Also in this letter:
■ Experts flag Aadhaar authentication amendments
■ In charts: ONDC’s potential and challenges
■ Google challenges Delhi HC ruling on ADIF petition
PhonePe likely to waive off ZestMoney’s $18 million debt after failed acquisition
Hi, this is Pratik Bhakta in Bengaluru. Today, Samidha and I are breaking a story on the much-talked-about ZestMoney acquisition by PhonePe, which was called off abruptly in March. ETtech has been right on top of all the important developments surrounding this deal. From being the first to write about the potential acquisition in November last year, to telling you that the talks had fallen through because of due diligence concerns. And if you thought the story ended with PhonePe walking away, well, read on…
What’s driving the news? PhonePe and ZestMoney have not parted ways completely, not yet. Sources tell us that PhonePe is close to signing a commercial arrangement with ZestMoney wherein it will use the lending startup’s technology stack. The Walmart-owned payments major is set to waive off the $18-million credit line it had offered to the beleaguered pay later lending startup in lieu of this licensing transaction.
What’s in it for PhonePe? PhonePe wanted to acquire ZestMoney to get a foothold into the lending business— a major selling point during its recent fundraise valuing it at $12 billion. By striking a licensing agreement, PhonePe gets the technology stack, and risk assessment engine.
And by absorbing around 150 ZestMoney employees, it also gets the talent to build the vertical. All of this is in a cut-price transaction. We reported on March 30, that initially, PhonePe was coughing up $90 million to acquire ZestMoney, which, too, was much lower than the $400 million valuation the company commanded in its last fundraise.
What’s next for ZestMoney? ZestMoney is pivoting into a new business model where it will offer its tech stack and other capabilities through a licensing agreement to aspiring digital lending companies, banks, or NBFCs.
ZestMoney’s platform was made compliant with the RBI’s latest lending guidelines. Lizzie Chapman and her cofounders hope to offer this stack to other companies interested in quickly building lending capabilities.
The bottom line: ZestMoney finds itself in a very tough spot. After the valuation bump it received over the last two years owing to the boom in the BNPL market globally, it has been a hard fall for the company.
It is to be seen if their pivot into a new model will help them survive.
RBI grants NBFC licence to neobank Jupiter
At a time when business models of neobanks are being questioned, fintech firm Jupiter is making a push towards its lending aspirations. The company has received a non-banking finance company (NBFC) licence that will help the four-year-old firm extend credit from its own books.
Lending aspirations: The NBFC is expected to operate as a separate regulated entity, Amica Finance, under the Jupiter group, with a professional CEO to run its operations. The Tiger Global and Brazil’s fintech major Nubank-backed startup is also expected to raise Rs 100 crore in debt to capitalise the NBFC, as it targets annual disbursements of Rs 600-700 crore in short and medium-term personal loans.
Why does it matter? The move is significant for the fintech firm as it adds a new revenue pipe, and increases margins in lending. Further, with the NBFC in the group, it will be able to directly serve customers instead of working as just a loan-service provider (LSP). To be sure, Jupiter reported significant losses of Rs 164 crore, making it imperative for the firm to focus on revenues considering the macroenvironment.
Jupiter’s founder & CEO, Jitendra Gupta told ETtech that the company has a runway of at least four years and that “solid revenues” will start coming in by the end of the ongoing fiscal. It has already seen 5% (or over 100,000) of its user base open SIPs, over 250,000 of them were started last month. However, its lending base was still small at 25,000 users.
What’s more? With the new NBFC, Jupiter is expected to play in longer tenure loan sizes ranging from three to 24 months with higher ticket sizes of Rs 75,000 to Rs 1 lakh, from the current Rs 30,000.
Amendments to Aadhaar authentication rules ‘unconstitutional’, say experts
Allowing private entities to use Aadhaar authentication is unconstitutional, experts opined on the proposed amendments to the Aadhaar Authentication for Good Governance Rules, 2020, accusing the government of sidestepping the Supreme Court’s 2018 order on the same.
What are the amendments? To avail of Aadhaar authentication, the new rules allow any non-government entity to submit a proposal to the government justifying its purpose to use the verification method. The entity will be able to authenticate if given a go-ahead by the govt.
Quote, unquote: “The Supreme Court has already examined this aspect. It says it should not be done (allowing private entities to perform Aadhaar authentication). Now the government cannot issue a rule and overcome the SC judgment. It can only be overcome in a proper parliamentary enactment if passed,” retired SC Justice BN Srikrishna told ET.
Catch-up quick: The SC in its 2018 judgment held that Aadhaar could be used for welfare, but it recognized a fundamental right to privacy and struck down Section 57 of the Aadhaar Act which specifically enabled private entities to use Aadhaar authentication to establish an identity for delivering services.
ET Ecommerce Index
We’ve launched three indices – ET Ecommerce, ET Ecommerce Profitable, and ET Ecommerce Non-Profitable – to track the performance of recently listed tech firms. Here’s how they’ve fared so far.
Google challenges Delhi HC ruling on ADIF petition
Google has filed an appeal in the Delhi High Court against a single-judge order directing the CCI to look into complaints filed by the Alliance of Digital India Foundation (ADIF), an industry body representing a group of Indian startups.
Delhi HC order: On Monday, Justice Tushar Rao Gedela had directed the CCI to consider the complaints by Wednesday (April 26), when Google’s new billing policy is scheduled to become operative.
The arguments were primarily around whether it was within the ambit of the law for the CCI to take the complaints up, given that the commission currently has only two members and is, therefore, lacking a quorum.
ADIF’s complaint: The body, which represents Indian startups such as Paytm, Matrimony, MapmyIndia, and TrulyMadly, alleged that Google was engaging in anti-competitive conduct by implementing the new policy and that it was taking advantage of the CCI lacking a quorum to look into the industry body’s complaints.
‘Ray of hope’: Post the HC verdict, ADIF had said that the order provides ‘a ray of hope’ to Indian startups, against Google’s ‘unfair lagaan’.
“ADIF will present more factual evidence to buttress our point and assist the CCI in making an effective adjudication of the contravention applications moved by us,” it said.
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In charts: India’s digital consumption to grow to $340B by 2030 with ONDC
The government-backed Open Network for Digital Commerce (ONDC) can potentially increase India’s digital consumption by five times to around $340 billion by 2030, American consulting firm McKinsey said in a report on Tuesday.
“India could exceed expectations for the growth and possibilities of digital commerce with ONDC. The network could evolve into a nerve centre of new connections, sparking continuous innovation and advances. However, there are multiple challenges to address to allow ONDC to scale and achieve greater momentum for success,” McKinsey’s report said.
Some of the hurdles include the lack of digital ease for customers and sellers, lower trust factor compared with traditional retail options, and fears of unsafe online fraud, among others.
Also read | Exclude ecomm firms whose main platforms don’t onboard ONDC: Piyush Goyal
Other Top Stories By Our Reporters
Microsoft’s Anant Maheshwari appointed Nasscom chairperson: IT Industry body Nasscom has appointed Anant Maheshwari, president of Microsoft India, as its chairperson for 2023-24 on Tuesday. Rajesh Nambiar, chairman and managing director of Cognizant India, was appointed the vice-chairperson.
TCS & Marks and Spencer extend partnership: Tata Consultancy Services (TCS) said on Tuesday that UK-based retailer Marks and Spencer plc (M&S) has extended its partnership with the IT services major to transform its core technology stack, improve pace of innovation and drive sustainable growth.
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