Flipkart, Mastercard and PayU have now decided to buy a 30% stake in Ferbine, the consortium headed by Tata Group that wants to set up a rival to the National Payments Corporation of India. Ferbine in turn will face competition from the likes of
and Amazon as these three biggies look to shape the future of digital payments in India.
Elsewhere in today’s letter:
- 🤝 Reliance and Kalaari make it official
- 💸 Tax windfall for Big Tech in India?
- 🏙️ The unmaking of ‘Cyber City’
Flipkart, Mastercard and PayU want that sweet NUE action
Rush for NUE licences explained: Hi everyone. Ashwin here. It’s no coincidence that
Amazon, three of the largest retail companies in India, have applied for NUE licences. Setting up rivals to NPCI would allow these firms to create pan-India payments networks on the lines of NPCI’s hugely popular Unified Payments Interface (UPI).
- In the age of online retail, the payment experience is as important as the product itself. A payment platform drawing from the experiences of such firms could help them develop so-called ‘Super Apps’ on the lines of China’s Alipay and Wechat.
- Alipay was launched in 2004 as the payment department of Taobao, the B2C program of Alibaba Group. It is now used for all kinds of transactions—from paying in-store and online, to receiving international money transfers from relatives overseas.
- WeChat launched in 2011 as a messaging app. It has since morphed into an ecosystem that allows users to do everything from ordering a taxi and applying for a loan to transacting with local businesses.
- Moreover, a 360-degree view of transaction data could also help these companies foray into financial services, such as helping companies underwrite loans and providing insurance.
- This transaction data could also help them target specific customers to sell anything from salt to software.
- And that’s not all. While NPCI has done a great job powering India’s digital payments transformation, there are still huge gaps when it comes to B2B, rural and cross-border payments.
- Industry observers also question UPI’s own ability to scale. The government’s zero-MDR diktat dissuades banks from processing more of these transactions owing to high cost burdens without adequate returns.
Deep-pocketed rivals thus see a huge opportunity to emerge as important stakeholders in shaping India’s digital economy.
SBI isn’t giving up on NUE licence yet
RIL and Kalaari make it official
Hi, Alnoor here. Reliance and Kalaari
have made their alliance official, by way of an email.
Reliance Industries Ltd. (RIL) has come on board as an anchor limited partner (LP) in Kalaari Capital’s fourth fund, the domestic venture capital firm’s founder and managing director Vani Kola told startup founders and investors in an email.
Jargon check: An
LP or a limited partner invests in a fund to get a share of the profits but takes no active role in managing the firm and has no responsibility for its debts.
- Anchor LPs are limited partners that invest early into a venture fund, set the terms of the investment, and in some cases get preferential terms.
Called it: We had reported on February 23 that Jio Platforms, a subsidiary of RIL,
was finalising a $100 million investment in Kalaari Capital, with a further commitment of $100 million over the next 12 months.
What does this mean for the industry? RIL’s backing of Kalaari is among the largest corporate investments in an Indian venture firm.
Over the past few years, it has become increasingly clear that there’s a dearth of rupee capital in India’s startup sector. Commerce and industry minister Piyush Goyal
has more than once urged businesses and entrepreneurs to set aside a portion of their wealth to support startups, and early-stage ones in particular. This deal could be a sign that things are changing.
What does it mean for entrepreneurs? A person tracking the deal closely told us, on the condition of anonymity, that Reliance could use Kalaari as a pipeline to identify innovation in the early stages, even if it may not actively look at acquiring these companies immediately.
Acquisitions could come at a later stage, which in itself might not be problematic, but with Reliance being known to drive a hard bargain, this could jeopardise value creation for entrepreneurs and other investors in such firms, the person added. On the whole, it could make startups cautious when approaching Kalaari for capital.
Why are there concerns over the deal? Reliance has already acquired four firms in Kalaari’s portfolio—
Urban Ladder, Zivame,
Haptik, and is in the process of acquiring a fifth —
Milkbasket. Urban Ladder, Zivame and even Milkbasket were acquired at highly depressed valuations, with most investors losing money.
Red flags were raised when Kalaari
sold its entire stake in Milkbasket to Mahendra Nahata-led MN Televentures, which was seen as a ploy to force a sale of the company to Reliance. Kola previously
had a similar falling out with the founders of Snapdeal over a proposal to sell the company to its larger rival Flipkart.
