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Neobanking attracts heavyweights

Good morning,

Bengaluru-based neobank Open, which has grown 10-fold since the start of the pandemic, is drawing the attention of tech and payments heavyweights.

Also in this letter:

  • Paytm invites shareholders to dilute stake
  • Twitter seeks more time to comply with new IT rules
  • Tata pumps $75 million into CureFit

Open sesame: Amazon, Google, Visa eye neo-banking firm

Neo banking startup

Amazon, Google and Visa are separately eyeing a stake in neo-banking startup Open, which is looking to raise about $100-$120 million, two sources told us. If it does manage to raise this amount, Open’s valuation is likely to jump three times to around $600-700 million.

Playing the field: Apart from these firms, Open is also in talks with a leading sovereign wealth fund and private equity firm TPG. The company has previously raised $45-50 million from investors such as Tiger Global, 3one4 Capital, Speedinvest and BetterCapital.

Boom time: Bengaluru-based Open has recorded nearly 10-fold growth over the past 18 months as the pandemic has forced businesses to go digital.

If the deal goes through, it would be significant for the neobanking space. Amazon is building its own digital banking platform, which will allow its local sellers to open current accounts, manage expenses and obtain credit from an array of partner banks.

What it does: Founded in 2017 by Anish Achuthan, Ajeesh Achuthan and Mabel Chacko, Open offers business banking, payments and expense management services to over one million small and medium businesses. It claims to process transactions worth $24 billion annually. The company is estimated to be onboarding close to 50,000 new businesses every month and has a target of 5 million paid subscribers by the end of the year.

What’s neobanking? A neobank can be a transactional platform for merchants, an account manager, or a lending service as well. Other prominent neobanks in India are Jupiter, RazorpayX, and Niyo. Amazon and Paytm are also making forays into this space.

Globally, Revolut, Chime and Banco are the leading companies in this space. Revolut has recently announced plans to enter India.

Issues in India: In India, a lack of regulations has hindered the growth of this sector as the Reserve Bank of India (RBI) does not yet recognise these companies as a separate class of banking intermediaries. Thus a neobank may need permission to be a business correspondent and a payment aggregator, and require a formal agreement with a regulated bank, detailing its ethical lending practices.


Paytm invites shareholders to dilute stake

paytm

One97 Communications, the parent entity of Paytm, said it is contemplating a mix of fresh issuance of shares along with an Offer for Sale (OFS) for shareholders, for the company’s proposed IPO later this year.

Why it matters: This is the first official word from the company on its proposed IPO. Paytm’s shareholders, including its institutional investors such as Ant Group, Softbank, T Rowe Price and Elevation Capital, can use the OFS option to dilute their stakes in the firm.

What’s next? Paytm will hold its annual general meeting on June 30, it told its shareholders in a note over the weekend.

IPO plans: The company, backed by China’s Alibaba and Japan’s SoftBank, aims to go public by November and is expected to file its Draft Red Herring Prospectus (DRHP) with Sebi by next month.

Last week, we reported that One97 Communications’ consolidated revenue from operations fell 14% to Rs 2,802 crore for the financial year 2021. Losses, however, narrowed to Rs 1,701 crore during the period, from Rs 2,942 crore in the FY20.

Read our in-depth analysis of Paytm’s IPO plan in our weekend newsletter ETtech Unwrapped here.


TWEET OF THE DAY


Follow @ETtech for all the breaking news, insights and smart analysis on the business of technology and startups from the newsroom of The Economic Times.


Twitter seeks more time to comply with new IT rules

FILE PHOTO: The Twitter logo displayed on a screen on the floor of the NYSE

Days after the Indian government gave Twitter “one last chance” to comply with the country’s new intermediary guidelines, the company said it was making every effort to comply with the new IT rules.

  • “We have assured the Government of India that Twitter is making every effort to comply with the new guidelines, and an overview on our progress has been duly shared. We will continue our constructive dialogue with the Indian Government,” a Twitter spokesperson said.

Government sources, however, told ET there was no update on the issue right now.

The Press Trust of India cited an unnamed source saying that Twitter had sought more time to comply with the new IT rules due to the pandemic.

India is the third-largest market in terms of users for Twitter. As of January, nearly 17.5 million people from the country were on the platform, according to data platform Statista. The company has 192 million daily active users globally. In April, Twitter had said India was a “priority” market and one of the fastest growing, globally.


