaver Export Account for freelancers and independent professionals. It’s the first Indian PA to support international payments for freelancers, enabling international bank transfers and eliminating the need for additional paperwork.

There are positives for fintech companies operating outside India. A fintech analyst who was formerly associated with PhiCommerce said that Southeast Asia is becoming a new territory for expansion.

“There are hot markets like Indonesia, Malaysia, Thailand and even the Middle East, where businesses are drastically going for cashless payments. We have seen Indian PAs like Razorpay providing tech infrastructure to the payment companies there. They might not be able to process transactions directly without necessary approvals which again will be cumbersome. However, acquisition of local companies and consolidation is happening,” the analyst added.

Will Acquisitions Be Razorpay’s Trump Cards?

Razorpay forayed into international markets in February 2022 by completing its first overseas acquisition in the form of Curlec, a Malaysian recurring payments startup. 

Industry watchers said that building a payment infrastructure model for many businesses in overseas markets will be a one-time revenue generation exercise, however, acquisitions will help them get into the core of the payments industry in these geographies. Working with local players in overseas geographies also involves strict adherence to local regulations and tie-ups with banks.

“Malaysia is an important strategic market for us as we see plenty of similarities with the Indian payments market. Our extensive experience in navigating the diverse and dynamic landscape of the Indian market empowers us to continually leverage that expertise, tackling various challenges and resolving payment issues on a global scale. I believe that we can help play a pivotal role in driving the adoption of DuitNow, similar to how we helped scale UPI in India,” Rahul Kothari, chief business officer for Razorpay, said in an earlier statement.

Razorpay’s product suite and value-added services can be largely attributed to the string of acquisitions since 2019.

Razorpay has forayed into niche verticals like HR services, payroll management, fraud detection, security, invoicing, cash rewards, and loyalty management, among others, through these acquisitions. In a bid to diversify its overseas revenue base, Razorpay will also need to identify which of these products will work in international markets. This will be critical to add to the profitability momentum in FY25.

This might be a challenging task for any growth-stage startups, but Razorpay’s revenue scale is an advantage. Nevertheless, there’s a difference between scale in fintech and other sectors. Even temporary setbacks due to regulations can have a damaging impact. And Razorpay runs this risk across geographies.

Can Razorpay balance its push for revenue across borders and verticals with the regulatory reality for fintech?

[Edited By Nikhil Subramaniam]

The post Razorpay Walks The Tightrope Of Regulations And Profits appeared first on Inc42 Media.

Even Kishore Biyani is not sure about how Meesho has done it. 

At Inc42’s D2C Summit in August this year, the Future Group founder and retail industry veteran admitted that he is flummoxed by how Meesho cracked the ecommerce code to compete with Amazon India and Flipkart. 

The SoftBank-backed company’s GMV growth has put it right up there with the two biggest marketplaces in India. And now Meesho is pushing the accelerator and taking them on in the branded category after making a name in the unbranded consumer goods space.

Despite its zero commission model, Meesho has scaled up its revenue by relying on advertising and marketing income from sellers, and a discounts-led acquisition strategy on the consumer side. Besides this, the company charges a fulfilment fee from sellers for completing deliveries using its multiple logistics providers.  

The Vidit Aatrey-led company claimed it turned profitable in July 2023 “at a consolidated PAT level, encompassing all costs (including ESOP)” which underlines how Meesho has transformed itself in the past two years from its social commerce model and its slew of experiments to its current avatar. 

We cannot say whether the profitability streak continued for the rest of FY24. The company is yet to file its financials for the year ending March 2024. But if Meesho has indeed hit profitability, it would be quite an achievement in the context of horizontal marketplaces in India. 

In fact, the company is said to be in the process of raising a large round of $500 Mn-$650 Mn and could potentially look to redomicile to India and go for an IPO. 

But before it gets there, Meesho has to make one final push and bring on more retail FMCG brands and D2C players to its platform. That’s the idea behind Meesho Mall, which got a big overhaul ahead of the festive season and is now ready for prime time.

Meesho Mall: From Unbranded To D2C 

Launched in 2022, Meesho Mall was the company’s foray into the branded category and it started out with beauty and personal care products. 

Last month, the marketplace announced brand tie-ups with the likes of Honasa, Denver Perfumes, Himalaya, Bajaj, Joy, Lotus Herbals, Biotique, Bata, Paragon among others in the BPC, fashion and home decor categories. 

The list of brands indicates that Meesho is looking to target those brands which not only have an established online presence, but also those which are more likely to connect with Meesho’s core audience base in India’s hinterlands and outside the metros. 

“These partnerships are designed to ensure that customers have access to the best products from both well-known and emerging brands, all under one roof. In the last six months alone, Meesho Mall has seen 3.2 Cr shoppers, reflecting growing consumer trust in the platform,” Megha Agarwal, CXO-Business at Meesho, said in an earlier statement.

The Meesho Mall product was unable to produce the right revenue outcomes in the first couple of years, according to analysts, as can be expected with any marketplace. It takes a while to put in place the virtuous cycle of consumers and sellers. 

A Meesho spokesperson claimed that since launch, Meesho Mall has partnered with over 1000 brands in high-value categories including electronics, personal care, beauty, home and kitchen, wellness and branded fashion. 

It has taken some time for the company to get its core and active users to get familiar with these brands and their USPs vs similar products in the unbranded category. Naturally, the price is a major sticking point for consumers habituated to Meesho, since unbranded goods are several times cheaper than their branded counterparts. 

“Even though Meesho was the most downloaded shopping app in 2022 and 2023, according to Sensor Tower, that was primarily because it was the user base that was new to ecommerce, mostly from Tier 2, 3 towns. Meesho managed to get a lot of downloads from these users,” according to Satish Meena, advisor at Datum Intelligence. 

With the revamped Meesho Mall, the company is looking to capitalise on this base. But in this case, Meesho will obviously have to shed its zero commission model. 

It remains to be seen how competitive Meesho’s commission rates are in comparison to other platforms. Sources claimed the company will charge single digit commissions from sellers on the Meesho Mall. 

Meesho’s Moat Against Amazon, Flipkart 

For D2C brands that rely on marketplaces such as Amazon India, Walmart-owned Flipkart and even Meesho, the biggest challenge is the commission model, the lack of access to data around their customers as well as the inability to have a say in the customer experience. In particular, brands are wary of Amazon or Flipkart using analytics data related to their products to launch private labels or products under their private labels. 

Through various regulations and by building pressure through lobbying, brands have forced marketplaces to curb some of these practices. Plus, the emergence of quick commerce has given brands a lucrative online channel and reduced their reliance on marketplaces. 

Meesho will face these challenges as well, but it’s counting on the fact that it connects to an audience base that is altogether different from Amazon or Flipkart.

“Through our extensive user research, we understood that our consumers are searching for branded products across categories, especially where salience of brands is typically higher. Furthermore, several brands also expressed a strong intent to partner with us and leverage our capabilities in serving over 160 Mn annual transacting users, particularly in tier 2+ markets,” the Meesho spokesperson added. 

Raju Sinha, CBO of ecommerce logistics company FShip, believes that unlike Amazon India or Flipkart, Meesho’s is the preferred choice for D2C brands looking to connect with consumers in Tier 2/3 India. These brands do not want the overheads of supply chain costs and high acquisition costs for users in these semi-urban markets. 

More than 80% of Meesho’s shopping revenue came from Tier 2, 3 cities which are relatively uncharted territories for new-age D2C brands. 

“This is a win-win situation for D2C brands and Meesho. D2C brands like Honasa, SUGAR, Renee Cosmetics and others explored offline channels to reach Tier 2 markets, but the retail landscape is so fragmented in these regions that brands don’t know which trade channels to invest in,” he added. 

On the other hand, legacy brands know the dynamics of retail channels in semi-urban India, and this has allowed them to earn trust among consumers. Meesho has built that trust online, and now it’s transferring some of that trust to the D2C brands now coming on board. 

The key will be user retention, providing a wide catalogue of products and categories and staying competitive on the pricing.

“At this point, growing the topline by ensuring the users continue buying from the marketplace by giving them more choices and also ensuring they offer competitive prices will be crucial. The new to ecommerce users which Meesho onboarded over the last few years are now looking to shop from other channels which could be Ajio, Myntra, Amazon Fashion and others. Meesho wants to stop this migration, and is therefore targeting mid-priced Indian brands on the platform,” Meena added.

