It’s been a curious past year for Paytm. Even as the fintech giant has shown improved financial performance on paper over the past two quarters, the real picture lies between the lines.

Let’s take the Q3 numbers, for instance: Paytm narrowed its net loss by 6% on a YoY basis to INR 208.5 Cr in the quarter ending December 2024 (Q3 FY25), but revenue from operations declined by 36% to INR 1,827.8 Cr compared to Q3 FY24.

Even though Paytm managed to reduce its indirect expenses by roughly 7.5% to INR 1,000 Cr in Q3, direct costs grew by 13% on a QoQ basis. In contrast, on a sequential basis, revenue grew at a slower rate of 10% from INR 1,659 Cr.

This indicates that the revenue growth has come as a result of higher spending on payments processing charges, cashback and incentive costs and other direct expenses. In fact, much of this spending has gone towards reclaiming the market share lost after the RBI action on Paytm Payments Bank.

In the meanwhile, the competition has caught up to Paytm in terms of revenue and we can expect an intense battle in the year ahead from the cohort of super apps in India. From PhonePe to CRED to Flipkart-backed Super.Money, Navi and others, a number of fintech heavyweights have looked to capture Paytm’s lost market share in UPI, personal and merchant loans, merchant services and even digital commerce.

These companies are building from a position of strength in many cases, whereas Paytm is looking to revive its brand and flywheel after the setback over the past year. How far behind is Paytm today?

Paytm Picks Profitability Over Growth 

Outside the quarter-on-quarter comparison, it must be noted that Paytm has consistently reduced expenses on a YoY basis in FY25 in line with slow growth guidance after the RBI action on Paytm Payments Bank. This has resulted in improved profitability, but at the expense of revenue and customer growth.

Maintaining this profitability will be a huge challenge for Paytm, especially because future payments revenue growth is highly dependent on sales employees.

Even though the company hired close to 2,000 sales employees between September and December 2024, the overall costs for sales employees have fallen marginally in the quarter.

For instance, overall employee cost (excluding ESOPs) fell by 6% QoQ and 29% YoY to INR 575 Cr.  Employee costs in FY25 (April to December) fell by INR 451 Cr compared to the same period in FY24, in line with Paytm’s guidance in January 2024 of having to cut employee costs by INR 400 Cr – INR 500 Cr.

Even non-sales employee costs —  business, operations, technology and support roles —  fell by 11% QoQ and 36% YoY, Paytm said, on the back of AI adoption for improving productivity across businesses.

The clear indication is that Paytm’s salaries and incentives for its salesforce and non-sales teams have fallen considerably in the past quarter. The big question is whether the company can accelerate growth while continuing to reduce employee costs, spending on marketing and customer acquisition?

Paytm In The Fintech Super App Race

There’s little doubt that the cost-cutting has led to slower revenue growth in FY25 for Paytm. The company is not even close to the Q3 FY24 revenue mark, and it’s becoming increasingly clear that the RBI action on Paytm Payments Bank has set Paytm back by more than a year in terms of the revenue expectations.

And it’s given competition a huge advantage and opened up the path for the likes of PhonePe or CRED to take over from Paytm. Even as Paytm has battled business slowdown and attrition of customers, rivals such as PhonePe, CRED and others have continued to make great strides in terms of revenue and profitability.

For the sake of the comparison, we will be considering FY24 numbers for PhonePe and CRED, both of which also reported losses in FY24 like Paytm. While both these rivals had lower revenue than Paytm, the headwinds of the past one year have slowed down the Delhi NCR-based giant significantly.

Like Paytm, PhonePe and CRED have both adopted a super app model banking on cross-selling services such as personal and merchant loans, insurance, digital commerce, travel bookings and more. For all three apps, the UPI payments service is a means to attract customers at the top of the funnel, then cross-sell services to the most active of these customers.

Given the poor revenue dynamics for UPI payments — zero MDR and high cost of operations — all three super apps need to build significant bridges to other services to further leverage UPI customers.

In terms of the revenue scale (as of FY24), Paytm is well ahead of these two rivals. However the past year has resulted in grave growth challenges for Paytm, which threatens to weaken its position as the largest fintech company in India by revenue.

CRED’s operating revenue jumped 71% to INR 2,397 Cr in FY24, while PhonePe reported operating revenue of INR 5,064 Cr in FY24, up 74% from the previous fiscal. In comparison, Paytm reported income of INR 9,978 Cr in FY24, comfortably more than the two rivals combined.

But, after three quarters of FY25, Paytm is well shy of PhonePe’s FY24 revenue. Paytm’s quarterly revenue for Q1, Q2 and Q3 FY25 has been trending 35% lower than the respective quarters in FY24. If this trend continues, Paytm could finish FY25 with around 30%-35% lower revenue than FY24, which would put its annual income in the ballpark of INR 5,300 Cr

So in effect, Paytm’s revenue in FY25 could be similar to what PhonePe reported in FY24. In fact, if the Bengaluru-based unicorn maintains the revenue growth rate seen in FY23 and FY24 — 77% and 74% respectively — PhonePe could well emerge as the leading fintech app in India by revenue as of March 2025.

This comparison is of course subject to Paytm and PhonePe holding their current course for the next quarter as well.

What Paytm would be banking on between now and March 2025 is a huge spurt in its lending business, which was severely dented by the RBI’s regulatory action on the payments bank.

But on the basis of the past three quarters, the company has an uphill climb in this regard as well.

What Can Paytm Count On?

The company’s revenue for financial services in the quarter increased 34% on a sequential basis to INR 502 Cr. But for the full fiscal, revenue growth was stifled as a result of the second order impacts from the regulatory challenges.

Personal and merchant loans made by the bulk of this category. Paytm’s financial services business also includes insurance distribution, equity broking and mutual fund distribution.

Revenue from lending was down by 17% YoY, and overall financial services revenue for 9M FY25 was INR 1,158 Cr, 32% lower than the same nine month period FY24.

Even when it comes to the customer and user metrics, it was a challenging quarter for Paytm. The number of financial service customers fell to 590,000 in Q3 FY25 from 810,000 in Q3 FY24.

The only silver lining for Paytm was that the merchant loans portfolio grew 16% QoQ to INR 3,831 Cr as a result of the introduction of default loss guarantee (DLG) terms with lenders in the previous quarter.  The company said it will also increase the DLG offered to lending partner Shriram Microfinance India Credit for merchant loans from INR 225 Cr to INR 350 Cr.

“Our revenue was bolstered by better collection efficiencies and higher revenue from loans distributed under the DLG model in this and the previous quarter. [For Personal Loans] We have been primarily focused on the distribution only model, wherein we have seen reduction in disbursements on account of tightening risk policies by lenders, which is inline with industry trends,” the company said in its earnings release.

The company also said it has resumed personal loans for a select group of customers (new and repeat) with income coming from distribution and collection of loans. “We see increased willingness from lenders to partner for these select customer cohorts and allocate capital in the DLG model, which will help to increase disbursements in the distribution and collection model.”

Optimism Within Paytm’s Ranks

Paytm president Madhur Deora told analysts in the earnings call after the Q3 results that the company has the opportunity of increasing the percentage penetration within merchant loans to maybe 10% to 15% of the total installed merchant device base, compared to around 5%-6% today.

“The ticket sizes have increased and they continue to increase. So I remember three years ago, this number was about INR 1,10,000, while currently the number is about INR 2 Lakh, and part of that is because the value per merchant has grown in Paytm. The merchants obviously are doing a lot more digital payments today than they were doing three years ago, especially our best merchants to whom the loans are sort of qualified for,” Deora added.

Paytm cofounder and CEO Vijay Shekhar Sharma has time and again said that the company is on the verge of turning things around after the past year. Sharma has reiterated multiple times that Paytm is looking at AI-first operations to bring more efficiency to its distribution-led model.

Deora elaborated, “We do expect that FY26 will be better than FY25, especially given that we are going to have additional partners going into FY26 for personal loans, so we do expect an increase in this business and a rebound from the lows that we saw last year.”

While Paytm would be banking on the network effects from its payments services and its ability to cross-sell to improve the financial services metrics further, getting there will not be easy given the stiff competition and the number of players in these spaces.

When it comes to insurance distribution, aggregators such as PB Fintech, InsuranceDekho and others have a clear market share advantage.

On the investment tech side, Paytm will compete against the likes of Groww, Zerodha, Upstox, Angel One and others that have a huge lead in terms of active investors. Groww and Zerodha can count on revenue from their AMC businesses as well, where Paytm does not have a presence.

Plus, these discount brokers are expecting slow volume growth in 2025 as a result of the changes in regulations for futures and options trading introduced in 2024.

And finally on the digital lending side, the entry of Jio Financial Services as well as the growing base of new platforms like Flipkart-backed Super.Money, Adani Group and others has complicated the situation for Paytm. Besides this, dedicated lending platforms such as MoneyView have also raised funds in the past year to target customer acquisition.

These platforms have partnered with the same lenders and would be competing for the personal and merchant lending pie from a different lens than Paytm, including a big push on secured lending, where Paytm has not yet launched products.

In that regard, the next quarter will be one of the most significant periods in the lifetime of the company. Can Paytm push forward from this position of competitive weakness and get back to its former self to dictate the terms of the fintech market in India?

The post Paytm Still Waiting For Revival, One Year After RBI Action appeared first on Inc42 Media.

Despite showing signs of a funding revival, the Indian startup ecosystem is in a peculiar place now. Most of the capital has been raised by companies in the public markets, which skewed the mergers and acquisitions (M&As) market in 2024. But will this have any ramifications on startup M&As in 2025?

With only 71 such deals recorded in 2024, it was the worst year for M&A deals in the Indian startup ecosystem over the decade. The second-lowest number in terms of M&As in the last 10 years was 82 in 2020. Post this, there was a funding revival which spurred on consolidation in key sectors like edtech, digital media and entertainment, and ecommerce.

In 2022, for instance, the number of M&As in the Indian startup ecosystem shot up to 240, before halving in 2023 and then further falling in 2024 to the nadir.

But looking beyond that, startup M&As are likely to shoot up by 58% in 2025, as more and more listed companies flex their capital. Sectors that are expected to witness the most number of M&As include — AI, edtech, ecommerce and consumer services as well as fintech.

One of the key reasons is the fact that most companies are looking to integrate automation into their operations and become AI-first, even as they experiment with new distribution channels and new products. This includes listed giants like PB Fintech, Nykaa, Paytm, Zomato, Swiggy, Nazara, Zaggle among others.

These listed new-age companies are expected to flex their muscles and dictate the terms of the M&A market in the coming year.

Listed Giants To Pursue Strategic M&As In 2025

While the trend of distress sales or fire sales will likely continue for startups that have hit hard times, one new factor could very well emerge in 2025.

That’s listed new-age companies eyeing growth-stage startups with proven business models, and a measurable revenue boost. Sectors like fintech, enterprise tech, and consumer services are most likely to see this wave of established players acquiring startups either for the tech or to add new verticals. Which is where the QIP wave of 2024 gives us a hint or two.

In 2024, Zomato raised INR 8,500 Cr through a QIP, followed by Nazara’s INR 855 Cr preferential placement, and Zaggle which netted INR 595 Cr from its QIP. In 2025, we expect several such QIPs from the cohort of startups that went public between 2021 and 2023.

Listed companies in competitive sectors such as fintech and consumer tech segments prefer QIPs for fundraising as a means to reduce the regulatory and financial burden compared to options such as debt, secondary or rights issues. For instance, a QIP round would suit companies in competitive sectors such as Paytm or Nykaa, or even those like PB Fintech which are looking to expand into new segments.