Tweet of the Day
No one at any company or startup has everything figured out. The most important thing is to work every day to solve… https://t.co/Wwtc7n55bG
— Allison Barr Allen (@abarrallen) 1614745973000
Tax windfall awaits Big Tech in India
A Supreme Court ruling involving Microsoft may entail
a tax windfall for Big Tech in India.
Driving the news: On Tuesday, the nation’s top court ruled that payments made by local users for purchasing software made by foreign companies or distributors cannot be taxed as royalty.
- “The amounts paid by resident Indian end users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs (end user license agreement)/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India.” — Supreme Court of India
In other words, deduction of tax at source for such payments is not allowed. Companies like Amazon, Facebook and Google need not deduct tax at source as per the Income Tax Act, the court ruled, before adding that this would cover the different models used by companies to operate in India.
‘Cyber City’, really? 🙄
Haryana’s proposed move to reserve 75% of jobs for locals with salaries of up to Rs 50,000 a month
could lead to an IT exodus from Gurugram, according to top industry executives.
Why will IT be hit particularly hard?
- ~70% of the IT workforce has less than five years of work experience.
- Nearly half of all employees earn less than Rs 50,000 per month.
“The industry hires people based on merit and not their address. The industry is at a loss to understand the local job reservation mandate,” said a Nasscom official. The regulation is also inconsistent with the Centre and the IT sector’s push towards a future model of work from anywhere, industry watchers say.
To be sure, the proposal, which has been approved by the state governor and is yet to be notified, applies only to new jobs that are added by companies and not to existing roles.
About Gurugram: A dusty crucible of glass and concrete, Gurugram has the third highest concentration of engineers in the country, after Bengaluru and Hyderabad. It houses critical operations for both global and local technology giants such as Google, Microsoft, Tata Consultancy Services (TCS), Infosys and Genpact.
They should start scouting for office spaces someplace else now. Or better still, WFH.
ETtech Done Deals
■ Online reseller
has raised $15 million in a Series D funding from Olympus Capital’s clean energy and sustainability arm, Asia Environmental Partners.
■ Dips and sauces maker
has acquired cash-strapped cold-pressed juices startup
Raw Pressery at a valuation of Rs 100 crore, marking a significant consolidation in the consumer brands sector, a senior company official said.
Bijnis, a B2B marketplace for unorganised retailers,
has closed a secondary transaction wherein some startup founders and top executives have purchased shares from existing early investors.
■ Online pharmacy
PocketPills, which caters to consumers in the Canadian market,
has received $30 million in a Series B funding round led by Telus Ventures, with participation from WaterBridge Ventures.
Outplay, a sales engagement platform targeted at small and medium businesses,
has raised $2 million in funding from Sequoia Capital India’s early-stage accelerator fund Surge.
Infosys’ digital deal with Google
Infosys has bagged a nearly
$500 million deal from Google as the software services provider eyes more business from tech giants.
What’s the deal? The scope of the work for Infosys ranges from customer experience and language support to business process requirements and data management. Google, like other large technology companies, works with Indian tech services firms such as HCL Tech, Wipro, Tech Mahindra and GlobalLogic to test and build new software products.
Why it matters: Analysts said this is “one of the largest all-digital deals” in customer experience services. Infosys signed large deals worth $7.1 billion in the quarter that ended in December, the largest three-month deal flow in the company’s history. It included a reported $3.2 billion deal from Daimler to transform its digital operations.
Other Top Stories We Are Covering
Infosys, Accenture to cover vaccination cost for employees, dependents: Infosys will cover the cost of vaccination of its employees and their families,
joining other tech firms such as Accenture in the government’s drive to vaccinate people against Covid-19.
Netflix unveils India lineup for 2021: Netflix said on Wednesday that
it will release more than 40 originals in India in 2021, including movies, television series, documentaries, reality series, and stand up comedy specials. These include new titles and new seasons of existing titles.
Truecaller launches Guardians, a safety app for women: Caller identity app Truecaller
has launched a safety app for women—Guardians. The app helps women share their location with family or friends at all or specific times and alert them in case of an emergency.
Global Picks We Are Reading
■ Google to stop selling ads based on web browsing
(The Wall Street Journal)
■ This is not a shoe. It’s an asset class
■ A golden age of local digital stars
(The New York Times)