At the same time, Meesho has to cater to the premiumisation sentiment within its audience base, if it has to drive up the average order value. The AOV for Meesho is around INR 400, compared to INR 1,200 for Flipkart or Amazon in fashion and BPC alone. The latter two have a much bigger lead in electronics, consumer durables and other categories.

Meesho will also look to amp up its advertising, marketing revenue by getting these brands to advertise on its platform now that it has reached more than 160 Mn transacting users.

“Ecommerce advertising has outshined even Google, Meta ad business growth rates. Amazon , Flipkart and Meta have substantially increased their advertising charges, which almost becomes unsustainable for homegrown smaller brands. Meesho’s scale and reach might be a better alternative,” the founder of a D2C athleisure brand who is considering listing on Meesho claimed. 

Pricing, Logistics Will Be Key

On the pricing front, Meesho will not have the flexibility of offering high discounts on products like it does on the unbranded side. The company may have to strike a deal with D2C brands to offer discounts and this could hamper some of the growth on that side of the marketplace. 

To counter this, Meesho might rely on Valmo, its in-house product for logistics aggregation. However, a key challenge would be to create pan-India coverage through this model. 

“With the launch of Valmo, Meesho brought in a franchise-based and asset-light logistics model suited for Indian brands. It has made the company more logistics efficient and reduced costs associated with paying third-party players. Each franchise centre is given out several pincodes to serve from where they fulfil delivery and returns,” FShip’s Sinha added. 

Industry insiders also believe entering into discounting deals with Meesho will not be a bad thing for brands, since Meesho will offset this with lesser commissions.

“Meesho cannot completely change its image of affordability which has been a distinguishing feature of the platform. Hence agreements with brands will be key. Mostly D2C will be willing to offer discounts on Meesho since the platform charges them lesser commissions. This will help attract users,” Meena added. 

Can Meesho Become The Online Zudio?

Elara Capital partner Karan Taurani believes that Meesho’s attempt to lure low-priced, mid-priced brands is similar to what Tata-owned Zudio has done in offline retail. 

It caters to the fashion-aware Generation Z and millennial audiences in metros and even Tier 1/ 2 cities. It has strategically set up stores in smaller cities to increase consumer awareness. 

Like Zudio, Meesho’s focus is on volume and not order value. Taurani foresees Meesho acquiring some D2C brands and investing in private labels like Amazon and Flipkart have done. This will help capitalise on user trust and maximise profitability. 

“Even as private label brands account for only 10% of sales for marketplaces in each category, they play a crucial role in shoring up the revenue base. Meesho could look at acquisition, consolidation strategies with some of these D2C brands to grow business in the long term in branded categories,” Taurani added.

The elephant in the room is quick commerce and how the likes of Blinkit, Zepto and Swiggy have entered the marketplace territory. The company has not yet spoken about making a re-entry into grocery or potentially a quick commerce launch. It will be interesting to see whether quick commerce will be part of Meesho Mall’s roadmap if and when the company raises funds.

It’s taken a few years, but Meesho seems to have cracked the code indeed. Will this hot streak continue well after the festive season? 

[Edited By Nikhil Subramaniam]

The post Meesho Courts D2C Brands: Will It Be Match Made In Heaven? appeared first on Inc42 Media.

CaratLane founder Mithun Sacheti and brother Siddhartha Sacheti, CEO of Jaipur Gems, have set up an investment firm Finqube Capital Private Limited looking to institutionalise their angel investments, as per sources familiar with the matter.

Registered in Chennai, Finqube will handle the duo’s investments in early and growth stage companies.

As per sources, the two investments by the Sacheti brothers, including their participation in listed gaming giant Nazara’s INR 900 Cr preferential rights issue as well as the investment in Ippopay are from the new firm, which could take on the shape of a family office or a corporate venture fund.

Mithun Sacheti declined to elaborate on Finqube Capital’s plans, and told Inc42 that there are no plans to launch a separate fund at the moment.

However, as per incorporation documents of Finqube Capital Private Limited, the company has been registered as an investment firm for acquisition, investment purposes. It’s not yet clear what structure will be adopted by Finqube.

“This could be a private investment vehicle or a corporate venture fund backed by Jaipur Gems. The brothers are in the process of setting up teams for this firm,” sources close to the Sacheti family said.

It must be noted that Jaipur Gems is the legacy business set up by the Sacheti family in 1974. While the brothers joined this family business initially, Mithun went on to set up CaratLane as a new-age jewellery platform.

Siddhartha’s son Yash Sacheti is closely involved with Finqube and is the primary contact for the entity, as per MCA disclosures. Plus, according to his LinkedIn profile, Yash is currently the head of the Sacheti Family Office.

Notably, Mithun and Siddhartha are both active angel investors in Indian startups. Their portfolio includes investments in Ippopay, Bombay Shirt Company, Nazara and Oro. Besides investing with his brother in these startups, Mithun has separately backed home decor startup Arrivae, cybersecurity SaaS platform Securden, marketing tech startup Paperflite among others.

In February this year, Titan completed its acquisition of CaratLane, which gave Mithun a remarkable exit, netting returns of INR 4,621 Cr for his 27% stake.

Mithun has publicly stated his ambition to become a full time investor and is looking to add to his various investments across fintech, SaaS, gaming, ecommerce and other sectors.  He also said that he is keen on investing in startups in the INR 100 Cr-INR 200 Cr revenue range in the D2C category.

While Finqube Capital is yet to launch officially, Mithun is the general partner at Singularity Growth Ventures, which is backed by Madhusudhan Kela. The CaratLane founder is also an anchor investor or limited partner in early stage fund Xeed Ventures.

Sacheti Brothers Double Down On Investments

It looks like the Sacheti brothers are following the playbook created by Zerodha founders Nithin Kamath and Nikhil Kamath who set up Rainmatter Fund in 2016. Over the past few years, Rainmatter has invested in fintech, climate tech, media and agritech sectors. Rainmatter currently has a corpus of INR 1000 Cr

Besides Rainmatter, Nikhil announced the launch of WTF Fund to invest in entrepreneurs under the age of 25.

While Zerodha was a completely bootstrapped business, the Sacheti brothers have the experience of running a legacy family business for many decades.

“There is a similar trajectory, and Sacheti brothers could very well follow the Kamath brothers. Nithin and Nikhil Kamath were both active angel investors before they formally launched Rainmatter” a fintech founder turned VC manager added.

Modelled as a corporate venture fund, Rainmatter has deployed INR 400 Cr across various portfolio companies, mostly early-stage bets.

Sacheti has often talked about the need for more VCs with an operator or founder mindset as this allows them to take nuanced bets on startups.

Mithun’s exit from CaratLane is one of the largest in the Indian startup ecosystem for a founder, after Sachin Bansal and Binny Bansal made a huge windfall from the Walmart acquisition of Flipkart in 2018.

Sachin Bansal and Binny Bansal have gone on to become serial investors in many startups after their successful exit from Flipkart. Other entrepreneurs such as Freshworks CEO Girish Mathrubootham have also floated funds. Mathrubootham’s Together Fund largely invests in early stage SaaS startups.

Similar to the Sacheti brothers, Snapdeal founders Rohit Bansal and Kunal Bahl set up Titan Capital to manage their angel investments, which were being managed separately previously. Titan Capital has gone on to become an institutional VC firm with multiple funds, and has a SEBI-registered AIF licence for its growth-stage fund.

[Edited By Nikhil Subramaniam]

The post Exclusive: CaratLane Founder Mithun Sacheti Sets Up Investment Firm appeared first on Inc42 Media.

Quick commerce vs ecommerce marketplaces — that’s the big battle in the 2024 festive season sales. 

The rise of Blinkit, Zepto, Swiggy Instamart has certainly thrown a big curveball to ecommerce giants Amazon India, Flipkart and Meesho. So how large of a dent will quick commerce make on the biggest sales season for these ecommerce giants? 

The question is particularly pertinent in 2024 given that quick commerce giants have stepped into the marketplace territory for key categories. This was not the case in 2022, when quick commerce had just emerged on the radar, or in 2023, where the focus was on scaling up and expanding the dark store network. 

But in 2024, quick commerce players are certainly matching marketplaces in terms of categories and penetration and have become the de-facto destination for festive season shoppers in metros and Tier 1 markets. 

Take the recent launch of Apple iPhone 16, for instance. While in the past couple of years, there have been one-off launches such as this, this time around, every quick commerce player has made a big deal of this launch.