Typically, such funds are allocated to new lines of business that came up after the public listing, such as acquisitions of adjacent or new verticals, investments in technology infrastructure (AI, in this day and age) or just for customer acquisition and brand-building for the long-term.

SaaS Startups, Edtech Consolidation On The Cards

The line between traditional SaaS and AI is fast blurring, as evidenced by the transformation seen by large SaaS giants such as Salesforce, Freshworks and Zoho. Other Indian SaaS companies are also busy integrating AI capabilities across their product suites to stay relevant in 2025.

In 2025, investors expect M&As to grow for sectors such as enterprise tech which are going through the AI churn and revolution. SaaS companies are shopping for tech capabilities, focussing on IP-led tech acquisitions. Watch for consolidation in areas like cybersecurity, cloud computing, and AI-enabled enterprise applications.

The edtech sector is also expected to be in for significant consolidation in 2025, with even unicorns likely to be acquired, particularly with continued speculation around Unacademy.

The market is maturing beyond the pandemic boom, and with the focus on sustainable business models, there’s little room for the splurging VC dollars as seen in the past. Watch for interesting combinations of online and offline models, particularly in test preparation and skill development segments.

The public listing of PhysicsWallah is also likely to be preceded by a few acquisitions, especially as the edtech giant continues its multi-product strategy.

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

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

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

Will Quick Commerce Giants Acquire Competition?

Vertical-specific quick commerce models are emerging as force breakers, with companies specialising in categories like fresh meat (Meatigo, Licious), medicines (Plazza, 1MG), fashion (Myntra, Slikk, Blip), food (Swiggy, Swish, Zing). While many of these platforms have the scale to sustain these quick commerce operations, several new startups will likely be at the mercy of VC funding to scale up.

Will investors back these new QC models or will these startups just become more acquisition targets for the giants?

Within QC, the focus for major players is shifting from customer acquisition to operational efficiency and sustainable unit economics either through the right product assortment or new categories.

It won’t be a surprise if some of this consolidation happens on the brand front if and when the delivery apps push for more private labels.

Dhruv Kapoor of Anicut Capital highlighted opportunities for vertical growth in quick commerce, where players could specialise in specific categories with streamlined supply chains for faster deliveries.

He noted that investors are now cautious, prioritising differentiation over more players in an already crowded market. This could lead to increased consolidation and new business models in the ecommerce space.

Plus, we can expect a tooth-and-nail battle in India’s metros for 10-minute cafe deliveries with Blinkit Bistro, Swiggy Snacc and Zepto Cafe. But other startups are also emerging, essentially turning the cloud kitchen model on its head by going logistics first.

Expect to see AI-driven demand mapping and automation in the kitchen being billed as moats for these apps. Some of these city-specific startups could fuel the next wave of M&As for well-capitalised giants in the quick commerce segment.

The post Will 2025 Bring Springtime For Startup M&As? 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.

Investors expect a bullish year ahead for startup funding, but that doesn’t necessarily mean a great 2025 for venture capital (VC) funds and private equity firms in India.

Our Indian Tech Outlook 2025 series has delved into individual sectors such as GenAI, fintech, edtech, ecommerce and gaming, all of which are likely to throw up a few surprises for Indian VC funds and startups investors.

The mood in the ecosystem has certainly lifted after 2024, which showed more signs of maturity in terms of public listings, a push towards profitability, the propensity of consumers to pay more for services, as well as the rapid rise of new models such as quick commerce which are giving a new lease of life to relatively older sectors such as ecommerce, logistics tech and delivery services.

But as we turn the spotlight to VC funds in India, there’s still a lot of churn in the pool. We know that the past two years have seen a number of new funds emerge, with a lot of dry powder waiting to be deployed in the Indian startup ecosystem.

VC Funds In India: The Trajectory In 2025

For one, the exodus of partners and fund managers has led to a dearth of experienced talent at some of the most prominent funds in India. As a result, a lot of the legacy funds are in the process of consolidating leadership and establishing new decision makers.

This has fuelled the launch of new funds, but most of these funds are going after the same pie — early stage bets and a sharp focus on AI. Many of these funds are built in a micro VC mould, which has created a new glut of investors in the market, and a lot of the froth will separate from this mix in 2025.

The other big hurdle of 2024 was the increased compliance burden on Indian venture capital funds — particularly with regards to the certification compliance that will come into effect from May 2025.

This has complicated operations at VC funds, as we covered towards the end of the year, but has coincided with fund closing cycles at some of the legacy firms that have been active since 2012 and 2013.

All these factors have come at a time when pre-IPO rounds and secondaries have become the flavour for larger funds. But it’s also created a tunnel vision around exits and fears around the bubble bursting.

That’s what’s bubbling on the surface — let’s dive deeper into how the VC ecosystem is changing as we step into 2025.

Pre-IPO Rounds Become Late Stage Engines 

As we have recounted in our review and outlook series for a number of sectors, the nature of pre-IPO rounds is fast evolving. In fact, at the late stage, many rounds can now be categorised as pre-IPO, seeing as they often come with exit conditions.

As per our conversations with investors, startups are now looking to raise a significant round without an eye on the valuation, with promises of an IPO in the next two years. But this means that investors are scrutinising the use of funds more closely, akin to how it happens in the public markets.

Besides being crucial liquidity events for early investors, these late stage rounds are helping companies build stronger foundations before going public.

Startups are also being compelled to be more compliant with filing and disclosure norms by investors that are infusing funds at the pre-IPO stage. This has resulted in a shift in the hiring patterns as well, with most investors now being engaged to rope in experienced finance and operations professionals, rather than splurging money on tech talent.

While earlier the likes of BYJU’S, OYO, Meesho, PhonePe, Paytm, CRED, Ola Cabs and other large unicorns raised mega rounds at Series E or Series F stages, the pre-IPO wave has all but erased these stages from the market.

Domestic Funds Turn To QIP Route

On the institutional front, QIPs are emerging as a competitive front with notable examples in 2024 —  Zomato’s INR 8,500 Cr refuel, Nazara’s INR 855 Cr preferential placement or Zaggle’s INR 595 Cr QIP.

Overall, more than INR 1 Lakh Cr was raised by listed companies through QIPs in 2024. In 2025, we expect several such QIPs from the cohort of new-age tech companies that went public between 2021 and 2023.

The primary factor is the high degree of liquidity in the mutual fund industry, which has recorded positive net equity inflows every month since March 2021. SIP contributions crossed INR 2,500 Cr mark  for the first time in October. Adding to this, the bullish market has stretched valuations, which is enabling promoters to dilute their equity for greater value than raising debt.

As of today, the market is still favourable for high valuations as indicated by the premium earned by MobiKwik, BlackBuck and Swiggy towards the end of 2024. This only adds to the notion that more companies will be lining up for the domestic institutional capital through QIPs.

Indian VC Funds See Big Spurt In Strategic M&As 

After a 20% spike in funding for the year in 2024, the next year is expected to see an even bigger jump. But when it comes to M&As the picture was bleak in 2024.

What might change in 2025 is the focus on strategic bets that could unlock value down the line for listed companies and large scaled-up startups that may have IPO plans in the pipeline.

Mergers and acquisitions fell to an all-time low since 2014, there is a consolidation wave imminent as listed new-age companies with healthy cash reserves look for the right deals. The capital flow is heavier towards public markets, which has tilted the M&A market.

Another factor that potentially adds to this notion is the rise in private equity (PE) activity in India. Between January and November 2024, the total PE inflow nearly touched $31 Bn across more than 1,000 deals. Startups in healthcare, green energy and manufacturing sectors are said to be on the radar of PE-backed corporations and conglomerates.

No Stemming The Secondary Deals Wave

The year 2024 witnessed a wave of secondary deals in the Indian startup ecosystem as VCs offloaded stakes via such deals in multiple startups like Capillary, ixigo, Urban Company, Porter, Pocket FM, among others.

Amid the increase in secondary transactions, startup founders also saw a jump in the interest in secondary deals. As per Inc42’s annual survey, 60% of the 100+ surveyed founders revealed that investor interest in secondary transactions “increased” in 2024.

Up to 35% of the surveyed founders said they see a “moderate” increase in interest for secondary transactions, 25% saw “significant increase” in interest from investors for such deals. This indicates that VC and PE firms are keen on backing well-established new-age tech companies and don’t mind entering the cap table later in the game.

Expect more such deals as funds from the 2012-2013 vintage reach expiry dates in 2025, and VCs look to offload their portfolio to return funds to the LPs.

New Models, Structures In The AIF Cupboard

When Peak XV Partners announced a new fund called Peak XV Anchor Fund with capital from its internal balance sheet, many saw it as a signal of how things will evolve for some of the more mature VC firms in India.

In Peak XV’s case, the launch of the evergreen or rolling fund allows the firm to stretch beyond its current mandate of focussing only on India, and allows it to pursue a legacy even more removed from Sequoia Capital in the US after the two entities separated in 2023.

It would not be a surprise to see other legacy firms pursue a similar structure to launch rolling funds, especially after realising gains from exits from IPOs in 2024.

Rolling funds reduce the burden on fund managers to raise new funds and engage with LPs as the firm invests through its own profits, and makes it easier for funds to find coinvestment partners in non-core sectors or geographies.

In addition to new structures, some funds in India have also implemented unique fee models more suited for the needs of the Indian market and Indian LPs. Expect more such models to come to the market as funds try to build competitive moats to raise funds from LPs.

Niche, Micro VC Funds To Continue Chasing AI High

The AI boom has not only turned the heads of entrepreneurs, but also experienced (and not so experienced) general partners (GP) and fund managers.

Typically speaking, micro VC funds are set apart by the fact that they have a special focus or a highly evolved thesis, thanks either to the fund manager’s expertise in a particular niche or whitespaces in the market. In 2025, AI is still a white space, given that there’s still plenty of headroom for innovation and maturity, especially in India.

Data shows that the number of new funds in India has seen an exponential growth over the past three years, and a lot of the activity is geared towards the early stage, where micro VC funds have become a distinct category similar to angel funds.

A lot of this is down to the all-new opportunity that’s opened up in the wave of the GenAI revolution, but it’s not just native AI companies raising the funds. Those with a data advantage are leveraging investor interest to pitch niche models that could solve vertical-specific challenges or target non-sophisticated consumers.

AI’s spillover impact will also be seen in fintech, SaaS, ecommerce, consumer services and healthcare, and startups in every sector are now looking to position themselves as AI-first.

With the micro VC boom, have come fears of a frothy market, where inexperienced GPs are looking to cash in on the buzz. While we are not yet in a bubble, having a glut of investors and not enough depth in the market could result in a few issues around due diligence towards the end of 2025.

The post Indian VC Funds In 2025: New Faces, New Models And New Horizons   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.

Paytm’s 2024 was a mirror image of 2023.

The fintech giant finished 2023 on a low after coming very close to cracking profitability, while in 2024, the tale was reversed — a bleak beginning followed by a more optimistic finish.

But if we have learnt anything from the past year, the road ahead is unlikely to follow this neat pattern for Paytm and its chief Vijay Shekhar Sharma.

Even though we have seen a lot of bullishness around Paytm towards the end of 2024, whether it continues will come down to how the company competes against rivals, especially sing they did not suffer the disruption that Paytm did earlier this year.