Tata pumps $75 million into CureFit

Mukesh Bansal

Tata Digital will plough $75 million into health and fitness startup CureFit. The deal was first reported by ET last month.

  • As part of the deal, CureFit founder Mukesh Bansal will join Tata Digital as president, in addition to his leadership role at the startup.

The RNT connection: Bansal and Curefit already have an association with the Tata group. When the startup was just a year old, Tata Sons chairman emeritus Ratan Tata had invested in Curefit through his UC RNT Fund, formed by Tata in partnership with the University of California Investments. Through this, Tata had led a $3 million funding round in Curefit in 2017.

Curefit Healthcare

Digital war chest: The deal comes as Tata is building its digital arsenal against the likes of Amazon, Reliance and Walmart-Flipkart. Last fortnight, Tata’s digital subsidiary announced its purchase of a 64% stake in online grocer BigBasket, in one of the largest M&A deals in India’s digital sector. It is also in the final stages of acquiring online pharmacy 1mg.


INFOGRAPHIC INSIGHT

Paytm has been steadily focusing on reducing losses, though the Covid-19 pandemic-led slowdown in the consumer economy has hurt growth.

Paytm Financials

DigitalSky platform may land by end of the year

India is aiming to launch its revamped DigitalSky platform by the end of the year.

Why it matters: This will enable automated registration and flight approvals, among other procedures for drones, in compliance with the Unmanned Aircraft System Rules that were passed in March.

  • DigitalSky, which was first unveiled in December 2018, is currently undergoing a revamp to become compliant with the new rules. For this, the civil aviation ministry has roped in Bengaluru-based IT services provider Happiest Minds, a senior government official told us.

By the numbers:

  • India has so far certified 22 models of drones in the micro, small and medium categories.
  • The country has issued 41 Unique Identification Numbers (UIN) so far.
  • It has also empanelled 16 drone pilot training schools and allowed 60 projects to use drones.

ETtech Done Deals

  • State Bank of India (SBI) has invested an undisclosed amount in Bengaluru-based Cashfree. With this, the country’s largest public sector lender joins a slew of investors—including Apis Partners, Smilegate and Y Combinator—at the fintech startup’s cap table.
  • Tele-health platform Truemeds has raised $5 million in a Series A funding round led by InfoEdge Ventures, Asha Impact and Indian Angel Network. InfoEdge had also invested in the seed round of the startup.
  • Trulioo, a Canada-based startup that provides electronic identity and address verification globally, has secured $394 million in a funding round led by venture capital firm TCV at a valuation of $1.75 billion.

Top Stories We Are Covering

Indian startups mitigate Covid-19 pain for their employees: A few Indian startups have announced allowances to staff as well as other measures of support to deal with Covid-19-related expenses and emergencies. Online food delivery platform Swiggy has put in place under Swiggy Suraksha a host of measures, including nutrition care support, hospitalisation cover of up to Rs 1.5 lakh, and life insurance coverage of up to Rs 5 lakh to support its 150,000 delivery partners.

Moily says he coined Silicon Valley of India: Former chief minister M. Veerappa Moily on Monday warned any new description for Bengaluru other than as the Silicon Valley of India will hurt the brand image it has built globally. His comments followed Infosys chairman Nandan Nilekani and Mahindra Group chairman Anand Mahindra picking up TecHalli as a new moniker for Bengaluru after running a competition on Twitter to find a suitable replacement for ‘Silicon Valley of India’.

Facebook says it won’t charge creators until 2023: Facebook Inc will not charge a fee to content creators for at least the next two years, Chief Executive Mark Zuckerberg said on Monday, moments before Apple Inc’s annual conference, where the iPhone maker faces an unsettled developer audience.

Jeff Bezos to fly to space on Blue Origin rocket: Amazon.com Inc. founder Jeff Bezos and his brother will fly into space next month on the first space flight of his rocket company Blue Origin, the billionaire said on Monday.

EbixCash appoints S Ravi as independent director: EbixCash, a wholly-owned subsidiary of Nasdaq-listed software and e-commerce services provider Ebix Inc., has appointed S Ravi as an independent director to its board, ahead of a prospective IPO in India.


Global Picks We Are Reading

■ Google to change global ad practices after French watchdog imposes fine (Reuters)

■ China’s emerging tech firms grapple with losses (WSJ)

■ Here’s everything Apple announced at this year’s WWDC (CNBC)

Today’s ETtech Morning Dispatch was curated by Zaheer Merchant and Karan Dhar in Mumbai.

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