Plus, ahead of the festive season sales, we have seen Zepto, Blinkit and Swiggy expand their dark store networks to Tier 2 and 3 markets as well. The signal is clear: quick commerce is going after the marketplace lunch. 

Industry insiders and experts believe while the quick commerce capacity-building is impressive, it will take a lot more to dethrone marketplaces as the primary festive season destinations for online shoppers. 

That’s because a majority of the festive season sales in India are driven by non-impulsive shopping behaviour where trust factor, planning, pricing and brand legacy are important metrics for shoppers. 

Quick commerce players still have a way to go in this regard. Data released by market intelligence firm Datum Intelligence last week suggested that quick commerce players will only contribute around $1 Bn in GMV to the total estimated GMV of $12 Bn during the festive season sales. 

Quick commerce platforms have seen a spike in order volumes due to their expansion beyond metros, but the average order value is not likely to overshadow marketplaces just yet. 

A majority of the non-grocery categories, where quick commerce players are catching up, will still be dominated by the ecommerce marketplaces, says Satish Meena, adviser at Datum Intelligence.

Quick commerce’s impact will be felt by marketplaces across a majority of the grocery categories and a few beauty, personal care verticals in the metros, Meena told Inc42. However, in Tier 2,3 cities and beyond, quick commerce’s entry will largely hit local brick-and-mortar retailers. 

“Quick commerce platforms account for 40%-plus share in online grocery sales outside the festive season. We expect this to increase to 51%. Instant deliveries as a trend is now catching up in markets beyond metros, Tier 1 cities. However, that will take away the market share of the local kirana shops rather than the ecommerce marketplaces,” Meena explained.

What about the non-grocery category? Analysts say that Flipkart, Amazon, Myntra, Ajio, Meesho and others have the upper hand when it comes to electronics and fashion categories which have typically contributed over 50%-60% of all ecommerce marketplace sales.

Indeed, when it comes to gifting, electronics and fashion are the biggest draws during the festive season. So can marketplaces protect these moats from the quick commerce onslaught?

Marketplaces Guard Electronics Stronghold

Among electronics, mobile phones is the dominant category, and each festive season, we see a ton of exclusive launches, discounts and brand tie-ups on Flipkart and Amazon India. 

Mobile phones account for nearly 40% of the festive season sales on these two marketplace giants. The fact that these platforms offer exchanges and EMI/credit-driven purchases also gives them the edge over Blinkit, Zepto or Swiggy Instamart. 

In fact, Flipkart’s strengths in the electronics space give it an edge in the quick commerce space, where the company has launched Flipkart Minutes.

“So far, Flipkart and Amazon have garnered millions of dollars in sales from mobile phones eating into the retail market share. This cannot be disrupted by quick commerce platforms anytime soon. Despite the initial buzz around delivery of iPhones, quick commerce platforms have a lot to catching up to do,” a representative of a Bengaluru-based mobile retailers body claimed. 

He added that the mobile retailers have also scaled online visibility, are tying up with ONDC like networks and giving deep discounts to prevent marketplaces from dominating further. 

“In recent times, retailers like Sangeetha Mobiles are going live on ONDC in Bengaluru with 2-hour deliveries. This actually could be a huge tipping point for brick-and-mortar stores as they look to level the playing field against Flipkart and Amazon. On the other hand, quick commerce companies will have to fight challenges like trust factor, returns, exchanges, EMIs and more which will not be easy to implement well this year,” according to the owner of a mobile retail chain. 

Datum Intelligence’s Meena also sees minimal impact on Amazon, Flipkart from quick commerce platforms in the electronics categories such as laptops or mobile phones or even large appliances like televisions, washing machines and refrigerators which are big sellers during the festive season.

“During the festive season, we tend to see a lot of planned purchases for large and high-value products. Many of these are heavily reliant on credit features such as EMIs or BNPL, and customers prefer options such as returns and exchanges that quick commerce players do not yet offer,” Meena added.

“Large ticket purchases are usually not impulsive like in the case of grocery items. Ecommerce giants and mobile retailers will easily trump quick commerce companies because of their limited exposure to these categories thus far,” Meena said.

Who Will Win The Fashion Show?

It was only late last year that we saw some quick commerce platforms add fashion as a category with a handful of SKUs in the athleisure, innerwear and footwear segments. Inventory building on the fashion side has been relatively slow for these platforms due to some particular challenges in this category. 

For instance, fashion sees the highest volume of returns and exchanges, but quick commerce platforms do not yet have the same robust returns process that the likes of Myntra and Ajio have relied on.

“Fashion has been a tricky category to crack, which is why we have not seen many platforms venturing into this vertical despite high margins. It’s not just enough to have the most popular brands on the platform, but consumers prefer a wide variety of brands across all price segments,” the founder of a Bengaluru-based athleisure brand said. 

“Quick commerce platforms can only take limited risks for inventory in the fashion category in the dark store model. Hence, fashion will see limited exposure to quick commerce and the key share is expected to stay with the vertical marketplaces,” founded added.

The other challenge is in the luxury or the premium segment. Myntra and Ajio have created separate sections within their apps to cater to these high-value products. Ajio has the edge when it comes to exclusive deals with international brands and labels. Expecting Blinkit and Zepto to have the same brands is far-fetched. 

Beyond fashion, quick commerce platforms can make a dent in the beauty and personal care, as well as lifestyle segments, since these categories do cater to impulse shopping. 

“We have seen a very fast adoption of skin care and beauty products by quick commerce platforms which will only increase in coming months. This might hit the niche players like Nykaa, Purplle and others that have been market leaders. We expect small-ticket purchases and non-make up product orders to spike during this festive season on quick commerce platforms,” Meena added. 

Similarly, quick commerce players will shy away from other large verticals such as furniture, which is also reliant on returns and exchanges. Catering to these categories will require a rewiring of the dark store model, which is not suited for large inventory. 

All in all, experts feel that bridging the gaps in the electronics and fashion categories will take a lot of brainstorming by quick commerce players. So as far as the 2024 festive season sales are concerned, marketplaces may not be too worried. Perhaps by 2025, they may be singing a different tune.

[Edited By Nikhil Subramaniam]

The post Will Quick Commerce Eat Amazon, Flipkart’s Festive Season Lunch? appeared first on Inc42 Media.

InMobi-owned Roposo is in the process of moving to a social commerce model and broadening its focus on short videos beyond the creator economy.  In its new avatar, Roposo will look to replicate the social commerce model popularised by Meesho before the latter pivoted to a marketplace model. 

Currently in a transitional phase, Roposo has stopped new user signups and existing users cannot edit or post content, even though the Roposo app and website are still functional. 

Mansi Jain, senior vice president and general manager of Roposo, told Inc42 that the platform is pivoting from a creator or influencer-led commerce model to social commerce where anyone can sell or resell products within their circle of influence. 

This is essentially the pitch used by Meesho and Limeroad before at least Meesho moved to a marketplace model in 2022. Jain indicated that Roposo would allow users to set up their own stores and use the platform to extend reach. She also claimed product development for the new model is in advanced stages and it will be launched as early as November. 

“Roposo in its current form was purely driven by influencer and brand collaborations, where the users could consume content and shop directly from the app, while the order fulfilment was being done by us. However, we are now making it more interactive with users using GenAI tools to sell products online,” Jain told Inc42.

Jain added that the full potential of AI in commerce hasn’t been leveraged yet and InMobi is looking to fill the gap allowing users to leverage GenAI tools to post content, videos and sell or resell products. 

In its earlier format, Roposo allowed the creators and influencers to use dropshipping to deliver products through Roposo Clout. Influencers could use Shop 101 (also acquired by InMobi) to purchase products and sell them on the Roposo app for a cut of the transaction. 

It wasn’t immediately clear whether the users on its social commerce platform can also avail products and services from Clout or Shop 101.

InMobi acquired Roposo in 2019 and was one of the dozens of short video apps that looked to fill the vacuum left behind by TikTok in 2020 after its ban from India. It was originally acquired to bolster InMobi’s Glance product which displays ads and links on smartphone lockscreens 

Before the acquisition, Roposo had raised $38 Mn in funding from investors such as Tiger Global, Bertelsmann India.

InMobi is meanwhile planning to expand its video commerce business substantially by integrating GenAI tools within Glance and Roposo. Naveen Tiwari, CEO, InMobi reportedly said that leveraging AI for Glance would unlock new consumption patterns by helping smartphone users buy from their lock screens instead of from individual apps. 

Video Commerce Gaining Traction?