As we count down to 2025, it’s worth taking a look at why Paytm — the largest fintech company in India by revenue — is still not out of the deep waters, and look back at how 2024 treated the company.

But first, a look at our recap of other unicorns and listed giants from this past week:

• Reliance’s AI Era: Reliance ended 2024 by completing the $8.5 Bn deal with Disney, and adding to its Jio FInancial Services platform and prepared itself for the AI revolution with new partnerships and products
• Zepto’s Rapid Rise: If the $1.3 Bn fundraise was not enough for Zepto, the startup also outpaced Swiggy’s Instamart, and Zomato’s Blinkit in terms of revenue, earning more than both these giants combined. Here’s the Zepto in 2024 story
• Swiggy’s Monumental Year: Swiggy’s $1.3 Bn public listing eventually came when there was already plenty of buzz for startup IPOs, but this was not the case at the beginning of 2024 when there were several doubts about the company’s financial state

Paytm Swallows The AI Pill

Towards the end of the year, Paytm founder and CEO Vijay Shekhar Sharma called on Indian entrepreneurs to build “AI-first companies”. That tells us a lot about what 2024 was all about for Paytm, especially after the RBI action on Paytm Payments Bank (PPBL) in the first quarter derailed all revenue momentum.

Everything that followed those testing months in the beginning of the year can be framed through the AI lens. Paytm had cautioned analysts that it had to cut around INR 500 Cr in costs, and AI and automation was one way to get there, besides laying off on-ground employees from the sales team.

At the AGM in September, Sharma, for instance, said that Paytm is leveraging AI to develop new technologies, and has already integrated the technology across all its business segments. “Some technologies being built are so good, if you fork it out, it could become a standalone business vertical.”

The past year was also a test of Sharma’s leadership as key employees such as COO Bhavesh Gupta, CMO Sumit Mathur, Ajay Vikram Singh (CBO of user growth and UPI), Bipin Kaul (CBO of the offline payments business) and Sandeepan Kashyap (chief business officer of the consumer payments vertical) all quit their positions.

Following this exodus, Sharma is said to have stepped in and taken charge of these key verticals, directly overseeing day-to-day operations and governance. This was also when the company decided to bank on AI and machine learning to fill the gap.

It named CTO Manmeet Dhody as “AI Fellow” to drive its projects related to AI innovation in business, and elevated senior VP of Technology Deependra Singh Rathore as its new CTO-Payments.

Interestingly, these two appointments showed that Paytm is thinking about the tech side of fintech, whereas many of the executives that quit had more extensive experience in the financial services industry.

Without explicitly saying it, Paytm flipped the AI switch and is now arguably putting technology first, while also cleaning up the verticals that increased its compliance and costs burden.

Sharma exclaimed that Paytm’s support staff costs have gone down by 60% in the past ten months. “The AI models that we are deploying and the costs that we are incurring are significantly low. I am happy to tell you that we have reduced 60% of our manpower cost on support in the last 10 months,” Sharma said in October this year.

Building A War Chest

The other big crutch that Paytm used was selling assets and bolster its cash reserves position. The sale of Paytm Insider to Zomato for INR 2,048 Cr in Q2 FY25 helped the company report a profit.

One can expect a similar boost for Paytm IN Q3, after the sale of its stake in  Japanese digital payments firm PayPay Corporation for INR 2,364 Cr ($279.19 Mn) to SoftBank’s Vision Fund 2. These two deals, combined with the dependency on AI has put Paytm on track to take on the highly capitalised competition of PhonePe, Groww, CRED, Flipkart Super.Money, Jio Financial Services and others.

This was the biggest fear for Paytm in the weeks after the RBI action in January 2024. And now in 2025, the company can look to use its improved cash position to either raise an institutional round — like Zomato, Zaggle and Nazara — and push ahead on Sharma’s vision of getting back to the top of the consumer payments pile.

Some might say that Paytm lost its competitive edge when it decided to put all its eggs into the wallet business around 2021 and reduce its reliance on UPI. This meant that the company was very dependent on the PPI licence and this was severely dented by the RBI action on PPBL.

Paytm Steps Into 2025 Arena

Paytm is today gung-ho on being a UPI payments app, and has also looked to improve its margins on the lending side with default loan guarantee arrangements for merchant lending. But competing in the B2C fintech arena will not be easy especially after Paytm lost some of its market share this year.

PhonePe retained its top spot despite seeing a dip in its monthly numbers, with 7.4 Bn transactions in November, down over 6% from the prior month. Similar dips were seen by Google Pay and Paytm in second and third place. While Google Pay processed 5.7 Bn UPI transactions in November, 1.1 Bn transactions were facilitated by Paytm.

Flipkart-backed fintech super app super.money, Navi, CRED and Amazon Pay are hot on the trails of these market share leaders, and it’s looking increasingly like the UPI market share is determined by how much companies spend on customer acquisition.

This is exactly why Paytm’s improved cash position and its reliance on AI for service distribution and customer success can be a key weapon. But the competition is also going in this direction — technology is not a long-term advantage, but allows Paytm more room to compete.

Having said that, Sharma will continue to face pressure for profitability in 2025. Before the RBI action, Paytm was on track to hit profitability, but that’s now been pushed further into 2025. On paper, Paytm has improved its position in 2024, but this is just precursor to a competitive war in the fintech space.

Can Vijay Shekhar Sharma steer Paytm back to where it was in 2023?

Sunday Roundup: Tech Stocks, Startup Funding & More 

• Inc42’s ‘Annual Funding Report 2024’: Indian startups cumulatively netted more than $12 Bn in fresh funds during the year, up over 20% from last year, and stabilising to 2020 levels
• Jio Calls For Less Regulations: Week after closing its $8.5 Bn deal for Disney+, Reliance Jio has reportedly opposed the telecom regulator’s proposal to bring OTT content services under Indian Telecommunications Act, 2023
• UPI Boost: The RBI has announced that Prepaid Payment Instruments (PPIs) or digital payments wallets with full KYC will now be able to make UPI payments through third-party apps

• Ola Electric Exodus: Ola Electric CMO Anshul Khandelwal and CTPO Suvonil Chatterjee resigned this week, days after the exit of CHRO Balachandar N from the EV giant
• Peak XV’s Bulk Deal: VC giant Peak XV Partners sold fintech major MobiKwik’s shares worth INR 81.63 Cr this past week via a block deal, after the stock saw a big rally

The post Paytm’s Roller-Coaster Year appeared first on Inc42 Media.

In August, when we last looked at PhysicsWallah’s product strategy, we said the company is the only game in town for edtech investors. And now the Gurugram-based startup is looking to capitalise on this with an IPO.

In fact, sources close to PhysicsWallah, or PW, investors have revealed that the company has been preparing for an IPO for several months now and that the $210 Mn fundraise earlier this year was pretty much a pre-IPO round.

After the trials and tribulations for the edtech sector from 2022 all the way through 2024, PhysicsWallah is the lone bright spot, with the competition either struggling with slow growth and losses (Vedantu and Unacademy) even after several years of operations, or dealing with existential crises (like BYJU’S).

And now, it’s looking to press home this advantage with an IPO that could set it up with the capital to execute its product strategy too. Let’s take a look, but first, the top stories from our newsroom this week:

• A Controversial Year: Inc42’s annual list of controversies is back, highlighting the founders who remained in the headlines for all the wrong reasons — from the MapMyIndia shareholder fracas to Bhavish Aggarwal’s social media spat
• Recapping Ola Electric: Speaking of Ola Electric, our review of the EV company’s 2024 shows a wide chasm between the ambitions of the company and the ground reality for the EV giant with market share slipping
• Zomato’s Story Of 2024: Our Year In Review train stopped by at Zomato land this past week to take a stock of the company’s emergence as the north star for the Indian startup ecosystem, but the times to come will not be easy, even for Zomato

Where PhysicsWallah Won The Game 

A few weeks ago, Unacademy Group cofounder and CEO Gaurav Munjal revealed the company’s operating numbers in 2024 on social media. He claimed that Unacademy had $170 Mn in the bank and was ready to leverage this for the long run.

Munjal was also dismissing speculation of an acquisition, just as he had done in the past. But one comment below the post stood out more than the post itself.

“This sounds so good. I miss the old times of fierce competition. I am waiting for the same. It is only when we compete, students get more options. Wish you luck,” said PhysicsWallah founder Alakh Pandey.

Many might see that as a snipe at Unacademy, given the phrasing used by Pandey. Especially when you look at the revenue growth for Unacademy and PW in the past two years. While PW has reported nearly 3X growth in revenue and is close to the INR 2,000 Cr mark, Unacademy’s revenue has fallen in FY24 to around INR 716 Cr.

One also cannot overlook the damage caused by two years of absolute mayhem at Unacademy, BYJU’S and Vedantu. All three unicorns had to scale back, and while both Unacademy and Vedantu have trimmed losses in the most recent FY24 fiscal, it came at the expense of slow revenue growth.

For PW, the online business is still the dominant category, but with a 55:45 split, that could soon change. That’s also vital if the company wants to improve its unit economics mix and get back to profitability in FY25. For instance, the margins on offline coaching are significantly higher for PW, according to sources in the investor base, and this will be the focus for the company going forward.

Even when it’s entering new verticals, the company has an offline-first approach today, as seen in its new School Of Startups vertical for aspiring entrepreneurs.

Despite having a huge operational headstart over PW, Unacademy has failed to capitalise on this advantage. What PW has today is the momentum that it needs to become the biggest target for edtech investors, customers, educators and partners.

Notably, the edtech major raised $210 Mn in its Series B funding round, led by Hornbill Capital, in September this year at a valuation of $2.8 Bn. Besides the new investor, Lightspeed Venture Partners, GSV Venture and WestBridge Capital also participated in the round.

In fact, one might even say that PhysicsWallah’s advantage is that it only formally entered the market in 2020, and therefore did not commit some of the cardinal mistakes that have become heavy weights around the shoulders of its rivals.

And it also helped that PhysicsWallah never over-capitalised itself even as it ventured out and branched into new products. The biggest criticism for PW’s product strategy is that it’s overleveraging the capital raised through acquisitions and not focussing on scaling up in a sustainable manner.

But with more capital in its bank now, perhaps the company has enough fuel to push forward on all fronts — especially outside its core of test prep.

Setting Up Shop For The IPO

If we analyse the weaknesses for PW or the potential challenges on its way, one can say that the startup’s relative youth is not something that will give confidence to public markets investors. Besides this, It’s also not a company that has a wealth of experience when it comes to its leadership or promoters.

Beyond the revenue growth challenges, edtech unicorns that started before PW have suffered reputational damage as well, thanks to layoffs and failures on the product front which led to sudden cutbacks. Now fixing this image is proving to be a harder challenge than many anticipated. And this has an impact on what kind of talent one attracts.

In fact, employee benefit costs more than doubled in FY24 for PW, and were its highest expense item.

While Unacademy and Vedantu have looked to continue operations well away from the public spotlight, PW has not shied from the limelight. Pandey has thrived in it, in fact, particularly with very public support for students impacted by the NEET controversy earlier this year.

PW’s penchant to put itself in the middle of the conversation has perhaps made it an even more attractive opportunity for investors, and seemingly even high-level talent.

Bolstering its top brass earlier this year, PhysicsWallah roped in former Blinkit finance head Amit Sachdeva as CFO, who will lead the company’s transition from a private to a public company in 2025. He was also the finance head at Wipro Digital prior to Blinkit, and comes with a wealth of experience in the finance function, which bodes well for PW’s IPO bid.

