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.

Zomato and Swiggy walk into a bistro, ask to see the menu and the kitchen, have a ‘Snacc’ or two while taking a peek into the sales register, and simply walk out. That would be the beginning of a joke, except restaurants aren’t happy about being the punch line.

Even though both giants have clarified that Bistro and Snacc, their new food delivery models, are not competing with restaurants, this just masks how they both arrived at these models.

If we have to believe the claims of these two giants, they both launched identical 15-minute food delivery products without relying on the playbooks written by other restaurants that have worked with them over the years. That seems a little too hard to digest, especially as the writing was on the wall already for the past few months.

Whatever said and done, this is the new battlefield for Zomato and Swiggy, as the two companies enter another phase in their longstanding rivalry. We dive into the cafe wars this Sunday, but after a look at the top stories from our newsroom this past week:

• The Best Of 30 Startups: We covered 300 startups throughout 2024 in our 30 Startups to Watch series, and to wrap up the year, here’s a look at the best of the best from the past year. See who made the cut
• Zoomcar’s Challenge: Interim CEO & COO Hiroshi Nishijima outlined a three-pronged strategy to address Zoomcar’s woes and improve cashflow and settle debt. Can he script a turnaround?
• Fintech View In 2025: Although the fintech ecosystem jumped plenty of regulatory hurdles over the years, the sector is likely to see lesser compliance related challenges in 2025 thanks to the maturity reached in 2024

The New Face Of Food Delivery

On the face of it, the 15-minute delivery services seem new and fashionable, but in reality they have been in the making for the past year.

Swiggy and Zepto both launched ‘cafe’ services in Bengaluru and Mumbai respectively way back in 2023, but neither of these experiments took off in any meaningful manner. It was only after the success of quick commerce models after this point that added more conviction to these models.

Since mid-2024, plans for cafe delivery operations went into overdrive. Here’s a brief look at the chronology:

• Swiggy launched 10-15 minute delivery services under the name Bolt in October. But unlike Snacc or Bistro, this utilised existing restaurant partners on Swiggy’s platform
• Zepto then announced that it is separating Zepto Cafe from the main app and spinning it off to scale it up away from the quick commerce operations
• Zomato followed up with 15-minute food delivery model from restaurants in a 2 km radius similar to Bolt
• Then Swiggy launched Snacc also selling fast food, beverages and prepared meals from nearby locations
• And Zomato-owned Blinkit then did the same with Bistro, similar to both Zepto Cafe and Snacc
• Besides this, we saw the launch of individual delivery startups such as Bengaluru-based Swish, and most recently Zing in Gurugram
• Moreover, the likes of Magicpin and Ola Consumer have also launched quick food delivery leveraging the Open Network for Digital Commerce

This has created a huge groundswell for instant food deliveries and given a new headache for restaurants. Not only do they have to partner with the likes of Zomato and Swiggy, but also compete with them to a certain extent.

Swiggy claims that Bolt contributes 5% to its overall food delivery volumes with availability in over 400 cities. Zepto CEO Aadit Palicha claimed Zepto Cafe order volumes have grown from 30,000 orders per day in December to 50,000 orders in early January.

Blinkit CEO Albinder Dhindsa clarified that parent company Zomato will never launch private brands on the main app to compete with its restaurant partners, which is why the Bistro app is launched by Blinkit and is separate from the Zomato app.

Restaurants Raise Alarm Again

But this seems like a thin explanation when one considers that Zomato and Bistro are both under the same roof, and will naturally share plenty of resources and knowledge. If nothing, Bistro will benefit from Zomato’s expertise and talent depth in food delivery.

Dhindsa also claimed that the company won’t be using the Zomato app to market its newly launched 10-minute food offering Bistro.

The Blinkit CEO was responding to concerns raised by the National Restaurant Association of India (NRAI) in light of the 10-minute delivery models. The group is said to be in the process of approaching the Competition Commission of India (CCI) to seek intervention and prevent the creation of private labels by Zomato and Swiggy.

Dhindsa’s clarification is not likely to soothe these nerves. He further added, “All the companies innovating with us on Bistro also work with a number of restaurants and our success at Bistro has the potential to add value for the entire food & restaurant ecosystem.”

Just a few days ago, NRAI even requested the government of giving industry status to the food services sector, to ensure fair play for restaurants, delivery partners as well as consumers against potential exploitative practices of foodtech platforms.

The NRAI is no stranger to taking on the two giants and in the past we have seen the group rally against loyalty programmes and deep discounting. The association previously alleged that the food delivery giants engaged in anticompetitive practices such as bundling of services, exorbitant commissions, delayed payment cycle and imposition of one-sided clauses.

Now the group claims that food delivery giants have access to crucial consumer data but do not share this information with restaurant partners, and are leveraging this data to launch new verticals that compete with restaurants.

Are Zomato, Swiggy Playing It Smart?

Market analysts question the financial viability of these models, because even quick commerce as it stands today does not have a healthy track record of profitability. And that’s with groceries and essentials.

Zomato and Swiggy are betting that new-to-delivery consumers would prefer Bistro or Snacc as a quick experiment and get habituated to online food ordering and graduate to the core app eventually.

But this journey is fraught with a number of points where the consumer could just drop off and never return. Squeezing more deliveries out of potentially overworked delivery workers is also a major problem.

It might suit these companies from the point of view of unit economics, but gig workers are the backbone of delivery services, and any stress here could have a cascading effect on other delivery operations as well.

What the cafe model does offer is a way to shorten the profitabilty timelines of existing dark stores, particularly in high volume cities. As a standalone business, one foresees problems such as low average order value and low retention of users.

If this weren’t enough the three major quick commerce players — Zepto, Blinkit and Swiggy Instamart — have all come under the scanner for their rapid expansion and how this has impacted smaller grocers and retailers in metros and Tier I cities.

We foresee a slew of regulations in 2025 to address this rapid expansion and its impact on the retail FMCG space over the past years. Incidentally, some startups are currently building quick commerce platforms with different models such as a clear retail presence, that might circumvent some of these concerns.

Will the likes of Blinkit, Instamart and Zepto also resort to physical stores in the near future to mitigate the potential regulatory risks?

Sunday Roundup: Tech Stocks, Startup Funding & More

• Funding Bump: Over the past week, Indian startups saw a big uptick in capital infusion more than $432 Mn raised by startups across 20 deals, led by Innovaccer’s $275 Mn round
• upGrad Cofounder Floats New Venture: Mayank Kumar has launched a new talent mobility startup, BorderPlus. The new startup claims to help employees in India land “nursing” jobs in healthcare facilities in Germany

• Ola Electric Vs CCPA: The Central Consumer Protection Authority (CCPA) continues to tighten scrutiny around Ola Electric, and sought more information in connection with an investigation into the company
• Rishen Kapoor Returns To Peak XV: Months after the shutdown of his SaaS startup Toplyne, cofounder and CEO Rishen Kapoor has joined back Peak XV Partners to look at early stage deals

The post Zomato, Swiggy Put Cafe Wars In Overdrive appeared first on Inc42 Media.

Ather Energy is entering 2025 on the cusp of an IPO, but now India’s EV pioneer needs to get out of its comfort zone and walk the talk.

For years, Ather Energy founders Tarun Mehta and Swapnil Jain have stuck to the strategy of building slowly and steadily, with a focus on service, quality and infrastructure rather than market share. None of that ‘move fast and break things’.

That could very well change under the spotlight of being a publicly listed company, with Ather Energy looking to raise INR 3,100 Cr from the public markets.

As it prepares to join Ola Electric on the stock market, Ather Energy will perhaps have to become a little more like the competition, and less like itself.

And at the same time, it has to address some key gaps in its portfolio relative to the competition. Before we see exactly what, here’s a look at some of the top stories from our newsroom this week:

• Indian Tech In 2025: Our tech and startup predictions for 2025 — from the state of IPOs, to what will happen after the quick commerce boom and how the GenAI revolution will shape up in 2025
• Best Of 30 Startups: The 54th cohort of Inc42’s 30 Startups To Watch brings crème de la crème of the 300 startups featured in 10 editions over 2024. Here’s our best-of list to wrap up the year gone by
• Reliance Bails On Dunzo: Reliance Retail, the largest shareholder in Dunzo, has written off its $200 Mn investment in the company, even as founder and CEO Kabeer Biswas is in talks with buyers for a distress sale

Ather Energy Vs Ola Electric And The Rest

The first thing Ather Energy needs to address is its relatively poor market share growth in the past year, even as EV sales have doubled between 2022 and 2024.

While the overall EV two-wheeler registrations surged 33% YoY in 2024, Ather’s sales grew only by 20%. In contrast, Ola Electric saw a 52% growth, while Bajaj and Hero had the biggest jump among the leading players.

Obviously, a lot of the attention in 2024 was on Ola Electric, as it became the first Indian EV maker to go public. The company also retained the top spot in the electric two-wheeler market. Ola Electric sold 4.1 Lakh units in 2024, accounting for more than 35% of the market share, compared to Ather Energy’s 1.25 Lakh units and 11% market share.

Competition was intense in 2024 for Ola Electric, as the likes of Bajaj and TVS overtook the Bhavish Aggarwal-led company at the end of the year. Whether this indicates a big inflection point for the two legacy manufacturers remains to be seen, but Ather Energy will equally feel the pain.

As it stands though, the 2024 performance does not make for good reading for Ather. And that’s also why there may be some uncertainty around investing in the Ather Energy IPO.

In fact, one might say that Ather’s focus on scaling up the service and infrastructure before sales might backfire in this competitive landscape.

Unlike Ola Electric, it does not have the critical mass of users to upsell or cross-sell services, and having more vehicles on the road will also help Ola Electric generate organic buzz.

This is evident in Aggarwal and Ola Electric’s focus since going public. The company has looked to sacrifice some of the market share in favour of building up the service and infrastructure network that many feel is critical for sustainable growth in the automotive sector.

Can Ather Step On The Pedal?

Ather Energy has not relied on marketing dollars to grow, but soon after the IPO one may see a different avatar – one that looks to press home the advantage of its slow-and-steady approach while aggressively going after market share.

Ather Energy is left with few choices but to chase sales growth aggressively, as it will need to recoup its capital expenditure since inception to unlock profitability.

The company plans to use INR 750 Cr, or 25% of the fresh issue portion of the INR 3,100 Cr IPO, for research and development (R&D). Moreover, capital expenditure for setting up a new plant in Maharashtra will be allocated INR 927 Cr. This should more than double the company’s annual manufacturing capacity to 900,000 units.

To put things in perspective, Ather sold just over 125,000 units in 2024. Even its current capacity of 400,000 units leaves it with some headroom.

Investors and shareholders would expect to see the monthly sales average grow by two or three times the 2024 monthly sales numbers, which will start delivering the returns on the capital expenditure.

The fact that Ather Energy does not have a battery cell manufacturing plant like Ola Electric is also a disadvantage for the former. Ather signed a partnership deal with battery maker Amara Raja in 2024, but it perhaps needs to improve its battery technology capabilities in the medium term. The R&D spending would definitely help in that regard.

Besides this, Ather does have the advantage of an interoperable fast-charging network in partnership with Hero MotoCorp, which competes with Ather Energy, but is also a promoter in the company.

The network allows Ather to have better unit economics for the battery charging infrastructure compared to the likes of Ola Electric. But Ather has not been able to grow its market share to truly take advantage of this partnership.

What Ather Is Missing

But there are other areas that Ather has to address. The company is betting big on the consumer opportunity, but the B2B opportunity cannot be ignored.

Meanwhile, low-speed electric scooters are seeing a surge in adoption due to the quick commerce boom. Companies such as AlphaVector have stepped into the low-speed segment, targeting consumers, while the likes of Zypp, Okaya, Hero Electric have looked to tap the B2B opportunity.

The expansion of delivery platforms outside the metros means there is increasing infrastructure development in Tier II, III, and IV cities, particularly for two-wheeler charging. This is a market that startups and new-age listed companies will look to target.

Ola Electric has already made its intentions clear with the launch of ‘Gig’ scooters. New product launches are expected to continue this year as companies look to increase their market share.

While the demand for Ola Electric’s electric motorbikes and new gig economy scooters will be keenly watched, the impact of Honda’s entry into the two-wheeler EV space on the market will also need to be seen.

Ather Energy is entering 2025 with a new version of its 450X electric scooter with a number of upgrades, but nothing that will change the competitive dynamics. Besides this model, it also has the Rizta lineup of scooters targeting families.

However, Ather does not yet have plans for electric scooters in the commercial category. This could be a major gap for the company and something investors would definitely want to see.

One cannot help but get a feeling that Ather Energy needs to do what it has been uncomfortable with for so long. The company has shied away from big campaigns and marketing spends. This has to change if it is to compete effectively with brands like Hero, Bajaj, TVS and Ola Electric and other emerging new-age startups, and soon the likes of Honda and Suzuki.

Can Ather Energy step out of its comfort zone as it stands on the cusp of its IPO?

Sunday Roundup: Tech Stocks, Startup Funding & More

• Funding Crystal Ball: Inc42’s annual funding report projects that compared to 2024, the total funding amount and deal count are likely to increase by 25% and 29% respectively, with Indian startups set to raise $15 Bn in 2025
• Women-Led Startups On The Up: By the end of 2024, women-led startups had raised more than $930 Mn, nearly double of what was recorded in 2023. What explains this sudden boom?

• PB Fintech’s New High: Shares of insurance major Policybazaar’s parent PB Fintech hit a fresh all-time high this past Friday, after the company ventured into the healthcare segment
• Bleak For Brokers: Zerodha CEO Nithin Kamath has predicted a tumultuous year for the Indian brokerage industry in 2025, anticipating a downturn in F&O volumes
• Zepto Takes Up IPO Mantle: Zepto is reportedly gearing up to file IPO draft papers in March or April this year, and is close to finalising its redomiciling from Singapore to India in the build up

The post Ather Energy’s IPO Speed Bumps appeared first on Inc42 Media.

Till Friday evening, Zepto was largely among the headlines this year for its massive $1.3 Bn fundraise spree. But with its FY24 numbers, the now Bengaluru-based startup is showing what it can potentially do with all that capital.

The startup has announced 2X-plus revenue growth and has shown great control on its losses. And now with a plan to push Zepto Cafe as a separate app, Zepto is also stepping into the food delivery waters.

So far, Zepto has delivered on the execution front for quick commerce, and outpaced Blinkit and Swiggy Instamart in terms of revenue. In fact, as of FY24, Zepto has 2X and 4X the revenue of Blinkit and Swiggy respectively as of FY24, which is staggering for such a new company and given the strengths of Zomato and Swiggy in this space.

What’s next for Zepto and how much will the Zepto Cafe entry change the company going forward? Let’s answer, but first a look at Inc42’s Year In Review series which was rolled out this week and will be our big focus all the way till the end of the year

• The Acquisitions Game: While the first half of the year still faced the ripple effects of the funding winter, the second half hogged the limelight for some notable acquisitions, turning over a new leaf for the Indian startup ecosystem.
• Startups That Bit The Dust: From Koo to Kenko Health to Stoa — at least a dozen startups shut shop in 2024, most of them owing to a cash crunch while others due to unsustainable business models
• The Make In India Wave: Tech giants continued to push the envelope in 2024 when it comes to manufacturing in India, with Apple, Google and others leading the charge with a host of domestic manufacturing partners
• Startup Layoffs In 2024:  In terms of layoffs, there was some respite in 2024 after a terrible two years. Even though more than 9,000 startup employees lost their jobs in the year, that’s just half of what we saw in 2023. Will 2025 bring more relief?

How Zepto Changed Its Tune

Diving into the financials, we can see that Zepto saw the revenue surge along with a significant rise in spending.

Revenue more than doubled to INR 4,454 Cr, compared to Blinkit’s INR 2,300 Cr in FY24 and Swiggy Instamart’s INR 1,100 Cr. That’s an achievement by itself.

Zepto spent INR 5,747.21 Cr in FY24, a 72% increase from FY23, with procurement costs dominating at INR 3,449.83 Cr, or 60% of total expenses. However, loss as a percentage of its revenue dropped to 28% in FY24 from 63% in FY23, which indicates improving profitability.

Cofounder and CEO Aadit Palicha said the company is on course to hit profits in the near term based on this unit economics trajectory. “We expect to continue this growth momentum with a clear path to PAT profitability in the near term,” he added.

What exactly changed for Zepto in the past year? The biggest change has come in reduced contribution margin loss or the loss per order after deducting variable costs (product price, delivery fees, etc) but before deducting fixed expenses such as employee salaries and marketing.

Contribution margin loss per order was around INR 8 at the end of 2023, and improved to INR 0.5 in April. This massive change proves that Zepto doubled down on profitability instead of growth earlier this year. This is also when Palicha’s first comments around profitability started appearing.

As per sources close to the shareholder group, Zepto focussed largely on unit economics between February to April in 2024, which has reflected to some extent in the improved margins. This is expected to improve further, but perhaps not immediately, because right now the company is looking to add to its dark store network and come close to Blinkit’s base.

Expansion Fuelled By Billions

By March 2025, Zepto is likely to have more than 1,200 dark stores around India, and many of these would also be part of the Zepto Cafe push. Anything over 1,000 dark stores would put Zepto in the same ballpark as Blinkit and Swiggy Instamart.

This scale is a moat for Blinkit, Swiggy and Zepto against the likes of BBNow, Flipkart or Amazon which are still transitioning to quick commerce in some ways.

For Zepto, accelerating the dark store expansion is largely only possible because the management went back to investors with its improved numbers by March this year, and was able to convince them to infuse billions. Plus, the spotlight on Blinkit’s improving profits also helped Zepto in showing investors the upside of the segment.

The fact that quick commerce itself was becoming a beast was another factor in Zepto’s favour in a year that has been relatively muted in terms of funding. Zepto’s $1.3 Bn round is more than 10% of all funding for startups this year. It underscores the company’s rise to prominence, but nothing cements it like great financial performance.

Zepto Cafe In The Picture

So credit where it’s due for Zepto, but now perhaps comes the tricky part. Zepto Cafe will be a separate app, Palicha has said, and with it the startup is entering Zomato and Swiggy territory. Not exactly, but it’s still closer to home for the two veterans.

Zepto Cafe will come up against Blinkit’s Bistro and Swiggy Instacafe or Swiggy Bolt. The 10-minute delivery war is shifting its battleground.

There may well be more on the horizon for Zepto. Quick commerce players are testing the waters when it comes to pharmacy, electronics and fashion. Other ecommerce giants are moving into this space, with strengths in each of these verticals.

Zepto has definitely made the most of the quick commerce limelight thus far. The company’s recent move to Bengaluru has also thrown a challenge to Swiggy directly, and with billions of dollars in its coffers, Zepto has the ammunition to attract talent and partnerships.

Zomato and Swiggy are also ready for this test.

Zomato’s first big fundraise — the INR 8,500 Cr QIP — since its 2021 IPO came just a couple of weeks after its rival Swiggy’s public debut, where the company raised close to $1.4 Bn.

Like Zomato, Swiggy is ready to launch multiple new services in the coming year to bolster its food delivery and quick commerce plays.Previously, Zomato CEO Deepinder Goyal had claimed that QIP was a key move for Zomato as the company needed additional capital because of “the competition landscape and much larger scale of our business today.”

There’s no doubt that Zepto is part of that competition. However, both Zomato and Swiggy have shown better profitability on food delivery after years of operations and trust building in the market.

Breaking into this will not be easy, even if Zepto Cafe is not going after the full food delivery pie. The logical extension of this model is food delivery.

In fact, Zomato today enjoys a 58% market share in the food delivery segment as of June 2024, according to a Motilal Oswal report. Given that it’s a near duopoly, Swiggy had about 42% share. It’s not clear how much of this market share will be lost to quick commerce cafes.

According to the brokerage, Zomato has grabbed market share at the expense of Swiggy, driven by “stronger execution”, which would be critical for Zepto in the long run with Zepto Cafe.

With its FY24 numbers, Zepto seems to have cracked the business model to a large extent. Now it has to show how well it handles potential challenges such as government regulations for quick commerce, amid concerns of kiranas and traditional retailers being displaced.

Zepto’s fundraise had raised some eyebrows. There’s always scepticism when one company tends to dominate the investment activity in this way, but it’s also a sign that it’s in the big leagues. The revenue surge is also a testament to new-age consumer services in India.

Sunday Roundup: Tech Stocks, Startup Funding & More 

• Funding Shoots Up: Between December 9 and 13, Indian startups cumulatively raised $635.8 Mn via 25 deals, up 155% from the $249.6 Mn secured across 18 deals in the preceding week
• Zerodha’s Revenue Milestone: The stock broking major’s consolidated revenue neared the INR 10K Cr mark in FY24, with INR 5,496 Cr in profits for the year
• Bluestone Takes IPO Step: Omnichannel jewellery company Bluestone has filed its DRHP with SEBI for an INR 1,000 Cr-plus IPO, after reporting a net loss of INR 142.2 Cr in FY24

• MobiKwik Attracts A Crowd: MobiKwik’s issue closed with an oversubscription of 119.38X, becoming one of the most heavily bid public issues among new-age tech companies
• BlackBuck Suffers Losses: Logistics major BlackBuck slipped into the red in the September quarter, reporting a loss of INR 308 Cr, weeks after its public listing

The post Zepto Hits Quick Commerce Gold appeared first on Inc42 Media.

What’s happening at Unacademy? Reports indicate that the company is close to an acquisition, but cofounder and CEO Gaurav Munjal has immediately come out and denied this speculation.

This is not the first time that Unacademy has been in the news for an acquisition, but this is perhaps the closest the startup has come thus far, by all indications. To his credit, Munjal has always denied wanting to get an M&A, but Unacademy has not exactly shown any major momentum since mid-2022.

After the troubled times of the past two years, a potential deal for Unacademy could be a silver lining for the sector and indeed for Unacademy, which has downsized in a big way in the past 24 months.

Will Unacademy eventually cave in to potential pressure from investors to find an exit and go in for an M&A or will Munjal & Co finally be able to deliver some positive news in terms of profit in the next future? Let’s look to answer these two questions but after a look at the top stories from our newsroom this week:

• The 80/20 Podcast: The 80/20 Podcast by Inc42 is here — catch the first episode now — offering you a backstage pass to the minds shaping the future of India’s startup economy. We’re diving deep into the trenches with maverick startup founders who are rewriting the rules of success in the digital age
• The Quick Commerce Pill: Many believe pharma and healthcare are the biggest untapped segments in quick commerce, where average order value is the current big focus for players such as Swiggy, Blinkit, Flipkart Minutes and Zepto
• The AI Policy Push: Government initiatives like IndiaAI Mission and Future Skills are expected to position India as a global AI leader and an attractive destination for global investors, but what more do startups in the GenAI and AI segment want from the policymakers?