With Instagram and YouTube dominating in terms of users, Indian short video apps have struggled to monetise and have looked at various new streams to remain relevant. VerSe Innovation’s Josh and ShareChat-backed Moj have tested video commerce in the hope that it will bring in the users and brands, but the outcome has not been favourable in terms of revenue and traction. 

In June this year, Flipkart said that video commerce offering is gaining popularity with more than 75 Mn users having watched videos while shopping on the app between January 2024 and June 2024 on its curated video sections ‘Liveshop+’ and ‘Vibes’.

“We have realised that just short-form content will be extremely challenging to monetize in the wake of increasing streaming costs, server expenses and influencer charges. Ecommerce industry growth in particular that of quick commerce platforms has also led to many players now strategising ways to engage audiences/ users and which is why video commerce will be crucial,” VerSe CEO Umang Bedi told Inc42 earlier. 

InMobi’ is betting that features such as product discoverability will set it apart from others in this space. Roposo’s Jain added that AI will unlock new commerce behaviour. “The world of Gen AI can change the way products are being sold and purchased which is what we are working on now and will be launched soon,” she claimed.

[Edited By Nikhil Subramanian]

The post InMobi’s Roposo Turns To Social Commerce To Solve Short Video Monetisation appeared first on Inc42 Media.

The Zomato and Paytm Insider deal is definitely one of the most high profile acquisitions in India. But the question that many are asking is: did Zomato overvalue Paytm Insider in the INR 2,048 Cr deal.

Zomato and its CEO Deepinder Goyal have been in this situation before, and had to answer a similar question two years ago. 

In 2022, when Zomato and CEO Deepinder Goyal decided to spend roughly $568 Mn (INR 4,447 Cr) to acquire quick commerce platform Blinkit, many were left scratching their heads as to whether this is the right valuation for Blinkit which had just pivoted to quick commerce after years of operating Grofers in a hyperlocal model. 

There were plenty of questions about the rationale behind the deal, particularly a year after Zomato’s public listing, and with pressure to turn profitable. Would acquiring and growing Blinkit disrupt Zomato’s path to profitability, analysts wondered. 

As it turns out, Zomato got its share of the quick commerce boom for a bargain. Today, Blinkit’s valuation is estimated to be close to INR 1 Lakh Cr or just over $12 Bn. The quick commerce app has the largest presence in India with over 630 dark stores around the country, and a major presence in key metros. 

Blinkit brought in over INR 2,000 Cr for Zomato in FY24, and doubled the revenue on a YoY basis in the last quarter (Q2 FY25), so it is on pace to make Zomato’s acquisition price look like a drop in a bucket. 

But assuming that Zomato and Goyal will pull this off again is a fallacy. The factors that worked for quick commerce cannot be applied to movie and events ticketing. 

The transaction size of 2,048 Cr is 6 to 7 times the revenue that Paytm Insider reported in FY24. Many industry watchers are shocked to see the rich valuation for a player that is a distant second to BookMyShow. So has Zomato overpaid for Paytm Insider? 

Is The Price Right? 

Multiple analysts and those in the events industry believe that Zomato’s valuation is overpriced by as much as 60%. 

As per industry benchmarks and Paytm Insider’s revenue trajectory, the price should have been in the INR 700 Cr-INR 800 Cr range, given the FY24 revenue of INR 297 Cr and EBITDA of INR 29 Cr. 

Karan Taurani, SVP at Elara Capital, who closely watches the media and consumer tech market believes that Paytm Insider was certainly given a premium with regards to the valuation, but he also noted that Zomato’s history of turning around businesses can actually deliver good ROI for the group in the medium to long term. 

“A lot depends on Zomato’s execution strategy and its track record of handling incumbent players which can fetch the company sizable returns in the long term,” Taurani added.  

Nishant Kini, founder of Bengaluru-based branding and events agency The Nishé & Co, added that the price seems particularly high considering Paytm Insider had a stronger presence in Tier 1, 2 towns. On the other hand, Zomato’s plan to add Paytm Insider to its District going-out vertical seems to be centred around metros. 

Going-out is the next big thing for Goyal. He wants to bring the same tech-led aggregation and feature set that has created Zomato and Blinkit to this relatively underserved space. 

The thesis is built around the fact that Zomato’s core base of millennials and Generation Z Indians has overlapped with the target audience for quick commerce and going out.

However, Paytm Insider’s business is built around ticketing, which is a subset of the going-out vertical for Zomato. In this light, Zomato’s valuation for Paytm Insider seems even richer. 

Then there’s BookMyShow, a cash-rich company with nearly 20 years of experience in the movie and events ticketing business and a separate event management vertical as well. The Reliance-backed startup is also profitable, and has been in the news for a potential $300 Mn infusion by KKR.

Reliance Industries, with 37% stake in BookMyShow, is a significant advantage for the company, particularly after the inception of the Nita Mukesh Ambani Cultural Centre (NMACC) in Mumbai in 2023, which has become the destination for large international cultural shows and performances, including some high-profile musicals. 

The company also has exclusive ticketing rights for large events that are owned and managed by its in-house team such as Lollapalooza India. 

Will Zomato dive into managing and owning live event properties? 

What Makes Going-Out So Attractive?

It’s as if the pandemic touched a raw nerve — Indians have increased discretionary spending on outdoor media and entertainment with great enthusiasm. Rising per capita income in the metros has led to a significant growth in spending on ticketed events, with all categories — music concerts, comedy performances, sports and other live events — growing in 2023. 

This is in line with the growth trends seen since early 2022, however, movie ticketing has not grown as significantly. 

For instance, PVR-INOX, one of the largest multiplex operators in India, saw revenue from sales fall to INR 594 Cr in the April-June quarter of FY25, compared to INR 695 Cr one year ago. 

This is why despite movie ticketing almost constituting a 70% of its annual revenue base, BookMyShow has invested millions into exclusive international events such as the Sunburn Festival and Lollapalooza India. 

One source privy to the events operations at BMS said that the company bought exclusive rights to host Sunburn Festival for Hundreds of Crores a few years ago, and this has mostly been a profitable investment. 

In addition, BMS also invested an undisclosed sum to buy the India rights for the legendary international music festival Lollapalooza, which it aims to take to breakeven by next year. The first two editions of Lollapalooza India give us an indication of why BMS has invested millions in this vertical. 

BookMyShow retains the entire consideration paid by visitors to Lollapalooza India and other festivals, with ticket prices ranging from INR 5,000 to INR 25,000 in some cases. Besides this, BMS earns revenue from exhibitors and merchants at these festivals 

The return of mega events can be attributed to the revenge spending trends seen in travel and retail shopping, which have reversed the lower consumer spending for these areas during the pandemic years. Sports events constitute more than 80% of the event ticketing market, and therefore this will be a major focus for Zomato in addition to movie ticketing. 

A March 2024 EY-FICCI report claims the live events and ticketing business in India grew by 20% in 2023 to reach a market size of INR 8,800 Cr and is expected to touch INR 14,700 Cr by 2026. 

“The proliferation of online ticketing platforms has made it easier for consumers to discover, purchase, and attend events and has aided in event marketing to create increased awareness,” the EY-FICCI report added.

Organising and owning large scale event IPs has its risks as well. While the revenue upside is clear, BookMyShow has to bear full losses for event cancellations due to any reason. 

For example: in September last year, BookMyShow came under fire after standup comic Trevor Noah’s shows in Bengaluru were cancelled. In this case, BMS was criticised for haphazardly cancelling the show and also not maintaining the high production value standards required for such events.

“We tried everything but because the audience can’t hear the comedians on stage there’s literally no way to do a show,” Noah tweeted about the reason for the cancellation. 

This shows that producing events is not a matter of will, but comes down to execution and the details. This is also why these events are typically in a higher price bracket than events where the platform is only selling tickets. 

Zomato’s Need For Events IP

“Movie ticketing has seen a slump in the wake of OTT entertainment, but live event ticket pricing has surged, and this does pose a challenge in attracting users beyond the affluent class. Hence platforms are looking to buy out large scale events knowing exactly what kind of consumer to attract,” added The Nishé & Co’s Kini.

Sources told Inc42 that BookMyShow is looking to consolidate revenue from live events. It is looking to sign deals with artists, comedians, musicians to create a pipeline of live events where it can maximise revenue collection. 