The startup has also reportedly finalised the bankers — Axis Capital, Kotak Mahindra Capital, Goldman Sachs, and JP Morgan — for its proposed $400 Mn to $500 Mn IPO next year.

As for the timeline of the IPO, our sources were not fully confident of the listing window but indicated that it could come around just around the Diwali festive season next year. And by then, we might even see PhysicsWallah back in the black and ready for its IPO.

Sunday Roundup: Startup Funding, Tech Stocks & More 

• Weekly Funding Falls: Between December 16 and 21, startups cumulatively raised $167 Mn via 19 deals, marking a roughly 73% decline from the $635 Mn raised in the previous week
• New Funds Worth $8.7 Bn+ In 2024: With 81 new funds worth over $8.7 Bn launched, VC activity in 2024 was comfortably higher than 2023, with early-to-growth stage funds dominating the investor pool
• Aye Finance’s INR 1450 Cr IPO: Aye Finance has filed its DRHP with SEBI for an INR 1,450 Cr IPO, which includes a fresh issue worth INR 885 Cr
• Unacademy’s FY24: The edtech unicorn trimmed its standalone net loss by 82.09% to INR 285 Cr in FY24, but revenue dipped marginally to INR 716 Cr in the year

• MobiKwik’s Listing Pops: Shares of fintech major MobiKwik tumbled nearly 10% on close on Friday, after the company’s bumper listing at a nearly 60% premium on the bourses earlier this week
• Swiggy’s Shares Jump: Shares of Swiggy jumped more than 10% week-on-week and finished at INR 597.50, following  domestic brokerage Axis Capital initiating coverage with a ‘Buy’ rating

The post PhysicsWallah’s IPO Frenzy  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.

Aman Priyadarshi claims his startup Plazza is building India’s first instant health app. The likes of Swiggy Instamart, Blinkit and Zepto have shown the way, and he is among a handful of entrepreneurs looking to branch off to create quick commerce offshoots.

The quick commerce battleground seems to be shifting from groceries and even electronics to medicine delivery and healthcare. Swiggy launched an epharmacy on Instamart through a partnership with Pharmeasy, while Flipkart Minutes is looking to leverage sister company SastaSundar to get a foot in the door.

Tata 1mg and Apollo 24/7 are also in various stages of piloting instant medicine delivery, with 1mg teaming up with fellow Tata company BigBasket for the service in select cities.

Many believe it’s the biggest untapped segment as of now in the quick commerce space, where average order value is the current big focus for players.

Like groceries, one can say that medicines and healthcare are part of the essential bucket for most households in India, and by going after this key segment, quick commerce players are hoping healthcare will also drive platform affinity besides average order value.

But even as the likes of Swiggy, Flipkart Minutes and Tata BigBasket look to capitalise on this whitespace, Priyadarshi and others say there’s a window of opportunity for new players to deliver consumer delight and value in the healthcare space through quick commerce.

Plazza, which launched on November 29, 2024, is currently limited to a single location in Bengaluru, and Priyadarshi, a former Kenko Health and Zomato executive, says the existing model for pharmacies is broken and outdated, and there’s an opportunity to not just disrupt medicine delivery, but also go beyond that.

And he also believes that having a mixed focus on grocery and medicines is perhaps not ideal, which is why a dedicated quick commerce pharmacy has the room to grow in India and increase the penetration of online pharmacies.

“It’s like in the real world, even a large kirana outlet will not have the bandwidth and workforce to manage pharmacy operations in the same space. You will need a more knowledgeable and qualified workforce in dark stores and the capacity for over 1.5 Lakh SKUs,” he says.

But will have the upper hand in the quick commerce pharma race?

Quick Commerce Enters New Era

If the rise of Flipkart in the early 2010s led to the emergence of vertical ecommerce marketplaces, can we really be surprised that the quick commerce era has also spawned similar counterparts? Swiggy Instamart, Blinkit, and Zepto are the new influencers.

Plazza is looking to bring the quick commerce magic to the pharmacy and healthcare side, while Swish, Slikk, Zing and perhaps dozens of others in stealth mode are looking to specialise in 10-minute food delivery.

Myntra is trying its hands at 30-minute deliveries for apparel and lifestyle products, and Nykaa is piloting the same with beauty. Essentially, quick commerce is easily the most pervasive trend in Indian consumer tech today.

Accel and RTP Global-backed FirstClub is looking to target the premium category and build a brand that has a significant presence in the physical retail space, rather than as an app-only service.

This quick commerce wave is wholly expected in some ways after the past year (FY24) when the three largest platforms — Blinkit, Zepto and Swiggy Instamart — all exceeded $1 Bn in GMV. But can this model be extended to pharmacies and healthcare in the same way.

Put another way: while many might appreciate the convenience of having medicines on their doorsteps in a matter of 10-15 minutes, is it really possible to go beyond this?

In fact, access to medicines and drugs is just one part of the healthcare value chain — albeit a significant part — and existing quick commerce apps have already built capacity in terms of over-the-counter (OTC) medicines. OTC drugs, supplements and nutraceuticals are

The big push today is for prescription-based medicines, which the likes of Swiggy Instamart, Flipkart Minutes and others are trying to target.

The Dawn Of Quick Pharmacies

“Prescription-led purchases of medicines are driven by doctors and healthcare providers, who typically guide patients to preferred brands and retailers around their clinic or hospital. This doctor-led distribution is embedded in the customer or patient’s mind. Breaking through this is difficult, which is why even the likes of Pharmeasy have found it challenging to scale up profitably” says the founder of a Bengaluru-based healthcare startup.

Plazza’s Priyadarshi also acknowledged that it will take a lot more to change customer and healthcare provider behaviour.

The key to success is incentivising these two sides of the healthcare industry to embrace the quick commerce model and not just for medicines but also for services like testing, consultation and monitoring all of which are critical in the healthcare chain.

These are also reasons why the grocery quick commerce model cannot simply be copy-pasted for pharma and healthcare. Plus, there’s the point Priyadarshi made about the need for a qualified workforce to manage pharmacy operations, but even beyond this, the Plazza founder says that the workforce in the retail pharma channel is heavily exploited and overworked.

“Being a pharmacist is a dignified job but not a good job. You are still doing things the old way and the supply chain is heavily outdated. A large pharmacy has anywhere between 5-6 pharmacists that do everything from opening to closing and managing customers,” the Plazza founder and CEO told Inc42.

Priyadarshi reckons that in one small pocket like Bellandur in Bengaluru, home to around 20-25 pharmacies, one sees around 1,500 walk-ins every day and it’s an INR 4 Cr to INR 5 Cr market on the basis of monthly revenue. All of these can be catered to by a couple of stores and by eliminating the doctor-led distribution, which forces patients to choose certain brands and manufacturers.

Reading and authorising prescriptions are a challenge, but that can be largely solved by technology and safeguards built around customer behaviour and other indicator data such as location and order frequency. The challenge, according to the healthcare founder quoted above, will be building a tech stack that understands drug inventory better than ever before, and removing the reliance on doctor-preferred brands.

Swiggy, Flipkart’s Pharma Flip

While these are early days for dedicated quick pharmacies, Swiggy and Flipkart have looked to capitalise on this gap. Swiggy, fresh under the spotlight from its recent mega IPO and the Q2 FY25 results this past week, is clear that having the right mix of categories across grocery, non-grocery and now pharma will be the key to garnering long-term customer loyalty.

In the earnings call after the Q2 results, Amitesh Jha, CEO of Swiggy Instamart, told analysts that categories like pharma are generally because as a use case they are more repetitive. “It also gives a very high recall value as well [for Instamart] because it is one of the things that you essentially need. I will come back to my whole view of how the offline market around you has a hardware store to a pharmacy to an FMCG store. Within this assortment, can you essentially cover all of them?”

A key piece of the puzzle are Swiggy’s megapods or the mega dark stores. Chief financial officer Rahul Bothra told Inc42 before Swiggy’s listing that the company is in the process of operationalising ‘mega dark stores’ with an area of 8,000-10,000 sq ft in several pockets of Bengaluru.

Swiggy cofounder and CEO Sriharsha Majety also said at the time that while speed is essential for quick commerce, having the right assortment of products and SKUs will be a key differentiating factor in the longer run.

Incidentally, the larger dark stores will allow Swiggy to stretch into more categories and grow the SKU count on Instamart. Such a setup allows Swiggy Instamart the bandwidth to carry lakhs of SKUs on the medicine side, but the company is also adding large appliances, fashion products and electronics to its dark stores. So medicines will have to share space with these categories for now.

At the moment, Swiggy’s pharma operations inside the dark store are managed by Pharmeasy, according to those working with these dark stores. Currently, Swiggy Pharma is only live in Bengaluru, and it’s not clear when Swiggy will take it to other cities.

On the other hand, Flipkart Minutes has started enlisting local chemists and pharmacies in Bengaluru and other metros and delivering them through its last mile delivery partners. Going forward, SastaSundar will be a key part of Flipkart’s healthcare offerings, which are bundled under Flipkart Health+.

Medicines get a dedicated space inside the megapods, and all due diligence such as prescription checks and sanctity of medicines happens through a dedicated person stationed inside these stores.

Pharmeasy’s prescription tech is being used to read and analyse prescriptions with the dedicated resource double-checking the order.

The question is will Swiggy continue to rely on Pharmeasy if and when this vertical scales up. Doing this without a partner might not be easy. The high margins in pharma delivery are diluted if Swiggy and others have to enter into licensing deals with existing epharmacies.

The All India Organisation of Chemists and Druggists (AIOCD) has already raised concerns about the quick delivery model, especially around prescription verification, warning of potential risks such as poor drug storage and lack of quality control.The body cited the example of the Swiggy-PharmEasy partnership as being risky.

India does not have a regulatory framework for online pharmacies and incumbents such as PharmEasy, NetMeds, 1mg and others have faced concerns in the past from chemist organisations around operating without a licence.

But the fact is that quick commerce has given new wings to the epharmacy business, as now startups have the logistics knowhow as well as demand forecasting and planning data needed to pull this off.

The Game Beyond Medicines

But Plazaa’s Priyadarshi says that the game is not AOV; but streamlining everything from consultation to appointments to tests to the eventual delivery of medicines through a single window. He believes that whoever owns this entire funnel will be the eventual winner, because this creates a virtuous loop that is so familiar to the healthcare customer.

In some ways, medicine delivery is just a go-to-market strategy for quick commerce players. Even Swiggy has admitted that the ultimate goal is to own the online experience for customers looking for that familiarity of the physical market.

So customers getting medicines in 10 minutes might start expecting tests and consultations in a similar time frame. Priyadarshi says that tests will be live on Plazaa within the next few weeks and customers will be able to get tests inside their homes in a matter of minutes, unlike say a few hours right now.

Will Swiggy, Flipkart and others also move towards this direction? It’s not unlikely but for now, the quick commerce focus is squarely on pharma deliveries within the healthcare piece. These platforms have to first overcome the very challenges that existing epharmacies face before looking beyond this.

The post Swiggy, Flipkart’s Growth Pill: Will Quick Commerce Disrupt Pharmacies Next? appeared first on Inc42 Media.

Even as Indian startups have grown in prominence through funding and milestones such as IPOs, engaging with policymakers and regulators has been one of the biggest challenges for all startups — large and small.

Founders often find themselves either blindsided by regulatory changes or feel that even as a new-age company driving value most of the policy is shaped by legacy giants and bodies. This is a major gap that needs bridging especially as the value creation continues to move India’s economic growth needle.

