Hat-trick of unicorns; What are neobanks?

Also in this letter:

• Paytm in talks with ADIA, GIC, BlackRock for IPO stakes
• Explained: Neobanks, the next evolution of banking
• Twitter to sell mobile ad unit MoPub to AppLovin for $1 billion

Howzat? Rebel Foods rounds off hat-trick of unicorns

(From left) Kallol Banerjee, cofounder of Rebel Foods, and Jaydeep Barman, cofounder and CEO

On Tuesday, fresh meat and seafood brand Licious said it had raised $52 million at a valuation of $1.05 billion.

The following day, CoinSwitch Kuber announced $260 million in funding led by Andreesen Horowitz and Coinbase Ventures at a valuation of $1.9 billion.

Rebel Foods—which operates a network of cloud kitchens and digital brands, including Faasos—completed a hat-trick of unicorns earlier today when it announced it had raised $175 million at a valuation of $1.4 billion. The round was led by Qatar Investment Authority (QIA), the country’s sovereign wealth fund, and also included existing investors Coatue and Evolvence India.

The company also said it has plans for an initial public offering in the next 18-24 months.

How’s business? Founded in 2011 by Jaydeep Barman and Kallol Banerjee, Rebel Foods created brands such as Faasos, Behrouz Biryani, Ovenstory Pizza and Mandarin Oak. Last year, it took over the India franchise of US burger brand Wendy’s.

The company said it was steadily moving towards profitability with annualised sales of $150 million, growing 100% year-on-year. It said the growth was on the back of brick-and-mortar restaurants using cost-efficient cloud kitchens to scale.

Business is also growing in tier-II towns, which saw higher demand for its services than metro cities between April and July, Raghav Joshi, chief executive of the company’s India unit previously told us.

The cloud kitchen sector in India has seen heightened deal activity in recent months. Wow! Momo Foods recently raised around $17 million and has IPO ambitions. Curefoods, founded by Ankit Nagori, raised $13 million from Iron Pillar in August to acquire and launch internet-first brands.

Mad, mad year: According to data from Venture Intelligence, Indian startups have raised a record $24.3 billion as of September 30. For comparison, they raised $11.2 billion in all of 2020 and $13 billion in 2019. The average deal size more than doubled to $35 million this year from 2020.

Also read: India’s online food services have plenty of room to grow

Paytm in talks with ADIA, GIC, BlackRock for IPO stakes

Paytm is in talks with sovereign wealth funds and financial companies to bring them on as anchor investors in its upcoming initial public offering (IPO), Bloomberg reported, citing sources.

Which ones? State-backed Abu Dhabi Investment Authority and Singapore’s GIC are among those interested in bidding to participate in the IPO, the sources said. Global financial firms such as BlackRock Inc. and Nomura Holdings Inc. are also in talks with Paytm, they added.

IPO details: The sources also told Bloomberg:

• Paytm is considering seeking a valuation of $20-22 billion based on initial feedback from investors.
• There are already more than enough bids to cover the shares allocated for anchor investment in the IPO.
• Paytm’s draft prospectus, which it filed in July, is still awaiting approval from the Securities and Exchange Board of India.

Year of the IPO: India’s market for IPOs is surging on the debuts of tech firms such as Zomato. Indian companies have already raised $10.8 billion from IPOs this year, according to data compiled by Bloomberg, and are on track to break the all-time record of $11.8 billion.

Paytm has fended off stiff competition from several global players and has the biggest market share of India’s merchant payments, with over 20 million partners in its network. Its users make 1.4 billion monthly transactions, according to numbers in a recent company blog post.

Yes, but: Aswath Damodaran, a globally acclaimed equity valuation expert, feels the company is overvalued and that its rightful valuation, once it lists on Indian stock exchanges, should be less than $20 billion, he wrote in a blog post. He said this was due to Paytm’s inability to generate profits despite spending heavily to expand its product suite over the past 10 years.

Paytm, which is backed by SoftBank., Berkshire Hathaway. and Jack Ma’s Ant Group, plans to raise $2.2 billion from its IPO, according to its draft prospectus.