Zomato is also likely to focus on music festivals, especially targeting international artists, with its upcoming Dua Lipa concert for Feeding India being a prime example. The company does have some experience with its Zomaland carnival organised in several Indian cities, but there is no doubt that Zomato will have to invest in building new live properties and a steady stream of events to justify the high price it is paying for Paytm Insider.  

Paytm Insider does not have event IP expertise as it has only been a ticketing player and has not gone into event operations and management. 

“Much will depend on how the two entities are brought together and the users on Paytm and Zomato given some over the top discounts on highly priced tickets to these big events which could get them a breakthrough,” the founder of an event management company told us. 

However, there’s no denying that Zomato has the base and the track record of executing the right things to achieve growth. 

As Elara’s Taurani added, “Going out businesses have reported healthy margins in the recent past. This gives a strategic boost to Zomato, which already has a large consumer base of young people on its apps who could ultimately be convinced to buy tickets online.”

Him and others clarified that there is no short-term threat to BookMyShow in terms of market share in movie ticket booking and the live events verticals. One thing Zomato is trying to do is to differentiate itself in terms of user experience. 

For instance, the Dua Lipa concert has a ‘Buy and Sell Later’ option that lets users resell their ticket in case their plans change. This is perhaps the first such feature for a ticketing platform in India. It shows that Zomato is not afraid to take risks to attract users. 

Another factor that could work in Zomato’s favour is its pull with Industry players, particularly F&B brands that are a key part of the live events space. Zomato has also curried the favour of several high-profile celebrities through endorsements in the past few years, which can also work to boost the live events business in the short to medium term. 

Plus, event sponsors, brands and organisers have been looking for an alternative to BookMyShow which wields considerable power in negotiations on commissions and pricing. While BookMyShow is ahead for now, Zomato can gain some ground in the early days by looking to break this ‘monopoly’. 

Edited By Nikhil Subramaniam

The post The INR 2,048 Cr Question: Did Zomato Overpay For Paytm Insider Deal? appeared first on Inc42 Media.

In July this year, Inc42 wrote about the struggles of short video platform Josh and the challenges faced by its parent VerSe Innovation in scaling up revenue and improving its bottom line. However, VerSe, which is also the parent of news aggregator DailyHunt, seems to have figured a way out — acquisitions and adtech offerings. 

Earlier this week, the company announced its newest acquisition – Bengaluru-based adtech company Valueleaf Services. With this, VerSe is looking to bolster its digital advertising and marketing verticals. 

While VerSe didn’t disclose the acquisition cost, sources told Inc42 that it spent $150 Mn – $200 Mn for the acquisition.

The announcement came on the heels of VerSe launching NexVerse.ai to provide AI-based solutions for brands and advertisers through performance marketing tools.

Explaining the company’s strategy, VerSe CEO and cofounder Umang Bedi told Inc42 that it is aiming to build Bharat’s biggest ad exchange which will use performance marketing strategy to provide better returns on investments to advertisers. 

This is part of VerSe’s plans to diversify its revenue sources. As part of this, the company announced acquisition of news subscription platform Magzter earlier this year. Bedi said that Magzter now has 1.1 Mn paid subscribers. 

Talking about the acquisition of Valueleaf, the CEO said that the company has been working with advertisers and brands for the last 15 years. Valueleaf has access to proprietary data as well as performance marketing campaigns, which are its biggest assets, Bedi said. 

Besides, Valueleaf has familiarity with websites, apps and other destinations where the advertisements are served, which will make retargeting advertisements on third-party websites easier, he added. 

“In addition, Valueleaf also has some industry and vertical-specific solutions like Buddy Loan for banking and financial services and Share and Earn, an earning app for growth hacking,” Bedi said. 

Valueleaf will be merged with VerSe, which will enable the latter to utilise the former’s assets to target users on Josh and DailyHunt through NexVerse.ai.

VerSe expects Valueleaf’s acquisition to increase its revenue by helping it charge higher amounts from advertisers and grow average revenue per user. In a statement, the company said that the acquisition would likely add $100 Mn to its top line in FY25. 

It must be noted that Valueleaf’s operating revenue almost doubled year-on-year to INR 281 Cr (about $33.5 Mn) in FY23, while net profit declined 8% to INR 11 Cr.

Cost-Cutting Measures At VerSe 

The developments come at a time when VerSe has been on a cost-cutting spree to reduce its losses. Amid the funding winter, VerSe laid off around 150 employees in 2022, months after it raised a funding of $805 Mn. 

This helped it cut its loss in FY23. VerSe’s net loss declined 25% to INR 1,909.7 Cr during the year from INR 2,563.3 Cr in the previous fiscal year. Operating revenue zoomed 51% to INR 1,456.5 Cr in FY23 from INR 964.7 Cr in the previous fiscal year.

For context, VerSe has raised a total funding of $1.5 Bn till date from the likes of Alteria Capital, Sumeru Ventures,  Peak XV Partners, Ontario Teachers’ Pension Fund, Luxor Capital, among others.

While the company is yet to release its FY24 numbers, Bedi told Inc42 it managed to narrow its loss by 50% in FY24 and double its revenue. He declined to disclose the exact numbers but said that the acquisitions would help it increase revenue and improve EBITDA margin. 

Bedi said that VerSe managed to bring down its expenses by reducing marketing, technology, and server costs. On Inc42’s report about layoffs at Josh, the cofounder said that it was performance-based employee attrition, which is a “routine exercise” in high-growth companies.

He further said that DailyHunt currently accounts for a majority of VerSe’s revenue, but Josh has started seeing green shoots in terms of diversification of revenue stream from advertisements to digital commerce. 

“DailyHunt, which is a news content focussed platform, derives 100% revenue from advertising. The digital advertising spends have grown after a slump last year which gives us a promising outlook on DailyHunt. With the acquisition of Magzter, we have also expanded our access to a premium customer base for subscription content. Magzter offers subscriptions to more than 10,000 outlets at a reasonable market price which has unlocked the opportunity,” Bedi said. 

Josh’s Digital Commerce Focus

After India banned TikTok in 2020, there were expectations that Indian short video platforms would fill in the gap and, in the process, monetise their services. However, monetisation turned out to be a challenge, as most of the Indian startups are struggling on that front. 

Acknowledging this, Bedi said many such apps, especially the ones that raised small-ticket funding rounds, have not been able to withstand costly licensing agreements, streaming fees, content creator costs, among others, while relying on advertising as the sole source of revenue.

“At Josh, we have realised this challenge and tried to tap the digital commerce offerings on similar lines like China’s Kuaishou app, which has significant revenue coming in from ecommerce offerings. Right now at Josh, the revenue mix is 60:40 in terms of commerce and advertising channels,” Bedi said.

Josh’s digital commerce offerings are in the form of in-app gifting, tie-ups with ecommerce platforms, among others. VerSe is eyeing to take the share of commerce revenue of Josh to 85%.

“Global market leader TikTok, which started off with a purely advertising revenue model, is now deriving 80-85% of its revenue from commerce. This is what we want to do with Josh now,” the CEO said.

The post Decoding DailyHunt Parent VerSe’s Booster Plan To Increase Revenue, Cut Losses Via Acquisitions appeared first on Inc42 Media.

Byju Raveendran is racing against time to save BYJU’S. Once India’s most celebrated tech entrepreneur, Raveendran & family, have seen a massive fall from grace and BYJU’S is battling insolvency proceedings from multiple corners. 

Addressing employees this past week, Raveendran attempted to show that the company is on track to overcome this tough period after months of uncertainty. 

“I want to remind all of you that we are still the largest edtech platform globally with 150 Mn students using our products and services every month. Despite the recent challenges faced, this organic user base has doubled over the last two years. Indeed, BYJU’S is transitioning to a sustainable business model that serves millions of students across India and employs thousands of people,” the CEO wrote to employees, several of whom have not been paid for months. 

This is not the first time that Raveendran has tried to rally employees to get behind the company, however, BYJU’S is in a more precarious position than ever before. 

While the leadership has been out of India for most of the past year, the company is on the brink of bankruptcy. The odds are stacked against Raveendran and his wife and cofounder Divya Gokulnath, and it all seems to be going awfully wrong. 

But where did the BYJU’S story begin? And will this saga have a bitter end with Raveendran being forced to relinquish the giant he built, and which many accuse him of bringing down as well. How did the highest valued startup in India at one time reach this nadir?

The Early Days: Byju Before BYJU’S

It was 2010, and Raveendran was a noted teacher for the Common Admission Test or CAT, an exam one is required to take to enter the IIM B-schools. 