Unacademy’s Year, According To Gaurav Munjal

Unacademy was already in the news this week when reports suggested that Unacademy was in advanced discussions with Allen Career Institute for a potential sale for $800 Mn. This would represent a big haircut on the company’s last private valuation of close to $3.4 Bn, but it would still be a relative success story in edtech, after the past two years.

However, Unacademy CEO Munjal took to LinkedIn today (December 7) and dismissed the reports of acquisition talks as “rumours”.“We are building Unacademy for the long run. We are not doing any sale or M&A. Ignore the rumours,” Munjal said.

Incidentally, just hours before Munjal posted on LinkedIn, sources at Allen told Inc42 that deal is most likely to go through, but that the valuation is unclear.

Besides denying talks over an M&A, Munjal added that 2024 will be the best year for Unacademy in terms of growth in the offline business and overall unit economics.

He claimed the edtech startup had seen 30% growth in its offline business with unit economics improving considerably. He also added that despite degrowth in the online test prep business, the vertical has seen improved unit economics.

Munjal also claimed that the company’s monthly cash burn had declined by 50% in 2024, with $170 Mn in cash reserves, no debt and a runway of over four years. He claimed that SaaS arm Graphy grew by 40% profitably, language learning product Airlearn surpassed ARR of $400K in the US, just four months after launch.

What’s Unacademy’s True Picture?

Unacademy narrowed its consolidated net loss by almost 40% in FY23 (ended March 31, 2023), but there’s no clarity on how it has performed in terms of the unit economics and revenue growth since then.

Even last year, Munjal claimed that Unacademy had managed to reduce its cash burn by 60% in 2023, and also said that the online business had shrunk. These are the only updates from Unacademy in the past two years in terms of the financials.

It’s certainly not helpful when Munjal’s claims aren’t backed by financial disclosures, and instead one has to rely on numbers from more than 18 months ago to ascertain how Unacademy has performed.

As of March 2023, the Peak XV-backed edtech unicorn had a net loss to INR 1,678.1 Cr (down 40% compared to FY22). Operating revenue had seen a 26% growth YoY to INR 907 Cr, with INR 137 Cr in non-operating income.

Between March 2023 and December 2024, Unacademy has seen a slew of exits. Partner and chief operating officer Karan Shroff , strategy head Arnab Dutta, COO Vivek Sinha, chief of staff Abhyudaya Singh Rana were among those who quit last year.

The exits continued this year too. In June 2024, cofounder Hemesh Singh stepped down and moved on to an advisory role, followed by the exit of chief operating officer (COO) for offline centres Jagnoor Singh in July 2024.

But to bulk up its leadership, Unacademy appointed former CRED head of finance Pratik Dalal as chief financial officer (CFO) of its offline business Unacademy Centres, as it looked to put this vertical front and centre in its operations.

Combined with the fact that online test prep has seen degrowth as Munjal claimed, it’s looking like Unacademy is clearly an offline learning company today.

Offline Rivals Grow Big

Having $170 Mn in cash reserves is only good as long as Unacademy can show actual profits in the offline learning business, which can contribute to the capital reserves and be leveraged for expansion.

Competition such as Physics Wallah (PW) has raised $210 Mn this year to capture the offline learning opportunity. Outpacing such a well-capitalised rival will not be easy. Allen too is a major competitor for Unacademy, so perhaps the legacy company is looking at Unacademy has a way to add some distance between itself and PW.

This is the only position in which Unacademy might be able to bargain for a higher valuation, according to the CEO of an education business. At the moment, it’s not clear how far Unacademy has improved its unit economics in all of FY24 and more than six months into the ongoing fiscal year.

The fact that the company laid off 250 employees earlier this year as part of a restructuring exercise to improve its bottom line does not necessarily go towards long-term profitability moves. It also laid off 145 employees from PrepLadder in March.

Unacademy has been the subject of acquisition talks for a number of months. Just earlier this year, the company was said to be in talks with fellow Peak XV portfolio company K-12 Techno Services, but sources close to the latter indicated that Unacademy’s unit economics situation was not clear, and there was no path to profitability yet.

Can Gaurav Munjal Turn It Around?

In light of this, Munjal’s defence of Unacademy’s financial position is reminiscent of another edtech founder who insisted that everything is well despite the situation worsening. Of course, we are talking about BYJU’S, which once claimed to be profitable, only to retract it later.

Unacademy’s Munjal had once said that Raveendran not listening to “anyone” was one of the reasons for BYJU’S troubles. In a post on X, Munjal had said, “Byju failed because he didn’t listen to anyone. He put himself on a pedestal and stopped listening. Don’t do that. Never do that. Don’t listen to everyone but have people who can give you blunt feedback.”

It was almost exactly one year ago that Munjal claimed the company turned down a tempting $500 Mn debt offer, and a host of merger and acquisition (M&A) opportunities in 2021, at the height of the funding peak. Coincidentally, this December, Munjal is back saying that he is not interested in selling the company.

“We are building Unacademy for the long run. We are not doing any sale or M&A. Ignore the rumours,” the CEO said.

But it’s hard to ignore the speculation when it comes every now and then, and when the company does not seem to have seen any major improvements in its financials, its retention of key employees, and degrowth in the core business.

In lieu of these indisputable indicators, what we have is Munjal’s claims about Unacademy’s best year yet. And if we have learnt anything in the past two years, it’s that such claims need to be taken with a grain of salt.

Sunday Roundup: Tech Stocks, Startup Funding & More

• Funding Up: Indian startups continued to show some signs of funding resurgence with $249.6 Mn raised across 18 deals in the past week, led by deals for Vastu and Prosus-backed Mintifi
• Antler’s India Bet: Venture capital firm Antler has expanded its India portfolio by backing 30 startups in 2024 through its maiden $75 Mn fund. This takes Antler’s total India portfolio to 80 startups

• Swiggy’s Jump: Shares of Swiggy surged as much as 11.35% on Friday, December 5 to reach an all-time high at INR 576.95, before settling on INR 544.65
• SEBI’s IPO Approvals: Logistics company Ecom Express and coworking space provider Smartworks have received SEBI approval for their IPOs
• Paytm Offloads PayPay: Paytm’s subsidiary in Singapore has sold its stake in Japanese digital payments firm PayPay for 279.19 Mn boosting the fintech giant’s cash reserves

The post Unacademy’s $800 Mn Question & The Future Of Edtech appeared first on Inc42 Media.

Swiggy just netted $1.35 Bn through its IPO, Zepto armed itself with over $1 Bn in VC funding this year, and now Zomato has fueled up with its INR 8,500 Cr ($1 Bn+) QIP.

It would seem that $1 Bn is table stakes in the delivery game — whether it’s food delivery or quick commerce. Zomato, which already had healthy cash reserves of close to INR 10,800 Cr at the end of Q2 FY25, will now look to capitalise on the momentum it has gained in the past year over its biggest rival.

It’s not just about delivery — the fundraise also positions Zomato to invest heavily in its District product, something which is a big goal for Deepinder Goyal in the year to come.

Now the question is, will Zomato continue to extend the lead or will rivals leverage their own capital to pull closer? Before we answer that, here’s a look at the top stories from our newsroom this week:

• boAt in Choppy Waters: The audio and wearables brand seems to have strayed away from its success mantra. Having slipped into losses last year, the Aman Gupta-led company needs to fight off competition from homegrown and international brands
• Apple’s Make-In-India Stack: High-end iPhones are manufactured in India today, but critical components are still being sourced from China. How far is a 100% made-in-India Apple iPhone?
• Edtech’s Big Reset: India’s edtech startups have been stuck in an existential crisis; can they bounce back after years of misplaced optimism? And where are the startups that are catering to this new reality?

Where’s Zomato’s Focus?

There’s little doubt that quick commerce has the biggest upside for Zomato in the short term. However, growth here has come at a cost. Even though Zomato-owned Blinkit has taken strides towards profitability, expanding dark stores and adding new categories will set Blinkit back temporarily.

In November, Zepto raised another $350 Mn from domestic investors. The company has secured a funding of over $1.3 Bn in the last five months alone.

One report pointed out that Blinkit rival Zepto is spending more than $35 Mn every month as it looks to double its store count and venture into the cafe category. The revenue growth is equally high though, with FY24 GMV crossing $1 Bn as per reports.

It’s no wonder then that Zepto raised three mega rounds this year — quick commerce is a major attraction for investors. Zomato has also become the first new-age tech startup to feature in BSE Sensex, which further underlines the growth seen by the company and the faith of public markets investors.

Zomato will use the QIP proceeds to expand Blinkit, with INR 2,137 Cr allocation towards setting up and running operations of dark stores and warehouses. Another INR 2,492 Cr has been earmarked for advertising, marketing and branding, while INR 1,769 Cr will be used to strengthen its tech stack, including cloud infrastructure and software.

The additional capital will likely also help Zomato scale its going-out or District vertical — we’ll look into this in detail later.

Food Delivery Stakes

Zomato’s first major fundraise since its 2021 IPO is particularly noteworthy because it comes just a couple of weeks after its rival Swiggy’s public debut.

The company’s $1.4 Bn IPO was heavily oversubscribed, and now, Swiggy is ready to launch multiple new services in the coming year to bolster its food delivery and quick commerce plays.

Previously, Zomato CEO Goyal had claimed that QIP was a key move for Zomato as the company needed additional capital because of “the competition landscape and much larger scale of our business today.”

While competition has intensified and sales have surged in the quick commerce segment in recent months, food delivery still remains a cash cow for the likes of Zomato and Swiggy.  Zomato would want to continue its profitability momentum built on the back of platform fees and lower costs across operations.

In fact, Zomato today enjoys a 58% market share in the food delivery segment as of June 2024, according to a Motilal Oswal report. Given that it’s a near duopoly, Swiggy had about 42% share.

According to the brokerage, Zomato has grabbed market share at the expense of Swiggy, driven by “stronger execution”. Zomato’s share is said to have increased from 54% to 58% in terms of reported gross order value (GOV) between the end of 2022 and June 2024.

Zomato clocked a GOV of INR 9,264 Cr from its core food delivery business in Q1 FY25, while Swiggy’s food delivery business reported a GOV of INR 6,808.3 Cr in the same quarter. Zomato’s higher scale is an advantage that the company will press forward on.

Zomato’s food delivery CEO Rakesh Ranjan expects the business to grow at an annual rate of 30% over the next five years. “The food delivery sector is still in its nascent stages in the country and … more competition will only foster innovation and growth which will benefit the sector overall,” Ranjan said in late November.

A key piece of the food delivery value chain is Hyperpure, Zomato’s B2B supply arm. The company launched an express delivery service (30 minutes to 4 hours) for its restaurant partners, looking to drive up revenue generation through this quicker fulfilment.

Hyperpure is the only B2B vertical of Zomato and the company has been ultra bullish about it. In 2022, Zomato said that Hyperpure had the potential to be as big as its food delivery vertical, and earlier this year, Zomato announced a plant for processing value-added food supplies for Hyperpure.

Notably, Hyperpure’s revenue doubled to INR 1,473 Cr in Q2 FY25 from INR 745 Cr in Q2 FY24. In fact, it raked in higher revenue than even Blinkit, and combined with food delivery, this could be the biggest trump card for Zomato in the battle against Swiggy.

District Rolls Out

The third piece in Zomato’s puzzle is District and the going-out business. Brokerage firm Jefferies is among the analysts expecting District to deliver the results and has increased the price target for Zomato to INR 335 for the near future, nearly 20% higher than today.

The ‘District’ app, which rolled out on both iOS and Android earlier this quarter, will combine dining and live entertainment ticketing verticals. But Jefferies for one is expecting more. “Starting with dining-out & ticketing, new use cases will emerge. The industry is in its infancy as the current TAM may be limited, but that is how food delivery and quick commerce (QC) were until a while back,” the brokerage added.

Zomato’s District will go head on against Swiggy’s ‘SteppinOut’ business, which includes Dineout and Swiggy Events. Sources claimed the dining out business has seen 100% YoY growth as of September 2024 for Swiggy.

While it’s not exactly clear whether the Rare Life concierge service will be part of ‘SteppinOut’, that’s another piece that Swiggy is pushing forward in this high stakes chess game against Zomato.

Sunday Roundup: Tech Stocks, Startup Funding & More 

• Funding Plunges: Investor interest remains fixed on public markets, while private Indian startups only raised $144.8 Mn across 14 deals in the past week, a big 75% drop from the previous week
• Paytm Rallies: Paytm share price rose by over 3% earlier today to hit a fresh 52-week high after brokerage UBS raised its target price for the fintech major to INR 1,000
• MapmyIndia Shake-Up: MapmyIndia CEO and executive director Rohan Verma will be stepping down from his role in March next year to launch a new B2C business

• Stellaris Closes Fund: Stellaris Venture Partners, investor in Honasa, Whatfix and others, has marked the final close of its third fund at $300 Mn (INR 2,534 Cr)
• New Mutual Fund Player: Zerodha and Groww rival Angel One’s AMC arm has received SEBI approval ahead of the launch of the Angel One Mutual Fund
• Masa’s Advice To Founders: Masayoshi Son urged Indian startup founders working on AI to build with a 10-year horizon during a meeting with some of SoftBank’s portfolio founders

The post Zomato’s INR 8,500 Cr Refuel appeared first on Inc42 Media.

One of India’s most celebrated beauty brands Mamaearth and its parent Honasa Consumer are under immense pressure. The past month has been a one to forget for Honasa, but it probably won’t be able to forget too soon.

The company posted dismal Q2 FY25 results; its stock plunged for the whole of last week, losing a whopping 40% of value. Investors are very likely to be spooked by the direction of the financials and the stock, and more value erosion can be expected in the next few days.

Honasa has also lost the unicorn tag (although that might well be temporary) and more importantly the trust of distributors and customers to a certain extent. Which way will the brand and the company go?

That’s what we will look to answer this Sunday, but first a look at the key stories from our newsroom:

• Amazon’s Festive Cheer: The demand for premium product categories in India and faster deliveries has unlocked a new insight for Amazon India, which claimed that it still has an edge over quick commerce players
• Pratilipi’s Content Bet: Over the past three years, Pratilipi has built a repository of 15 Mn stories and even refined its monetisation model, but profitability has remained elusive. What will it take for this to change?
• Behind The GenAI Buzz: With infrastructure and horizontal solutions being dominated by global AI giants, Indian VCs and investors say FOMO is driving a lot of investments in Indian GenAI startups

What Went Wrong For Honasa? 

One of the only D2C startups in India to reach an annual revenue mark of INR 2,000 Cr mark, which it posted in FY24, Mamaearth seemed to have found the profitability formula by the end of March this year.

However, the company quickly turned cash flow negative with the first six months of FY25 (April to September) seeing a 7% revenue decline YoY. Honasa also slipped into losses, pretty much swinging from high to low in just six months.

Brokerages are now recommending a “Sell” rating for the Mamaearth stock, instead of the erstwhile optimism.

Although a slowdown in consumption has moderately impacted the stock prices of retail heavyweights and Mamaearth’s rivals in the beauty and personal care space such as Unilever, ITC, among others, Honasa’s problems are not limited to this industry-wide slowdown.

Cofounder and CEO Varun Alagh said in a recent analyst call that the company did not anticipate the high impact on margins from the renewed offline distribution strategy under ‘Project Neev’, introduced in November 2023.

The company went from super stockists in its supply chains to direct distributors. This eliminated a big cost and allowed the company to walk towards profits, but this change which is being adopted across all Honasa markets has had an adverse impact on the company’s financials.

Uncertainty Hits Mamaearth 

The CEO also acknowledged that Mamaearth’s brand equity and growth also suffered due to the changes.

“I think the second area where again our assumptions have not panned out in line has been the growth for Mamaearth. I think the model that we are trying to execute was very similar to what has worked for the brand in the past. We have recognised that there are a few strong tweaks that we need to make across the mix from a product mix perspective, in terms of SKU sizing,” he said.

He also said the company needs to become sharper on communication around which brands are seeing the budget allocation. “Our learning is that we have gone too wide and we need to narrow our focus onto a few categories and go deep within them with our hero SKU,” the Honasa CEO told analysts.

Jefferies said in a note that the inventory correction and loss therein was disappointing, and the CEO’s comment on reworking the playbook creates further uncertainty.

Mamaearth is the flagship brand of Honasa, accounting for a majority of its revenues in FY24. Further, more than 65% of the company’s revenues comes from online channels.

Fast forward to Q2 FY25 and Honasa’s investor presentation now states, “Mamaearth is growing slower than our expectations and we are making identified structural changes to bring it back to its growth trajectory in a few quarters.”

Is Honasa’s Marketing Paying Off? 

The company’s investor presentation also says that changing consumer buying patterns from family oriented purchases to individual-led approach thanks to new channels has had an impact on revenue. One such channel is quick commerce, which has changed the retail distribution dynamics in metros and Tier 1 cities.

Plus, Honasa said that the emergence of new categories through influencers is leading to more evolution of trends and experiments, which brands cannot afford to ignore.

Industry experts underlined that the slow demand, the inability to earn customer loyalty and thereby repeat orders are factors that should alarm Honasa. One important metric is the customer acquisition cost (CAC), which has steadily gone up for Honasa.

Advertising spends stood at INR 183 Cr for Q2 FY25, nearly 40% of the INR 462 Cr revenue. The marketing spends overall in H1FY25 have also gone up to INR 383 Cr from INR 336 Cr in H1 FY24.

A founder of a skincare brand and Mamaearth rival said that Honasa’s aggressive marketing spends have outshined every competitor and without such spending, the revenue would be even lower. “This is very high compared to the industry norm of allocating 20% of the total revenue to brand building and marketing,” the founder, who did not wish to be named, said.

This also means that Mamaearth and other Honasa brands do not attract repeat customers. “The higher CAC means that repeat orders are slowing down. Repeat customers have a lower CAC, and this is likely one of the reasons why the flagship brand Mamaearth is experiencing growth challenges,” a digital marketing analyst told us.

Distributors Saddled With Stock

For offline retail distribution, Honasa’s Project Neev has been the reason for ire for distributors. Distributors have alleged that the company dumped inventory worth hundreds of crores, which was returned by retailers.

Stock worth more than INR 300 Cr is said to be lying unsold across various warehouses, even though Mamaearth has rubbished these claims.

“We have been cautioning Mamaearth about this inventory pile up since the IPO. This year we have seen a very high rate of return compared to the last few years, due to damaged goods, expired products. They have been lying with us for months now. We work on a credit system with the retailers where if the stock is purchased by consumers, only then will we be paid,” All India Consumer Products Distributors Federation (AICPDF) national president Dhairyashil Patil told Inc42.

He added that retailers have reported slow demand for Honasa products and they have returned inventory en masse. Honasa also owes INR 50 Cr to distributors in the ACPDF, Patil claimed. “We have now been approached by a Senior VP at Honasa that they will address our concerns,” Patil added.

Another Bengaluru-based retailer and wholesale distributor said that Honasa has not kept up with customer preferences that have drastically shifted in the past year, with higher demand for Korean products and make-up brands promoted or owned by celebrities.

“We tend to keep the BPC products on our shelves for 2-3 months. This is a reasonable time to gauge consumer interest. We were seeing higher demand for Mamaearth for baby and shampoo, sunscreen products earlier, but now we see customers, especially young people, asking for Korean skincare replicas, active ingredients-based products etc.,” the retailer added.

He added that many customers are also insisting on importing skincare products from the UAE, South Korea or Turkey where these products are competitively priced and have a global following.

Falling Behind The Times

Honasa’s innovation team is headed by cofounder Ghazal Alagh, and this is where the product development takes place — ranging from formulation, clinical trials, stability and batch level testing, quality assurance, packaging, pricing and positioning. Apart from Mamaearth, Honasa which calls itself “house of brands” also has The Derma Co, Aqualogica, Dr. Sheth’s, Bblunt, Ayuga, STAZE under its belt.

Honasa has acknowledged this new wave of demand for active ingredients-based products, where Mamaearth’s product portfolio is perhaps not very strong. However, in 2023, the company launched an unusually high number of 122 products with multiple size SKUs in the market which analysts say could have also led to brand dilution .

“Skincare works on trust factor. And this takes time and experience in the market. Launching more than 100 products in one year is definitely very problematic, and indicates that Mamaearth was trying to simply keep up with rising competition rather than win consumer trust,” another D2C beauty brand founder told Inc42.

In the investor call, Alagh said, “We realised that we were allocating our investments over 10 different categories in Mamaearth and that was too wide a dispersion of investment which was happening. Our hero SKUs and categories were getting suboptimal investments because of that and that’s a clear recognition that we have had.”

The rapid increase of quick commerce in India over the past couple of years has also provided increased visibility to new and early stage D2C brands. Honasa said the “rise of quick commerce is not only changing distribution but also potentially impacting buying behaviour of pantry and shopping”.

The company which had cracked the marketplace formula in the past with Mamaearth will have to now adjust rapidly to the quick commerce wave with a bevy of brands, or else risk fading into irrelevancy in the key metro and urban markets.

“As beauty brands see rapid adoption on quick commerce platforms, the fight for shelf space in dark stores is getting more intense, and for larger D2C brands getting new SKUs into these dark stores is not easy. Marketing costs for brands on quick commerce are increasing, and this will even out as the market matures,” the D2C brand CEO quoted above said.

While Honasa scripted history by becoming the first D2C house of brands to list publicly, the game has changed rapidly in the last 24 months. Now the company behind Mamaearth has to write a new playbook, or perhaps even two, for both online and offline channels and win back the trust of not only consumers but also distributors.

Can Honasa pull this off and get back to profitability?

Sunday Roundup: Tech Stocks, Startup Funding & More

• Funding Spikes: Indian startups cumulatively raised $579.5 Mn this past week, with the bulk of this coming from Zepto’s $350 Mn round, the startup’s third major fundraise this year
• BlackBuck’s Muted Debut: BlackBuck shares fell nearly 6.5% below the IPO price during the intraday trading on the BSE in its debut session closing at INR 260.20

• Ola Consumer’s IPO Bid: Taking the first step towards its IPO, Bhavish Aggarwal-led Ola Consumer (formerly Ola Cabs) has turned into a public limited company
• Zomato Joins Sensex: BSE will add foodtech major Zomato to its flagship BSE Sensex, replacing JSW Steel, from December 23, marking a major milestone in the Indian startup ecosystem history
• OfBusiness Preps For Listing: SoftBank-backed B2B marketplace OfBusiness has reportedly roped in five banks for its $1 Bn IPO

The post How Mamaearth Lost Its Glow appeared first on Inc42 Media.

