Paytm stock hits record low on Reliance threat; startups shouldn’t see public markets as exit option: Zerodha CEO

Paytm’s stock plunged more than 11% to a record low of Rs 475.55 on Tuesday after analysts said the company faced a threat from Reliance’s foray into the financial services business. Reliance already has a non-banking financial company (NBFC) licence, which it could leverage to kickstart consumer and merchant lending in a big way, the analysts said, putting Paytm into direct competition with Jio Financial Services.

Credit: Giphy

Also in this letter:
■ Startups shouldn’t see public markets as an exit option: Zerodha CEO
■ Musk puts Twitter Blue launch on hold, to start hiring for key roles
■ Panel may recommend 28% GST on online gaming: report

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Paytm stock hits all-time low as Macquarie flags Jio Finance threat

Shares of Paytm’s parent firm One 97 Communications fell to a new all-time low on Tuesday after Macquarie Group analysts flagged risks from billionaire Mukesh Ambani’s foray into financial services.

Driving the fall: Reliance’s Jio Financial Services “can pose a significant growth and market-share risk” for players such as Paytm and Bajaj Finance Ltd, Macquarie analysts led by Suresh Ganapathy wrote in a note on Monday.

Credit: Yahoo Finance

Battered and bruised: Paytm’s stock fell more than 10% on the news and ended the day at Rs 475.55 on NSE, 11.44% down from its previous close. The company has shed more than 20% of its market cap in just the past five trading days, with SoftBank having reduced its stake after the lock-in period for pre-IPO investors expired. The stock is now down about 75% from its listing price.

Reliance juggernaut: Macquarie’s warning comes after Reliance Industries announced last month it would spin off and list its financial services unit to bolster its presence across consumer businesses. This throws up a new challenge for Paytm, which has struggled since its $2.3 billion IPO in 2021 – one of the biggest offerings ever in India.

Reliance already has a non-banking finance company licence which it could leverage to kickstart consumer and merchant lending in a big way, the Macquarie analysts said.

Peers suffer too: The Paytm stock rout comes just a day after shares of Delhivery hit a new 52-week low of Rs 340.30 as the six-month lock-in period for pre-IPO investors expired. On Monday, CA Swift Investments – a part of the Carlyle Group – sold a 2.5% stake in the company for Rs 607 crore through an open-market transaction.

Shares of FSN E-Commerce Ventures, the parent firm of Nykaa, fell 3.6% on Tuesday, after private equity firm Lighthouse India likely sold 1.8 crore shares of the company in a block deal, various reports said.

On November 17, Nykaa’s shares shed 7% to intraday low of Rs 171.05 after 2% of the company’s equity changed hands in five bunch trades. In the previous session, Lighthouse India Fund III had sold three crore shares of the company at an average traded price of Rs 175.13, BSE bulk deal data showed.

Nykaa CFO quits: Meanwhile, Nykaa said in a filing on Tuesday that its chief financial officer Arvind Agarwal has resigned “to pursue other opportunities in the digital economy and startup space”. The company said it is in the process of appointing a new CFO.

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Startups shouldn’t see public markets as an exit option: Zerodha CEO

Nithin Kamath, founder & CEO, Zerodha

Zerodha founder and chief executive Nithin Kamath said a fundamental problem with India’s startup ecosystem is that founders and executives typically see the public markets as an exit option, when in reality it is an entry point.

Driving the news: Speaking at The Economic Times Startup Awards in Bengaluru over the weekend, Kamath said, “The problem with the startup ecosystem is that everyone is looking at the public market as an exit but really it is an entry as you are getting in retail investors who can take the least risk [of any investor] on your cap table. So you should leave some value on the table for that, right?”

Also Read | ETSA 2022 panel discussion: a moment of truth awaits Indian startups

IPOs won’t be easy: Kamath said startups looking to go public from here on won’t have an easy time of it, in part due to the performance of their predecessors, such as Zomato, Paytm, Nykaa and Delhivery, which have performed poorly on the bourses.

Also Read | ETSA 2022: India may ride out global storm

“Memories in public markets last much longer than in the private markets and unless a few companies cannot make money, it is hard to see how a lot of new startups could come and raise money from the public market,” Kamath said.

“The thing about retail investors is all those IPOs, the tech ones, did not have too much retail subscription. It was just 15-20% at max, so most of them were institutional investors,” Kamath said.

Also Read | ETSA 2022: Whole world seeking FTAs with bright spot India: Piyush Goyal

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Musk puts Twitter Blue launch on hold, to start hiring for key roles

Elon Musk has changed Twitter’s plans once again.

This time the new Twitter chief executive has put on hold plans to relaunch the $8-a-month Twitter Blue subscription – which comes bundled with a verified badge or ‘blue tick’. A few days ago, Musk had said the revamped service would be relaunched on November 29.

“Holding off relaunch of Blue Verified until there is high confidence of stopping impersonation. Will probably use different colour checks for organisations than individuals,” Musk said in a tweet.

Following a surfeit of fake accounts on the platform after a hurried release of the revamped Twitter Blue, Musk had said last week the $8-a-month subscription service would be relaunched with ID verification.

Firing to hiring: According to a report by The Verge, Musk and his team are done with layoffs at Twitter and are now actively looking to hire people.

Encrypted DMs: Musk is also planning to launch encrypted direct messages (DMs) on Twitter, The Verge reported. He told employees during a meeting that the company would also work to add encrypted video and voice calls between users.

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Panel may recommend 28% GST for online gaming: report

A panel comprising state finance ministers is likely to recommend a uniform Goods and Services Tax (GST) rate of 28% for online games, irrespective of whether they are games of skill or chance, PTI reported, citing sources. They said the report has almost been finalised and will be submitted to the GST Council for consideration soon.

Yes, but: The panel is likely to suggest a revised formula for calculating the amount on which the GST would be levied.

Catch up quick: Currently, online gaming attracts 18% GST, which is levied on gross gaming revenue – the fees charged by online gaming portals.

The Group of Ministers (GoM), chaired by Meghalaya Chief Minister Conrad Sangma, had in an earlier report – which was submitted to the council in June – suggested 28% GST on on the full value of the consideration, including contest entry fee, paid by the player, without making a distinction between games of skill or chance. However, the council asked the GoM to reconsider its report.

The GoM then took the views of the attorney general and also met stakeholders from the online gaming industry.

Although the GoM deliberated on separate definitions for ‘games of skill’ and ‘games of chance’, it finally decided to recommend that both be taxed as demerit goods, which attract 28% GST.

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Infographic Insight: US, China at forefront of space race 2.0

India’s first privately made rocket lifted off from ISRO’s spaceport in Sriharikota last week, marking the private sector’s first foray into space.

Developed by four-year-old Hyderabad-based startup Skyroot Aerospace, the launch of Vikram-S – named after Vikram Sarabhai, the father of India’s space programme – is the first launch since the space segment was thrown open to private players in 2020.

Yes, but: India’s private space companies have a lot of catching up to do. According to data from Space Capital and Statista, US companies have cornered almost half (46.3%) of all investments in private space companies since 2014. China comes in second with 29.3% and Singapore is a distant third with 5.2%. India comes in at number six, with 2.3%.

Today’s ETtech Top 5 newsletter was curated by Zaheer Merchant in Mumbai and Siddharth Sharma in Bengaluru. Graphics and illustrations by Rahul Awasthi.