Market Buzz this week

Market movement this week

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Where’s the recession? 🧐

Raining money – While recessionary fears are plaguing the domestic economy, they don’t seem to have touched the startup ecosystem where the funding frenzy continues in full force. 

• Matrix Partners India which has invested in Ola and Razorpay has announced a fund of $450m, the 4th and largest India fund ever!
• This comes just a week after Sequoia Capital dedicated a massive $2.85 bn corpus for southeast Asia, of which $2 bn is for India alone. They are also making more money available to its seed-stage investees.
• Early this year, Accel (funded Flipkart and Swiggy) and Elevation capital (Paytm and Unacademy), have also earmarked the largest-ever India funds of $0.5 bn each.
• Lightspeed Venture Partners is also looking to set aside a similar amount, nearly double compared to 2 yrs ago.

Almost halfway through this year, India has already seen 17 new unicorns, 3 have come in June itself. The mood remains upbeat after a record-breaking 2021. 

While Marque investors are keeping the local startup scene upbeat, they are stressing viable business models and definite paths to profitability against mindless growth chase. 

Bottom line – It will be interesting to see how many VCs will eventually find lucrative exit routes this year. Overall VC exits in Indian start-ups surged over 10 times to $14 bn+ in 2021 helped by record IPOs and secondary sales. A similar show this year may however be hard to come by!  

RBI blows a knockout punch 👊

What happened – RBI issued circular saying non-bank issuers of prepaid payment instruments (PPI) to stop loading wallets with credit lines. Confusion and frustrations sparked among fintech players as it essentially wiped off a $5 billion credit card-based industry opportunity. Not to forget the amount of global capital this space has attracted. Tiger Global-backed Slice and Uni Cards are likely to be the hardest hit. This circular seems like a death punch to these challenger cards and all variations of BNPL products.

What is PPI – Pay later companies, like Slice, Uni and Dhani, offer prepaid cards or wallets which give a credit card-like experience but are backed by a non-bank credit line. This is because only banks have so far been allowed to issue credit cards. When a customer swipes these PPIs, the amount is sent from the credit line through the card. 

Reading between the lines – Since March, RBI has been seeking details of BNPL arrangements from all banks and NBFCs regarding the partnership terms, business model and loan details. Regulatory “workarounds” has harboured a growing possibility of a systemic risk that RBI wants to clamp. In April itself, RBI had issued guidelines on co-branded credit cards whereby non-banks partnering with banks on co-branded credit cards will have no ownership rights of end customers. In short, RBI is challenging the existing modus-operandi of several fintech who have been using loopholes in the system to operate in the ecosystem. 

Bottom line – These repeated regulatory interventions by RBI point to just one thing, that fintech and regulations have to move hand in hand to thrive. Otherwise, growth at all costs or regulatory “arbitrages” is only going to come to bite this fintech back. 

Mumbai Talkies 📽

Drama again – Maha Sankat gripped Uddhav Thackeray’s govt as Maharashtra’s political crisis unfolded on Yoga Day (June 21). Videos of about 40 Shiv Sena MLAs and six independents camping in Guwahati with the rebel leader Eknath Shinde surfaced on social media. Allegations roused that BJP was behind all the coup which has brought the Shiv Sena-led Maha Vikas Aghadi coalition government to the brink of collapse.

The government is currently backed by 152 MLAs and Eknath would need the support of 36 MLAs to side with BJP without attracting disqualification. 

Bottom line – The current crisis in Maharashtra comes amidst repeated setbacks faced by the present coalition government in recently-held Rajya Sabha and Legislative Council polls. In both the elections, the alliance government lost one seat each to the BJP due to cross-voting. Didn’t Mr Thackeray see it coming?

Twitter taking the longer route 📑

What happened – Twitter, the micro-blogging platform is going beyond its 280 characters. Co. is currently testing “Twitter Notes” a long-form blogging feature with a 2,500-word limit.  Twitter is also making Revue, a newsletter firm it acquired last year, as part of Twitter Write.  

From Tweets to threads and now Notes, is Twitter moving from short to long-form? – Company says “No”, Aim is to provide an additional experience for writers on Twitter outside the so-called “Tweets.”

Numbered Twitter threads are common these days to connect a series of tweets together as a means of storytelling to bypass Twitter’s character count restriction. Although Twitter threads encourage engagement as users click to expand the tweets, they are sometimes cumbersome to read especially for very long content. Notes can potentially come as an alternative. 

Bottom-line – Twitter is aiming to be the one-stop destination for all content writers. Tackling the ultra-short attention span (often less than the 280-character tweet) is a battle it will still have to deal with.  

Uber exit plans?

What happened – Bloomberg reported that Uber has explored exit from the Indian market. While CEO has vehemently denied it, Uber has struck similar deals with Didi Global Inc. in China and Grab Holdings in S.E. Asia. Uber gave away markets in these regions but kept an equity stake in the dominant local player. 

Future in India? – Uber’s struggle in this price-sensitive Indian market is real and they are still far from generating profits. It has sold its food-delivery vertical in India to Zomato. Its self-driving biz is sold-off too. Uber’s market cap is halved in a year to $43 bn and global cost-cutting is underway. 

Bottom Line – Uber is on a mission to improve financials and focus on key markets. A likely exit from Indian markets doesn’t seem odd at all, does it?

What else made the news?

😩 Crisis cry – Sri Lanka PM announced that the economy has “completely collapsed” as it seeks help from global partners and IMF

🏦Another banking fiasco – CBI filed a case against DHFL promoters for defrauding a bank consortium, led by Union Bank of India, for ₹34k crore, the biggest Indian banking fraud ever!

❤️‍🔥Fired up: A Tata Nexon EV caught fire in Mumbai, the first case involving an EV car in India 

👋 Pink slips: Layoffs by Indian startups cross 10,000 mark after City Mall announced termination orders to 191 employees

🆓Free at a cost– Social media influencers and doctors will have to pay 10% TDS on freebies received for promotional purposes from July 1

💸Crypto clarification – Starting 1^st July, 1% TDS will be levied on crypto payments, when the value exceeds ₹10,000/yr, as per the CBDT directive

🎂 Bday favours – Mr Adani and family have pledged $7.7 bn for social causes on the occasion of his 60th bday

What Tavaga Tribe has been up to this week?

Reading: The Boy, The Mole, The Fox and The Horse by Charlie Mackesy– One of my favourite coffee table books, relevant for all age groups. A book you would want to keep going back to

Listening: The Joe Rogan Experience by Joe Rogan. The podcast is known for its quirky, crazy topic discussions, pure laugh-out-loud moments and a slew of intriguing and interesting choices of guests

Meme of the week

Mumbai local show

Key insights from our Research Team

Rupee and RBI: A Match Not Made in Heaven

2 Stocks that will Benefit from Plastic Ban

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Hope you have a safe and relaxed weekend!

Cheers,

Ruchi Mehta

Business Analyst

Disclaimer: This write-up is solely for educational purposes. This in no way should be construed as a buy/sell recommendation. Please consult your investment advisor before investing.

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