Ola Electric has always run on the fast track in India’s electric vehicle race—but after going public, the Bhavish Aggarwal-led company is possibly coming to the realisation that it has to curb its enthusiasm a tad bit.

As its financials this week show, Ola Electric’s rapid growth before the listing has suddenly come to a halt after the stock market debut. On a QoQ basis, the numbers do not make for good reading, but as Aggarwal accepted the company has to fix its service quality to turn this around.

But at the same time, Aggarwal has made it clear that speed required to launch new products is non-negotiable. Even with service complaints stacking up, Ola Electric will focus on new models and new stores to claw back market share.

Many are asking: is this a gamble worth taking at this moment? We look to answer this Sunday, right after a look at the top stories from our newsroom:

• 30 Startups To Watch: Inc42’s much-anticipated 30 Startups list is back with another roundup of the startups that are pushing the envelope on innovation and profitable business models in line with market trends. Take a look!
• Zepto’s 50:50 Bet: From a 10-minute online grocer to an everything platform, Zepto’s transformation has come staggeringly quick. Can it find the right balance to grow both grocery and non-grocery categories?
• The Reliance-Disney Deal: Merging JioCinema with Disney Hotstar will be no easy feat for Reliance. Will the tech giant ramp up content spending after investing heavily in acquiring rights for marquee sports events?

Bhavish Aggarwal Unfazed 

There’s little doubt that Ola Electric’s vision is grand — the company is targeting 2,000 stores from around 800 today, and more than 10,000 partners by March 2025.

These numbers as usual look great on paper, but in reality Ola Electric needs to focus especially when service network and quality don’t match the pace of product rollouts, as many of Ola Electric’s customers have claimed.

Ola Electric’s addressed the concerns around complaints and the service network at the Q2 earnings call on Friday. While Aggarwal did not reveal how many complaints Ola Electric gets every month, he mentioned that the reported 80,000 figure is not bad given the scale of the company’s operations.

He added that more than two-thirds of complaints are minor issues, where no parts were changed, while some are accident cases and there are some which are warranty claims. He added that currently, 80% of service requests are being addressed within 24 hours.

Aggarwal was also unfazed by the questions around the quarterly dip in numbers

The company narrowed losses by 5.5% on a YoY basis, but its loss widened almost 43% from INR 347 Cr in the June quarter amid a decline in EV sales. Similarly, operating revenue zoomed almost 39% YoY to INR 1,214 Cr in the quarter, but slumped 26.1% on a sequential basis when compared to Q1.

Till FY24, its Ola S1 Pro model earned it the highest amount of revenue. But newer models are on the anvil.

Aggarwal said Q2 has always been a bit of a dip over Q1 for Ola Electric, even when you look at the FY24 numbers. “There is a seasonality also in the industry, and also generally whatever FAME reductions the government does is around the start of Q1 or the end of Q1. In Q1 FY25, we made deliveries for a lot of customers who had booked in March which was FY24 due to the season changeover.”

Ola’s market penetration is impressive—EV adoption hit 21.4% in India by September 2024—but this is a crowded space. Customers don’t just buy into a product, they buy into the entire experience, at least that’s what Ola Electric’s rival Ather Energy’s pitch has remained.

Ola Electric’s focus remains on the affordable segment. But price alone isn’t the only draw.

And if Ola wants to cross over to the premium segment, customers will expect not just a sleek, high-performance scooter but also premium experience across the board from sales to servicing. Without that, Ola risks losing high-value customers to rivals who focus on the service network from the get-go, as we reported a few weeks ago.

Clearing The Bottleneck

Nevertheless, Ola Electric is pushing hard to stay ahead of the curve with upcoming models like the S1 Gen 3 and Roadster motorcycle.

The more Ola expands into new models, the more complex its service infrastructure needs to become — and this is a constant battle for OEMs when they are playing the aggressive game. A good example is Maruti Suzuki which built its sales empire around the reputation of its service network.

Competitors like Bajaj and TVS are already strengthening their service networks while keeping pace with product development.

For Ola to remain competitive, it needs to do more than launch new scooters and bikes — it needs to deliver a service experience that can alleviate the ire of its customers, many of whom have been waiting for months for resolutions, if reports are to be believed.

Ola Electric has set its sights on a bold future. With rapid expansion, a strong market share, and aggressive product launches, it’s clear that the company isn’t about to slow down anytime soon. But the question remains: can it keep this momentum going without the operational hiccups getting in the way?

Plus, there’s the issue of profitability. As per, BofA Global Research, Ola Electric is not likely to get to profitability before FY27. Goldman Sachs’ research note on Ola Electric also estimates the company will remain loss-making on a consolidated level till FY27, or March 2027. The Ola Electric stock has plummeted to an all-time low and below the listing mark, finishing the week at INR 72.74.

Ola Electric’s future hinges on two crucial factors — its ability to turn the narrative around in relation to the poor servicing and the lack of profitability, which is directly linked to the EV sales volume.

The company’s ability to scale its service operations while maintaining product innovation will determine whether it can stay ahead of its competition. But if Ola doesn’t find a way to resolve its service bottleneck quickly, it might just find that speed isn’t enough to win the race.

Can Ola Electric turn its service issues around in time to retain its lead in an increasingly competitive EV market?

Sunday Roundup: Tech Stocks, Startup Funding & More

• Funding Dips: Between November 4 and 9, Indian startups secured $125 Mn across 18 deals. This marked a 51% decline from the $256.9 Mn secured via 8 deals in the preceding week
• Big Wave For Swiggy: Swiggy’s INR 11,324 Cr IPO was subscribed 3.59X by the final day of bidding with the retail investor quota seeing 114% subscription

• BlackBuck’s IPO Bid: With its IPO set to open next week, logistics startup BlackBuck posted a net profit of INR 28.67 Cr in the June quarter of the financial year 2024-25 (Q1 FY25)
• PW Hits Losses: Physics Wallah slipped into the red in FY24, posting a consolidated net loss of INR 1,131.2 Cr and also adjusted its FY23 numbers, where it has now reported a loss of INR 84.06 Cr
• Meesho’s Turnaround? The ecommerce marketplace managed to narrow its net loss by 81.8% to INR 304 Cr, with more than INR 7,614 Cr in revenue in the fiscal year

The post Ola Electric Hits A Bottleneck appeared first on Inc42 Media.

Diwali is all about lights, celebrating with our close friends and family, and a time to take stock of our health and wealth. Of course, it’s also a time to recharge and come back rejuvenated after the celebrations.

This is as much true for individuals as it is for the biggest startups in India. Indeed, there are quite a few parallels between the traditions and rituals of Diwali and what startups are wishing for later this year. For them too, it’s a time to take stock of their health, reward employees and refuel themselves before resuming the hard yards post the celebrations.

Several of the biggest names in the ecosystem are lining up for IPOs and by next year, we might even have more clarity on giants such as Flipkart, OYO, PhonePe, Zepto, Groww, Razorpay, CRED and many other unicorns. Not to mention the mega Swiggy IPO which will come up for bidding just after Diwali, and potentially set the tone for the next year.

So this Sunday — even as we are in the throes of our festive mood — it’s time to look closely at this wave of IPOs and what this means for not just for those heading for the public markets but for hundreds of other Indian startups that may be eyeing this route in the next few years.

As usual, that’s after a look at the top stories from our newsroom this week:

• BigBasket’s Quick Commerce Bet: One of the earliest grocery ecommerce platforms is feeling the heat from quick commerce. Can Tata-owned BigBasket adjust to the new reality of the Indian consumer market and find its groove again?
• Razorpay’s Tightrope Walk: Scaling up the payment aggregator business is key for Razorpay to maintain its profits which have grown nearly 6X in FY24, but the startup has to contend with from thin margins, high compliance burden and stiff competition
• PhonePe’s Super App Brigade: PhonePe is already acting like a public company with a healthy amount of disclosures in its FY24 annual report. And this gives us a peek at the horizontal and vertical layers of the company’s leadership structure, both of which are vital for PhonePe’s super app ambitions

Behind The Startup IPO Wave

After a slump in the IPO market in 2022, there was a spurt of IPOs in 2023, but this is nothing compared to the boom seen in 2024, with Indian companies showing their bullishness about the domestic economy and market sentiments.

In 2023, for instance, India saw 57 mainboard IPOs raising INR 49,434 Cr. As many as 70 mainboard listings have already taken place so far this year, collectively raising more than INR 1.4 Lakh Cr.

On the SME boards on both NSE and BSE, a whopping 217 IPOs have been recorded in 2024, as per publicly available data. On the startup front too, SME boards have witnessed frenetic activity, with Trust Fintech and TAC Infosec listing at significant premiums on the NSE SME platform.

While fintech company Trust Fintech listed at a premium of 42%, cybersecurity company TAC Infosec listed at a 173.6% premium, highlighting the potential of smaller IPOs in India.

As per market analysts, the year 2024 is expected to see these green shoots further bloom, with three more IPOs coming in the first week of November, including the highly anticipated Swiggy listing.

Despite the frenzy in the IPO market, Mahavir Lunawat, managing director at Pantomath Capital Advisors, believes that there is an appetite for more IPOs. As per Lunawat, India is very short of capital formation, and as an economy, the country needs more than INR 2.5 Lakh Cr of capital formation if it has to double its economy by 2030.

“If we look at it from a liquidity perspective, we have more than INR 2 Lakh Cr coming in the capital market from mutual funds, insurance, pension, and other modes annually. So, if there are fewer fresh equity issuances and IPOs (which currently stand at INR 60K-INR 70K annually), where will this money flow?” Lunawat told Inc42 in an earlier conversation.

And some believe that India’s IPO market is not yet reaching its full potential since many companies are not able to raise as per their business needs, but have to kowtow to expectations around valuations. For instance, there is a feeling among analysts that the Indian market needs to beef up its IPO activities by 4X from the current level for demand and supply equilibrium.

The Valuations Caveat 

It’s in this context that we have to question the unbridled enthusiasm of some upcoming public listings, where the valuations may be a concern.

Rajesh Sawhney, founder and chief executive of GSF Accelerator believes that some listed startups did the right thing by raising money at a lower valuation than their last private valuations. This shows that startups are learning the ropes when it comes to public markets.

“Ola Electric did the right thing by pricing the company’s IPO lower than its last valuation. Ola Electric and ixigo left money on the table for new investors during their IPO,” Sawhney said, adding that ultimately they were rewarded by the increase in their stock price after listing.

It’s another matter that Ola Electric’s long road to profitability, slowdown in EV sales, and a challenging after sales service situation have resulted in the stock falling and hovering close to the issue price. What Sawhney and others have pointed out is that it’s much easier to get to the IPO stage in India today, than it was a few years ago, as long as startups compromise on pricing and valuation to a certain extent.

Are Startups Adapting In Time?

AceVector Group (Snapdeal and Unicommerce’s holding company) cofounder Rohit Bansal believes that there is a perception shift happening among Indian startups, as more and more and tilting towards public markets at earlier stages.

“I expect a large number of Indian startups to go public early in the next few years. I also believe the current fixation of startups zooming their toplines before taking the IPO plunge is also set to change as more companies will look at listing at earlier stages,” Bansal said at Inc42’s D2C Summit in August.

It’s not just scale; startups are cleaning up their act around disclosures and corporate governance well before they file their pre-IPO papers.

Newly-listed travel tech giant ixigo’s cofounder and CEO Aloke Bajpai is a big proponent of private companies having strong corporate governance guardrails and professional management teams in place before any plans for IPOs.

“After the 2021 era, some of the learnings from public markets are now acting as a feeder into the private market, which necessitates companies to have strong fundamentals and a sustainable business model, as well as the realisation that they need to turn profitable at some point and start delivering positive cash flows,” said Bajpai.

Indeed, we have seen a marked improvement in how companies disclose their financials, for instance, even though the level of disclosures is not great. Some startups have resorted to sharing cherry-picked or adjusted numbers to highlight their financial health, and while this may not be enough, it’s certainly a change from the past when financials were routinely delayed by six to 12 months in some cases.

One pertinent example is PhonePe’s FY24 annual report, which clearly stated that the fintech giant wants to act like a publicly listed company and be as transparent about its operations as possible.

From VCs To Stock Markets

Thus far, startups have relied on venture capital in the later stages to fuel growth and expansion, but these days, VCs are more keen on backing startups at the earlier stages or just before the IPO, rather than infuse capital in growth stage companies and run the risk of value erosion.

For startups looking to list publicly, profitability and solid fundamentals are the key pillars, but the IPO frenzy in 2024 means that many companies are willing to impress public markets investors with their scale alone or with their potential to disrupt existing industries, as long as valuations are sober.

Currently, the high valuation chased by Swiggy and the large issue size will make it the key IPO to watch out for. Given Zomato’s gains in the past year, there will be a lot of scrutiny around Swiggy’s scale, its relatively weaker profitability quotient, as well as the lack of momentum for its quick commerce operations when compared to Zomato’s Blinkit or Zepto.

Besides Swiggy, close to a dozen new-age tech startups are looking to make their public debuts soon,

Delhi NCR is expected to lead the startup IPO parade, with MobiKwik, Ecom Express, Smartworks and Zappfresh having received SEBI approvals for their listings.From Bengaluru, Swiggy, Ather Energy and BlackBuck are lining up for the bourses after getting the regulator’s nod.

Besides these, a host of other startups, including Zepto, Shadowfax, IndiQube, Pure EV, Physics Wallah, have public listings on the cards in the near future.

Many of these startups have been around for less than half a decade and have scaled up rapidly on the back of VC funds. But now their eyes are firmly on a listing, which means adapting their ways to suit public markets.

“While Mamaearth went for IPO in just 6-7 years, companies like MakeMyTrip took close to 10 years,” Info Edge founder and executive vice chairman Sanjeev Bikhchandani said at September’s MoneyX by Inc42.

However, it must be noted that this acceleration has only come as a result of the scale that startups have reached in the past decade, much of which was built on VC dollars. Now comes the time for more responsible growth and proving that profits will follow the scale.

The post IPO Lights For Indian Startups appeared first on Inc42 Media.

Would you pay INR 50,000 to Swiggy to be your personal butler?

Well, not quite a butler — that would be a disservice to what IPO-bound Swiggy is aiming for with the Rare Life concierge service that’s been making waves in India. Catering to the growing class of high-net-worth individuals (HNIs), Swiggy Rare Life is the company’s first punt at targeting the affluent class.

For the first 10 years of its life, Swiggy positioned itself as a service for everyone. But with Rare Life, that’s about to change. This is because of the potential in the concierge business, which inherently does not have a ceiling when it comes to the revenue. That’s actually a big deal for Swiggy which is about to hit the public markets.

Can Swiggy crack the concierge service code, and will it be able to match global and Indian platforms such as Indulge Global, Quintessentially India, RedBeryl, Pinch, One Concierge, among others?

Before we answer that, a look at the top stories from our newsroom this week:

• Meesho Courts D2C Brands: Meesho’s in-house logistics, cheaper ad rates, lower commissions as well as strong presence in Tier 2, Tier 3 markets are all huge draws for D2C brands, but will that be enough to dethrone Amazon, Flipkart?
• FirstCry’s Path To Profits: Even as FirstCry built an empire around the kidswear proposition, its recent investments have indicated an appetite for diversification to bolster its core business.
• Melorra’s Lost Shine: What exactly went wrong for D2C jewellery brand Melorra which once claimed to be building Zara for the jewellery industry in India, but now has to settle for a fire sale after two years of slowdown.

Swiggy Rare Life Taking Shape

While more information about Swiggy Rare Life will be announced in the days to come, sources close to the company gave us a peek at what it’s all about.

“The idea came from insights from Swiggy’s research on white spaces in the consumer services space. India’s HNI base is around 0.1% or 0.2% of the population, but this cohort lacks a service that’s differentiated for their segment. Yes, The TAM is low — around single digit millions in India at the moment — but this is a rapidly growing segment,” one of the sources said.

Another source privy to the development revealed that the service will be membership-based and will begin at INR 50,000. The top end of the pricing for Swiggy Rare Life is yet to be determined. “Affluent Indians are seeking convenience on a very different level. So there’s an opportunity to cater to them, which led to the concierge service and curating experiences they wanted access to.”

The model is fairly straightforward with an annual subscription, and no mark-ups on any requests made by the customer. Plus, there will be no service charges, so presumably the margins are built into the subscription layer. But Swiggy is also likely to earn commissions from event organisers, hotels, and other partners it ropes in to operationalise the experiences.

Rare Life will offer a concierge for every member and access to privileges such as live music, sports events, fashion shows, and other lifestyle activities.

Inc42 learnt that requests will be open-ended in nature, and can range from cab booking to travel planning to luxury shopping or access to particular events or shows. In addition, there will be some Swiggy curated events, which will potentially be linked to the company’s SteppinOut vertical, which was teased in the DRHP.

So far, only DineOut is a revenue contributor for SteppinOut. But Swiggy is testing the waters on some events, as we could see from SteppinOut social media channels.

“Swiggy Rare Life members will likely be able to request for any service that does not violate Indian laws. Events and experiences will be ticketed separately and these will be at market or below-market rates,” another source said.

While Rare Life is not built as a networking club, the sources did mention that members will have opportunities to engage with each other at events. But networking is not the top priority for the Rare Life team.

In fact, there will be a plus-one option for all events so it’s not only about the members but also their loved ones. It’s not yet clear whether Swiggy will entertain inbound queries from individuals to join the Rare Life platform.

One month into the launch, Rare Life has not yet been opened up for other members. “It’s limited and invites have been selectively sent out. The focus is on ensuring consumer delight, and the service will have a referral or invite-based membership system,” one of the sources cited above said.

As for the operations, there’s little clarity on that too. Currently, there’s a team within Swiggy working with members directly. But these are early days, and more clarity is expected soon.

Swiggy Vs Concierge Startups

One thing is amply clear about the concierge service business. This model is built around manual intervention and execution. Founders of concierge services believe that the HNI class is not quite open to virtual assistants, and the tech part in this business is largely used in the backend for scheduling, managing dates, and bookings.

Swiggy Rare Life, for example, is built around a web interface. Even if there is an app, it’s most likely going to be separate from the Swiggy app.

“You cannot solve problems for HNIs using a chatbot, for instance. You need to have humans available round the clock and people around the world to ensure top notch service,” the India CEO of a global concierge platform told us on the condition of anonymity.

The CEO didn’t want to comment on Swiggy Rare Life because they felt at the moment it is not comparable to high-end concierge services.

As per industry sources, the membership for platforms such as Quintessentially India, RedBeryl, Indulge Global begins at INR 3.5 Lakh per year, and goes up to INR 35 Lakh per year. Indulge Global’s pricing is INR 4 Lakh per year, while RedBeryl’s invite-only platform has a joining fee of INR 5 Lakh and a separate annual fee.

In the concierge space, pricing is used as a filter for the right customer persona. Swiggy’s INR 50,000 starting price seems rather affordable in comparison to others.

Service Quality Is Paramount

This brings us to one of the biggest challenges in operationalising concierge services. Swiggy needs to diversify its talent acquisition as well as partnership model towards the hospitality and luxury lifestyle industry. Despite the adjacency to the restaurant world, this is something of a new territory for the tech-first company.

Indulge Global cofounder Advita Bihani claimed the two-year-old startup is “building the world’s most expensive app”. She believes that having the right talent that can go the extra mile is critical for the concierge space.

“Partnerships will only take you so far, you need people on-the-ground to manage the members’ needs and ensure service quality. For one particular order, one of our executives had to fly to the UAE to pick up a rare item and get it cleared through customs in India,” she added.

Goa-based Indulge claims to have over 1,000 members, with a 90%-plus retention rate. It counts the likes of CRED founder Kunal Shah, Udaan’s Sujeet Kumar, Zerodha cofounder Nikhil Kamath, actors such as Mouni Roy, Anshula Kapoor, and Tanmay Bhatt among its members.

The point is that Swiggy needs to rewire its customer service outlook entirely. The founder of a Delhi NCR-based platform added that even within the HNI class, there are segmentations. “Once you go from HNIs to ultra HNIs, the service expectations are altogether different. And you need to have continuity in operations. Any service executive should be able to pick up from where their colleague left off,” the founder added.

Besides, there are other nuances to account for in a country like India. Bihani acknowledged that there have been attempts to target the HNI base with concierge services in the past as well. “These attempts were not very fruitful because the fabric of the country is very different. I have personally gone across the length and the breadth of the country and sat across these individuals to understand what convenience and luxury means to them. The answers are very different in Kerala than in Delhi,” she told Inc42.

Swiggy’s Trump Card

A lot about Swiggy Rare Life is not yet clear. But we do know that it will be targetting use-cases that are much more high frequency. In contrast, most other platforms and startups in this space are trying to unlock unique experiences that the wealthy want but can’t plan for.

For instance, one of the sources said that Swiggy’s vision is “elevating everyday” for Rare Life members. But those building in the space feel it is about creating experiences that don’t feel like every other day.

“You cannot serve HNIs with the same model that you might use for the mass-affluent class. It requires a higher degree of attention to detail and round-the-clock presence. It’s not easy to do this with a small and hungry team, you need resources and talent around the world,” the CEO of the global concierge platform quoted above added.

There’s little doubt that Swiggy is eyeing a new audience altogether. Its food delivery and quick commerce platform has 14 Mn-plus users. In contrast, the HNI base in India topped out at close to 3.6 Mn individuals, according to the World Wealth Report 2024.

Serving such a small base — even if it may grow larger every year — requires a different approach than what has worked for Swiggy thus far. A lot of that has to do with the fact that HNIs are willing to spend but only for the right service.

To its credit, this is a rather courageous and ambitious move by Swiggy. Zomato has so far not shown the appetite to venture into the concierge space. Will Rare Life turn out to be the trump card for Swiggy in its showdown against Zomato?