Also Read: Red herring, red flags: Top 10 takeaways from Paytm’s draft IPO filing

Delhivery a step closer to IPO: Meanwhile, Delhivery has changed its registration to that of a public company as it prepares to file its draft IPO prospectus with Sebi, according to regulatory filings sourced through Tofler. It plans to launch the IPO before the end of the financial year and will look to raise close to $1 billion from it.

The company is also realigning its cap table ahead of its IPO filing, we reported on October 4. China’s Fosun International sold a part of its stake to Lee Fixel’s Addition and Bay Capital, a late-stage equity fund, at a valuation of $4.2 billion.

Tweet of the day

Explained: Neobanks, the next evolution of banking

Neobanks bridge the gap between the services that traditional banks offer and the evolving expectations of customers in the digital age. They are changing the face of fintech and could one day eclipse traditional banks.

Many might confuse neobanks with digital banks. Both are similar in that they offer banking services through smartphones and other devices. But that’s where the similarities end.

So, what are neobanks? Neobanks are financial institutions that give customers a cheaper alternative to traditional banks. You could think of them as digital banks without any physical branches, offering services that traditional banks don’t, and doing so efficiently. They leverage technology and artificial intelligence to offer personalised services to customers while minimising operating costs.

Neobanks vs traditional banks: Traditional banks have many advantages over neobanks, such as funding and—most importantly—customers’ trust. However, legacy systems are weighing them down and they find it difficult to adapt to the growing needs of a tech-savvy generation.

While neobanks don’t have the funds or customer base to overthrow traditional banks, they have something special in their arsenal—innovation. They can launch features and develop partnerships to serve their customers much more quickly than traditional banks.

Read the full explainer here.

Twitter to sell mobile ad unit MoPub to AppLovin for $1 billion

Twitter today agreed to sell mobile ad company MoPub to AppLovin Corp. for $1.05 billion in cash, as it looks to focus more on advertisements on its own app and website. It had bought MoPub for nearly $350 million in 2013.

MoPub, which generated about $188 million in annual revenue for Twitter last year, allows companies to keep track of ad inventory in real time, similar to Google’s DoubleClick.

Twitter said on Wednesday it would focus on its core business by accelerating development of new products and features to achieve its goal of doubling its revenue in 2023 to $7.5 billion.

The MoPub deal comes months after Apple updated its mobile operating system, which powers iPhones and iPads, to make it hard for digital advertisers, including social media platforms and mobile game developers, to track users on Apple mobile devices.

Other done deals

■ Twin Health, makers of the Whole Body Digital Twin precision health technology today announced $140 million (Rs 1,000 crore) in Series C funding as it is looking to scale its presence in India and the US. The Series C funding round included Sequoia Capital India, ICONIQ Capital, Perceptive Advisors, Corner Ventures, LTS Investments, Helena and Sofina.

■ Stader Labs, a cryptocurrency staking management platform for global investors, has raised $4 million in a funding round led by Pantera Capital. Coinbase Ventures, True Ventures, Jump Capital and Ledgerprime also participated in the round.

■ Mohandas Pai’s Aarin Capital Partners-backed startup lender UC Inclusive Credit (UCIC) has received its first external borrowing from the US International Development Finance Corporation. The loan—$5 million—will primarily be used for on-lending to financial inclusion sector firms that support women empowerment.

Ola launches online vehicle sales platform

Ride-hailing startup Ola announced the launch of Ola Cars, an online platform where people can buy new and pre-owned vehicles. It will offer services including purchase, finance and insurance, registration, and maintenance, among others.

Step by step: Ola Cars will first be launched with pre-owned vehicles. Over time the company will open it up to new vehicles from Ola Electric and other automotive brands as well. It will begin operating in 30 cities and expand to 100 by next year, the company said.

Leadership: Ola also appointed Arun Sirdeshmukh as chief executive of Ola Cars. “He will oversee sales and distribution, service, marketing, customer support, and go-to-market strategy for the business,” the company said.

Quote: “With Ola Cars, we are bringing a completely new experience for buying, selling and overall ownership for both new and owned vehicles. I look forward to working with Arun and building this core pillar of our New Mobility vision,” said Bhavish Aggarwal, founder and CEO, Ola.

Today’s ETtech Top 5 newsletter was curated by Arun Padmanabhan in New Delhi and Zaheer Merchant in Mumbai. Graphics and illustrations by Rahul Awasthi.