That’s the gap that the Startup Policy Forum (SPF) is looking to fill, and at launch more than 30 of the most prominent startups and founders in India are joining forces with experienced hands when it comes to dealing with public policy,

Founded by Shweta Rajpal Kohli, a public policy veteran with extensive experience, SPF aims to foster constructive collaboration  between founders, policymakers and regulators. The forum’s objective is to support the government’s initiatives to position Indian startups on the global stage, but in a way that’s inclusive and collaborative.

Notably, SPF’s membership is restricted to 100 companies only, but to launch with several of the most prominent founders have come on board, including the likes of CRED’s Kunal Shah, Unacademy’s Gaurav Munjal, Dream11’s Harsh Jain, ixigo’s Aloke Bajpai among others.

SPF is being led by Kohli, who is the president and CEO and was previously leading the public policy function at Peak XV Partners, after similar stints at Salesforce and Uber India.  Besides Kohli, Avantika Gode is the vice president at SPF, and also comes with experience in the public policy space, at Razorpay and Uber India before that .

The forum’s founding members include a roster of the most notable startups and founders in India. The forum is launching with Razorpay, CRED, Pine Labs, Groww, Acko, OYO, Swiggy, Practo, Dream11, MPL, Cars24, Cardekho, CureFoods, Livspace, Ixigo, Ultrahuman, Digantara, Invideo, Jupiter, One Card, Mobikwik, Yubi, and Progcap as founding members.

Speaking to Inc42, Kohli said that the SPF’s launch is critical for the Indian startup ecosystem which has reached a stage of maturity now. More and more startups are looking to find more collaborative ways to engage with policymakers regardless of whether it is for clarity in regulations or in shaping key policies that govern startup sectors. The Forum will be officially launched on January 16, 2025 — The National Startup Day — with 100 startups as members.

Kohli said that India is already one of the most attractive destinations for investors due to the innovation of Indian startups and the government’s focus on catalysing this ecosystem. But founders often struggle to understand the nuances of dealing with legislators.

“There is a gap in the market when it comes to helping these new-age nation builders that are keen to engage in constructive collaboration with government and regulators. Founders don’t always know which departments to approach and how to build relationships within government regulators, and SPF wants to be that bridge between these two.”

There’s some merit to this thought given that so far no industry body has looked to focus exclusively on the startup ecosystem when it comes to creating a bridge between industry and policymakers. While bodies such as IAMAI and Nasscom have taken on the mantle at times, these have no adequately addressed the needs due to various challenges over the years.

“Our startups are driving transformative change by democratising business and converting job seekers into job creators. We are glad to see many founders joining the Startup Policy Forum (SPF), which should reinforce India’s global leadership in the new-age economy,” Piyush Goyal, Union Minister of Commerce and Industry, said in a statement.

To address the needs of specific sectors, SPF has established four specialised councils. While the Fintech Policy Council will deal with issues related to the payments, banking and financial services sector the Consumer and Commerce Council covers a whole host of key sectors including ecommerce, edtech, food delivery, gaming among others.

Then there’s the Emerging Tech & AI Council, which will address the gaps for startups in AI, semiconductors, electric vehicles and other emerging areas that even the Indian government is looking to promote. Finally, there’s the New-Age Public Companies Council, which will bring founders of listed companies along with those companies looking to go for public listings.

Kohli added this includes everything from reverse flipping to regulatory filings to how to approach merchant bankers, all essential steps for companies preparing for an IPO. Besides this, founders would have the opportunity to learn how to lead a public company from CEOs of listed companies.

By curating a limited membership and assembling expertise in public policy, legal affairs, taxation, and communications, SPF is aiming to create a reliable platform that can improve the dialogue and engagement between entrepreneurs, regulators, and policymakers, and civil society at large. Besides Kohli and Gode, SPF has also assembled a team of India’s foremost experts in public policy, legal affairs, taxation, policy  research, communications, and marketing.

The post With 30 Startups At Launch, ‘Startup Policy Forum’ Looks To Fuel India’s New Economy  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.

Swiggy is now a publicly listed company and there’s no looking back. But this is not the Swiggy that we have come to know in the first half of its life.

In fact, Swiggy is not just a food delivery company any more. And neither is Zomato. Both arch rivals are changing rapidly and at least for Swiggy, the focus is on the wider consumer services ecosystem.

With Rare Life and Yello on the cards, Swiggy is looking to stretch into areas that don’t exactly line up with food or delivery. This is part of the company’s identity shift in the past few years, even before the pandemic, to become a convenience-first platform, solving problems for consumers, but also merchants and partners.

So here’s a thought experiment: What will Swiggy look like one year from now? Let’s try to answer this question, but first a look at the top stories from our newsroom this week:

• SaaS In Focus: Inc42’s latest report delves into the $70 Bn SaaS opportunity in front of Indian startups by 2030. Will the future be shaped by horizontal or vertical SaaS startups? Here’s a look at the landscape
• SustainKart Comes Undone: The ecofriendly products marketplace has shut down amid serious accusations of financial misrepresentation and revenue inflation levelled at founder Kanthi Dutt by investors looking to take legal action
• Coworking IPO Boom: The public listing of Awfis earlier this year has set off a chain reaction as nearly half a dozen coworking startups are lining up for the stock market. What exactly has fuelled this movement and what lies in store for these startups as they look to expand

Swiggy’s Compass Shifts

There’s naturally a lot of excitement inside Swiggy these days. As the company goes public, it’s also showing a lot more candour in talking about its future plans.

A day after the IPO cofounder and CEO Sriharsha Majety spoke about Swiggy looking to solve problems across the consumer space with new services, and bulking up the existing food delivery and quick commerce plays.

Inc42 has covered many of these in the days leading up to the public listing — including the push for mega dark stores on the Swiggy Instamart business and catering to larger non-grocery product categories and high value purchases.

At the same time, features such as Bolt — 10-minute food delivery — have also become significant levers for Swiggy, as per sources close to the leadership. “Food delivery will always be the core for Swiggy, but naturally there’s a lot of comparison with quick commerce. Bolt is one way to bridge the two services, and take the learnings from Instamart to food delivery,” sources added.

The feature is already live in 150 cities and unlike the Swiggy Instacafe delivery, the company is bullish because this is food being delivered from real restaurants, and it’s contributing to order frequency significantly.

Sources claimed that food delivery features have accounted for an INR 100 Cr positive EBITDA swing in the second quarter of FY24, the numbers for which are expected in the next few weeks. Swiggy’s food delivery vertical reported an adjusted EBITDA profit of INR 57.8 Cr in Q1 FY25, as against an INR 43.2 Cr adjusted EBITDA loss in Q1 FY24.

Despite the spotlight being on quick commerce and Instamart, Swiggy is bullish about food delivery being the lynchpin. On Instamart, the push for new categories will continue in the next year as dark stores themselves continue to evolve.

Even though it launched pharma deliveries amid controversy, Swiggy is confident that introduction of such categories will continue to add to the Instamart value creation.

The Battleground Tilts 

There’s little denying outside the delivery businesses, Swiggy’s other big focus over the past few months on going out and live events. Dineout, sources claimed, has seen 100% You growth as of September 2024.

Then there’s Rare Life. As we wrote a few weeks ago, Rare Life will be a membership-based concierge service and will begin at INR 50,000. “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.”

Rare Life ties into Swiggy’s upcoming services marketplace to some extent. The marketplace, branded Yello, is a Yelp-like platform that connects consumers to service providers such as fitness trainers, astrologers, chefs, beauticians, repairmen and more.

Sources added that Yello will not adopt an Urban Company-like model where professionals are contracted to offer services. Instead, it will be an open marketplace geared towards making it easier for consumers to discover professionals in their cities.

The idea is similar to JustDial but Swiggy is unlikely to enter into the wider classifieds space just yet.

Another Super App Race Emerges

These two new businesses, along with Dineout, have added a new dimension to Swiggy’s rivalry with Zomato.

Interestingly, Zomato is getting ready for a dogfight with its old rival with an INR 8,500 Cr QIP. This should allow the company to invest in District, which saw an official launch this weekend.

District is Zomato’s third product, and will look to cover experiences such as dining, movies, live events and more. Even though this would be a third app from the house of Zomato, the idea is very much about acquiring users with affinity to food delivery, quick commerce and going out.

For Swiggy too the push into new areas is about maximising the returns on its investments in acquiring users over the past decade. The app today has 14 Mn monthly active users for food delivery and 5.2 Mn users on Instamart.

This by itself is a sizable number, and gives Swiggy plenty of leverage in new verticals and services such as Rare Life and Yello, even though both have their own sets of challenges related to scaling up.

So far very little is known about how these new services will play out, but sources told us after revolutionising two major categories — food delivery and FMCG deliveries — Swiggy is bullish about having a similar transformational effect on other areas that it ventures into.

Of course, these are days of optimism for Swiggy. The company might very well have to rethink some of these bets in the long run. The battle with a well capitalised Zomato will be one to watch in particular, as two of the giants in the Indian startup ecosystem evolve and pivot to find new growth opportunities.

Will Swiggy be the same one year from now?

Sunday Roundup: Tech Stocks, Startup Funding & More

• Funding Picks Up: Some good signs on the funding front as we near the end of the year. Between November 11 and 16, startups raised $185.8 Mn across 21 deals, a 49% increase from the previous week
• Razorpay Turns Investor: Payments giant Razorpay has partnered Peak XV Partners and Lightspeed to launch a venture investment programme targeting early stage B2B startups across fintech, ecommerce, retail, healthcare, logistics and other sectors
• BlackBuck IPO Opens: Logistics major BlackBuck saw lukewarm response for its IPO after two days of bidding, with overall subscription reaching 32%. The IPO closes on Monday

• Menhood’s Profit Surge: NSE Emerge-listed Macobs Technologies, the parent of Menhood, saw its profit swell by 190% to INR 1.84 Cr in H1 FY25, on strong revenue growth and improvement in margins.
• Reliance-Disney Merger: After months of anticipation, Reliance, Viacom18 and Walt Disney have merged their media businesses, with RIL holding the lowest stake in the combined entity valued at $8.5 Bn
• Floating The IPO Boat: Electronics maker boAt has reportedly finalised a host of bankers for a $300-500 Mn IPO next year, days after reporting a YoY decline in revenue for FY24

The post Swiggy, One Year From Now 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.

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.

As far as milestones go, the Indian startup ecosystem crossing the $150 Bn mark in funding in 2024 is a big moment for the investment landscape. The figure by itself may not speak volumes about the maturity of the Indian tech and startup ecosystem, but it does highlight the road taken to get there and the role played by Indian angel investors, global venture capital giants and hundreds of family offices backing Indian startups.

While hundreds of billions of dollars have been pumped into startups to get them to the point of maturity, many of these stakeholders believe it’s time for the next leg of the journey.

The maturity of the Indian startup ecosystem is playing out in terms of exits through IPOs or secondary sales or M&As, but what about backing the next generation of startups?

What often goes under the radar is that most of these exits and returns have gone to foreign investors. The share of domestic investment in India is estimated to be less than 15% over the past decade.

How keen are Indian investors — angels and family offices — to join the next wave? And in particular, are family offices the key to unlocking the domestic capital vault in India?

Behind The Family Office Wave In India

Concerns around foreign capital dominating the Indian market have lingered for years. We have seen founders and Indian fund managers bemoan the lack of domestic investor participation.