Sunday Roundup: Tech Stocks, Startup Funding & More

• Weekly Funding Falls: Indian startups cumulatively raised $145.5 Mn across 10 deals, a 70% decline from $478 Mn raised in the previous week
• Paytm Back In The Black: The fintech major reported a PAT of INR 930 Cr in Q2 FY25 against a loss of INR 292 Cr in the year-ago period. Revenue from operations fell 34% YoY to INR 11,660 Cr. Paytm has also received the NPCI nod to onboard new UPI users
• RIL-Disney Merger Takes Shape: The combined entity plans to keep Disney+ Hotstar as its sole streaming platform. Reliance is said to have chosen Disney+ Hotstar over JioCinema for the former’s superior tech infrastructure

• NVIDIA’s India Pitch: NVIDIA founder and CEO Jensen Huang said that India will have nearly 20x more computing infrastructure by the end of the year to fuel the AI revolution
• Platform Fee Hikes: Foodtech majors Zomato and Swiggy have both hiked their platform fee to INR 10 to cater to the festive season rush

The post Swiggy Wears The Concierge Hat appeared first on Inc42 Media.

Food delivery in India is a two-bike race, but Rebel Foods is living up to its name by going a totally different route than Zomato and Swiggy with EatSure.

Reports suggest that global investment giant Temasek Holdings is looking to acquire a significant stake in Rebel Foods as the homegrown cloud kitchen unicorn prepares to go public.

The Singapore-based investor is likely to become the largest shareholder in Rebel Foods after the transaction, which adds a spicy new dimension to the food delivery rivalry, and with an IPO on the cards, Rebel Foods will soon go directly up against Zomato and IPO-bound Swiggy.

Interestingly, even as it is looking to raise funds, the company might see a drop in its valuation. Nevertheless, this infusion is critical for Rebel Foods as it looks to expand its digital food court model and its brand network. Will Rebel Foods’ differentiated play in food delivery pay off?

We’ll try to answer this, but let’s first take a look at the key stories from our newsroom this week:

• Private Equity’s New Avatar: VC and private equity firms have always been fundamentally different but PE funds are showing VC-like risk appetite in some recent deals. What does this mean for the growth and late stage ecosystems?
• Fast Fashion’s Festive Season: With the return of Shein and homegrown marketplaces such as NewMe, fast fashion seems to be the flavour of the festive season sales. Plus, a look at the premiumisation wave in fashion ecommerce!
• Swiggy’s Revenue Stack: The IPO-bound food delivery and quick commerce giant is not just looking at adding to the order value, but unlocking new use cases in its core products. Will this revenue push pay off?

The Rebel Foods Moat

Rebel Foods began in 2011 as a delivery-only company, with Faasos as a singular brand. Over the past 13 years, it has added Behrouz Biryani, Mandarin Oak, Oven Story Pizza, Sweet Truth, LunchBox, The Good Bowl, Firangi Bake, The Biryani Life and US-based fast food giant Wendy’s to its stable of brands.

Given that it was an early mover in the cloud kitchen space, Rebel Foods has the widest network of kitchens among all players in India. The cloud kitchen major operates more than 450 kitchens across 75 cities, and is also present in the Middle East, North Africa, Indonesia, and the UK.

The biggest differentiator for Rebel Foods compared to other cloud kitchens and aggregators such as Zomato and Swiggy is that it is looking to own the full stack and offer a multi-brand experience to consumers. This was the idea behind the launch of the smart food court in Pune in 2023, where consumers could pre-order food for takeaways or order from multiple outlets for home deliveries.

The thesis is that consumers — especially large groups — do not want to place orders from one outlet, but want to see a variety of options, just like in a real food court.

Ahead of the IPO, the Mumbai-based unicorn is looking to invest INR 200 Cr in the next two to three years to expand the food court format under the EatSure brand. It claims to be working on more cloud kitchens and branded outlets for a dine-in experience as well.

Sagar Kocchar, the company’s cofounder and CEO, said that the offline opportunity is relevant for brands under the EatSure and Rebel Foods umbrella. In the pipeline are plans to open 100 EatSure food courts within the next two to three years, and expand Rebel Foods and EatSure’s delivery footprint to 150-200 cities by 2028.

“We are now making the brands accessible to Tier II and Tier III cities as well, while we further penetrate in Tier I cities. The plan is to add a couple of dozen restaurants by December 2024,” Kochhar was quoted as saying in recent reports.

Another differentiator for Rebel is the fact that it has launched on the ONDC network, which is fast emerging as a challenger to Zomato and Swiggy, the two largest aggregators. Rebel Foods and EatSure brands aim to create multiple consumer touchpoints through the ONDC integration, which means its brands will be available on apps such as Paytm, Magicpin, Ola Consumer, among others, in the ONDC buyer app space.

Building A Cloud Kitchen For Others 

But the digital food court is just one model that Rebel Foods is going after. It’s also aggregating popular chains and brands through a SaaS product, Rebel Launcher.

Through this, Rebel Food leverages its expertise in this field by offering supply chain support and full-stack technology solutions to established brands such as Naturals, Mad Over Donuts, Nirula’s, Chai Point, Big Wong and others.

Envisioned as an OS for food brands and cloud kitchens, Rebel Launcher brings features such as inventory and kitchen management, demand management, fulfilment services, procurement, as well as culinary expertise and capabilities, allowing brands to scale up on food delivery platforms instantly. More importantly, this is a funnel for the company to add more brands to the EatSure app and therefore adopt a hybrid aggregation and owned brand model.

While Zomato and Swiggy also offer SaaS products for restaurants to manage orders, procurement, and even for hiring staff, Rebel is banking on its experience and knowledge as an operator of cloud kitchens and not just a delivery app. Through Rebel Launcher, brands get cloud kitchen space under the EatSure banner and do not have to invest in infrastructure to launch delivery-only kitchens.

This is a crucial distinction for Rebel because it allows the company to occupy a niche of its own in the Indian market. While it competes with Curefoods, Eat Club, Box8, Wow! Momo Foods, FreshMenu, Call Chotu among other cloud kitchens, the competition lacks the breadth of revenue streams that Rebel Foods has built over the years.

Zomato and Swiggy looked to enter the cloud kitchen game, but eventually both majors decided to pull out of this vertical and focus on aggregation and delivery as their core businesses. The advent of quick commerce has given both these giants a new lease of life.

Rebel Foods’ Overseas Push

With another fund infusion on the cards, Rebel Foods will be looking for its quick commerce moment too. Plus, it has to break free from the loss malaise and hit breakeven and possibly even turn profitable. The company managed to narrow its net loss by 42% to INR 378.2 Cr in FY24, while revenue neared the INR 1,500 Cr mark.

While this pales in comparison with Zomato and Swiggy’s revenue figures, it is the industry benchmark among cloud kitchens. For instance, Wow! Momo is looking at INR 650 Cr in topline in FY25, while as per its last available financials, Ankit Nagori-led Curefoods had reached INR 450 Cr in revenue as of March 2023.

Of course, Rebel Foods has also raised the most amount among cloud kitchen companies, with over $510 Mn in investment from the likes of Coatue Management, Lightbox and Peak XV Partners. These and potentially other investors are reportedly selling shares ahead of the IPO.

CEO Kocchar said the company will likely look to list in 18-24 months and is currently identifying bankers for the IPO.

And by then, Rebel Foods will be hoping it will also have cracked profitability. One thing that is key for Rebel Foods to get out of the red is its international business, where take rates and average order values are said to be higher.

In fact, it has launched brands specifically for international markets and is looking to become a fast food chain in these regions, particularly the UAE. It launched Fricken, a fried chicken fast food chain in the UAE and is looking to take Behrouz Biryani to the UK market in the coming few months.

These steps will contribute significantly in padding up the bottom line for Rebel Foods in the coming few quarters.

But there is a big brand challenge that Rebel Foods has to hurdle. Despite being around just as long as Zomato and being even older than Swiggy, Rebel Foods is not really a brand that consumers think of when pulling up food delivery apps.

One might choose a Rebel Foods brand on Zomato or Swiggy, but EatSure’s reach and brand awareness pales in comparison. Plus, competing with QSR giants such as Jubilant Foodworks (the master franchisee of Domino’s in India), KFC and Pizza Hut owner Devyani International as well as Westlife Foodworks (McDonald’s) will be a huge uphill battle. These companies are between 2X to 5X in revenue scale in comparison to Rebel Foods.

So for Rebel Foods and EatSure, battling these giants will arguably be the biggest test, and even more crucial than outperforming Zomato and Swiggy.

Sunday Roundup: Tech Stocks, Startup Funding & More

• Funding Roars Back: After a tepid two weeks, funding activity gained significant momentum this week, with more than $478 Mn invested into Indian startups, led by big rounds for Purplle and Eruditus
• Jio’s Profit Surge: Reliance Jio Platforms’ bottom line shot up by nearly 25% on a YoY basis with net profit of INR 6,539 Cr on a revenue base of INR 31,709 Cr in Q2 FY25 
• Temasek Bags Lendingkart: Existing investor Fullerton Financial Holdings — part of Temasek group — will acquire a controlling stake in Lendingkart with an investment of INR 252 Cr

• Levy Shock: Karnataka is planning to levy a 1-2% fee for transactions on aggregator platforms, such as Zomato, Swiggy, Flipkart, Ola, Urban Company, which could disrupt the momentum for these new-age tech giants
• TAC’s Post-IPO Playbook: TAC Infosec has been the standout listed new-age tech stock in terms of gains this year, and now the cybersecurity company is eyeing the Middle East and North American markets with new acquisitions

The post Rebel Foods’ EatSure Gambit appeared first on Inc42 Media.

We’ve seen founders clash with founders and even their investors, but last week brought a new experience as Bhavish Aggarwal took on a comedian on X (formerly Twitter) over the allegedly poor quality of Ola Electric’s scooters and company’s customer service.

The social media skirmish took place on Sunday and appeared to simmer down by Monday evening. Yet, as the dust settled, the situation for Ola Electric only worsened. News reports dug out thousands of customer complaints against Ola Electric in the recent past, and even central government ministries were suddenly interested.

However, the problem for Ola Electric is deep because the company’s numbers are also slipping. With Q2 results on the horizon, the pressure is real on Bhavish Aggarwal and Ola Electric — as it is for Ola Consumer as it looks to go for an IPO.

Before we see why, here’s a look at the top stories from our newsroom this week: 

• Decoding Ather’s Edge: Ather Energy is coming from a vastly different trajectory to join Ola Electric in the public markets. What fate awaits Ather after Ola Electric’s less than pleasant beginning?
• The Deeptech Problem: India’s venture capital firms and fund managers often talk about innovation, but in the age of generative AI and deeptech, such talks seem shallow. So the question is: where are the deeptech investors?
• Swiggy’s Big Ask: The Swiggy IPO raises two major concerns — a high valuation and hefty losses on the books. Besides, the platform is now set to increase its IPO size as well. Will this come back to bite the food delivery giant?

Where Ola Electric Is Slipping

The scrutiny intensified when news broke that the Ministry of Heavy Industries (MHI) has asked the Automotive Research Association of India (ARAI) to verify if Ola Electric is honouring warranties and maintaining the requisite service centres.

This is a critical condition related to the company’s production-linked incentives which not only stipulate production levels but also standards in quality and safety. So there is some element of taxpayer money involved here.

This investigation comes at a time when the company’s sales have been declining. Ola Electric’s market share fell from over 30% in August to 27% in September—a signal that its grasp on the electric two-wheeler market may be weakening.

As Ola Electric grapples with this turmoil, competitors are gaining ground. Bajaj Auto’s sales surged in September, with 166% year-on-year growth, and market share growing from 19% to over 21%,

In contrast, Ola Electric’s registrations slipped 11% month-on-month, its lowest sales figures since October last year.

Legacy automakers, such as Bajaj and TVS Motor, have years of experience and have handled product or part recalls in the past. Ola Electric, being relatively new to the game, is yet to face such an issue, but its current service woes suggest that it could be heading down a spiral if it doesn’t follow the established playbook for product quality and customer service.

Meanwhile, others are also rising quickly. Ather Energy saw a 15% bump in September, and its market share has grown to 14% from 12% in August.

The fluctuations in the electric two-wheeler market this year have been influenced by changes in government subsidies under the FAME scheme. However, the recently approved ‘PM E-DRIVE Scheme,’ with an initial budget of INR 10,900 Cr over two years, aims to provide fresh momentum to EV adoption.

This new initiative targets the production of 24.79 Lakh electric two-wheelers, building on the previous FAME-II scheme, which supported the development of 10 Lakh vehicles.

This dip in sales for Ola Electric is particularly concerning given these widespread concerns about product quality. The Central Consumer Protection Authority (CCPA) issued a show cause notice asking Ola Electric to explain accusations of misleading advertising and unfair trade practices.

This emphasis on service and after-sales support should be the next focus area for electric two-wheeler makers, said Deloitte partner Rajat Mahajan.

Deloitte projects that by 2030, electric two-wheelers could account for as much as 50-55% of the total market, so naturally there’s a lot of room for all kinds of OEMs. Mahajan highlighted the distinct advantage that traditional OEMs have with extensive dealer networks and said they are better equipped to handle service and sales growth in conjunction.

“They don’t sell in districts where their customers cannot get service. Ola Electric and Ather are looking at it like a D2C model, but Ola Electric has taken it to an extreme. You cannot sell in one district and hope that the local mechanic will know how to fix the bike. Ather’s service is said to be much better and more streamlined, but they have their own set of challenges,” a Delhi NCR-based angel investor told Inc42 about why the traditional model is better for OEM services.

As these startups scale up, they may need to adopt hybrid models that combine D2C channels with dealership-based service centres to meet rising customer demands.

The Stock In Free Fall 

It’s no surprise that Ola Electric’s stock has been on a rollercoaster. On October 10, shares plunged 5.8% during intraday trading on the Bombay Stock Exchange (BSE), before closing down 5.19% at INR 90.81.

Reports around Ola’s poor service standards and the government involvement seems to have rattled investors. Since hitting a post-listing high of INR 157 in August, Ola’s shares have plummeted by 42.1%.

Earlier this week, the company launched its ‘HyperService’ initiative, promising “one-day resolution” for service issues in an attempt to stem the tide of customer complaints that have been widely circulated on social media.

While the market remains cautious, brokerages like Goldman Sachs and BofA Securities are still bullish, with Goldman Sachs assigning a price target of INR 160 per share.

Brokerage firm Bernstein, for example, maintains that Ola Electric is on track to achieve EBITDA profitability, with the highest gross margins among its competitors.

On the financial front,  Ola Electric’s consolidated net loss rose 30% YoY to INR 347 Cr in Q1 FY25, even though it fell on a quarterly basis. The Q2 FY25 numbers expected in early November will make things clear as to how the sales decline impacts Ola Electric.

In the past, Aggarwal had claimed that Ola Electric will rely on the premium category products for profitable growth. “Our premium portfolio is growing, and the launch of the mass segment has resulted in further 77% YoY growth in deliveries,” he said after the Q1 results. 

Are EVs Terrible For Customer Service?

So can Ola Electric learn from its competitors or is service an ecosystem-wide problem?

One Ather Energy executive claimed that some companies did not approach after-sales service with a clear strategy like they might have done on the distribution side. According to this senior executive, service is a natural extension of sales in the automobiles space. “When we open a new store, it’s mandatory for the dealer to also open a service centre,” the executive claimed.

Ather ensures that its service capacity matches its sales network, prioritising both technical training and soft skills for its technicians. This past week we examined how Ather’s premium positioning means it has to invest in customer service meaningfully, unlike Ola Electric which has gone for the affordable end of the spectrum. And service is a big part of the premium experience.

After accusations of poor customer service this past week, Ola said that it will look to take feedback and improve its services. Aggarwal said that the company heavily invests in training programmes, and will build a team of skilled EV technicians.

On Ather’s part, our sources said the company conducts skilling and refresher courses every six months, to ensure that its dealers and technicians can meet the high standards customers expect.

The shift to electric vehicles is also changing the dynamics of after-sales services. Traditional two-wheeler dealerships typically generate around 40% of their revenue from after-sales services. But this is not the case with EVs that have fewer mechanical parts. However, the complexity of EV technology and proprietary nature of some scooters means that authorised service centres are critical for scale.

Despite the noise about product quality and service issues, Deloitte’s Mahajan remains confident in his projection that by 2030, electric two-wheelers will dominate the market, provided subsidies and government support remain in place. And this is why the results of the government’s scrutiny into Ola Electric potentially dishonouring warranty claims is important.

Ola Electric, despite its strong product lineup, must address its service issues if it hopes to maintain its leadership position. The company’s current struggles echo those faced by smartphone makers like Xiaomi when they entered the Indian market in the early 2010s. Back then, Xiaomi was criticised for inadequate after-sales support.

This time, people are also more gravely concerned because vehicle safety issues are a lot more dangerous than a dysfunctional smartphone. “Like Xiaomi, Ola Electric will need to build a robust service network if it wants to stay on top. Otherwise, it risks losing customers and market share during this crucial growth period,” the angel investor quoted above added.

The timing of this controversy, coming during the festive season, is particularly concerning for Ola Electric, as poor service or product quality can quickly erode consumer trust. If not addressed, these issues could drive potential buyers toward competitors that have wider service networks and better recent reviews.

For Bhavish Aggarwal and Ola Electric, the road ahead also requires introspection. The company claims to be building an EV for India, but it seems to have forgotten that the quintessentially Indian maxim of ‘sasta aur tikaau’ has two parts that are equally important for the consumer.

Sunday Roundup: Tech Stocks, Startup Funding & More

• Indian startups raised $114 Mn via 22 deals during October 7-12, up 32% from $86.4 Mn, but much lower than the past few weeks. Is a cold October on the cards for Indian startups?
• Bengaluru-based B2B marketplace startup Zetwerk has joined the growing list of Indian startups eyeing an initial public offering, and is in talks with investment bank JP Morgan
• In another move to diversify beyond the grocery segment, Zomato-owned Blinkit is now preparing to roll out a cafe feature to deliver snacks and beverages to match Zepto and Swiggy Instamart

• Caratlane founder Mithun Sacheti and brother Siddhartha Sacheti, CEO of Jaipur Gems, have set up an investment firm Finqube Capital looking to institutionalise their angel investments
• Ahead of the IPO, Swiggy founder and CEO Sriharsha Majety and some of the company’s investors sold shares worth INR 670 Cr, with the CEO pocketing INR 23 Cr

The post Ola Electric Needs Servicing appeared first on Inc42 Media.

One often gets asked: where are the profitable startups? Three recent examples come to mind, all coincidentally in the same segment and from Bengaluru. We are talking about Zerodha, Groww and Dhan.

In fact, the ‘success rate’ in investment tech for profitability is rather high compared to other segments in the broader fintech sector — even Upstox reached profitability in FY23. And this is perhaps why many fear that SEBI’s changes this year might disrupt this profitability in some measure.

This past week, Zerodha revealed that SEBI’s new derivatives framework will definitely have an impact on futures and options (F&O) volumes. For SEBI, these rules are critical to protect investors from becoming too enthralled by the F&O frenzy, but will the changes set Zerodha, Groww, Dhan, Angel One and other discount brokers back in terms of profitability as many fear?

Let’s try to answer that after a look at these top stories from our newsroom this week:

• End Of BharatPe-Ashneer Grover Saga? After two years of bad blood, mudslinging and court battles, BharatPe and Ashneer Grover have come to a settlement, but its timing has raised quite a few questions. Was it a settlement or a compromise?
• The Valuation Game: Prominent investors are now saying that the age of high valuations and unicorns is over for the Indian startup ecosystem and now the focus is shifting to value over valuation. What explains this shift?
• The Festive Season Battle: Quick commerce has the edge when it comes to online grocery, but are the likes of Blinkit, Zepto and others close to disrupting Amazon India, Flipkart and Meesho’s festive season expectations? Here’s a breakdown

Regulatory Hit For Zerodha, Groww & Co

Since July this year, discount brokers and investment tech platforms have had quite a few things to worry about, with more major changes on the way

It started when SEBI decided to bar market infrastructure institutions from offering discounts based on trading volumes of members, effectively hitting the business model of discount broking platforms such as Zerodha, Groww, Upstox, among others. The move was largely seen as a way to curb the F&O trading frenzy.

The second setback came via the Union Budget, which hiked capital gains tax and securities transaction tax. Common sense dictates that retail investors are more likely to think twice about how much they now want to invest.

The most recent disruption has come from SEBI’s new derivatives framework, which will come into effect from November. These changes include weekly expiry of only one index derivative per exchange, upfront collection of option premiums from buyers, increasing the minimum contract size for index derivatives to INR 15 Lakh, among others.

Together, these changes have made it slightly more difficult for platforms to predict investor and trader activity, made it more complicated for them to bring in new users and have forced them to look at other revenue streams to make up for any potential dip in profits.

Zerodha, Groww and other investment tech platforms that have scaled up massively on the back of the F&O boom of the past 18 months will feel the heat.

Into The F&O Frenzy

As per SEBI data as of May 2024, equity derivatives and F&O volumes on BSE and NSE saw a whopping 71% YoY growth to INR 9,504 Lakh Cr.

Further, according to data by global trade monitor FIA, more than 36.8 Bn equity index options were traded on these two exchanges between April and June 2024. This is 100% YoY growth and represents two-thirds of all F&O trades on every exchange around the world. In other words, India is quite mad about F&O.

This growth has coincided with investors flocking to discount broking platforms. Groww now boasts over 11 Mn active investors as of May 2024, with Zerodha trailing at 7.8 Mn as of August 2024. However, these leading platforms see the impact from SEBI’s new rules differently.

For instance, in the past week, Zerodha CEO Kamath said that the platform will not change its zero brokerage model in structure even as most industry observers expected the opposite. And then a few days later, Zerodha put on a brave face in the light of yet another potential complication with SEBI’s new derivatives framework, saying it would affect 30% of its futures and options (F&O) orders.

To put this in context, Zerodha reported INR 8,320 Cr or about $1 Bn in revenue for FY24. This is undoubtedly a major milestone for the company, but now other industry observers believe revenue for the current year (FY25) will drop by 30%-50% for Zerodha.

Groww on the other hand has distanced itself from F&O as a category. In the past, the company has said that its growth and revenue generation is not heavily dependent on F&O trading. In a recent interaction at a media conference, cofounder and CEO Lalit Keshre also said that Groww has a different outlook on investment tech.

“Groww is not an F&O company, but a financial services company. Hardly 15% of our customers do trading. Trading is a zero-sum game. Investing is a win-win game. We encourage responsible trading,” Keshre was quoted as saying.

Kamath also claimed that the real impact of SEBI’s changes in the F&O framework will only become clear after November this year when the rules come into effect. And that could be a big blow to the profitability streak for Groww, Zerodha and others.

Speaking of profits, as we reported this week, Groww is likely to see a 4X YoY jump in its net profit to INR 297.8 Cr in FY24. Among startups, Groww is the closest to Zerodha, which had a sizable lead over the former with INR 4,700 Cr ($562 Mn) in profit for FY24. This is despite Groww having significantly more active investors.