Raveendran began with classes at Jyoti Nivas College in Bengaluru’s Koramangala area, and his classes were said to be running chock-full. So much so that Raveendran had to book stadiums and college auditoriums to teach thousands of CAT aspirants. 

These ‘Byju’s’ classes were a rage in most of the southern Indian states, where convention came second to outcomes. Raveendran, a self-educated teacher and learner as he likes to call himself, had appeared for CAT and topped the exams twice. He is said to have received and rejected offers from the six IIMs between 2005 and 2007. Instead, he joined a UK-based firm where he worked for three years, before pursuing his calling as a teacher in 2010. 

By then, Raveendran had taken his individual brand and incorporated a company Think & Learn Private Limited to run operations. And two years after this journey began and with considerable attention surrounding his classes, Raveendran was introduced to Ranjan Pai, the chairman of the Manipal Group, and Infosys’s former CFO Mohandas Pai, who also ran venture fund Aarin Capital.  

Ranjan Pai and Mohandas Pai wrote the first cheque for BYJU’S in 2013 for a combined stake of 26% and the juggernaut started rolling on. 

Byju Raveendran Wears The Founder’s Hat

After that first investment, there really was no turning back. In fact, it’s a theme we will revisit time and again when it comes to BYJU’S

Even though the early years for BYJU’S were around offline classes, the startup launched its first smartphone app in 2015. By then more investors had joined the company’s cap table. Aarin Capital invested in the $25 Mn Series B, before the company raised a massive $145 Mn in 2016, and another $70 Mn in the next year. 

Armed with more capital than most Indian startups see in their lifetime, BYJU’S went about acquiring students by millions. Massive ad campaigns were launched featuring superstars such as Shah Rukh Khan, Mohanlal among others. 

Naturally, BYJU’S was also a very attractive employer. It was offering unprecedented pay — at the time for Indian startups — and the company became a workforce and sales engine. Raveendran often threw people at the problem, employing basic graduates who could sell tablets preloaded with BYJU’S courses 

By 2019, nearly a decade after Raveendran began his solo adventure, BYJU’S was now a massive empire with more than 50,000 employees. Offices were set up in India, US, UAE and it seemed like Raveendran wanted a global domination in edtech. 

The growth was unparalleled and even the big corporate firms in India were a no match at that point. In fact, Raveendran was the poster child for the burgeoning Indian tech and startup ecosystem, making the covers of magazines across segments. 

The aggressive sales strategy was something that caught everyone’s eye. Raveendran and other senior leadership often dealt with accusations of a high-pressure and somewhat toxic work environment. Between 2018 and 2019, the edtech decacorn reported a 173% increase in revenue from INR 500 Cr in FY18 to INR 1,366 Cr in FY19, becoming the first edtech startup to breach the INR 1,000 Cr mark. 

It also helped that the company raised nearly $650 Mn in 2018, and the resulting push on the growth side definitely put Raveendran in a league of his own. Despite the teething issues around the toxic work environment and a sales-first culture, BYJU’S was on the up. 

The company was alleged to have hired a low-cost workforce to deliver emotional sales pitches to parents, and this strategy of tapping into the fear of missing out or FOMO was working well. 

However, many also wondered whether BYJU’S was pushing its products on to unsuspecting parents in ways that could have severe legal implications. 

For instance, those who could not afford BYJU’S tablets and courses were brought on board with EMI payments for surreptitious loans availed by BYJU’S from NBFCs. Many parents claimed they were not aware of BYJU’S signing them up for loans. The company faced a lot of hue and cry over this strategy, but its sales targets kept growing.

This particular concern snowballed later on in the company’s journey, as BYJU’S had to re-recognise some of its past revenue and ended up showing higher loss and lower income for some previous years in 2021. 

Edtech’s Pandemic Boom

But looking at 2021 would be jumping the gun a bit — the beginning of 2020 changed everything for edtech, and gave unicorns like BYJU’S a misplaced hope about the future of online learning. The highs of these two years and the funding boom was soon followed by gloom. 

Even before the pandemic, the edtech story being sold to global investors was simple: India is a market of 150 Mn students and internet penetration is increasing due to cheap cost of mobile internet. Plus, Indian parents have always been willing to spend for education outside the classroom. .

It wasn’t just BYJU’S selling the edtech dream — Unacademy, WhiteHat Jr (before the acquisition by BYJU’S), Vedantu and a host of other startups had sprouted up to capitalise on the growing market. The pandemic sent this edtech brigade into overdrive.  

But BYJU’S was easily the biggest of the lot. It raised well over $1 Bn between July 2019 and October 2020. The pandemic effect and the zero interest rate policy across the world had brought in a whirlwind of investments. The valuation zoomed by more than 22x from 2017- 2021 and this was the mercurial growth no startup in India could match. 

Till date, BYJU’S has raised more than $5 Bn in capital from over 120 investors. Meanwhile, Raveendran, his wife Gokulnath and brother Riju Ravindran still have a cumulative 22% stake in the decacorn once valued at $22Bn.

At this point, Raveendran was far from the teacher and educator he was once known to be. Inc42 spoke to some employees who worked closely with the CEO during this hyper growth period. 

One such employee told us that as a CEO, Raveendran often wondered why student enrollments declined from time to time. When the CEO was told that rival companies were signing up these students, Raveendran apparently told his team to ‘buy them all’, the source added.

Indeed, BYJU’S was an acquisition machine. Between 2017 and 2021, BYJU’S went on a shopping spree and acquired 17 companies within five years, which is a record three and a half companies every year

“The hunger to throw money at everything and anything was well known within the company. Sales people were spending nights in the office to meet targets and get incentives. We brought new NBFCS on board for EMI customers. The pressure to perform grew so much that sales numbers being botched up did not surprise anyone. Even the finance team was not surprised when there were discrepancies. Everyone had to deliver like Raveendran wanted,” a former senior manager told Inc42 about the months leading up to 2020. 

The biggest shock came when BYJU’S former auditor refused to sign the audited FY22 results due to an alleged unethical accounting practice that would recognise unrealised revenues for a financial year on the account of sales made on the paper. The dodgy sales numbers came back to bite BYJU’S later in life. 

Though how it escaped the notice of investors and auditors such as Deloitte for so many years still remains a mystery. 

Becoming A Marketing Machine

Despite raking in billions of dollars, BYJU’S focus was to appear on every TV commercial and sponsor every major event. 

It was already the biggest edtech company in the world, but it wanted to sustain the lead. In 2019, BYJU’S signed up as the main sponsor for the Indian cricket team at a steep cost. The edtech giant agreed to pay INR 4.61 Cr per bilateral match and INR 1.51 Cr per match featuring India in an ICC event.

It also splurged $40 Mn for being a sponsor of the FIFA World Cup 2022 in Qatar, besides continuing to pay celebrities for endorsements. 

The company roped in football superstar Lionel Messi for a $5 Mn-$7 Mn per year deal for its non-profit arm. When this deal was announced in 2022, social media was swamped with outrage as the company laid off 2,500 employees just weeks before this deal. 

“To have the biggest superstar of Indian cinema like Shah Rukh Khan endorsing your brand for years on TV commercials is no small feat. They were spending crazy dollars. Every agency was chasing them. Everyone thought they are doing INR 10,000 Cr business every year,” a Bengaluru-based ad agency founder told us. 

The Beginning Of The Downfall

In public and going by the claims in the media, BYJU’S seemed to be growing from strength to strength, but even by late 2022, the cracks had begun to appear. For one, the pandemic 

An internal crisis was brewing inside the company as parents questioned the quality of the online learning courses, and demanded refunds. This issue also became a matter of debate in the Indian parliament. 

While BYJU’S wanted to project the image of an international edtech brand globally, back home it faced a big blot on its reputation with allegations of cheating students and parents, especially those from lower economic stratas.

Besides this, many of its acquisitions were proving to be a burden rather than a boon. BYJU’S wanted a presence in test prep, K-12, text books, language and coding skills, higher education and the offline learning vertical. While it got this through acquisitions, several of them tanked. 

WhiteHat Jr, bought at a cost of $300 Mn in August 2020, created a lot of initial buzz but the product-market fit fizzled out after the pandemic, and WhiteHat became a huge weight around the group’s shoulders.  

Industry analysts claim that at the time, the strategy was sound. BYJU’S was cash-rich and instead of waiting for the market to be built, it went after startups. “Raveendran’s intent was twofold. First was to build a world-class edtech company and second to somehow reach that elusive INR 10,000 Cr revenue mark which will justify the big investments.”