But the trigger point came around the end of 2022 when startups realised that foreign VCs were tightening their purses, and the current phase of growth for Indian startups depends on Indian investors. With this foundation laid down, VC firms and fund managers are looking to tap that all-important domestic investor pool for their fundraising.

Recent market trends, particularly around growth expectations and bloated valuations, have highlighted the importance of having domestic investors who know the Indian market and its peculiar challenges, particularly around profits and scaling up.

Domestic investors have learned valuable lessons from the period of FOMO investing and the “spray-and-pray” approach of 2020 and 2021, and now, there’s a lot more focus on value than valuation. Instances of governance lapses at unicorns have also led to some fears about a startup bubble. But fund managers claim domestic family offices and limited partners are more diligent at times because of how well they know the market.

Family offices are also realising that startups need patient capital and that they are best suited to deploy such capital, as they are more familiar with the ground reality, according to fund managers and multi-family office managers.

“So many foreign VCs are now realising that the Indian market does not have the depth for large deals, especially in deeptech. We are not creating an OpenAI or Anthropic yet, so founders need to seek investors that don’t bring the pressure of growing like OpenAI,” according to the family office manager for a Delhi NCR-based real estate giant.

Tech giants in the US and China took advantage of access to patient domestic investors who were willing to make long-term bets on new and disruptive ventures. In India, a similar shift is underway, and it’s vital for domestic capital to actively participate in this transformation to nurture homegrown innovation and create globally competitive companies.

India’s Patient Capital Pool

Startups, especially those led by founders from Tier II and Tier III towns, are increasingly looking to HNIs and family offices helmed by seasoned industrialists and entrepreneurs for funding. Unlike foreign investors, who might be focussed on achieving quick returns, domestic investors often have a more nuanced understanding of the local market and are better positioned to provide patient capital for this very reason.

This type of capital is crucial because it allows startups to grow sustainably without the immediate pressure of delivering rapid returns. Domestic investors bring the added advantage of regional market insights and experience, enabling them to offer more than just financial backing—they can offer strategic support as well.

Gaurav VK Singhvi, the founder of We Founder Circle and SEBI-registered Avinya Ventures, believes India needs a robust base of domestic investors, even those with a lower appetite for investing than global VC giants. Startups are seeing that large cheques come with pressure to grow and scale in a manner that the Indian market does not allow.

Singhvi added that the startup playbooks backed by foreign capital are now mature enough to be scaled up with domestic money. “Family offices are the true patient capital, and if we have to change the direction of Indian tech from established and mature sectors to emerging sectors, we need this patient capital. And the best way to attract more family offices is to have an established track record as a fund manager,” he told Inc42.

In this regard, Singhvi’s background as the founder of We Founder Circle as well as his record of exits as an angel investor have proven to be key propositions to attract family offices. Singhvi pointed out that with exits from the likes of BharatPe (80x returns), Rooter (32X returns), Zypp Electric (28x returns) and Coutloot (22x returns), many family offices are convinced that he is able to find the right deals.

However, bringing family offices on board for funds investing in emerging and new frontier technology is easier said than done.

How HNIs Are Testing The Waters

Waterfield Advisors’ managing director Rohan Paranjpey believes family offices in India are fortunately seeing the right indicators in many of the new AIFs launched in the past year. Fund managers are coming with unique insights and a track record that makes it easier for family offices to invest in funds. Family offices began their startup investments as a hobby, with smaller cheques of around INR 10 to 50 Lakh and limited fund allocations of 2% to 5%. But they are maturing fast.

“We are seeing in Tier II, III and IV that family offices are being created, which we had never heard of before. They are excited to invest in startups, but the first cheque may not be that large. Only when they are aligned more with the startup’s model, they are ready to invest more,” he added.

The focus was on testing the waters rather than making major commitments.

VC fund and family office managers believe there is reticence among older generations of industrialists and HNIs when it comes to such investments. However, millennial and generation Z members of a family office may want to allocate a small portion of the portfolio to such areas and sectors.

“I think with the involvement and the influence of the millennials and Generation Z [in family offices], and with the emergence of a lot of nuanced products in the market, the requirement or the ask is obviously rising,” a Bengaluru-based multi-family office manager said.

Today, family offices typically invest in startups through VC or angel funds, relying on these funds’ reputations. However, when they co-invest or invest directly, it gives them a chance to showcase their business expertise and build their own presence in the startup world.

Even so, founders often prefer to raise from established VC funds or angel funds rather than family offices, due to the perceived brand value of having such a name on their cap table. In some sectors such as insurance, having domestic investors is crucial, so these are sectors where family offices have an advantage over foreign VCs.

Why Multi-Family Offices Are Booming

Of course, running a family office is not unlike running a fund. They need the talent and the structure of an institutional fund. Often, this means hiring lawyers for various deals, getting chartered accountants to vet deals and statements, having a roadmap for the next generation in the family and so on.

This is where multi-family office managers and advisors come into play. Multi-family offices such as Entrust, Cervin Family Office, Legacy Growth, Waterfield Advisors and others are looking to become the pillars for horizontal aspects of running a family office. When it comes to cost, expertise in investments, legal compliances, estate planning and indeed rifts within the family, multi-family offices can be a good option for HNIs to test the waters.

“In a single family office, they prefer to have an in-house lawyer. But one lawyer is not enough, because one would be an expert in VC and startup investments, and another in real estate. So the moment you start adding all these layers, your cost increases.” the multi-family office manager quoted above added.

She added that in a multi office, HNIs can get access to multiple lawyers, registered experts in various investment classes as well as tax related experts.

Sharan Asher who runs Eragon Ventures, the family office for the former promoters of J.B. Chemicals and Pharmaceuticals, points out another challenge: managing family offices isn’t yet seen as a serious career option among fund managers. But having a multi-family office means the HNI family can bank on those with the right expertise and credentials.

One cannot understate the significance of IPOs and the public markets in swaying the domestic LPs and investor base towards the startup ecosystem.

In particular, the massive gains for stocks such as Zomato, TBO Tek, Policybazaar, Honasa and RateGain in the past year, as well as the boom in the SME IPO market have turned heads. It’s not just about the large brand names but also smaller promising IPOs, and with the likes of Swiggy entering public markets soon, startups and funds are likely to see more domestic HNIs and family offices queuing up to back them.

Domestic family offices and investors are more than familiar with the dynamics of public markets — some of the promoters behind these offices lead public companies themselves. For these investors, the IPO-led exit momentum is a massive validation of the maturity of the new-age tech and startup ecosystem.

And it’s creating a virtuous cycle where each wave of successful listing brings gains and attracts more family offices to the investor pool. No wonder then that there’s a lot of optimism around India’s domestic capital finally showing its true colours.

The post Behind The Rise Of Family Offices Changing The Indian Startup Investment Landscape 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.

Zeta founder Bhavin Turakhia has long held a unique view on fintech in India. He believes that startups need to separate fin and tech because these two sides of the fintech coin are vastly different from each other.

In March this year, Turakhia tweeted, “Banking is fundamentally about “risk management” above anything else. What is (incorrectly) perceived as the RBI’s heavy handedness against fintechs is infact [SIC] an opportunity for founders to leverage tech to reduce risks, improve governance, and enhance compliance.”

This week, the RBI’s action against heavyweights in the non-banking financial companies (NBFC) space has once again turned the focus on how fintech startups need to deal with regulators and vice versa. The Reserve Bank of India directed Sachin Bansal’s Navi Finserv, DMI Finance, Arohan Financial Services and Asirvad Micro Finance to immediately stop sanctioning and disbursing loans due to supervisory concerns.

The four NBFCs have up to close of business on October 21, 2024 to manage the fallout from this RBI action, but essentially, this has thrown a huge spanner in the digital lending ecosystem. Among fintech founders, there’s a defeated feeling, with many claiming that startups have to continuously play catch up with regulators.

Why The RBI Acted Against NBFCs

As per the RBI, the pricing policy of these NBFCs for the Weighted Average Lending Rate (WALR) and the interest spread charged over the cost of funds were found to be excessive and not in adherence with the regulations.

WALR is calculated by multiplying the interest rate for all individual loans with the loan balance and dividing this figure by the total loan balance.

Besides this, the central bank claimed their lending operations were “not in conformity with the provisions laid down under Fair Practices Code”. The central bank added that the four NBFCs were involved in unfair and usurious practices, which were noticed during onsite examinations as well as from the data collected and analysed by the RBI.

The RBI also said, “Deviations were observed in Income Recognition & Asset Classification (IR&AC) norms, resulting in evergreening of loans, conduct of gold loan portfolio, mandated disclosure requirements on interest rates and fees, outsourcing of core financial services, etc.”

While most commenters have picked up on RBI’s usage of usurious practices in relation to the interest rates, those in the fintech and lending ecosystem believe that there are several other compliance hurdles that may not be publicly discussed by the RBI.

Many founders have lashed out against the so-called opacity in RBI’s actions. A similar sentiment was heard during the January 2024 action against Paytm Payments Bank, which disrupted Paytm’s UPI and lending business for months.

Will Digital Lending Feel The Heat?

Ever since the troubles for Paytm in the past year, there has been an industry-wide transition in the digital lending space. Across the board, digital lenders have looked to diversify their lending partnerships with multiple NBFCs and registered lenders furnishing the funds. With four NBFCs being asked to stop lending operations, many fintech companies would be left scrambling for partners.

In particular, RBI’s claims that such platforms have been charging usurious interest rates means that other lenders would feel compelled to reevaluate their lending partnerships in the short and medium term.

One side effect of these changes is that lending platforms are finding it harder to raise funds. Take MSME lender Lendingkart, for instance, where existing investor Fullerton Financial Holdings acquired a controlling stake after a cash crunch forced the company to look for investors at a lower valuation, due to challenges in the unsecured loans market.

Indeed, DMI Finance is one of the biggest lending partners in the digital distribution and co-lending space, having partnerships with the likes of Google Pay, Samsung for their distribution businesses, as well as lenders such as Moneyview.

It also operates its own DMI Finance app for personal loans, MSME business loans as well as consumption loans on purchases of durables and large appliances from a host of partners. DMI Finance also acquired ZestMoney earlier this year, and got exclusive right to use ZestMoney’s brands. DMI Finance became a preferred lender on ZestMoney’s BNPL platform after the transaction.

Then there’s Navi Finserv, which offers personal and home loans through the Navi app. Navi’s AUM increased 44.6% YoY to INR 11,366 Cr in FY24, and then to INR 11,724 Cr in Q1FY25. According to India Ratings, the NBFC’s personal loan portfolio accounted for INR 10,439 Cr of this loan book, with the home loan portfolio at INR 1,285 Cr growing 3X from Q1FY23, two fiscals ago. About 50% of the personal loans disbursed by Navi are pre-approved, which means it is primarily targeting customers with a good credit score.

For the home loans business, Navi has adopted a co-lending strategy, with five separate partners as of June 2024.

Incidentally, the RBI’s action against Navi came a few days after the NBFC announced the completion of a $24.5 Mn loan securitisation transaction with Goldman Sachs (India) Finance Private Limited, the NBFC arm of Goldman Sachs in India. Goldman Sachs is the seventh multinational bank to lend to Navi Finserv and the securitisation deal covers unsecured personal loans, originated and serviced by Navi Finserv.

Besides these two majors that work primarily with fintech players and on the digital lending front, there will be some systemic impact from the action on Arohan Financial Services and Asirvad Micro Finance as well.