As for the other profitable players, Angel One, the discount broking arm of full service firm Angel Broking, reported a net profit of INR 1,126 Cr, while Dhan finished FY24 with a healthy profit of INR 177 Cr after just about three years of operations.

Dhan expects the gross revenue impact from SEBI’s changes to be around the 25%-30% mark, according to a report by The Arc, which would certainly eat into those profits.

Diversification Is The Game

It’s no surprise then that most players are looking to diversify their revenue streams. The most clear example is of Groww, which has seen its lending business grow steadily in the past year.

The Bengaluru-based unicorn has also added UPI payments and an asset management company to make the most of its lead in terms of active investors.

Groww’s NBFC arm Groww Creditserv’s loan book stood at INR 965.44 Cr as on June 30, 2024, growing 32% from INR 731.1 Cr in the previous quarter. Personal loans accounted for 98% of the total loan book, and consumer durable loans accounted for the rest. However, Groww Creditserv is not yet a profitable entity. It posted a loss of INR 24.1 Cr in FY24, almost 10X higher than its loss in FY23.

Some such as Upstox are leveraging scale to launch insurance distribution, but this is not exactly a high margin play.

Then there’s margin trade funding or MTF – where brokers lend money to traders to earn interest income while keeping the financed shares as collateral. This is usually an area where banks have had a strong presence. However, Groww has made an entry into this space and Zerodha is also contemplating a launch, as per sources.

Among discount brokers, Mirae Asset-backed Mstock has cracked the MTF formula to some extent and has built a loan book of around INR 2,000 Cr, as per ET, while Angel One also has a significant interest in MTF.

Industry insiders believe that MTF can be a lucrative vertical for discount brokers because the primary target audience is high-net-worth individuals, which naturally have larger propensity to invest. It could be a way for Groww, Zerodha and others to nullify the revenue impact from SEBI’s strict new framework for F&O.

Despite the upside, making the most of these new verticals will be a distraction for Zerodha, Groww, and others, who have become used to consistent revenue generation and profitability.

But it’s also an opportunity for Groww to turn the tables on Zerodha in terms of revenue, or for other players to emerge as strong rivals. As always, India’s regulators have added a fresh new twist to the fintech game.

Sunday Roundup: Tech Stocks, Startup Funding & More

• After a drought of almost two years, the Indian startup ecosystem is showing signs of recovery, with startup funding growing by 2X YoY to $3.4 Bn in Q3 2024
• VC giant Peak XV Partners has pared the size of its $2.85 Bn fund by 16% or $465 Mn, and restructured the carried interest and management fees for its LPs across various stages
• Ahmedabad-based coworking space provider DevX is looking to tap the IPO boom and has filed its DRHP for a fresh-issue-only public offering

• Bullish about its IPO, Swiggy will now look to raise a total of $1.4 Bn through the public issue, up from previously planned $1.25 Bn, after getting the shareholder nod for the increase
• Ola Electric slipped below the INR 100 mark in the week, as concerns of profitability and drop in EV market share linger on the stock

The post Zerodha, Groww’s Revenue Conundrum appeared first on Inc42 Media.

A few weeks ago, we asked whether Zomato overpaid for Paytm Insider and the ticketing business in the INR 2,048 Cr deal. Since then, we may have seen the first signs of why the acquisition was such a big deal, and why Zomato is looking to take on BookMyShow.

First, Zomato was in the spotlight for Diljit Dosanjh’s ‘Dil-luminati Tour – India’, which was sold out in a matter of minutes, resulting in the tickets being resold on scalping websites. This was followed by Zomato’s only major rival in the ticketing space now, BookMyShow coming under fire for a similar incident involving ‘Coldplay: Music Of The Spheres World Tour’.

Thanks to these incidents, the online ticketing space is getting unprecedented attention from all corners. Many blame BookMyShow and Zomato for not conducting sales in a more transparent manner, and now there’s a legal mess that both companies have to wade through.

Is this a new dawn in the Indian live events space? Let’s find out, but first, a look at the top stories from our newsroom this month.

• Swiggy On The IPO Trail: As the food delivery and quick commerce giant lines up for its massive IPO, here’s a look at who holds the cards and the equity to get big returns come the public listing
• The End Of WazirX: WazirX’s $234 Mn crypto heist has unveiled serious security flaws and mismanagement, with several burning questions over founder Nischal Shetty’s role and the platform’s future. Here’s our deep-dive into how the hack happened and what it means
• The Domestic Capital Push: As Indian startups stand at the cusp of another pivotal moment after the past decade of growth, domestic capital will have a big role to play in the next phase. Here’s why India needs more domestic funds
• Quick Fashion: Blinkit, Zepto and Instamart have changed grocery ecommerce in India forever, and now Bengaluru-based Slikk believes it can bring the same magic to the fashion category with a quick commerce platform. Will this new model take off?

Gold Rush For BookMyShow, Zomato

It’s important to understand the sequence of events before we look at how Zomato and BookMyShow could tackle the rush for live events going forward.

On September 24, two days after tickets for the Coldplay concerts went live on BookMyShow, the platform filed a police complaint about unauthorised resale of tickets or scalping for its exclusive concert. Reliance-backed BookMyShow clarified that it had no affiliations with ticket reselling platforms such as Viagogo, Gigsberg, or any other third-party individuals involved in the unauthorised sale of Coldplay concert tickets.

The Mumbai-based company was looking to dodge allegations of fixing the sale of tickets such that scalpers would benefit. However, those in the industry believe this is a far-fetched notion. “No one benefits from scalping. Not the government nor the platforms nor the actual buyer. This is only great for those who are looking to make a quick buck and this is thoroughly banned in India, unlike in the US, where scalping is allowed with certain limits,” according to one of our sources in the industry.

For instance, in the US, many venues enforce private property rules to clamp down on scalping in the vicinity of the concert, but nothing stops anyone from reselling online.

On its part, BookMyShow condemned scalping and emphasised that such activities are punishable under Indian law, and it also pledged to cooperate with authorities in any investigation related to scalping of the Coldplay tickets.

For many of those who were in the waitlist for the Coldplay concerts, it was a double blow. Just a few days before BookMyShow, a similar rush was seen on Zomato. Tickets for the Dil-Luminati tour had sold out in a short time but were later spotted on secondary platforms at inflated prices.

Originally, the tickets were priced from INR 12,999; however, they were listed on Viagogo for as much as INR 53,000 or 4X the original price. In some cases, tickets for both these shows were being sold for over INR 3 Lakh.

Zomato issued a formal notice to Viagogo for selling tickets without authorisation, and the company filed multiple cyber crime complaints against other scalping or secondary sales sites, as per sources.

In both cases, the sudden rush for tickets seemingly overwhelmed the platforms, causing them to crash temporarily, leading to more public outcry, as even those ahead in the waitlist could not get the tickets.

In wake of the controversy, the Economic Offences Wing (EOW) of the Mumbai Police has summoned BookMyShow’s parent entity Big Tree Entertainment’s CEO Ashish Hemrajani and the company’s technical head for questioning.

The summons was issued after a complaint was filed by lawyer Amit Vyas, who alleged that BookMyShow enabled scalping and secondary sale of tickets, while deceiving the public.

What makes this worse is that reports indicate that tickets began appearing on third-party sites even before the official sale had gone live, which not only shows a lapse in the distribution process but also gives credence to the possibility that many of these scalpers were running scams. In fact, BookMyShow clearly warned users of scams being run in the name of tickets for the Coldplay show. 

Scalpers Make Bank

“Some artists definitely generate this kind of frenzy. If you remember, Coldplay’s previous concert in Mumbai in 2016 also faced similar issues, where tickets, originally priced between INR 5,000 to INR 20,000, were resold at exorbitant rates, Scalpers are getting smarter and deploying bots to buy large batches of tickets in seconds,” said an industry insider and former CXO of an events and movie ticketing platform.

Whether it is Ed Sheeran’s Divide Tour or Justin Bieber or other electronic dance music (EDM) artists, this is a consistent trend in India. A large reason for this is that India does not have any permanent venues for concerts. In India, cricket stadiums are typically repurposed for concerts and that makes it much harder to get a proper idea of the demand.

In many cases, organisers have multiple plans ready to accommodate the demand. “They can reduce the size of the venue for the audience and put more focus on the stage, or they can reduce the stage and add more people into the venue. It would be better managed and there would be better visibility for the demand if we had permanent concert venues,” the former CXO added.

There could be other tech-led solutions to stop scalping. For instance, one could monitor IP addresses and restrict sales if there is a big spike from a cluster of related IP addresses, but this is a technical problem in India where most ISPs route traffic through hubs such as Pune or Gurugram.

Another option is linking sales to mobile numbers and permitting only those with the right ID card to enter the venue. But this is a logistical nightmare given just how difficult it would be to manage thousands of ID checks at the gate.

Having non-transferable tickets is also not an ideal solution. One source close to the Zomato Live operations told us, “How do you ensure that those buying tickets actually show up to the concert? We don’t want a situation where tickets cannot be transferred and very few people show up for the concert.”

Can BookMyShow, Zomato Fight Back?

So what can platforms do? For one, Paytm Insider let users transfer their ticket to another individual free of charge. But this does not completely stop scalping.

Zomato is trying something similar with its ‘Book Now, Sell Anytime’ feature, which lets users list their tickets on the app for sale for a price lower or higher than their original purchase price. The platform is set to go live on its app from September 30, starting with the ‘Zomato Feeding India Concert’ featuring Dua Lipa.

Incidentally, Lipa’s concert was also criticised for not being an open process, providing early access to some credit card holders. Do such deals make it seem like platforms are acting out of bad faith?

“We cannot completely stop tie-ups with financial partners because they are making it easier for many users to actually attend these concerts. One of the secular trends driving the rise of live events is the easier access to short-term credit through BNPL and similar options,” added the Zomato Live insider quoted above.

The other major trend is that live events and experiences have roared back after the pandemic which has certainly given BookMyShow and now Zomato a major boost. Similar to the travel sector, Indians are willing to go the extra mile to get a taste of these experiences that were out of reach for three to four years.

Plus, it’s no longer enough for people to aspire to attend a Coldplay show, but the fact is that a lot of online ‘clout’ is built around being seen at these concerts and events. Social media credentials and conversations are built around these experiences and younger Indians are certainly not going to miss out on the opportunity.

Both BookMyShow and Zomato indicated that they were exploring solutions to stop scalping, but this may not be easy as we have highlighted above. “We implemented a queueing system to manage the overwhelming demand and addressed issues caused by suspicious and malicious traffic within minutes, causing a brief delay, but ensuring minimal disruption for genuine fans. Due to the unprecedented demand, a third Mumbai show was added shortly thereafter, which also received a fantastic response,” a BMS spokesperson told Inc42.

India Shows Its Appetite

But a cursory search for scalping and TicketMaster (US-based ticketing giant) would make it plain as day — this problem has not been solved even by those who have experienced it for decades. BookMyShow added a third Coldplay show in India to appease fans, but tickets for those too were sold out in a matter of minutes.

Speaking of Coldplay’s third concert, another industry insider, said this is a game-changing moment for Indian events. We talk about premiumisation as a trend in the D2C category, and that’s pretty much true for live events too.  “I can’t remember the last international artist who did more than one show here. Covid has been an insane trigger, and the numbers have exploded. This is why we are seeing this frenzy today. It’s not about the concert, it’s about status signalling, it’s about the aspirational nature of the Indian consumer.”

And there’s also a silver lining here. Those in the industry say this gold rush pretty much puts India on the global live events map, if that wasn’t the case before. So for those who didn’t grab that Diljit or Coldplay ticket, there’s a lot more to come.

The Best Of MoneyX By Inc42

• What compelled Sanjeev Bikhchandani to take a big bet on Zomato. The Info Edge founder spills the beans
• Can the Indian EV revolution catch up to China’s hot pace? Not for at least 20 years, believe some of the key investors in the EV space
• Peak XV’s Mohit Bhatnagar believes it’s time to retire the current valuation-centric definition of unicorn. Here’s what he wants instead
• The quick commerce boom will fuel new models built around granular customer and brand data, believes All In Capital’s Aditya Singh. Here’s how
• As family offices become a prominent feature of the Indian investor ecosystem, there’s a need to rethink how they are managed, says Jai Rupani of the Dinesh Hinduja Family Office. Here’s how

Sunday Roundup: Tech Stocks, Startup Funding & More

• Startup Funding Is Back: Indian startup funding is showing signs of a major recovery with the total funding raised this year now crossing $9 Bn, thanks to this week’s tally of $432 Mn
• The BYJU’S Mess: In a fresh blow to BYJU’S, the SC told the insolvency resolution professional to hold off on further meetings with the committee of creditors amid fresh challenges by US lenders
• Zoho’s India Focus: US was a key pillar of growth for Zoho thus far, but the SaaS giant is now keenly focussed on boosting its India revenue through investments in R&D, says CEO Sridhar Vembu

• EMT’s New Deal: Easemytrip CEO Nishant Pitti offloaded half of his stake in the company this past week, just before the company signed a deal with PhonePe to list hotels on the fintech super app
• DotPe’s Faux Pas: Gurugram-based payments and commerce platform DotPe found itself in choppy waters over lax cybersecurity guardrails that led to leaks related to restaurants and user data

The post BookMyShow, Zomato And India’s Concert Mania appeared first on Inc42 Media.

Ecommerce is not what it used to be before 2020. But Amazon India is stuck in the slow lane, in a pre-pandemic world, which has put the company on a backfoot, even though it is Amazon we are talking about with all the resources of the world at its disposal.

So why has Amazon not done what Flipkart is doing now, what BigBasket is betting big on, what JioMart wants to do and what Blinkit, Zepto and Instamart seem to be so sure about? Why is Amazon not in the quick commerce game, and even if it does jump in now, will it be too little too late?

We try to answer these questions, but after a look at these deep-dive into three Indian giants from the past week:

• Into Swiggy’s Core: Alongside cofounders Nandan Reddy and Phani Kishan, cofounder and CEO Sriharsha Majety has built a team that sees quite a few experienced professionals from the world of ecommerce, consultancy and technology products. Here are the people taking the food delivery giant to the IPO pole 
• Myntra’s GenZ Mantra: With a sharp focus on India’s growing Generation Z base, fashion giant Myntra has not only added new features to its platform but is also looking at exclusive brand partnerships specifically for a younger audience. Will this help Myntra win over GenZ loyalty?
• Who’s Navigating Shiprocket? The Zomato-backed unicorn has gone from a third-party logistics tech player to a one-stop ecommerce enabler with a range of services for merchants and large FMCG companies. But who are the people steering the company beyond the INR 1,000 Cr+ revenue milestone? Here’s a look

Amazon India’s Quick Commerce Miss 

No one would have batted an eye at Amazon not having a quick commerce service if it wasn’t for the past year. Zepto claims its revenue has grown over five-fold to over INR 10,000 Cr in FY24 from about INR 2,000 Cr in FY23, while Blinkit’s revenue for FY24 was over INR 2,300 Cr as against INR 730 Cr in FY23.

These gains have not gone unnoticed, even though there is an acknowledgement that the YoY growth is only this explosive because of the relatively small size of the market thus far, and the fact that only a few players were offering the quick commerce service till FY24.

With competition increasing, we expect the growth rate to slow down for the primary players — i.e Swiggy Instamart, Zepto and Blinkit — even as others catch up on market share.

In fact, most analysts believe that the 2024 festive season will be the first real test of whether quick commerce is ready for the big transition. We already know that platforms have expanded to Tier II and smaller cities in a bid to find new customers for the festive season.

Given this, Amazon’s absence from the quick commerce market could be a major strategic failure.

But Flipkart Sees The Merit

Complicating matters is that Flipkart is bullish on Minutes, which has gone from a pilot to a nationwide launch rather soon. Tata-owned BigBasket is also moving to a quick commerce-only format, and will transition from slotted deliveries to the on-demand model soon.

The significance of quick commerce is clear from the fact that Flipkart wants to start off operations with 100 stores. That kind of commitment underlines the fact that quick commerce has gone from the product-market fit stage to the scale-up stage.

India’s ecommerce market grew 18-20% by value in the first six months of this year, with grocery sales surging over 38%, driven largely by a sharp uptick in quick commerce, according to data sourced by 1Lattice and Datum Intelligence.

In a research note published in August, brokerage firm UBS said Flipkart has an advantage of supply chain when it comes to Minutes and this is why the company is banking on the strategy of lower pricing as a market entry plan.

As per 1Lattice, almost 40% of online grocery sales now come from quick commerce, which again underscores why Amazon needs to focus on quick commerce for the existing Amazon Fresh vertical, which is stuck on two-hour delivery.

Plus, now quick commerce platforms have the right scale and leverage to sign up deals with D2C and new-age brands, which puts Amazon further on the backfoot.

D2C brand Drools CEO Shashank Sinha said at Inc42’s D2C Summit last month that Flipkart Minutes will outdo other quick commerce players in smaller towns and cities given the brand recall for Flipkart. Similarly, Swiss Beauty cofounder Mohit Goyal highlighted that quick commerce has become the preferred mode for emergency beauty purchases, a category that was never being catered to before 10-minute deliveries.

So some might say Amazon has already missed the bus.

Quick Commerce On The Ascendancy

According to UBS, Blinkit leads the India market with 40%-45% market share as of July 2024, followed by Swiggy Instamart (20-25%), Zepto (15-20%) and BigBasket (10-15%). Flipkart, with its massive user base and huge marketing machinery, will certainly enjoy an advantage when it comes to acquiring users for quick commerce.

So, how much room will Amazon have, even if it makes a belated entry, as was reported in late August.

And to make matters worse, Amazon is also losing out in terms of revenue from non-grocery categories. For quick commerce startups, categories such as household and kitchen equipment, electronics, smartphones (iPhone 16, for example) are the biggest focus areas.

They want the consumer to only order from quick commerce platforms for all their online shopping needs. This festive season, most QC platforms are expected to offer more than 20,000 SKUs. And with this expansion into new categories, quick commerce players are eating Amazon’s lunch.

That was the case with Flipkart as well, before the company decided to invest in Minutes. Amazon needs to read the room, and perhaps it’s starting to do so.

This week, Amit Agarwal, Amazon’s SVP for emerging markets, announced that Amazon veteran Samir Kumar will take on the responsibility to lead India as the country manager, replacing Manish Tiwary, who stepped down in August and will transition out of the company in October.

The new country head, who has been with Amazon since 1999, was an integral part of the team that launched Amazon India in 2013, and now Kumar has to take the reins at a critical juncture. He will oversee Amazon India’s other key executives — Saurabh Srivastava (categories), Harsh Goyal (everyday essentials), Amit Nanda (marketplace), and Aastha Jain (growth initiatives).

These executives have the tough job of ensuring that Amazon’s ecommerce investments in India are not in vain.

What could really hurt Amazon is that quick commerce companies dominate in the metros, where Amazon has a lead over Flipkart. Losing ground here is not just damaging for Amazon in the short term but also erodes its moat over its long-time rival.

In the past few years, Amazon has focussed on AWS as a revenue channel for the Indian market, particularly as startups grew in scale and stature. But for most Indians, Amazon is the online shopping destination first, and then a video streaming service, and most might not even know what AWS is.

Any slip on the ecommerce front will be very damaging for Amazon as a brand in India. It will also hurt its Prime Video business which many users get bundled with Amazon Prime subscriptions.

For Amazon India, this festive season is going to be an unprecedented experience. It’s no longer about competing with Flipkart, like it was till 2023. Yes, Meesho entered the picture in 2023, but the 2024 festive season will be the first time that Amazon will have to compete with about half-a-dozen well-capitalised and scaled-up companies for market share.

Can Amazon India and its new leadership tackle this cohort? It’s certainly going to end in fireworks — one way or the other.

Join Us For MoneyX This Week 

The second edition of MoneyX by Inc42 is just around the corner and we are hosting a one-of-a-kind gathering with 300+ leading investors under one roof to decode the future of startup investments in India.

With prominent investors such as Info Edge’s Sanjeev Bikhchandani, Accel’s Prashanth Prakash, Peak XV’s Mohit Bhatnagar, Stellaris Venture Partners’ Ritesh Banglani, Artha Venture Fund’s Anirudh A. Damani  and a host of other LPs, GPs and family offices

Find out more about our stellar lineup of speakers, and grab your pass for MoneyX here.

Sunday Roundup: Tech Stocks, Startup Funding & More

• Startup funding saw a major uptick this past week, with a total of $447.5 Mn invested across 22 deals, thanks to Physics Wallah’s mega round
• OYO has expanded its footprint in the US with the acquisition of G6 Hospitality, the parent entity of Motel 6 and Studio 6 brands, from Blackstone Real Estate for $525 Mn
• Listed gaming giant Nazara plans to raise another INR 900 Cr from SBI Mutual Fund, CaratLane founder Mithun Sacheti and others to fuel strategic acquisitions an business expansion

• Looking to add to its pile of acquisitions, edtech unicorn Physics Wallah has raised $210 Mn (about INR 1,756.7 Cr) in its Series B round, led by Hornbill Capital, at a post-money valuation of $2.8 Bn
• Delhi Police’s Economic Offences Wing (EOW) has made another arrest in the investigation related to the INR 82 Cr fraud at BharatPe, taking custody of Ashneer Grover’s relative Deepak Gupta
• India Lifestyle Network, which runs MensXP, iDiva, and Hypp, is looking to separate from parent company Mensa Brands, two years after Mensa acquired the three content platforms

The post Amazon India Caught In Slow Lane appeared first on Inc42 Media.

Our investor survey for H1 2024 showed Swiggy is the most hotly anticipated IPO of the year. But if OYO had been an option, many investors might have chosen the hospitality giant over Swiggy.

However, Ritesh Agarwal postponed OYO’s IPO plans earlier this year, and since then the focus has shifted to why OYO took this step. Unlike 2021, this was not about market conditions, but rather about going for an IPO in a much better financial state than ever before in OYO’s lifetime.

There is a lot of buzz around OYO these days and with good reason. With a profitable FY24 and a strong start to FY25 with a fresh infusion, OYO seems to be ready for the next chapter in its life. If the first few years were about standardisation, the past two years for OYO were about premiumisation.

