PhonePe goes live with merchant loans; Government probing Byju’s

After its failed ZestMoney acquisition, PhonePe is kickstarting its credit journey with merchant lending. This and more in today’s ETtech Top 5.

Also in this letter:
■ India, US to come together for DPI in developing nations
■ ETtech Deals Digest
■ More pain coming for Indian IT firms


PhonePe goes live with merchant loans

PhonePe credit

From left: PhonePe cofounders Sameer Nigam & Rahul Chari

Fintechs getting on board the credit ecosystem is fast becoming the norm, the latest entrant being digital payments major PhonePe which is now entering merchant lending, offering loans in the Rs 15,000 to Rs 5 lakh range. There’s a rider though, with only merchants who have used the app actively over the last six months being eligible.

Driving the news: PhonePe has gone live with loans for the over 35 million merchants who accept UPI payments through PhonePe.

A PhonePe spokesperson said the company has already processed around 20,000 loans in its pilot, which was launched in May, and is eyeing an annual loan disbursal rate of Rs 1,000 crore.

Who can use this? Besides having used the app actively over the last six months, the merchants would also have to process more than Rs 25,000 per month through their PhonePe QR code stickers to avail of the offer.

What’s the big deal? PhonePe’s entry into merchant lending assumes significance as its closest rival Paytm generated a large chunk of its topline from credit to its merchants. PhonePe’s credit business also needs to fire as it holds tremendous potential to boost its topline.

As of FY 22, PhonePe reported total revenue of Rs 1,698 crore. In FY22 Paytm posted total revenue of almost Rs 5,000 crore, which jumped to nearly Rs 8,000 crore in FY23.

Consumer lending again, soon: PhonePe eventually will get into consumer lending as well. It had tried to enter that space through the acquisition of buy-now-pay-later player ZestMoney, which fell through. Now, the digital payments company might build its own platform or look for fresh inorganic growth opportunities.


A bad week at Byju’s with board exits, auditor smack-downs and a looming government probe
Startups vs IAMAI, redux; Mojocare investors mull legal action against founders

With three directors exiting Byju’s board, the resignation of its auditor and the likelihood of an enquiry into alleged corporate governance lapses, Byju Raveendran is scrambling to put things in order at his company. And this comes on top of recent layoffs, valuation markdowns and troubles with lenders over a massive loan default.

Details: The Ministry of Corporate Affairs (MCA) ordered an inspection of Byju’s last week, sources told CNBC-TV18. The ministry has taken cognisance of various corporate governance lapses at the edtech, the TV channel reported.

Byju’s, however, dismissed the report as “speculative”. “We have not received any such correspondence from MCA regarding this, and are not aware of any such inspection,” a spokesperson said.

Also read | Explained: Byju’s battles auditor criticism, board exits

Bad news piles up: This comes a day after the company, one of India’s most valuable, was hit by senior-level exits. ET reported on Thursday that three of Byju’s directors and its auditor Deloitte Haskins had resigned. The directors are GV Ravishankar, managing director at Peak XV Partners (earlier Sequoia Capital India), Russell Dreisenstock of Prosus, and Vivian Wu of the Chan Zuckerberg Initiative.

Byjus term loan saga

Trouble with the law: Byju’s was recently on the radar of the Enforcement Directorate (ED), which searched premises linked to the company as part of a probe into alleged violation of foreign exchange rules over investments received and funds transferred abroad by the edtech startup.

The company has also been under the scanner of the MCA and the GST department over the delay in submitting its annual report for FY21 after auditor Deloitte refused to sign off on it.

Other woes: In a bid to prune costs, Byju’s said it was cutting as many as 1,000 jobs across departments, including its WhiteHat Jr vertical. Currently, Byju’s is negotiating with its lenders to rework the terms of a $1.2 billion loan. Both sides have filed suit against each other.


India, US to work for digital public infra in developing countries
Modi Biden

High-value deals around artificial intelligence (AI), defence, drones and other technologies between India and the US dominated the news amid PM Narendra Modi’s American sojourn. Of the many tech-focussed agreements that took place between India and the US, one of the key pacts was on deploying digital public infrastructure (DPI) in developing countries.

Details: In a joint statement, India and the US vowed to develop a ‘US India Global Digital Development Partnership’ under which they will bring together technology and resources from both countries to enable development and deployment of DPIs in developing nations. This will include appropriate safeguards to protect privacy, data security and intellectual property, the statement said.

Quick recap: PM Modi’s commitment in the US comes days after the Indian government championed the concept of a partnership between like-minded countries to work together on DPI that can be used by everyone.

Deals rush: A number of tech pacts were inked during PM Modi’s “milestone” visit to the US. He also met with Tesla boss Elon Musk, who said that his electric car company is looking to drive into India “as soon as humanly possible”.

US memory chip firm Micron Technology said it would invest up to $2.75 billion in a new chip assembly and test plant in Gujarat, its first factory in India. US semiconductor toolmaker Applied Materials also said it will invest $400 million over four years in a new engineering centre in India.

The two countries also established a Joint Indo-US Quantum Coordination Mechanism to facilitate joint research between the public and private sectors across both countries.


ETtech Deals Digest: Startups raise $103 million this week as funding drought persists

Startup VCFUND

Another week has gone by, and the funding drought persists across the Indian startup landscape, with new-age companies mopping up just $103 million across 17 rounds in the last seven days. The funding raised by these companies plunged 85% year-on-year, from the $688 million raised across 45 rounds last year.

Overall funding trend for Indian startups

Sequentially, funding activity for Indian startups plunged 58%, against $243 million raised across 28 rounds last week.

Top funding rounds in 23 June 2023

Bengaluru-based pet food-maker Drools led the funding activity this week, scooping up $60 million from L Catterton, a private equity (PE) firm backed by Paris-based luxury products giant Moët Hennessy Louis Vuitton (LVMH) group.

most active VCs this week

Here is a list of startups that got funded this week.


Accenture results hint at more pain for Indian IT companies

IT industry salary

Experts are concerned about the demand outlook for Indian IT services after Accenture narrowed its revenue guidance for the ongoing fiscal year to 8-9% from 8-10% earlier.

Tell me more: Amidst a worsening demand outlook, brokerages have maintained a cautious stance on the sector.

Nomura said it expects 480 bps slower revenue growth (at 6.1% YoY) in FY24 vs FY23 for largecaps. “[The] Lowering of revenue guidance by Accenture indicates continued softening demand for IT services. Moderating deal bookings momentum (due to lower-than-expected smaller duration projects) and cut in total headcount indicate rising near-term demand uncertainty for the industry, in our view,” Nomura said.

Expertspeak: Emkay Global’s Dipeshkumar Mehta said Indian IT companies are expected to face growth challenges in the near term, which would weigh on their FY24 growth prospects as H1 is usually a seasonally strong period. “Our pecking order is Infosys, Wipro, Tech Mahindra, HCL Tech and TCS in largecaps,” he said.

Accenture results: The IT giant clocked a net income of $2.05 billion for the quarter-ended May, up 12.6% year on year, boosted by growth in its health and public services and resources verticals.

“Our clients are kind of crawling back on the small stuff, and doing the bigger (projects), which obviously converts to revenue differently,” Julie Sweet, chair and CEO at Accenture, said. She added that the IT bellwether will “pivot” to higher growth areas such as digital manufacturing, supply chain, data and artificial intelligence.

Today’s ETtech Top 5 newsletter was curated by Megha Mishra in Mumbai and Vaibhavi Khanwalkar in Bengaluru. Graphics and illustrations by Rahul Awasthi.

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