But does RBI’s mention of usurious lending mean that these platforms are charging interest rates much higher than allowed?

As per analysts and lending startup founders, interest rates on digital loans can climb up to 35%-40% per year, depending on the borrower’s credit profile. Banks and NBFCs typically partnered with fintech startups because of their strengths in digital distribution. But such arrangements might be put on hold for the time being.

“Co-lending, where multiple NBFCs are used to distribute loans, has been a key business growth driver for fintech startups and one of the ways that these startups are hedging their risks. Larger NBFCs will potentially look to revisit deals and special tie-ups with startups after the recent RBI action,” the founder of a Delhi NCR-based lending platform told Inc42.

In fact, a lot of these interest rates are decided based on the borrower profile as well as these special arrangements between NBFCs and lending apps.

Regulatory Disruption Is A Way Of Life

Those in the industry believe that the signs were there for everyone to read. It’s not the first time that the RBI has come down hard on digital platforms. For well over two years, public pressure has been mounting on the central bank to act on complaints related to predatory lending, aggressive recovery and collection tactics and poor underwriting models for digital lending platforms.

In March this year, brokerage Bernstein said that while the broader household credit has largely grown in line with the system credit growth, consumer loans have grown at a much more rapid pace, which foreshadows heavier regulatory scrutiny. The share of personal loans to banking credit has almost doubled from 16% in 2014 to around 32% in 2024.

This surge in unsecured loans during and after the pandemic had led to such unscrupulous practices and unauthorised lending platforms.

“The RBI has never shied away from regulating. There was the disruption for SBM and its fintech partners in April 2023, then in November, the RBI increased the risk weight for consumer credit. Then came Paytm in January 2024, followed by the crackdown on NBFC-P2P lending in August this year,”a Bengaluru-based VC fund manager told Inc42.

Founders and investors believe that these were all signs of things to come, and no startup can claim to be unaware of what would happen if regulations are not followed. “It all depends on how you view compliance and how you balance it with fintech innovation. They go hand-in-hand, founders need to realise that compliance is not an option, but a necessity,” a Pune-based digital lending platform’s CEO said.

On the other hand, critics of RBI’s move believe that it’s not the action itself but the lack of clarity on the rationale or the principles behind the action. Many pointed out that the RBI has not clearly stipulated what interest rates are usurious, for instance.

But Gautam Sinha, CEO of LTFLoW, a division of Loantap, said the regulator is continuously engaging with stakeholders and is training them on various aspects related to compliance. “The RBI has always been more concerned about systemic risks, and the interest of the majority i.e the consumers and businesses using banking and financial services. In the RBI’s view, it cannot allow exceptions for startups just because they are innovating.”

Sanjay Swamy, managing partner at Prime Venture Partners, which has backed fintech startups such as Freo, Niyo, kredX and FinAgg said it’s not easy to build a fintech business, and that’s by design. “There are no get rich fast schemes. But there are huge problems to solve in fintech, and if one takes the long-term view, there will always be meaningful and large companies to be built,” he added

Will Secured Loans Rescue Digital Lenders?

So where does the lending ecosystem go from here? For one, many startups are eyeing a move towards secured lending as a way to move forward.

Paytm CEO Vijay Shekhar Sharma said in May this year that the fintech giant will focus on secured lending business as a growth vertical. “We are trying secured loans also, as a part of our experiments. We are integrating a couple of secured credit lines, especially for small merchants, micro LAP (loan against property) makes a lot of sense,” Sharma said at the time.

On the same lines, PhonePe, listed giant Paisabazaar, CRED, Volt Money and others are also eyeing secured loans as a way to hedge against regulatory risks. But secured loans are easily the biggest opportunity for those with an existing base of borrowers. However, it might require a review of the risk profile of these borrowers.

The likes of PhonePe, Paisabazaar, CRED and Paytm are banking on the growing mutual funds market for loans against securities. But the pace that startups typically take up for new products or features is sometimes at odds with regulators. Even when it comes to secured loans, as the market grows and as more players come in, there are likely to be several regulatory hurdles.

Investors insisted that startups cannot choose to interpret regulations in their own way and then cry foul about the regulator taking action. Unfortunately for Navi and DMI Finance, the RBI’s action could very well set them back several quarters.

“Compliance is not a moat, it’s actually oxygen. Non-compliance is the death knell,” Prime VP’s Swamy told Inc42.

The post RBI Vs Fintech Startups Redux: Action Against Navi, DMI Finance Revives Debate appeared first on Inc42 Media.

The line between venture capital and private equity in India is fading rapidly. More and more PE firms are looking at late-stage deals and even growth-stage investments in startups as VC appetite wanes and as funds look to exit their portfolio companies at the right time.

The wave of secondary deals and ‘forced exits’ is driving the PE ecosystem. The likes of Kedaara Capital, Investcorp, TVS Capital, ChrysCapital are now giving a VC-like twist to the traditional PE investment thesis.

Besides global funds such as KKR, Blackstone, CVC, Warburg Pincus, Silver Lake, Carlyle Group, General Atlantic and others have also backed some of the most scaled up startups in India since 2014.

In many cases, these global PE giants came in at a much earlier stage than they might have in the US or Europe because of their experience in scaling up tech giants in the US. It was believed that having these PEs on the cap table would bring a measure of maturity to the Indian tech ecosystem much faster than otherwise.

The Blurring Of Lines

VC and private equity firms have always been fundamentally different. Venture capital comes in early, even at the pre-revenue stage, and therefore, VCs assume a lot of the risk inherent in startup investments. Over the years, the returns and investment horizons have been built around this risk factor.

As one PE fund manager told Inc42 this week, “VCs are the pioneers, but this takes time. They sit on the cap table for decades and have a soft influence. But PEs require more control. In India, PEs have long acted like VCs and have been patient with their bets, and now they are seeing these bets pay off with public listings of startups and secondary deals.”

PE firms differ significantly from VCs and are classed separately because of the stage at which they come in. “That was a trend some time ago when global VC funds used to write large cheques for growth stage Indian startups. Of late, very few venture capital firms are willing to engage in $100 Mn deals as standalone investors. The funding winter has not completely thawed and VC funds are pulling back in certain sectors,” Gaurav Sharma, head of Investcorp’s India business, told Inc42.

Take the example of Wakefit, which raised $40 Mn from Bahrain-headquartered Investcorp in January 2023 after reaching a scale of INR 800 Cr and more than 50 stores around India. Peak XV Partners invested five years before Investcorp and that investment saw Wakefit through the riskier stages and the early challenges.

Despite this, some in the PE world might call this an ‘early deal’ on Invescorp’s part, because compared to how PEs operate outside India, this is a fairly low ticket size and Wakefit does not have the solid track record that private equity players typically bank on.

Startups Reaching Maturity

Globally, PEs invest in companies that have an established track record of growing a sustainable business and look to exit in three to five years. On the other hand, some VCs stick around on the cap table for more than a decade without an exit. VCs also value companies based on potential rather than track record.

Fundamentally, PE is investing in mature companies, and with many startups showing some signs of a mature business, the Indian market is seeing a shift where PEs are eyeing growth-stage deals as well in addition to late-stage deals.

Bengaluru-based Wakefit crossed INR 1,000 Cr or roughly $120 Mn in revenue in FY24, whereas it is valued at well over $300 Mn. But with the company on the verge of profitability, it’s eyeing an IPO in the next two years and the late investors will look to exit.

One cannot deny the role played by IPOs in this because PEs like the fact that they can exit as per thesis on their exit points and still earn some value from the investment. As a result, we are seeing more small cheques from PEs, too, in companies that don’t need high capitalisation but just enough capital to get to the IPO stage.

Plus, in light of the lack of large size deals by VCs, many institutional investors are looking to invest in PE funds that are taking up pre-IPO positions through secondary deals or primary investing.

The Rise Of Indian Private Equity

Chennai-based TVS Capital Funds has a strong thesis on family-owned businesses and emerging sectors with large TAMs, which align with the PE fund’s strengths and the legacy of the family-owned TVS automobile empire.

TVS’ Gopal Srinivasan told Inc42, “Our portfolio construction is around three stages: venture growth, classic growth and late growth. Late growth is kind of moderate returns with very low risk, classic growth is medium risk, medium to high returns, and venture growth is higher risk and higher returns.”

Since its inception in 2007, the fund has invested more than INR 3,000 Cr across companies such as Nykaa, Digit Insurance, Five Star Business Finance, all of which have hit the public markets since. And often, these deals came at the venture growth stage.

But that doesn’t mean that PE funds don’t have their unique propositions. Sharma pointed to Investcorp’s $125 Mn buyout of NSEIT (the National Stock Exchange’s digital technology arm), which is completely beyond the scope of VC investing. He believes that in India, PEs are comfortable making such buyout or take-private deals as well as investing in growth stages as well, largely because of how the route to public listing has changed.

The Investcorp India head added that VCs have been instrumental in the startup growth story, but after reaching a certain scale a startup often requires a different organisational structure. Just like that companies require different systems and processes once they mature and therefore private equity deals are not just financial investments. They are inherently strategic in nature.

In a similar vein Kedaara Capital cofounder Manish Kejriwal believes that success in private equity goes beyond just delivering returns, and it’s about setting a culture of governance and systems for operations.

“Venture capital is built on identifying disruptive potential and nurturing new ideas, private equity focuses on optimising established companies for sustained growth and performance,” he said, but added that PEs cannot ignore the softer aspects of investing such as trust and mentorship and only look at the numbers.

Kedaara Capital raised a $1.7 Bn private equity fund, the largest ever in India, and is looking to bring its local expertise and deep knowledge of the key sectors to the startup ecosystem’s scaled-up companies. With the likes of Blackstone, Carlyle, General Atlantic, Warburg Pincus and others hunting for deals to exit their Indian portfolio companies, Indian PE firms are in the driver’s seat.

Kedaara cofounder Sunish Sharma has said in the past that the firm will look to provide exits to global backers that have plenty of dry powder but find themselves in need of more deal flow in India. “When you get a window for an IPO, you take it and don’t try to over-optimise it,” he said in an interview in July.

PE fund managers credit the IPO wave for the heightened PE deal activity in India even for traditionally weak sectors like consumer and retail as well as in healthcare, and core technology.

According to a report by Grant Thornton, India recorded 643 deals worth $17 Bn in the first half of 2024, with consumer-driven sectors leading the charge. Many funds are looking to reduce their exposure to China, which has definitely fuelled the manufacturing and EV sector.

There are challenges too. Most PE investors find it hard to deal with startups with overly rich valuations. This poses a hurdle for PE fund managers in securing the right deal. However, with several venture capital funds or alternative investment funds approaching end-of-tenure, they are putting their portfolio on sale and this is a particularly attractive proposition for PE firms geared towards buyouts.

The post Is The Line Between Private Equity And VC Funds Blurring? 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.

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.

That’s because when we look at the startups that have raised the most funds in India over the past two years, or the ones that have given exits, the innovation is only seen in the business models and commercial models, rather than technology itself.

For instance, when it comes to AI and deeptech, Indian startups have largely benefitted from the IP creation and technology created in Silicon Valley and Europe, but only a few claim to have created such an IP. And so comes the perennial question — when Indians are the ones building products and platforms for Google, Microsoft, Amazon, Meta and other giants, why have no such companies emerged from India in the past decade?

The answer, among Indian VCs at least, is the lack of the patient and domestic capital base that was needed to create those giants in the west. And as the first wave of startups mature, it’s unlikely that such large outcomes will ever be seen in India.