This swing has proved vital for Agarwal’s plans to take OYO public sometime next year. So this Sunday, we are looking at how this transition has set OYO apart from the rest of the hospitality startups in India, but after a look at the top stories from our newsroom this week:

• The People Driving Ola Electric: Ola Electric is looking to create a vertically integrated EV stack and the company has brought on some key experts to lead the charge across the various arms. Here’s a look at Bhavish Aggarwal’s inner circle 
• Ather’s IPO Ride: Despite having a first-mover advantage, Ather Energy has fallen behind Ola Electric due to the latter’s speed in expanding market reach and scaling up infrastructure and sales. Here’s our analysis
• VCs Asked To Spill The Beans: Markets regulator SEBI is said to be looking into matters related to side letters or contribution agreements, that govern preferential terms for some LPs in a venture fund which have led to an uneven playing field. We dive into this matter

The New OYO 

As reported this week, FY24 has proven to be the turnaround year for OYO. It reported a profit of INR 229.57 Cr, a huge change from the loss of INR 1,286.51 Cr in FY23. We cannot remember many startups in India that have shown such a major swing from loss to profits. Agarwal said OYO is looking to triple its profit after tax to INR 700 Cr in FY25.

To get there, OYO raised INR 1,457 Cr (around $175 Mn) led by Agarwal floated Singapore-based entity Patient Capital, along with J&A Partners and ASK Financial Holdings. The round also included INR 417 Cr investment from Incred announced in July.

The latest funding saw OYO’s valuation fall to $2.37 Bn from $10 Bn at its peak in 2019. And this is the valuation that OYO is likely to take to the IPO next year.

As per sources in the company, the plan for the year is to focus on international travel to cater to large events. The acquisition of Paris-based premium rental company Checkmyguest for roughly $28 Mn is a part of this push.

In recent years, OYO has looked to bolster its presence in Europe and the US, where the company earns higher revenue due to larger ticket sizes. The idea was to focus on markets that were actually bringing in money and pull back from China where the company was struggling to compete with local players.

Where The India Biz Is Heading

In India as well, the focus has changed from budget hotels to the premium category. In April 2024, OYO teamed up with SoftBank to launch a luxury hotel chain called ‘SUNDAY’, targeting top-tier cities. The company also expanded their Palette chain of premium hotels and resorts.

Last month, OYO partnered real estate firm M3M India to introduce a premium hotel under the ‘SUNDAY’ brand in Gurugram. Starting with Gurugram, considered a significant hub for social events, domestic tourists, and long-stay international guests, SUNDAY will expand to other cities by next year.

The SUNDAY brand of hotels was launched in May 2023 with properties in Jaipur, Vadodara, and Chandigarh, as well as international locations in London and Dubai.

If the OYO of the past was all about budget hotels and small properties, the new OYO is closer to a large hotel chain, distinguishing itself from startup ecosystem players such as FabHotels and other budget hotels and hostels.

One employee close to the CEO added that this has been a conscious effort by OYO as the brand itself can be leveraged to tap the premium category. “Particularly, when you look at business travellers, OYO is now playing against the likes of Ginger Hotels or Lemon Tree Hotels. The days of cheap OYO Rooms are over because the company wants to prioritise revenue, even though it has a presence in the budget segment,” the employee added.

For instance, in the budget category, OYO has increasingly focussed on sports-related travel where it has not only looked to grow its footprint in cities that host cricket stadiums but also for sports at the grassroots level. Case in point is the recent tie-up with ‘India Khelo Football’.

The startup said it has catered to the requirements of more than 40,000 sports officials and players at various athletics and sports events, and the next step will be to more than 100 cities and villages across India. “These athletes usually live in bad conditions when travelling, and OYO has the experience of standardising budget hotels. So, they are taking this to categories that desperately need the budget options,” one of our sources said.

As per a report by The Arc, OYO said its overall take rate is 33%, whereas rivals such as Treebo and MakeMyTrip charge under 30% at the higher end. At the moment, most of OYO’s hotels fall in the budget category, a fact that the company is actively trying to change. On average, customers in the budget category pay Rs 1,500 per night, which can go up to INR 2,000 for mid-range hotels and up to INR 2,500 for premium hotels.

This is how OYO has continued to cater to the masses, while the international business and a sprinkling of premium hotels bring in the revenue.

Getting Back To The IPO Table

From our in-depth look at the people that have led this turnaround, it’s clear that Agarwal has revived the company by balancing the business model changes with a core team of leaders. The core group of executives or CXOs at OYO have stuck around for years, and many have seen the company go through unprecedented crises such as the pandemic.

Now, as it prepares for the IPO, the profitability combined with the healthy leadership layer makes OYO a prime candidate for public markets success.

In fact, when you compare OYO to Swiggy from purely an IPO perspective, OYO has better fundamentals, whereas Swiggy has attracted attention due to the booming quick commerce business which is key strength today over and above food delivery.

Plus, OYO has the market on its side now. A profitable company with a big brand name and a high-profile investor base will naturally attract a lot of attention from public markets investors. Plus, travel as a category has grown very robustly in the past two years.

All in all, the stage is set for Ritesh Agarwal to take his startup public. One of the most celebrated founders in the Indian ecosystem, Agarwal will follow the likes of Deepinder Goyal, Vijay Shekhar Sharma, Bhavish Aggarwal and hundreds of other entrepreneurs to the public market.

For many years, OYO was criticised for not having the ambition to grow beyond the budget category. Now that it has done that and also shown profits, the only thing left is the IPO.

Sunday Roundup: Tech Stocks, Startup Funding & More

• Funding across the Indian startup ecosystem entered the slow lane as startups cumulatively raised $227 Mn across 22 deals, marking a 34% decline from the previous week
• It’s convenience over catalogue this festive season as the quick commerce segment is expected to see a growth of 70%-80% this quarter as per experts
• Following Zepto’s path, IPO-bound Swiggy has launched ‘Cafe’ to deliver snacks and beverages in 15 minutes in Bengaluru

• Listed major Delhivery claims rival Ecom Express used incorrect information about Delhivery multiple times in its DRHP filed with SEBI
• Gaming giant Nazara will acquire a 47.7% stake in online poker platform Pokerbaazi for INR 831.5 Cr in what is its biggest deal so far
• CCI has alleged Samsung, Xiaomi and other smartphone makers of colluding with Amazon and Flipkart to exclusively roll out their products on these ecommerce platforms in breach of antitrust laws

The post OYO’s Big Swing appeared first on Inc42 Media.

Zomato’s food delivery platform is profitable, thanks to platform fees, and Zepto is on a tear on the quick commerce side after raising $1 Bn this year — but both need to thank Swiggy with at least a hat tip for showing the way.

Swiggy was the first to introduce platform fees in July 2023, and Swiggy Instamart started the quick commerce revolution at the end of 2020. The Bengaluru-based company can take the credit for these two major developments in the Indian consumer internet story.

But now, with its IPO on the horizon, Swiggy not only has to prove its own worth against Zomato but also against Blinkit, Zepto, BigBasket, Flipkart, Jio and others in the quick commerce segment. And this is even before we take a look at the dining out vertical, where Zomato has big plans.

Some clues about Swiggy’s strategy can be seen in this week’s reports about its FY24 numbers. Over the past month or so, it has also launched several new revenue streams. Swiggy is going full throttle ahead of the IPO, but will this be enough to make a bull run in the public markets?

Let’s find out, after these top stories from our newsroom.

• A Messy Split: In the WestBridge vs. Anupam Mittal case, the fate of Shaadi.com hangs in the balance with multiple lawsuits across India and Singapore, and the final resolution could very well shape the future conflicts between investors and founders
• Liquidation Blues: Many noted Indian VC funds will be close to their fund expiry dates in the next 18 months, and SEBI’s updated rules for liquidation with mandatory performance reporting has put these expiring funds under the spotlight. Read to know why
• Did Zomato Overpay? After the high-profile acquisition of Paytm Insider, many industry analysts have questioned whether the INR 2,048 Cr deal price tag was justified or is Zomato stretching itself too much in the hope of building the going-out business

Swiggy Vs Zomato In 2024

It’s all about the IPO. Swiggy’s upcoming IPO is the most anticipated public listing for investors, as highlighted in Inc42’s recent investor survey after H1 2024.

Swiggy, which was last valued at $10.7 Bn, is said to be targeting a valuation of $15 Bn for the IPO where it will look to raise anywhere between $1 Bn and $1.2 Bn. VC and PE giants such as Prosus, Accel, SoftBank and Invesco among others will be looking to cash in on the IPO, which follows a very critical year for Swiggy in terms of proving its revenue scale as well as a path to profitability.

We reported in early 2024 that Swiggy could report over INR 10,000 Cr in revenue for FY24, but it turned out to be much higher than that. According to details from its annual report, the company saw its revenue grow by 36% to INR 11,247 Cr from INR 8,265 Cr in FY23.

More importantly, Swiggy also slashed its net loss by 44% to INR 2,350 Cr during the year under review from INR 4,179 Cr in FY23. Without a look at the audited financials, one can only assume that a lot of the expenses have been incurred as the company expanded its quick commerce network in 2023 and 2024.

The big surge in Instamart quick commerce orders, introduction of platform fees midway through FY24, and growing traction for its ads and dining out business are the platforms that Swiggy is using to attract investors ahead of its IPO.

The company even got a round of minor infusions this past month, with Amitabh Bachchan’s family office, Hindustan Composites, Motilal Oswal Financial Services’ chairman Raamdeo Agrawal joining the cap table recently.

With $1.4 Bn in revenue in FY24, Swiggy’s potential price of $15 Bn in the IPO seems to be justified to a certain extent.

Swiggy investor 360 One, formerly known as IIFL, recently pegged the company’s valuation at $11.5 Bn, with a revenue of $1.4 Bn. In this regard, Swiggy has a lower revenue multiple of just over 10X compared to Zomato’s (close to 20X), thanks to a market cap of $30 Bn. Zomato’s FY24 revenue stood at INR 13,545 Cr or roughly $1.6 Bn.

The biggest factor for Zomato has been it turning profitable on this revenue base. Swiggy is yet to prove that, though it does look like the Bengaluru-based company might turn the corner soon.

What’s Happening With Food Delivery?

For most comparisons, it would be a folly to put Swiggy and Zomato against Zepto directly, as the latter is wholly focussed on quick commerce. For Swiggy and Zomato, food delivery is bread and butter, or it should be, but the rise of quick commerce has come at the expense of slower growth in food delivery volume, at least for Zomato.

Will this also be the case with Swiggy?

By the time Swiggy goes to the public markets, the revenue figure could well be over $2 Bn, especially because the company has structured its main verticals to maximise revenue collection. On the food delivery front, Swiggy has looked to expand revenue streams from both ends.

For consumers, there’s the platform fees as well as Swiggy One subscriptions. It has also looked to make itself indispensable for restaurants.

Within a matter of days in July, the company launched marketing tool ‘Smart Links’ to help restaurants widen online reach and boost orders, as well as a data analytics tool for restaurant partners to gauge their marketing performance against peers. It also rolled out a SaaS suite for partner restaurants to leverage influencer and social media marketing. Then there’s ‘Staffing Support’, an initiative to assist its restaurant partners with staff recruitment.

Most recently, Swiggy launched a large order delivery fleet in metros to compete with a similar offering by Zomato. This fleet is meant to be a way for Swiggy to cater to festive season demand more efficiently.

Sources in the company told Inc42 that for long it has been believed that food delivery is underpenetrated, and if that’s the case, the only way to maximise revenues and profits is to extract more revenue per user. Platform fee has been hiked to INR 6 per order in its key markets, including Delhi and Bengaluru, and this could go even further up depending on how Swiggy sees food delivery growing.

We expect Swiggy to add more premium features for users and restaurants going forward because this is where it is catering to habituated users and app-dependent kitchens. For consumers, using Swiggy can be a discounts-related alternative for Zomato at certain points in time, so offsetting the occasional discounts with per-order platform fee makes sense.

On the restaurant side, Swiggy is looking at cloud kitchens and large restaurants as a growth category. These are the partners who have the most to lose if Swiggy were to suddenly shut its food delivery business. Large restaurants are double-sided partners too, featuring on the Dineout side of the Swiggy revenue menu as well, while cloud kitchens would simply not exist without apps.

And Then There’s Quick Commerce

There is a lot of business rationale in pushing food delivery towards the revenue side and keeping quick commerce towards the growth side. The scope for experimentation is higher on quick commerce right now as the competition is also higher.

With a duopoly on the food delivery side, Swiggy can rest easy in the knowledge that it can’t be blind-sided by a third player. The revenue potential is also way higher for quick commerce in comparison to food delivery, since the former has a higher order frequency per user.

“Quick commerce is the key for long term profitability. Blinkit has already outpaced Zomato’s food delivery business. A Goldman Sachs report this week said that Blinkit’s contribution to Zomato’s market value has surpassed the core food delivery business. So Instamart will be extremely critical for Swiggy,” Rahul Jain, vice president of brokerage firm Dolat Capital, told Inc42 earlier this year. 

But Swiggy is also said to be losing ground to Zepto and Blinkit in the quick commerce business. Zepto, which has raised over $1 Bn this year, is gearing up for expansion and is likely to launch 100s of new dark stores across the country this year.

To boost average order value for quick commerce, Swiggy expanded the non-grocery category for footwear, appliances, fashion, beauty and electronics within Instamart. Other players have done the same, and the entry of Flipkart and JioMart is quickly blurring the line between quick commerce and ecommerce.

This will be critical as Zepto claims to be on pace to achieve $1.2 Bn in annual sales in FY24, which will undoubtedly be helped by the recent introduction of Zepto Pass loyalty programme and a per-order platform fee, as well its plans to launch a BNPL-like Zepto Postpaid product.

Zepto is not sitting back when it comes to big plans either, and is reported to be in talks with bankers for an August 2025 date for a public listing.

Even though it remains the second largest quick commerce player in India after Blinklit, Swiggy has seemingly lost its first mover advantage in this category. How deeply will this hurt the Bengaluru-based giant?

What complicates this further is the big push for quick commerce from the likes of Tata-owned BigBasket, which has the category expertise and the scale to compete with Blinkit, Zepto and Swiggy. In fact, BigBasket is merging quick commerce into its main app, which will immediately widen its customer base.

It’s interesting that despite Zomato hitting the public markets before Swiggy, it was not a moment for quick commerce. Swiggy’s IPO will be the first real litmus test of how the public markets embrace the quick commerce model and its revenue trajectory. It’s arguably why the Swiggy IPO is being watched so closely by everyone in the startup ecosystem.

Sunday Roundup: Tech Stocks, Startup Funding & More

• Mega Rounds This Week: Rapido and Drip Capital led the way with mega rounds as Indian startups collectively mopped up close to $348 Mn in funding across 19 deals this past week
• 30 Startups To Watch:  Thousands of early stage Indian startups have featured in our monthly 30 Startups list and this month, we are reaching a new milestone with the 50th edition of our flagship series. Take a peek now
• Rapido’s Unicorn Round: The ride-hailing startup has raised $200 Mn (INR 1,660 Cr) in a Series E funding that catapulted the company into the unicorn club

• EMT’s New Vision: Easemytrip is looking to become a commercial vehicle OEM and incorporated a wholly owned subsidiary Easy Green Mobility to enter electric bus manufacturing
• Another Setback For BYJU’S: The embattled edtech major has seen a second auditor resignation in under a year as BDO stepped down after raising concerns over financial and governance issues
• Ecom Express’s IPO Playbook: After Delhivery’s muted debut in 2022, logistics tech rival Ecom Express is hoping for a different tune as it prepares for its public listing

The post Swiggy’s Litmus Test appeared first on Inc42 Media.

It’s been nearly 10 months since we first peeked into BharatPe’s plans for the consumer fintech space. Those were the initial days of the fintech convergence, where every app was looking to become a super app.

In fact, with the troubles for Paytm in 2024, this industry-wide move towards super app or fintech platform strategy almost seems prescient. The platform play is evident when we see the product launches from the houses of PhonePe, CRED, Groww, Google Play, Jio Financial Services (JFS) and now, even Flipkart.

Many of these are built around UPI, with the exception of Groww, but BharatPe was already different from many of these apps. It’s always been a merchant-first platform, and so when the leadership told us last November about how it planned to take on the consumer super apps, our scepticism was not unwarranted.

The competition was not exactly light weight here. And that was last November; since then they have bulked up. So when BharatPe finally showed its super app cards this week, we couldn’t help but wonder: is it too little, too late?

Let’s look to answer that, after this short detour into the top stories from our newsroom this week:

• CRED’s Super App Revenue Stack: Speaking of super apps in India, the Kunal Shah-led fintech giant has added more pieces to its platform play this year. We dive into how CRED has changed its outlook towards monetisation in the past two years
• A Game Of Returns: Big exits with large returns have always been a sore topic for Indian VCs. But this situation may be changing with more and more exit events being seen in 2024 thanks to IPOs and secondary deals. Here’s a look at the state of VC exits in India
• The Empire That Was: The odds are stacked against BYJU’s founders Byju Raveendran and Divya Gokulnath, and it all seems to be going awfully wrong for the edtech giant that once was a poster child for Indian tech. We look back at how the BYJU’S empire failed

A Page Out Of Paytm

In some ways, BharatPe has built its super app platform using Paytm as an ideal. In this comparison, we are talking about Paytm from around September last year, when the company was on the verge of turning profitable.

Leveraging Paytm Payments Bank, the company was firing on all cylinders — particularly lending — to get out of the red. But that was not meant to be. In the past year, not only has Paytm lost its key competitive advantage of the payments bank but also some of the trust that had been created among other lending partners.

Now BharatPe is looking to fill that void of an app that has a bank as its competitive moat. The Unity Small Finance Bank, in which BharatPe has 49% ownership, is one of the key cogs of the startup’s plans to launch a super app.

Having rebranded its postpe BNPL app to BharatPe, the company is making it a one-stop shop for all services. UPI accounts on BharatPe will have the @bpunity handle, and these can be used for payments for bills, utilities, merchants and other users. Pretty much like any other UPI app. In fact, the company says as much on the Play Store: “BharatPe UPI – Another UPI but the only UPI Made for Bharat”. 

It’s clear that BharatPe is promoting itself as an UPI app for the masses. And as such, it will have to build a significant user base to capitalise on the Unity Small Finance Bank (SFB) support. But a super app cannot be about payments alone — it requires a universe of interlinked products. Does BharatPe have that?

Caught In The UPI Paradox

At this point in time, we can safely say that UPI usage is heavily influenced by discounts and cashbacks offered to users. The user experience is more or less the same, so users are more prone to using the apps that are offering the highest discount on every transaction through cashbacks or other means.

BharatPe says its USP is that it will have one of the most secure payments platforms, thanks to the Unity SFB which is an RBI-regulated entity. However, one can safely assume that BharatPe cannot just rely on the bank as a way to attract and acquire users.

For the average end user, the security of a UPI transaction is not as big an attraction as getting a few rupees back for every transaction.

We have written about the UPI paradox in the past, which is a paradox that all super apps have to deal with. By itself, the payments network is not a profitable revenue stream, but without UPI, most super apps do not have a cheap entryway for users to enter their walled garden.

CRED faced this conundrum when it made a belated entry into UPI payments. While the company’s market share in UPI has grown, we cannot say for certain that it has been a profitable route since we don’t know the company’s FY24 numbers.

The goal of course is to keep users coming back to the app and intelligently sell other services. It’s not possible to build a super app with just UPI.

What does BharatPe have in that regard?

Pieces Of The BharatPe Super App

We signed up for the new BharatPe experience and the app itself has a new look and feel that does add to the experience.

Besides UPI payments, bill payments and credit card repayments — bringing in revenue through commissions and fees —  BharatPe has added an ecommerce section where it’s currently selling vouchers for Amazon, HealthifyMe, ixigo, Nykaa, Zomato as well as several modern retail and D2C brands.

This is arguably the foundation for a larger marketplace that BharatPe may launch in the future. The startup certainly has ecommerce ambitions because the revamped super app also has an ONDC-powered food delivery service.

With the new app, BharatPe is also offering unsecured personal loans up to INR 15 Lakh via NBFC partners such as L&T Finance, CASHe, and True Credit.

Besides this, BharatPe has the 12% Club, which is an investment platform for peer-to-peer lending and investments, as well as Zillion, a rewards and loyalty program which involves virtual coins a la CRED Coins.

What’s Missing?

What’s lacking is a major payment aggregator licence for which BharatPe has received an in-principle approval, but it cannot yet operate as a PA and therefore it cannot yet become a middle-man between customers and merchants for online payments.

The Delhi NCR-based unicorn also lacks a payments gateway product, which is increasingly being seen as a way for fintech companies to become a part of in-app payments.

Just this week, PhonePe launched PG Bolt, its in-house solution for merchants to integrate a PhonePe payments gateway into their apps and online stores.

BharatPe’s go-to-market strategy of merchants first and then consumers means that it will now have to match some of the upfront investments by the likes of PhonePe, CRED, Google Pay and others to acquire users.

In the eyes of many, acquiring consumers is tougher as consumers easily jump from one UPI app to another.

Acquiring merchants is also costly, but it involves lock-ins and subscriptions that can pay off over the period of usage. Pretty much every major consumer payments app has made inroads towards the merchant side with a view to building a double-sided network of consumers and merchants that can be leveraged to cross-sell other services.

Super Apps Are Expensive

BharatPe is joining this wave from the other side, with Nalin Negi as the full-time CEO now, who was appointed at the beginning of this financial year.

In April this year, the company claimed to have witnessed 182% increase in revenue from operations in FY23 and achieved its first EBITDA positive month in October 2023. In November last year, it also claimed that its “annualised revenue” crossed INR 1,500 Cr for FY24, a 31% increase from FY23. However, these figures were not audited at the time and haven’t been filed by the company officially.

So we don’t know whether BharatPe broke its loss-making streak in FY24. We suspect that the company will continue to be in losses given how much work was needed at the end of FY23. While the revenue breached the INR 1,000 Cr mark, BharatPe’s net loss was almost the same as the income at INR 926.9 Cr.

BharatPe had INR 508 Cr as cash and cash equivalent at the end of the fiscal year, which the company will look to leverage as it expands into new areas. The startup will need to spend on marketing, invest in brand-building exercises. acquire and retain users through discounts and cashbacks, and also bring partners on board for ecommerce, lending and other consumer verticals.

At the same time, it cannot afford to step off the accelerator for merchants either. Its most recent launch was the BharatPe One, an all-in-one PoS device for cards and UPI transactions. It plans to push the presence of this device to 450 cities by the end of the year.

What we know is that the super app strategy can have a real payoff for startups if they manage to get their products right and trigger cross-selling at the right junctures. PhonePe, for instance, claims that its revenue in FY24 grew to INR 5,064 Cr, largely due to the diversification of revenue streams and cross-selling.