Neither happened. By 2023, even after the high-profile $1 Bn acquisition of offline coaching giant Aakash Educational Services, BYJU’S had not managed to live up to the expectations of investors. 

Aakash, which continues to hold promise today along with Great Learning, has wrested back most of the control from Raveendran and the parent company. Incidentally, BYJU’S first investor — Ranjan Pai — is now the largest shareholder and is slowly disassociating from BYJU’S. 

Great Learning, sources claim, is also looking at a buyback from BYJU’S led by the company’s cofounders. The fate of US-based Osmo and EPIC hang in balance as the creditors have hounded BYJU’S to dissolve both companies to repay debt. 

“Was Raveendran transparent with his investors when he went on these acquisition sprees? That is the question they have been asking. We cannot neglect their complacency too when there was an edtech boom especially when the biggest investors were from the US and BYJU’S was looking to buy companies there,” a veteran investor associated with BYJU’S said. 

And Now, The Cookie Crumbles 

Empires fall. And that seems to be the fate for BYJU’S too. Raveendran seemed to have it all at one point. But through reckless business planning, overambition and perhaps even some hubris, the giant is now in a punier state. 

After scaling back from online learning, shedding nearly 90% of its workforce and cutting costs for everything from office space to SaaS tools, BYJU’S is a shadow of the force it once was. Investors have given up on the company in all likelihood, and the likes of Prosus are staring at a $500 Mn loss from their bet on BYJU’S. 

With just the offline learning vertical as a saving grace — along with some ownership in Aakash and Great Learning — BYJU’S is in a tough spot that’s about to get worse. The company is close to shutting down nearly half of its 250+ BYJU’S Tuition Centre outlets. 

In a bid to control its expenses amid the ongoing cash crunch and legal troubles, the company has started sending notices to the head of its tuition centres for terminating lease contracts for the properties. The move is likely to result in it shutting 120 offline centres, sources told Inc42.

Raveendran remains bullish though. In an email to employees this week (August 20, 2024) Raveendran claimed that the company is on the verge of a turnaround and investors are ready to back the firm in its journey

The cofounder said the startup is on the brink of reversing the negative business cycle that began two years ago and with BYJU’S 3.0, the company will offer an AI-driven, hyper-personalised educational platform that will be high on impact, but low on cost. 

However, not many believe this will be the case. “Raveendran has many friends in the UAE and even some allies in the US. But slowly everyone is coming after him because this is how bad businesses meet their fate,” the investor who worked with Raveendran during BYJU’S heyday said. 

It is not like Raveendran did not try to repair the damage — he introduced leaner sales and business models, but it’s all proving too little, too late. The corporate governance challenges persist and even if BYJU’S figures out a way out of its current predicament, it will take a lot to get there. 

 The BYJU’S saga bears an eerie resemblance to another big corporate scam in India in the recent past, aka the Satyam Scam of 2009 where Byrraju Ramalinga Raju, the founder and CEO of the IT services company, was accused of syphoning off more than INR 7,000 Cr from the company coffers. 

Satyam’s books and accounts showed profits that had never existed, while the company’s share price surged, and Raju then sold shares for personal gains. Raju then confessed that the books were cooked, and six years later, he was among those found guilty by court and sentenced to imprisonment. 

But in BYJU’S case, the outcome is uncertain. As the founder of an edtech skilling startup company puts it, “There are people chasing Byju Raveendran — from lenders, hedge fund managers to his own employees. But then India also has a bad track record when it comes to bringing wilful defaulters back to the country. It needs to be seen what the SC’s will do after the insolvency proceedings.”

Despite an uphill task of convincing the country’s top court, foreign lenders and investors to give him some more time for settling pending dues, Raveendran is in no mood to give up. His latest communication indicates just that.

“Over the past 29 months, [our] only source of capital was the founders. Founders together have infused approximately INR 7,500 Cr in the company for various operational needs. I guarantee this: When we regain control, your salaries will be paid promptly, even if that means raising more personal debt. We have investors ready to back our turnaround story. They see what I see – enormous potential and inevitable growth,” Raveendran’s email to employees said.

However, thousands of employees have been promised many times over the last year and a half and are now contemplating fighting one more legal battle against Raveendran and his fallen empire.

[Edited By Nikhil Subramaniam]

The post BYJU’S: An Empire That Was appeared first on Inc42 Media.

In yet another cost-cutting exercise, beleaguered edtech giant BYJU’S is likely to shut nearly half of its 250 BYJU’S Tuition Centre (BJC).

In a bid to control its expenses amid the ongoing cash crunch and legal troubles, the company has started sending notices to the head of its tuition centres for terminating lease contracts of the centres. The move is likely to result in it shutting 120 offline centres, sources told Inc42.

BYJU’S parent, Think & Learn Pvt Ltd, has sent termination notices for tuition centres in Mohali, Lucknow, Meerut, Ghaziabad, Indore, Ranchi, among others, over the last few days, the sources said.

The edtech startup started sending the notices from July 31 and a majority of these tuition centres will be shut by August 31, they added.

“Everyday two to three centres are being shut by BYJU’S now and this is going to impact more than half of the operational tuition centres,” one of the sources said.

Inc42 also accessed some of the notices sent for the termination of lease contracts. In the notices, Think & Learn attributed the move to changing business priorities.

Queries sent to BYJU’S on the above developments didn’t elicit any response till the time of publishing this story.

The latest development comes nearly a month after Inc42 exclusively reported that BYJU’S was locked out of over 100 tuition centres across the country over non-payment of rent, electricity dues, water bills, among others.

Why Tuition Centres Failed To Live Up To The Hype?

The edtech firm launched BYJU’S Tuition Centre business with much bullishness in February 2022. At that time, the company claimed it would invest $200 Mn to expand this vertical.

Amid the slowdown in the edtech business post the Covid-19 pandemic, offline centres were expected to bring in additional revenue for edtech startups. Over the last couple of years, offline or hybrid learning became the lifeline for edtech startups, including Unacademy, Vedantu and PhysicsWallah. All of these companies opened offline centres for test prep and K-12 learning with much fanfare during this period.

However, for BYJU’S, the offline bet seems to have failed to bring in the expected results. Despite the company slashing the tuition fees for the tuition centres, rising costs and high teacher-student attrition seems to have made the business unviable.

The BYJU’S of a few years ago would likely have been able to tide over this situation by pumping in more cash. However, the firm is currently a pale shadow of itself. A severe cash crunch, layoffs, multiple insolvency pleas, and other legal cases have left the company in a bad state.

Despite settlement of dues of a few operational creditors and the Board of Control for Cricket in India (BCCI), BYJU’S is involved in a legal battle with its US-based lenders over the payment of a $1.2 Bn Term B loan.

While the National Company Law Appellate Tribunal (NCLAT) set aside the insolvency proceedings against BYJU’S after it reached an agreement with the BCCI, the Supreme Court on Wednesday (August 14) quashed the Appellate Tribunal’s order and revived bankruptcy proceedings.

Employees Paying The Price

BYJU’S has cut its workforce by about 90% over the last two years. However, the edtech firm has still not cleared the pending salaries and other dues of many of its former employees. Besides, the employees currently working with the startup have also not been paid their salaries for the last few months.

Nearly a dozen current and former BYJU’S employees Inc42 spoke to said that the company’s human resource (HR) department is expressing its inability to clear the dues amid mounting debt.

The company’s revenue collections on sale of tablets, online tutoring and offline business is falling.

“Many employees who have been keeping the operations alive, including those at the senior positions, have been paid only half of their salaries since February this year. That too was stopped from May onwards and the management kept communicating that as soon as they will have access to the funds via the rights issue, the dues will be paid. However the management is incommunicado now and people are leaving the organisation,” one of the sources told Inc42.

The employees have also not received their Form 16 for this year. Employees believe that BYJU’S not making TDS payments is the reason for this.

It is pertinent to note that while BYJU’S has been in the news for all the wrong reasons in the recent past, the entire edtech space in the country is under tremendous stress currently. Amid these, legacy educational companies are eyeing acquiring small edtech firms at cheap valuations to strengthen their respective portfolios. Earlier this year, Inc42 reported that Unacademy held initial discussions with K-12 Techno Services for an acquisition.

The post Exclusive: BYJU’S To Shut Nearly 120 Tuition Centres appeared first on Inc42 Media.

Dunzo is still stuck in a limbo.