But large outcomes is something that VCs should be chasing. And what can be larger than creating the next Nvidia or OpenAI in India, as foolhardy as it may seem right now?

As OpenAI’s Sam Altman said in 2023 Indian startups cannot hope to build something like a large language model (LLM) for $10 Mn or even $100 Mn. Microsoft poured in billions and so did other investors, leading to  the stage where OpenAI stands today.

Even so, it’s a loss-making company — the latest projections show a staggering loss of $14 Bn even in 2026. Yet, no one can argue that OpenAI has created the groundswell for generative AI and machine learning that will have a lasting impact.

Despite the ongoing funding challenges, the sector has continuously grown in the last three years. In 2023, deeptech startups raised $496 Mn compared to $397 Mn in 2022, according to Inc42’s latest “Indian Tech Startup Funding Report 2023”.

Overall, between 2014 and 2023, deeptech startups in India secured over $1.5 Bn in funding across 343+ deals, but many of these companies are much smaller in scale versus the traditional tech giants. So what will it take for India to grow its deeptech expertise?

Deeptech Is Just Beginning

It’s perhaps not surprising to some investors that Indian companies cannot come close to behemoths such as OpenAI or Google. The DNA of tech in India is quite different from that in the West, according to a Bengaluru-based early-stage fund’s founder.

As he said, in the West, the idea in the early 1980s and 1990s was always to build something for the world to use, and export technology because the US market was limited at that time. “India began late, and therefore, we will be late on many things. When we decided to leverage tech, there was the realisation that no one is catering to Indian problems and consumers. Tech startups could only build on top of existing IP, and this also suited us because we were focussing inwards rather than outwards,” the founding partner added.

That’s something other marquee funds are also claiming. Peak XV’s Rajan Anandan told Inc42 last year that deeptech playbooks are now being written in India, and typically, Indian startups move from application to the tech side because that’s the go-to-market strategy that has worked so far. As Anandan put it, AI startups have been around for decades, and investors have backed them for years, but what India needs now is the infrastructure

And this is also why viewing AI as the primary deeptech segment is perhaps facetious and myopic. “We are seeing what’s happening beyond AI and that’s very critical for the Indian tech economy to mature beyond where we are. [At Peak XV] we have two semiconductor companies. Mindgrove is making systems on chip. InCore is building a fabless semiconductor startup, while Newtrace is working to improve India’s green hydrogen production,” Anandan added, indicating the beginning of VCs backing startups creating tech IPs in India.

The True Depth Of Deeptech

Developing a global generative AI success story from India means dealing with the reality of how expensive it is currently, even though deeptech itself allows so many varied business models, according to All In Capital founder Kushal Bhagia.

We are talking about robotics, industry 5.0, machine learning, generative AI, semiconductors, AI computing capacity and of course data refinement and enrichment. All of these are open for disruption, Bhagia said.

Most early stage investors do not have the appetite and today, startups cannot build tech IP with 10s of millions of dollars, like it was possible in the 1980s. The investor quoted above added, “The age of the garage startups is well and truly over. Today, the technology that is defining the world is being made in shiny buildings. Do you really expect Indian companies to build the same from the garage?”

What many investors are asking for is not just domestic capital, but domestic capital that is patient. To extend the analogy, Indian startups are building with a garage mindset and competing with giants. While it’s commendable, this cannot be done on a small pool of capital that demands an exit in six to seven years.

But at the same time, there is a bit of a chicken and egg problem. As one fund manager who has backed companies like LLM maker Sarvam AI, semiconductor IP company InCore and other startups in the deeptech space told us, “Till there is a big outcome from India, all deeptech bets will seem small. Just like till Flipkart, Indian ecommerce was just an India story.”

What about VCs that are very bullish and long on deeptech. The likes of pi Ventures, Bharat Innovation Fund, Exfinity Ventures, Speciale Invest, Bharat Innovation Fund among a host of other funds are specifically looking at deeptech sectors. BIF’s Ashwin Raguraman is one of the most optimistic investors when it comes to deeptech in India.

He told Inc42 that startups are more than capable of resolving some of the most pressing problems in India — from access to healthcare to agriculture to education to social welfare and governance. So far they have not been given the foundation that is needed. With the introduction of the India AI Mission, which promises compute capacity, besides access to data and network, some of the foundation is being taken care of.

“As civilisations evolve, things are bound to become complex. The more complex the problem, the deeper the technology you need to resolve them. I’m certain that the deeptech built by talent from India is going to play a big role in solving complex global problems,” Raguraman, one of the founders of the $100 Mn deeptech focussed fund, said.

Patient Capital In The Age Of Exits

This group of investors, which has put the wagon behind deeptech, surprisingly believe that deeptech investments will outlast and outperform consumer-facing sectors in the long run. These are the models that are creating foundations — both hardware and software — for the future.

“When a deeptech startup goes past the initial stage of product creation and achieves product market fit, follow-on generalist investors are willing to come in because there’s tech acting as a differentiator, thereby offering strong moats and better opportunities to scale,” BIF’s founding partner added.

But he also acknowledges that getting there is not for every deeptech startup. Finding the product-market fit is hard in the deeptech space because these companies are creating the very technology that is rapidly evolving all the time. So deeptech is not for investors without the tenacity to last this course.

Unfortunately, the current attention of most of the VC ecosystem is on outcomes such as public offerings and exits through secondary. Over the past two months, we have written about this movement, which has been necessitated by the upcoming fund closure deadlines of some of the most prominent funds in India.

Exits through IPOs are also being heralded for multibagger returns and vindication of investment. Zomato is one example, but ask any deeptech VC and they will tell you the opportunity is larger on the IP and tech innovation side than what most investors even understand.

The narratives around exits and IPOs will not be seen in deeptech for at least a decade. Do investors have the patience to endure another decade of limited outcomes, just as they are reaping the fruits of the past decade?

The post India’s Deeptech Problem: Where Are The VCs Backing Startups Creating IP, Innovation? 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.

With one quarter to go in 2024, we are beginning to another inflection point in the Indian startup ecosystem, with VC funds and investors, in particular, displaying a lot more optimism than just one year ago. And in particular, we are seeing a shift from valuations to value.

Much of this bullishness was on display at MoneyX by Inc42 last week, but even outside the spotlight of the stage, conversations revolved around true valuations, monetisation and profits, the IPO frenzy and exits. When just last year, perhaps the mood was a bit more sombre.

Indeed, over the past two months, we have delved into the factors that have given Indian venture capital firms this brighter view of things — including the improving outlook for exits through IPOs and the secondary market for startups.

But what’s often unspoken in these conversations is the rationalisation in startup valuations. The discussion around valuations is usually restricted to the public markets where we have seen debates on Zomato’s staggering rise to $30 Bn and beyond, and on the flipside, Paytm currently trading at over 70% lower than its listing price.

These fluctuations in valuations are pretty much expected in the world of publicly listed companies, but for startups, the conversation has pretty much always been about rising valuations, or when things go pear-shaped and there’s a big erosion — think, BYJU’S or Pharmeasy.

That’s until now. In 2024, there is a more measured and rational view on valuations and the fact that many startups are now coming closer to their true value than before. In particular, the fact that even smaller IPOs are gaining a lot of traction and interest is also a great sign for startup investors, and another factor behind the shift from vanity valuation to real value.

From Vanity Valuation To Real Value

Several noted investors told Inc42 last week that if the past decade was about backing the potential of Indian startups, the next few years will be about backing the value that has been created from this potential. And for many VCs, the age of unicorns is over, or perhaps the metric by which a unicorn is defined has changed.

Until FY23, only a handful of unicorns were profitable. But this tide seems to be turning in FY24 as companies have figured out ‘comfortable’ monetisation models. Zomato, Honasa, OYO have shown that companies can scale up and yet remain profitable.

It’s no longer the choice between profits and revenue that it used to be, and valuations, therefore, are not the metric by which to judge the startups that need to be celebrated.

Peak XV Partners’ managing director Mohit Bhatnagar admitted to having a problem with the term unicorn, because as an investor, it gives the wrong signal. He believes that valuation only truly matters at the time of an exit, and to get this valuation, investors have to back value.

“It’s time we look at redefining what it means to be a unicorn. While surely, it cannot always be about profits, we have to judge companies on how much revenue they are generating and are they closing the gap when it comes to going breakeven. This is the real metric and the days of chasing these vanity valuations are over,” he added.

In a similar vein, early-stage and angel investor Rajesh Sawhney believes that the wave of smaller IPOs, which have also delivered the returns to pre-IPO investors, shows that valuation was never the right north star for founders.

“Of course, valuations are important when you exit, but that cannot be the reason you invest in startups. Founders bargaining for a higher valuation is a red flag in most cases, and only in a fraction of investments does this pay off. But why take that risk at all? Venture investing is already risky,” Sawhney told Inc42.

Why Valuations Don’t Matter For Some VCs

Others such as Hiro Mashita, founder and director of Singapore-based m&s Partners, had a different take on valuations. Mashita said that as early investors, the potential upside can be so big that valuation at the time of investing is often immaterial.

Mashita pointed to his experience of investing in Razorpay’s seed round in 2015, when the company had just started out and was not making much revenue to its current valuation of over $7.5 Bn. He claimed his investment has grown by over 700X since the seed round. So for him, it was not about the valuation but the value that Razorpay could unlock.

Interestingly, Mashita also cited the example of Y Combinator founder Paul Graham, who once said, “Valuation matters far, far less than the decision of whether to invest or not. The spread between bargain and outrageous startup valuations can’t be more than 5X, in a world where the best investments can return 1,000X.”

Incidentally, Y Combinator also invested in Razorpay’s seed round, and the company is now looking to list in India by FY26 or next year.

IPOs & Indian Startup Valuations

Speaking of IPOs — many VCs have seen the writing on the wall for a number of years, and have held onto the belief that private valuations are just a number on a paper that does not matter for many years.

The fact is that many VCs feel vindicated about their thoughts on valuations today, than a few years ago, because of the fact that today startups are at the stage where they can grow into their valuations more easily.

The ripe market for IPOs is a big part of this vindication. Relatively small size of some new-age tech public listings this year and the spate of SME IPOs (even accounting for the potential bubble there) have also justified their patience.

When criticism around bloated valuations first came up in 2021 during the ZIRP investing bubble, Blume Ventures’ partner Sajith Pai wrote, “VCs found that the techniques that public market investors used couldn’t hold for younger, fast-growing companies with unpredictable revenue. Through long years of iteration, they came with the practice or protocol of playing long-term multiparty staging games to take the company from idea to IPO.”

At the time, Pai claimed the VC valuation process has been honed and has evolved over the years, and can at times lead to situations where certain startups seem to have ‘absurd’ valuation for their particular stages. But also he warned that comparing these valuations with public markets misses a big point.

“Over time, these ‘derived valuations’ correct themselves out, and in the long run, as the startups move to an IPO, the values converge with those of their public market counterparts,” Pai wrote in 2021

This seems to have presaged what we are seeing in 2024. A lot of the private market valuations are either sobering to meet public market benchmarks and when private companies go public, their valuations reach more rational levels seemingly automatically.

In many ways, this too is a sign of maturity of the market, of a necessary step in the evolution of Indian startups. Even the most absurd valuations tend to get corrected in the long run. And when they do, as they have now, the real value comes to the fore.

The post From Valuation To Value: Indian VCs Shift The Gears appeared first on Inc42 Media.