So the upside is clearly there. We can see a similar boost for CRED and the likes when their individual products mature and add to the bottom line.

Now, let’s come to the question of whether BharatPe is late to the party. The popular argument is that India has plenty of depth for multiple large players in the same sector. The UPI transaction share cap is also a factor. Both are valid arguments, though we don’t yet know whether BharatPe has the right product mix to tap this depth.

Another significant challenge will be fighting off the more mature super apps who have more verticals to offer, more customers to bank on when fighting off the competition and are more firmly embedded as brands in the consumer’s mind. And that’s not even counting the might and reach of Reliance and Jio Financial Services, which is also going the super app way.

Finally, how much of a factor will Ashneer Grover continue to be for BharatPe? The former MD and cofounder of the company is still in the midst of a few legal battles with the company and there is the matter of the Economic Offences Wing probe. Will these ghosts of the past continue to haunt the new BharatPe?

BharatPe has taken its sweet time getting here. Is it too late to the super app party?

Sunday Roundup: Startup Funding, Tech Stocks & More

• Zepto’s $340 Mn round dominated the total funding tally for Indian startups this week, with $466 Mn raised across 22 deals
• Cash-strapped Dunzo has fired 150 employees in a fresh round of layoffs, leaving just 50 employees in the company for the supply chain and marketplace verticals
• With yet another acquisition, Dailyhunt parent VerSe Innovation is looking to boost digital advertising and marketing revenue. Will the plan work?

• Newly-listed Unicommerce saw its net profit zoom 31% YoY to INR 3.51 Cr in Q1 FY25, largely on the back of improved operational efficiency considering the relatively slow YoY revenue growth
• Firstcry pulled back its net loss by nearly a third to INR 75.68 Cr in Q1 FY25, its first quarterly results after the public listing last month
• Reliance Jio made a huge AI play, announcing multiple new products for its telecom subscribers as well as enterprise automation through Jio Brain

The post BharatPe Turns The Super App Switch On appeared first on Inc42 Media.

Edtech has taught us all a lesson in the past four years. It’s arguably easier to do one thing than everything at once. But the painful experience of BYJU’S, Unacademy, Vedantu and others has not stopped the relatively fresher PhysicsWallah from following the older guard.

What started as a YouTube channel has morphed into an umbrella company for everything to do with edtech and learning. With each passing year, PhysicsWallah (PW) is becoming the rival it looked to dethrone.

In fact, we said something similar last year. But PW’s product universe has expanded further since then. The latest piece is the School Of Startups or SOS, where PhysicsWallah would be investing more than INR 100 Cr.

Is PW stretching itself too thin? Or is it looking to take advantage of the fact that it’s pretty much the only game in town for investors? But before we get there, here’s a look at the top stories from our newsroom this week:

• The OYO Top Brass: CEO Ritesh Agarwal seems to have assembled a 14-member leadership team that can take the company to an IPO and beyond, after turning things around and bringing the company to profits in FY24 from major losses. Here’s a peek at who’s running the show
• India’s Spacetech Future: As India celebrated the National Space Day this past week, Lightspeed partner Hemant Mohapatra said he believes spacetech is set to benefit from investor interest over the next few years not only because most other sectors are maturing faster but also because of the high innovation quotient. Read this special Q&A
• Into The District: Taking inspiration from Blinkit’s success story, Zomato plans to revitalise the going out business with a major acquisition from Paytm and cross-selling opportunities. Can District become the third weapon in Zomato’s armoury?

PW Turns Away From Profits 

Not often does a company raise funds on the back of a profitable year just to slip into losses two years later. That’s the case with PhysicsWallah, which became a unicorn with its first institutional round in June 2022.

When it raised that $100 Mn, the startup was just stepping out of FY22 and reported a profit of INR 98 Cr. But soon after that, PW went the way of any startup that had raised a large round.

For instance, PhysicsWallah acquired four companies in less than a year, made a significant investment in a fifth, and also signed a JV deal with Utkarsh Classes for offline learning.

Even before most people knew about PhysicsWallah or PW as it christened itself after the funding round, the company was looking to go toe-to-toe with BYJU’S and Unacademy, two of the most capitalised test prep players at the time.

As it usually happens, these investments led to a 91% dip in profit and revenue falling short of previous guidance given by cofounder Alakh Pandey. While earlier Pandey was optimistic about reaching INR 1,200 Cr in revenue in FY23, the company only managed to bring in INR 770 Cr in the year.

Even in terms of the FY24 numbers, there is a bit of a drop in what PW had expected before the year closed and what it ended on.

In an earlier interaction with Inc42, cofounder Prateek Maheshwari claimed the company was on track to hit INR 2,000 Cr in revenue in FY24, but reports now indicate, the startup may have raked in INR 1,800 Cr in revenue for the fiscal year. More importantly, PW slipped into losses for FY24, according to a report by The Captable.

So essentially, PW has lost the one thing that set it apart from the rest of the edtech players in the test prep and skilling segment. Despite this, there is speculation of the company raising a large round in 2024 to fuel its many products.

New Products, Big Promises?

To the company’s credit, it has admitted that it is investing in a bunch of products ahead of time, and creating the foundation for future growth. However, these investments do add up to a massive number.

In FY24 alone, PW invested $10 Mn in offline learning vertical Vidyapeeth, and launched 50 new centres for this business. It also said it would invest INR 100 Cr to scale up the UPSC test prep vertical, and another INR 120 Cr over three years for the tech skilling product.

Further, there was a $61 Mn (INR 490 Cr) deal for a 50% stake acquisition in Xylem as the company looked to make inroads into southern Indian states. In effect, PhysicsWallah allocated or spent close to INR 700 Cr for new products in FY24 alone. That’s just shy of the revenue it earned in FY23.

To add to this, it also launched a new school for elementary education in February 2024, and now the School of Startups in August.

Interestingly, with the latest product, PW is taking on startups such as Masters’ Union, where the average pricing is far higher than something like a test prep course, given that PW is targeting entrepreneurs with mentorship, fundraising and incubation opportunities with the School of Startups. In some ways, it is also competing with accelerators and incubators targeting early-stage entrepreneurs.

In addition, Physics Wallah will be overlapping with the likes of Stoa, which offer management courses with the PW Institute of Innovation, another product introduced in recent months.

Having multiple verticals is fine enough, if the revenue contribution is significant. School of Startups is clearly a revenue-led play, but growing this vertical and attracting entrepreneurs will not be easy given and PW has to show results consistently.

Speaking to Inc42 earlier, cofounder Maheshwari claimed that Utkarsh Classes, acquired in February 2023, was set to conclude FY24 with INR 150 Cr revenue. The UAE-based Knowledge Planet, acquired in March 2023, was to bring in around INR 30 Cr in revenue.

The other subsidiaries were expected to bring in INR 20 Cr revenue, according to the cofounder, but this was on an overall revenue guidance of INR 2,000 Cr, which itself has not been verified as PW is yet to file its financial statements for the year.

We know the company has scaled down some of its offline operations in Kota, and also laid off more than 150 employees in the past year to save costs.

Further, it also moved some teachers to new regions which were closer to profitability. This has led to some discontent among educators. Naturally, with so many products under its umbrella, PhysicsWallah would need to balance the student and educators side of the value chain if it wants these products to grow from experiments to revenue generating verticals.

PhysicsWallah Waiting To Refuel

Naturally, investing in new products without external funding means PW dipped into its revenue to expand into new verticals.

This approach does have its upsides as companies can more tightly control product development timelines as well as vertically integrate pieces. Most famously, the likes of Amazon are said to have carried losses for years due to their continuous investments in expansion and new product lines.

However, given how rapidly things are moving in India, startups cannot completely cut themselves off from funding. That’s perhaps why PW is said to be in talks with Lightspeed and existing investors Westbridge and GSV Ventures for a $150 Mn round.

PW has not raised an external round since 2022. In 2023, there was talk of a $250 Mn infusion at a $3.3 Bn valuation. That, however, did not materialise.

Now, sources in the company indicate that PhysicsWallah’s leadership and management have been in discussions with investors including Lightspeed for a new round.

Reports on this deal have been going around since March, and most recent speculation is that a term sheet has been given to PW by some investors. But sources close to Lightspeed and PW told Inc42 this week that the deal is not yet close to completion.

Sources in the edtech industry claim that valuation is a major bottleneck in discussions between founders and investors. This could explain why the deal which has been making the rounds for nearly six months is not close to done.

Talks over valuation have certainly been influenced by the value destruction at BYJU’S as well as the slow growth at Unacademy and Vedantu. While the latter two are unicorns, they are yet to grow into their valuation and both carried major losses into FY24.

Unacademy is said to be exploring deals for an acquisition, where once again, the discussions are centred over valuation and Unacademy’s revenue problem.

It’s in this climate that PW is looking to basically do what these companies have tried for years. What could work in PW’s favour is its big focus on offline learning, as opposed to online products.

Most of its investments in the past year have been for offline verticals, which indicates that the company is heading towards becoming a multi-discipline offline coaching giant, of course, backed by tech such as personalised learning, AI tools and automation.

While its rivals attempted building edtech around online learning for various verticals, the adoption was slow and product-market fit was weak. Will PhysicsWallah’s offline-first gambit deliver the right outcomes?

Our Founder Pay Tracker Is Back

Let’s face it: All startups have had to cut costs in some ways to tackle the lack of access to easy VC money. Some have had to take drastic measures like laying off thousands of employees to sake their skins, and others have trimmed down verticals.

But what about the founders? Has FY24 seen startups founders take a pay cut or has founder-CEO and founder-CXO pay surged?

Inc42 has analysed the salaries of 21 founders of 12 startups, to see where things stand. Overall, these individuals took home INR 168.1 Cr in cumulative salary for the year, but is this better or worse off than last year?

Find out in our Founder Salaries Tracker

Sunday Roundup: Tech Stocks, Startup Funding & More

• This past week, Indian startups raised $265 Mn across 16 deals, with jewellery giant BlueStone leading the charts thanks to its $107 Mn round
• Paytm finally decided to sell its entertainment ticketing business to Zomato in an INR 2,048 Cr all-cash deal, which is definitely one of the most eye-catching acquisitions in Indian startup history
• Zomato rival Swiggy, which was last valued at $10.7 Bn, is reportedly targeting a valuation of $15 Bn for its $1.2 Bn IPO, which is likely to be announced before the end of the year

• Peak XV and BEENEXT-backed Kenko Health has shut shop after failing to find a way out of the investor deadlock that kept it from an insurance licence
• The Open Network for Digital Commerce (ONDC) has launched digital lending services through third-party players along with other fintech products to move beyond ecommerce and mobility

The post PhysicsWallah’s Product Gamble Continues appeared first on Inc42 Media.

We have seen Bhavish Aggarwal take to the stage and say many things in the past. The week gone by was no different. Ola’s huge Independence Day event ‘Sankalp’ saw Aggarwal lay out the vision for newly-listed Ola Electric and his latest big bet Ola Krutrim. Curiously, not only was Ola Cabs shunted to the sidelines but also renamed to Ola Consumer.

However, it was hardly surprising. Ola’s transition from a ride-hailing company to a EV maker has been three years in the making, but Aggarwal has also positioned Ola as a future-focussed tech infrastructure company to compete against the AWSes and NVIDIAas of the world, as well as a consumer platform that could potentially become a digital commerce behemoth.

Those who admire Aggarwal have long called him the Elon Musk of India, but at the same time, Ola’s trajectory does hint at an Amazon-like platform that works as the backbone of the upcoming AI revolution and for digital commerce. So perhaps a comparison with Jeff Bezos is not unwarranted either.

But this is not a paean. What we are trying to say is that Ola is changing. It wants to be in the middle of everything that could change India in the future, and at the moment, that’s not ride-hailing. It’s EVs, AI and chips.

So, should we already be preparing our eulogies for Ola’s ride-hailing business? Not quite yet, but that time looks to be getting close.

Before we see why, here are some of the other top stories from our newsroom this week:

• The New Instamojo: Instamojo faced an existential crisis in October 2023 after the RBI barred it from operating as a payment aggregator, leading to a major pivot. Now the startup is a Shopify challenger looking to bring MSMEs to the ecommerce fold. Here’s how the company changed itself
• Dunzo Still In Doldrums: Reliance Retail could well save Dunzo, but other investors are still on the fence about the future of the startup that has barely survived through months of cash crunch. In fact, even if Reliance saves Dunzo, what future awaits the company?
• Exam Time For VCs: SEBI is making it mandatory for AIFs in India to have at least one certified decision maker in investment teams, and VC funds are scrambling to comply before the May 2025 deadline. What’s SEBI thinking and why do some believe it’s taking it easy on funds?

An Ola For India

Ola is just a copy of Uber for India. This low-hanging fruit naturally became the central criticism for Ola Cabs when it first launched in India.

In fact, Ola in those days meant a cab, and it’s only in 2023 that one had to really clarify they are talking about Ola Cabs and not Ola Electric. Even now, it’s really hard to speak about Ola Electric, without the ‘baggage’ of the other Ola.

But Aggarwal is hell-bent on changing that. Or at least that’s what we saw at Ola Sankalp. For simplicity’s sake, we are using Ola here very loosely to signify the group.

What was on display on August 15, 2024 at Ola Sankalp was unbridled ambition, some cherry-picked stats and a vision that had a grandeur seldom seen in Indian startups. At least not in the same unabashed manner.

The Ola Sankalp livestream ran for over three-and-a-half hours and rivalled the runtime of the LOTR trilogy. Its content was perhaps just as fantastical, as we said in our examination of some of Aggarwal’s and Ola’s claims.

But parsing all that PR speak and grandeur, we can see where Aggarwal is looking to take Ola. And that’s being everything that India needs or is seen as needing. In this context, the ‘excluding China’ disclaimers sprinkled throughout Ola’s Sankalp presentation, are about positioning India as the main China alternative for the manufacturing of semiconductors and electric vehicles.

Incidentally, that idea worked for smartphone manufacturing, with Apple making the biggest push. Can Ola Electric similarly catalyse chip and EV manufacturing, which are its biggest focus areas right now?

What Is Ola Today? 

Ola is a chip maker; it’s an EV maker; it will provide cloud services and power digital commerce, logistics and AI copilots through Ola Consumer. It seems mad, but there is a method.

These are unsurprisingly the areas that the Indian government wants to focus on for its economic growth targets. India sees itself becoming the semiconductor capital of the world over the next decade, with a huge outlay of government spending to propel the industry.

Aggarwal is painting Ola Krutrim as the poster child for this revolution, with the AI chips, which the company claims would outperform the current market leaders, when they launch sometime in 2026.

This is a claim that cannot be tested yet, and perhaps Ola can indeed pull it off if everything falls into place. But there are a lot of moving pieces, and even the semiconductor industry could see major changes in the next couple of years. For now, Ola is saying it will be the company to drive that change in India, whatever it may be.

A similar pattern can be seen in the Ola Electric vision. Besides new product launches, there were big numbers, market-beating expectations and claims that are hollow at-present, but could become true in the next three to four years.

Here too, Aggarwal latched on to the hot topic of self-reliance or ‘atmanirbharta’ as far as energy production is concerned, with his vision for the Gigafactory and cell manufacturing. Ola Electric could very well be a critical part of India’s aim to reduce imports of batteries. But at this point, it is a nice story that sells well in the right circles.

Curiously, these are targets that Ola Electric has not tried to sell in its IPO pitch. Undoubtedly though, it is great content for social media reels and highlights.

And finally, Aggarwal’s pitch for the Ola of the future was about Ola Consumer, a new platform that essentially crams in everything that Ola makes. This brings us to the end of Ola Cabs, formerly known as just Ola.

End Of The Ride For Ola Cabs?

Okay, perhaps the end of Ola Cabs is a little overstated, and hopefully, it did serve as a lure to get you this far. But here’s one thing we are having a hard time changing our mind on. Bhavish Aggarwal is perhaps not in love with ride-hailing any more.

In some ways, it would be hard even for Aggarwal to shed the Ola Cabs business, which explains the vociferous denials last year when reports of a Uber-Ola merger surfaced.

We don’t want to analogise too much about smoke and fire, but can you really deny that Ola has given up on cabs in recent years. The service quality has taken a nosedive, and perhaps the biggest indication is that rivals have caught up.

Rapido and BluSmart have made gains and both have the funds they desperately need to scale up. Rapido basically stepped into every gap that Ola left in the ride-hailing business, and sources in the industry believe it is poised to dethrone Ola as the second largest player in this segment.

Another newish rival is InDrive, which is gradually adding more drivers and expanding to smaller cities. Even Uber is turning a corner by utilising India as its tech hub for the global operations, as we uncovered in our look at the US giant’s India experience in recent years.

Ola had the first-mover advantage, which it squandered by not addressing weaknesses in the operations and service quality. For long, Ola Cabs rested on the fact that the advantages presented by an Uber-Ola duopoly could only be broken by something really massive.

In the past few years, that ‘something massive’ has happened. Ola Cabs is now a cab stuck in the mud, and rather than pull it out and try to spark the engine again, Aggarwal is building a big manor around it.

Within this manor that’s being built, cab-hailing will rarely be spoken about, but Aggarwal is keeping some of the Ola Cabs vestige alive with Ola Share or ride-sharing.

Other ride-sharing services have not fared very well in India, but we can see why Ola is adding ride-sharing for now as an option. Sharing is more popular in smaller cities and towns, which is the key user base of Ola Consumer as well as ONDC.

As Ola Consumer builds on the ONDC network, Ola will likely look to own the last-mile mobility needs in smaller cities, and scale that up. But here, it will have capitalised rivals like Namma Yatri and others as well. It’s challenging to scale up ride-sharing in markets that don’t offer a high volume of active users, and that’s only if you don’t discount rides.

Ola says on its website that Ola Share prices are always fixed and payment has to be done before the ride starts, but the service will be cheaper than typical Ola rides. Given this, Ola Share right now looks like a way for Ola to stay in the mobility game, and keep the Ola Cabs car running on low fuel.

It’s a ride that could end any time.

Sunday Roundup: Tech Stocks, Startup Funding & More

• A temporary blip or a start of a turnaround? With $395 Mn raised by startups this week, this is comfortably the highest weekly tally in recent months
• Does BYJU’S have any fuel left? The fallen giant is likely to shut nearly half of its 250 BYJU’S Tuition Centre to cut expenses further
• Blinkit across borders! The quick commerce giant is now allowing customers overseas to place orders for their siblings in India for Raksha Bandhan. How long before it becomes a permanent thing?

• FirstCry pops on debut! The ecommerce giant listed on the stock exchanges at a 35%-40% premium over the issue price, with M&M, SoftBank, TPG Growth making big returns from the IPO
• Unicommerce’s stellar listing! The B2B ecommerce company debuted at a premium of 117.59% over the issue price, which was expected by many thanks to the rampant oversubscription for the IPO

The post Ride Over For Ola Cabs?  appeared first on Inc42 Media.

Every four years, with the Olympics, we get to see spirit and competition that tend to become stories and legends. Records are broken and new challengers emerge. The story is similar for quick commerce in India, with Flipkart Minutes joining the field.

And like any athlete that wants to challenge the leaders, Flipkart is fully geared up and is not shy about what it wants to do with quick commerce.

Coincidentally, quick commerce as a model gained traction four years ago, before the pandemic pushed the 2020 Olympics to 2021. Covid disrupted plans on the sporting side, and it certainly changed the game for ecommerce too.

This change is best evidenced by how Flipkart sees the category. While once instant delivery was about essentials, today it’s essentially everything.

While it’s early days for Flipkart Minutes, there are legitimate reasons why the incumbents – Blinkit, Zepto and Swiggy Instamart – need to be worried.

Before we find out why, a look at the top stories from our newsroom this week:

• Swish’s Bold Bet: In the era of 10-minute deliveries, Swish is looking to do what Zomato couldn’t by bringing quick commerce to the food delivery space. Will it manage to pull it off?
• Mygate’s Turnaround: After a dismal FY23, Mygate went back to the drawing board and proved that it can crack unit economics and find sustainable revenue growth in FY24. Here’s how the startup did it.

Learning Quick Commerce Tricks

Flipkart has already taken a couple of stabs at grocery delivery in 2015 and then in 2017. The first one was Flipkart Quick, which offered 30 to 90-minute deliveries in some cities, which was followed by Flipkart Supermart in 2017. Subsequently, Flipkart Quick was phased out in November 2022.

Supermart had the best chance to succeed, but instead of expanding dark stores to many corners of the country, Flipkart chose to go with fulfilment centres which have a wider inventory and typically a wider distribution radius.

The dark store model has more or less become the only way to do quick commerce today. Blinkit, Instamart, Zepto have chosen this route, while Tata’s BigBasket is also going this way.

This time around, Flipkart has gone for the dark store model and is competing in every category that Blinkit, Zepto and Instamart have added in the past year.

Flipkart Minutes currently offers free deliveries on all orders above INR 99 and is also levying a platform fee of INR 5 per order.

The vertical is being led by Hemant Badri, who is the vice senior vice president and group head of supply chain for Flipkart. His appointment indicates that Flipkart sees supply chain as a key component of the business.

Flipkart is said to be planning to open 100 dark stores across top cities. But Blinkit, in comparison, has over 639 dark stores as of now. The Zomato-owned company wants to have 2,000 dark stores by the end of 2026. So, in terms of scale, there’s a lot of catching up to do for Flipkart.

Sources say Zepto is on course to double its dark store count to more than 700 by March 2025. The company recently got a massive $665 Mn infusion to fuel this expansion.

Swiggy’s Instamart is also expanding its network ahead of the IPO in 6-12 months, and much of its focus in recent months has been on the quick commerce side, where it has seen a significant growth in revenue.

Flipkart’s Edge

What could work in Flipkart’s favour is its large existing user base, plus its strong brand recall in smaller towns, where Blinkit or Zepto might not yet have made inroads. Blinkit has done tremendously well in the past two years, but this has come largely from consumers in metros.

A majority or 80% of the new stores it opened last quarter were in the top eight cities, with Delhi NCR seeing the most investments. Delhi NCR is also the biggest contributor to Blinkit’s GOV and revenue, and well ahead of the other 25 cities that Blinkit currently has a presence in.

Earlier this week, Drools’ CEO Shashank Sinha predicted that Flipkart Minutes will outdo other quick commerce players in smaller towns and cities. Speaking at The D2C Summit by Inc42, Sinha said Drools came on board Flipkart Minutes because Flipkart can scale up quickly in these cities, even though the service is currently only live in Bengaluru.