After more than a year of negotiations and speculation, the startup’s current cash crunch is likely to be solved by its largest shareholder Reliance Retail. But this does not mean that Dunzo is completely out of the water yet.

Sources privy to the development told Inc42 that Reliance Retail may also end up acquiring the troubled firm at a throwaway valuation. The conglomerate currently holds more than 25% stake in Dunzo after it invested $200 Mn in January 2022.

Interestingly, Reliance has been in talks with the company for more than a year, as reports emerged in July last year about a potential lifeline for Dunzo, which has been mired in a severe cash crunch since early 2023.

At the time of its last funding round, Dunzo was valued at $770 Mn, but the Kabeer Biswas-led startup has fallen from grace since then.

Unable to hit the brakes on its marketing spending, employee costs and operational expenses and forced to sit out of the quick commerce boom, Dunzo turned to B2B deliveries as we reported earlier.

But now, the company is moving back to its older model — deliveries from retail stores to consumers — in a shift that’s clearly meant to protect the brand value inherent in Dunzo’s name.

Over the past year, Dunzo has seen the exit of two cofounders — Mukund Jha and Dalvir Suri — while CEO Biswas and the other cofounder Ankur Agarwal desperately try to bring in more funds to keep operations going.

Will Reliance Deal Go Through?

Biswas told employees on July 20 that key investors including Reliance Retail have agreed to infuse funds into the company, according to sources. He also claimed that the fresh capital will be deployed to clear the pending salaries and other dues owed to former and current employees as well as vendors.

In an email dated May 19, 2024, seen by Inc42, Biswas claimed that the company has closed 75% of the round, but there is no clarity on the final timeline for clearing employee dues as the company cannot yet access the funds.

In another email dated August 12, 2024, Biswas told employees that the ongoing fundraising process had hit a roadblock, with the management unable to close the transaction. If Dunzo is unable to close this deal, the company would most likely be further dragged into ongoing insolvency cases.

“Kabeer claimed the management is trying to get the signatures of all the investors to close the transaction as soon as possible and that Reliance has finally agreed to be a part of the funding. However the management did not mention whether the nature of the transaction will be a rights issue or an acquisition,” according to one of the employees who was a part of Biswas’ address.

Incidentally, having experimented with quick commerce through Dunzo Daily, the company had completely pulled out of the segment. Its B2C operations instead focussed on the original Dunzo proposition — hyperlocal deliveries for nearby grocery stores and those on the ONDC network.

Besides this, the company had also looked to become a delivery partner for retailers and merchants who had their own online stores. Inc42 has also reviewed communications between the management and employees which indicates that Reliance is likely to infuse funds to support the operational spending as well.

According to sources, Biswas claimed that the intention is to deploy a small portion of the proposed funds infusion into B2C operations, after the startup clears its existing dues.

Meanwhile, queries sent to the Dunzo CEO and Reliance Retail  did not elicit any response.

Dunzo Goes Back To B2C

Interestingly, Dunzo is back to B2C mode, and is looking to scale down its B2B vertical aka Dunzo For Business. The B2B vertical was largely catering to Reliance’s ecommerce platform JioMart and Dunzo was banking on partnerships with ONDC sellers as a logistics, fulfilment service provider for the open network.

However, Dunzo did not have the nationwide network that is critical to scale up the B2B logistics business. For instance, the likes of Shiprocket, Delhivery, Shadowfax, Ecom Express have operations that cater to hyperlocal deliveries as well as intercity movement from marketplaces, D2C brands.

“Dunzo as such has not been able to expand its clients base when the industry saw exponential growth on the back of rise in quick commerce players and D2C ecosystem. Its multiple attempts to raise funding since last year have been blocked by several shareholders that acted as a roadblock. Besides, dependence on a few business clients for B2B has also not served it well,” according to a partner at a fund that has invested in Dunzo.

As its quick commerce bid failed, Dunzo’s losses surged to INR 1,801 Cr in FY23, up from INR 464 Cr in FY22. As we reported last December, cumulative losses have grown to over $150 Mn (INR 2,000 Cr+) vs revenue of just around $12 Mn (INR 100 Cr+) from 2018 to 2022

This wide disparity is not likely to have been solved in FY24. While the losses for FY24 are likely to be much lower as Dunzo cut costs, the startup would have also seen a dip in revenue as per most sources in the industry. This is also indicated by the fact that the company had severe cash flow issues all through FY24.

In addition, Dunzo defaulted on payments to two key vendors who have taken the ecommerce company to NCLT for recovery of the dues. Betterplace Safety Solutions moved the NCLT in Bengaluru against Dunzo for unresolved payments to the tune of INR 4 Cr. Both companies are currently in talks for a settlement.

Further, a group of creditors — Invoice Discounters of Dunzo Digital — filed an application under section 7 of Insolvency and Bankruptcy Code, 2016, alleging that the Reliance Retail-backed startup has cleared only 50% of its dues to such creditors.

The NCLT also admitted Velvin Packaging Solutions Private Limited’s insolvency plea against the quick commerce startup. In addition, Dunzo’s advertising partners and vendors including Google India, Facebook India, Glance among others are collectively owed approximately INR 11.4 Cr, as per earlier reports.

Is Quick Commerce On The Cards Again?

Even as Dunzo was one of the few early movers in quick commerce in 2021, its inability to scale operations beyond Bengaluru and shore up volumes in several key markets have led to its downfall. Despite having Reliance Retail’s backing, Dunzo missed out where Blinkit, Swiggy Instamart and Zepto cashed in.

While all talk is about Blinkit turning profitable, Zepto raising nearly a billion dollars and Instamart becoming the lynchpin for Swiggy’s IPO push, no one is looking at Dunzo. Instead, the focus is on Flipkart, BigBasket and JioMart on the quick commerce front.

Incidentally, Flipkart, which launched Flipkart Minutes last week as a pilot in Bengaluru, was reportedly in talks with Dunzo for an acquisition.

Surprisingly, Reliance shut down its 90-minute delivery services through Jio Mart last year, and is now reportedly planning to enter this space as the demand for instant deliveries across metros, Tier 1 India surges.

Will Dunzo become a part of JioMart’s push and finally see a piece of the elusive quick commerce boom? But for now, Dunzo, despite raising nearly $500 Mn in its lifetime, needs to rely on Reliance for something a lot more basic — funding to live another day.

The post Can Reliance Retail Save Dunzo? appeared first on Inc42 Media.

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

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

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

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

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

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

Ola Dreams Food Delivery Again

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

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

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

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

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

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

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

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

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

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

Can Ola-ONDC Eat Into Zomato, Swiggy Share? 

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

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

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

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

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

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

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

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

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

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

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

ONDC’S Food Delivery Menu

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Lessons From The Past

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

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

Can Ola’s ONDC success lure these players in?

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

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

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

[Edited By Nikhil Subramaniam]

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

VerSe Innovation is struggling to keep its Josh going.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How Josh Lost The Game Of Algorithms 

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

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

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

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

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

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

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

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

Cost Cutting Squeezes Out Creators

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

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

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

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

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

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

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

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

No Country For Short Video Apps

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

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

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

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

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

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

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

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

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

[Edited By Nikhil Subramaniam]

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

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

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

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

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

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

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

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

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

Will Zerodha, Groww Face The Heat?

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

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

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

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

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

Inc42 reached out to Groww, Upstox for comments on how the tax changes impact revenue. Our article will be updated as and when these startups respond. 

However, Zerodha cofounder and CEO Nikhil Kamath tweeted earlier in the day that the hike on STT would have up to 66% impact on tax collections. Zerodha collected INR 1,500 Cr through STT from its users last year, and if trading volumes don’t drop, Kamath expects this to go up to INR 2500 Cr annually, from October. 

Though Kamath did not elaborate on how the increase in various taxes for an active retail trader will affect the trading activity on Zerodha or decline in user base, analysts we spoke to said that discount brokerages have seen a huge bump from the surge in F&O, intra-day trading. 

“Zerodha contributes 20% to the retail trading volumes of stock exchanges in India. Groww’s active user base was more than 11 Mn in June. If the idea of the budget was to slow down the momentum of retail trading activity, then not only the stock exchanges, but also the broking companies which have the highest market shares will get hit,” a Bengaluru-based wealth management executive told Inc42 on the condition of anonymity. 

[Edited By Nikhil Subramaniam]

The post Budget 2024: Traders Reel Under Capital Gains Tax Shock; Will Zerodha, Groww Take A Hit? appeared first on Inc42 Media.