In the past, Flipkart had rolled out the same-day delivery services for multiple products across 20 Indian cities, including Ahmedabad, Bengaluru, Bhubaneswar, Coimbatore, Chennai, Delhi, Guwahati, Hyderabad and Indore, among others. So, it does have the on-ground capability to fulfil the logistics needs for quick commerce in these cities, many of which would perhaps be getting a first taste of instant delivery.

The fact that Blinkit, Zepto and Instamart have yet to penetrate deeper into the country provides an opportunity for Flipkart. Earlier, Zepto cofounder and CEO Aadit Palicha said that India’s top 40 cities provide enough growth headroom for Zepto and other quick commerce platforms. “If we execute well, we can realistically take this business from INR 10,000+ Cr top line today to potentially to INR 2.5 Lakh Cr top line over the next 5-10 years,” Palicha said, even though Zepto currently has a presence in just 10 cities.

Flipkart’s entry into the quick commerce space ahead of the 2024 festive season sales is also significant, as this allows the company to get the right mix of volume and order value. In this regard, Flipkart’s debut with non-grocery categories is key.

Zomato, in its most recent shareholder letter, said that an increasing number of non-grocery ecommerce users are shifting to quick commerce. D2C founders also believe there is attrition of brands and customers from marketplaces to 10-minute delivery.

For instance, Swiss Beauty cofounder Mohit Goyal highlighted that quick commerce has become the preferred mode for emergency beauty purchases, a category that was never being catered to before 10-minute deliveries.

Where Flipkart Minutes Stands Out

And the quick commerce trend has also trickled down to fashion startups and food delivery. It’s only right then that Flipkart Minutes has chosen to go all-in with a host of electronic products and some items such as cameras and large printers that are not available on Blinkit currently.

The number of SKUs in each category on Flipkart Minutes might fool some into thinking Flipkart has turned its entire platform into quick commerce. Though to be fair this is currently restricted to some postal codes in Bengaluru only.

In the short term, the company will have to invest heavily to expand Flipkart Minutes. The $1 Bn funding round led by Walmart and with Google as a backer is certainly going to be useful in that regard. But it will also have to restructure its distribution for quick commerce, from fulfilment warehouses to smaller dark stores and limited SKUs.

While Instamart, Blinkit and Zepto have added thousands of SKUs to their grocery aisles as well as new categories recently, their customer base is skewed towards urban users. It is not yet clear whether Flipkart Minutes can unlock the same appetite for new brands and faster deliveries for high-value items in smaller cities.

Given this, it is very likely that some Flipkart Minutes facilities will double-up as warehouses for inter-city deliveries and dark stores for hyperlocal quick commerce. The exact model is yet to be determined.

Flipkart Minutes is a key part of the ecommerce giant’s super app model. It is also investing in growth areas like digital lending, insurance distribution, travel and fashion verticals. But none of them have the revenue potential that quick commerce offers.

Goldman Sachs estimates that Blinkit is already worth more than Zomato’s food delivery operations. Zomato’s quick commerce revenue jumped about 2.5X YoY to INR 942 Cr and adjusted EBITDA loss also improved to INR 3 Cr in Q1 FY25. The turnaround from an adjusted EBITDA loss of INR 133 Cr in Q1 FY24 has turned quite a few heads.

Blinkit is on the verge of profitability after a shift to quick commerce from its older hyperlocal model in 2022, with 78.8 Mn orders in the most recent quarter, and monthly transacting user base of 7.6 Mn. This is the benchmark for Flipkart Minutes and other quick commerce competition.

Speaking of competition, there is plenty of depth in the Indian market, but then we are also talking about huge companies like Zomato, Swiggy, Flipkart, Reliance Retail, BigBasket and Zepto.

They will all want to justify their investments in quick commerce, and there will be a situation where the market is divided between five or six players. It will be interesting to see which of these giants gets impatient first and looks to end the battle of attrition by acquiring rivals instead of playing the long and patient game.

Will Flipkart be on the right side of the market when this happens?

Sunday Roundup: Tech Stocks, Startup Funding & More

• The weekly startup funding tally fell by halve in comparison to the previous week, with startups raising $112 Mn via 22 deals this past week
• Ola Electric made a flat market debut, listing at INR 75.99 against the issue price of INR 76. But by the close of the week, the stock was trading at INR 91, 20% higher than the listing price

• Ecommerce giants FirstCry and Unicommerce are also set to get listed in the first half of the week ahead after their public offerings closed this week with healthy oversubscriptions for both companies
• US-based lenders of BYJU’S have moved India’s Supreme Court to appeal against NCLAT’s order quashing insolvency proceedings against the company
• The Economic Offences Wing has made an arrest in the alleged BharatPe fraud case, taking custody of an individual linked to fake vendors allegedly being paid by Ashneer Grover and Madhuri Jain Grover

The post Flipkart Minutes & The Quick Commerce Olympics appeared first on Inc42 Media.

Bhavish Aggarwal is in the thick of it. From Ola to Ola Electric and now Krutrim — the much-celebrated founder is now on the verge of taking Ola Electric public, the first of what is likely to be a series of IPOs.

After the public offering and a listing later this week, Ola Electric will also become the first auto sector company to list on the exchanges in two decades. While Aggarwal will take perhaps a few moments or a day or two to bask in the IPO limelight, his focus is likely to shift very soon from Ola Electric to Ola, Krutrim and the company’s new verticals.

While the attention is unsurprisingly on Ola Electric currently, this past week we turned the spotlight on other potential growth areas for Ola.

• A Fourth Bite At Food Delivery — Ola is back in the food delivery game, and for its fourth attempt it is getting a little help from ONDC and a lot more help from discounts
• Mapping The Future — The company’s Ola Maps product is the latest to grab the limelight with sources claiming it’s on course to become another name in Bhavish Aggarwal’s stable of unicorns. But it’s a long, long road ahead

Despite the optimism around these verticals, there are still quite a lot of questions around Ola’s ride-hailing business and whether Krutrim can indeed take on AI tech giants. So let’s take a closer look at Bhavish Aggarwal’s house of unicorns.

What About The Original Ola? 

It’s hard to talk about Ola without talking about the original Ola. These days, EVs and AI are the buzzwords, but when Ola started out in 2010-11, ride-hailing was the in-thing.

In that sense, Aggarwal has always had a penchant for sectors that were grabbing the headlines. Before we go into EVs and AI, let’s see how Ola capitalised on the ride-hailing opportunity, but seemingly has remained stagnant over many years.

The delightful experience of early adopters created a magical aura around ride hailing, and particularly Uber, which launched in 2009, and Ola wanted to bring the same experience to India. The first three to five years saw Ola acquire users by the millions fuelled by funding from Tiger Global, Sequoia (now Peak XV) and SoftBank. Ola was a darling of the Indian VC ecosystem, but the challenges in ride-hailing are still largely the same, more than a decade later.

Ola has raised more than $5 Bn in the past 12 years, one of the most heavily funded companies in the ecosystem.

The startup competed with Uber on price in the early days, but once discounts disappeared and driver incentives shrank, the complaints have continued to rise. The overall ride-hailing experience has continued to slide over the years, and only recently has competition once again forced Ola to review key aspects of the ride-hailing operations.

The New Rides In Town

The likes of newly-crowned unicorn Rapido, BluSmart, InDrive, Namma Yatri and others have accumulated capital and looked to usurp Uber and Ola.

Let’s take Rapido as an example. The startup found a go-to-market route through bike taxis, where it claims to have more than 60% of the market. In the last year, Rapido has also entered cab hailing and expanded auto rickshaw ride too. The company entered the unicorn club earlier this week with a $120 Mn round, which sets it up to scale up in the months to come.

And Rapido is growing quite rapidly. Ahead of FY24, it claimed to be on track to reach INR 600 Cr in revenue against INR 450 Cr in FY23. Ola’s ride-hailing business brought in INR 1,987 Cr as revenue in FY23, while Uber India recorded INR 679 Cr as income from ride-hailing.

One could say that Rapido has grown faster.

Ola’s ride-hailing revenue in FY23 is around FY20 levels (March 2020) when it earned INR 2,096.1 Cr. The pandemic years are largely to blame for this. Rapido on the other hand, only suffered a minor dent in revenue during the pandemic years, thanks to its relatively low revenue base. Rapido has seen 10X growth between FY20 and FY23 (INR 42 Cr to INR 450 Cr), as Ola went through a slump.

To fight the revenue problem, Ola launched the Prime Plus tier for drivers and riders. But as we argued last year, it’s not the greatest of propositions for either side of the Ola business.

After halving its losses to INR 772 Cr in FY23, Ola parent ANI Technologies would be hoping to cut this further. Firstly, it laid off 10% of its workforce or close to 200 employees in late April 2024, and added new revenue streams through ONDC and food delivery.

It also cut tech costs by moving away from Microsoft Azure and Google Maps. The latter, Aggarwal claimed, would result in savings of INR 100 Cr per year. While the migration from Azure and Google Maps has been framed as global giants vs homegrown tech debate, it makes most sense from a cost-saving point of view.

But ride-hailing as a proposition is also changing. Electric vehicles will soon become the norm if state and the central governments keep up with their green mobility targets. Ola has been slow to get on the green mobility curve.

The hope in the long term is that Ola’s potential electric car business will feed the supply chain for EV-hailing. But the electric car plans are being put on hold for now, and Ola is largely looking at EV two-wheelers on the ride-hailing side.

As we argued in March this year, Ola’s green mobility journey has been stop-start. Aggarwal has to balance costs of running the ride-hailing business with the investments needed to move towards EVs in the next few years. Even if Ola turns profitable by FY25 (if we assume generously), can profits be sustained through this transition?

A Brief Word About AI & Krutrim

Ride-hailing might yet prove to be a profitable business in the next couple of years, but Aggarwal will also need to look at Ola Electric and Krutrim from the point of view of profitability.

It’s too early to look at Krutrim given that it’s only just started rolling out products and solutions, but being a unicorn and the current focal point for new products (cloud and maps), we believe that Krutrim is being seen as the lynchpin by Aggarwal & Co.

For instance, GPUs for AI cloud computing will come into play for Ola Maps and Ola Cabs in the future. AI-driven calculations will be critical for battery manufacturing and testing. In turn, Ola Maps will be a key part of food delivery and ride-hailing and EVs.

If we squint hard enough, we can see this flywheel taking shape, but of course all of this hinges on how well Ola can scale it up and whether it has the endurance that AI will take.

While Krutrim could launch its language models, chatbots and translation models as standalone products, the real big money is in becoming a provider of AI tools and computing to enterprises. It’s also why Aggarwal is wooing developers with free access to the Krutrim Cloud and Ola Maps products to start with.

However, profitability is a distant prospect because in many ways, Krutrim is currently in the proof of concept stage, looking to demonstrate that this approach can work and Ola and Ola Electric are the testbeds.

When it comes to profits, OpenAI is struggling to get there, so is Google and Meta too. The capex needed for scaled-up AI platforms is massive as evidenced by OpenAI. The AI giant is expected to make between $3.5 Bn to $4.5 Bn in revenue in 2024, as per The Information, but it could finish the year with a loss of over $5 Bn, thanks to a staggering $8.5 Bn in operating costs alone.

OpenAI is likely to raise more funds by next year, so Krutrim’s fundraising spree is just beginning, if anything. In other words, this is going to take a long time, especially if the idea is to feed the appetite of the Indian market, where scaling up revenue will be slower than OpenAI or Google or Meta.

Ola Electric Tosses The IPO Coin

Of course, if you ask Aggarwal about Ola and Krutrim right now, you may not get a response at all, because all eyes are on Ola Electric. We have a few interesting observations on Ola Electric’s business, which we have captured in the past in our coverage, but more of that will be coming in the next few days.

While it’s undoubtedly a huge landmark for Ola Electric, the company has lost some of the bullishness from earlier this year when it filed its draft red herring prospectus.

For one, the valuation in the final prospectus has been slashed to around $4 Bn from $5.4 Bn (over 25% lower) and investors such as Ab Initio Capital, Alpine Opportunity Fund, and Tekne Private Ventures will be selling shares in the IPO at a loss over the acquisition price.

Of course, these investors might well make up for these losses in the long run with their remaining holdings, but the IPO is not going to generate the same kind of returns for all investors.

In fact, just about 10% of the IPO involves existing shareholders selling their stake, which shows just how early the IPO is for some of these investors. It’s no surprise that many analysts believe the Ola Electric IPO is coming a little too soon, and perhaps is banking on the gap in the auto sector for new-age businesses.

The company continued to post losses at the operating level, along with negative cash flow from operations during FY24. It has also borrowed heavily since March, securing more than INR 3,000 Cr through loans, with just INR 1,700 Cr in cash and bank balances (as of March 2024).

This level of borrowing indicates that perhaps Ola was not confident of raising enough funding through the public markets at the high valuation that it was touting in January 2024. The company is looking to utilise over 15% of the IPO proceeds on debt repayments for the core Ola Electric Technologies business.

Ola Electric may indeed raise enough money to plug in whatever funding gaps it has through this IPO, but retaining the faith of investors and shareholders will need a consistent effort towards reducing the debt exposure and profitability.

Ola Electric seems to be doing the hard work of the IPO before it has cleared all doubts with regards to how it will scale up profitably. This sets it apart from many of the profitable startups that public investors have seen IPO this year, and not in a good way.

So is Aggarwal jumping the gun with the Ola Electric IPO, the first from his house of unicorns?

30 Startups To Watch: The July 2024 Edition

Every month we pick 30 of the hottest and most innovative startups that are making waves in the startup ecosystem. And our list this month is testament that many of these early-stage startups don’t need bags of funding to live up to their potential.

In the July 2024 edition, just eight of the 30 startups have raised more than $1 Mn in funding, while a whopping 16 early stage startups raised less than $1 Mn or just about $1 Mn. Plus, a significant portion (20%) of the list remains bootstrapped.

Dive into our list now

Sunday Roundup: The D2C Summit, Q1 Results & More

• Kirana tech startup 1K Kirana has collapsed under the weight of its cash burn-heavy business model after rasing INR 250 Cr+ in funding. Inc42’s in-depth investigation shows just what went wrong for the Info Edge-backed startup \
• The D2C Summit is back this week, with a series of riveting panel discussions and illuminating fireside chats featuring 40+ luminaries from the world of modern retail and D2C — including Future Group’s Kishore Biyani, BlueStone’s Gaurav Singh Kushwaha; The Moms Co’s Mallika Datt Sadani among others
• Indian startup funding regained momentum with a total of $222 Mn invested in startups this past week across 25 deals, a whole lot better than the slump of the previous week
• Zomato announced net profit of INR 253 Cr in Q1 FY25 and saw a massive rally on the stock as its market cap inched closer to the $30 Bn mark

• Logistics unicorn Delhivery returned to the black, posting a net profit of INR 54.3 Cr in Q1 FY25 and is eyeing the booming quick commerce sector for growth next
• Among other listed tech cos, ixigo reported profit after tax of INR 14.85 Cr; Tracxn saw profit nearly double to INR 1.27 Cr, while Fino posted profits of INR 24.27 Cr

The post Ola Electric On Cusp Of IPO, But What About Bhavish Aggarwal’s Other Unicorns? appeared first on Inc42 Media.

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

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

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

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

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

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

Budget Blues For Groww, Zerodha

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

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

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

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

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

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

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

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

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

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

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

SEBI’s Slap

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

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

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

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

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

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

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

Jio Waiting To Pounce

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

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

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

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

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

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

Best Of The Union Budget 2024-25

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

Sunday Roundup: Tech Stocks, Startup Funding & More 

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

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

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

There’s optimism within Paytm again. In fact, founder and CEO Vijay Shekhar Sharma said the Q1 FY25 results mark the end of tough times for the Indian fintech giant.

Sharma lauded the company’s resilience and the capability of Paytm’s products, and said now the target is to head towards profitability in this fiscal year. This bullishness is not unwarranted, but there is still a long way to go before Paytm is back to where it was even three quarters ago.

One year ago, we said Paytm was knocking on profitability’s doors, and the momentum definitely seemed to be carrying the company towards this milestone after the bloodbath on the stock market post listing. However, since then, it has been a season of adjustments, reassessment, scaling back and preparing the Paytm machinery for leaner times.

After the Q1 results, it’s clear that Paytm has taken some steps forward, but there is a lot more of the mountain left to climb for Sharma and Co. This Sunday, we are looking to bring more context to Paytm’s Q1 results, in light of what’s happening in the market.

But as usual, a look at the top stories from our newsroom this week:

• Shein’s Second Innings: Shein is back in India with a little help from Reliance Retail, but can the fast fashion behemoth recreate the magic that worked for it in India before the ban in 2020?
• BYJU’S Vs Bankruptcy: After months of speculation, BYJU’S was finally hit with insolvency proceedings this week, and the company is precariously close to being auctioned for its parts as creditors look to settle matters
• Looking Ahead To The Budget: While most Indians would welcome tax rate cuts with open arms, the Union Budget 2024 need to look at long-term measures to boost consumer spending and the Indian startup story

Where Paytm Stands After Q1

Much of Paytm’s optimism at the end of Q1 stems from the fact that new merchant signups are reaching January 2024 levels and there has been an increase in payments GMV — both are critical indicators of the health of the company. Merchant stickiness is more important than consumer stickiness for Paytm, given the better unit economics on the merchant side and the ability to continually cross-sell products.

There was only a marginal increase in the merchant subscriber base to 1.09 Cr, but daily merchant payment GMV (excluding discontinued products) went back to January 2024 levels, much before the downturn began.

CEO Sharma claimed that this is the beginning of the end of the tough times. “This quarter reflects the full impact of the challenges we faced. As a team, we are committed to navigating through these times with a focus on compliance. My team and I are committed to ensuring we return to profitable quarters,” Sharma said.

But this optimism hides just how much more climbing Paytm has to do.

— Paytm reported a net loss of INR 840.1 Cr, more than double quarter-on-quarter

— Operating revenue fell by 36% QoQ to INR 1,502 Cr

— Plus, revenue from financial services (loans primarily) was down by 8% to INR 280 Cr

On personal loans, Paytm’s focus is on the distribution side and the company is looking to add more bank and non-bank partners to diversify its revenue streams. This particular change and the retreat from lower ticket size loans has nearly halved the revenue from financial services.

In other words, Paytm is not completely out of the weeds.

The Uphill Climb Continues

For one, Paytm has not exactly cut down on all expenses. While employee costs have lowered as a result of layoffs, there’s a lot more that needs to be done.

The scale of the potential layoffs and restructuring can be understood by the fact that Paytm reported just over 31K employees in the sales team as of Q1 FY25, which is down from 35K employees in Q4 FY24. In three months, the company has let go of nearly 5K employees from the sales team, but this is a drop in the bucket when considering Paytm’s target of saving INR 500 Cr in employee costs in FY25.

In Q1 FY25, indirect expenses (excluding ESOP costs) rose to INR 1,301 Cr from INR 1,186 Cr in the previous quarter and INR 1,220 Cr last June.

Even though employee cost has come down by 9% QoQ, it is still higher on a YoY basis. “Given the focus on merchant acquisition, we will continue to invest in the sales team while having a higher focus on productivity of sales employees,” Paytm said.

Further, marketing costs were also higher during the quarter since the company had to spend heavily to communicate the changes to its platforms after the RBI action. “Cost-optimisation across the board will continue to be our key focus area and we will continue to be disciplined about our overall cost structure.”

During the analyst call on Saturday (July 20), Paytm CFO Madhur Deora said that employee costs will go down 5%-7% quarter-on-quarter. He added that the marketing expenses were higher during the June quarter because of new ad campaigns but should go down in the coming quarters as marketing activities are scaled back.

Another big challenge for Paytm is that it still cannot bring on new users for UPI payments. Given that Sharma said the next few quarters will see a bigger push on the payments front to become a cross-selling channel, changing this will be crucial for Paytm’s future growth.

“In the process of completing technology and consumer migration. The merchant migration is completed, but on the consumer side, it is a multi-bank system, so all banks have to participate and our primary partner YES Bank has to also expand on certain technologies. We’re at the tail end of the migration on the consumer side and we can go back to the NPCI to request to add new users,” Sharma said.

Jio-Sized Threat For Paytm & Co

Of course, the competition is watching Paytm and many rival payments platforms are grabbing users and retaining them with new loyalty programmes and other cross-selling. Even Flipkart has jumped into the payments game and is investing heavily to grab and retain users.

And let’s not forget Jio Financial Services (JFS), which is expected to go from beta to full launch in the next quarter. JFS is essentially doing everything that Paytm was doing before the RBI action disrupted the momentum.

More entrenched players like PhonePe and Google Pay have cashed in on the vacuum left behind by Paytm, migrating its users to other banks and nodal accounts. Now, Paytm not only has to spend to get these merchants back and retain them but also compete in the cross-selling of financial services to these merchants.

But, as we said in the beginning, Sharma is optimistic and confident of beating the odds. Earlier this month, the company’s CEO said that RBI action and the fallout did take a heavy toll on his emotional and personal wellbeing, though it wasn’t the worst moment in Paytm’s 14-year journey.

“At a professional level, I would say we should have done better, there is no secret about it. We should have understood the situation better. We had responsibilities which we should have fulfilled in a better way. I think we have learnt our lesson from the issue and are making a better comeback,” Sharma said at an event in Delhi.

Despite that setback, Sharma said his vision continues to make Paytm a $100 Bn company. At the moment, that seems like a pipe dream; for now Paytm has to get back to the growth seen till January. And that will take a lot more from Sharma and the fintech giant.

Sunday Roundup: Tech Stocks, Startup Funding & More

• Funding momentum across India’s startup ecosystem has seen a slight revival as startups cumulatively raised $200 Mn across 25 deals this past week
• A day after the Microsoft outage wrecked havoc at a global level, the tech giant now claims to have managed to retrieve some of its more critical services, but many others are still down

• Reliance Retail’s digital and new commerce businesses contributed 18% to the total revenue of the retail giant in Q1 FY25, while ecommerce platform JioMart saw average bill value grow 16% YoY
• Several states, including New Delhi, Karnataka, Tamil Nadu, Goa, and Kerala, are said to be exploring allowing alcohol delivery through Swiggy, BigBasket, Zomato, and other platforms
• Ola Electric is likely to be valued at around $4.5 Bn for its upcoming IPO, a decline of roughly 20% from its last private valuation, according to reports this week

The post Can Paytm Bounce Back After ‘Hopeful’ Q1? appeared first on Inc42 Media.