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Paytm’s Rs 740-crore loan to founder

Good morning,

Paytm, slated to go public in November, plans to loan Rs 740 crore to its founder Vijay Shekhar Sharma to fund his purchase of an insurance firm. Its shareholders will vote on the proposal on June 30.

Also in this letter:

  • Unions ask RBI to rethink NUE policy
  • How Indian startups are helping creators earn
  • Twitter blocks accounts of JazzyB, 3 others

Paytm to lend its founder Rs 740 crore to buy insurance firm

merger

A proposed Rs 740-crore loan from Paytm to its founder Vijay Shekhar Sharma’s investment firms will be used to finance Sharma’s purchase of Raheja QBE General Insurance, sources told us.

Closing this deal, announced nearly a year ago, is crucial for the Noida-based payment major as it prepares for an IPO in November. The proposal to lend up to Rs 740 crore, or around $100 million, to two companies of which Sharma is a director is expected to help seal the deal sooner, said the people cited above.

The two investment firms are VSS Holdings and VSS Investco.

“The nearly $100 million debt will provide the liquidity to Sharma to actually pay for the acquisition. They (Paytm and its founder) are also exploring multiple restructuring options to stitch this deal so it could get the IRDA approval sooner,” said a source.

Shareholder vote: Paytm shareholders, who were told about the loan proposal on June 5, will vote on it during the company’s annual general meeting on June 30. The AGM notice did not specify why the money was being loaned to Sharma.

Loan details: According to the AGM notice, Paytm will loan close to $34 million at 15% interest to VSS Investco in one or more tranches. “Vijay Shekhar Sharma to raise external funding or sell his shares in the company for repayments of the loan borrowed from the company,” the note read.

Deal details:
The acquisition of Raheja QBE, which is awaiting regulatory approval, will be routed through Paytm subsidiary QorQl, of which Sharma owns 51% and Paytm’s parent firm One97 Communications owns 49%.

IPO plans: For Paytm, this pivot from a wallet firm to a full-fledged financial services provider will be critical to its public listing. Insurance is one of the firm’s big bets as it looks to scale its financial services portfolio. It needs to close pending deals and secure all the clearances quickly since it aims to list by November.


Unions ask RBI to rethink NUE policy

NPCI

A group of Indian and global unions, including State Bank of India’s staff association, has written to the Reserve Bank of India, seeking a review of its New Umbrella Entity (NUE) framework.

  • The group, comprising associations such as UNI Global Union, IT for Change, Joint Action Committee Against Foreign Retail and E-commerce (JACAFRE), also raised objections to multinationals, particularly Amazon, being allowed to own private NUEs under the framework.

“Threat” to NPCI-owned networks: It also raised concerns about potential abuse of user data by firms eyeing NUE licences, and competition risk to India’s indigenous payments networks such as RuPay and UPI, which are owned and operated by NPCI.

NUE race: Reliance, Tata, Paytm and Amazon have all applied for NUE licences. Setting up rivals to NPCI would allow these firms to create pan-India payments networks on the lines of the hugely popular Unified Payments Interface (UPI).

Also Read: NUE licences may come only by November, say sources

Tweet Of The Day


Twitter blocks four accounts critical of government

Twitter has “withheld” the accounts of popular singer JazzyB, hip-hop artist L-Fresh the Lion and two others in India, in response to a legal demand by the Indian government on June 6.

In context: This comes a day after Twitter said it was making every effort to comply with India’s new IT rules. Last week, the ministry of electronics and IT (MeitY) sent a “final notice” warning the platform to comply with the new rules.

Read our explainer on India’s new digital media rules here.

In February, the government had ordered Twitter to block around 1,400 handles associated with the farmers’ protests. Twitter suspended more than 500 of these for violating its rules, but said it would not take any action on accounts of news media entities, journalists, activists, and politicians as that would violate their “fundamental right to free expression under Indian law”.


Indian startups launch monetisation tools for creators

helping Influencer

A number of Indian startups are helping creators earn money directly from their audiences.

What’s happening? These startups are building paid-private communities, cohort-based platforms, tipping features, and other tools to cater to the two to five million individuals in India’s growing creator economy. In most cases, they are taking single-digit commissions from a creator’s earnings. By contrast, Twitter charges up to 20% for certain features, while Apple and Google take a 30% cut from apps in their stores.

However, Facebook founder Mark Zuckerberg on Monday said that the social media giant would not charge creators a fee until 2023 to use the tools on its platform.

Challenges ahead:
Indian startups are aiming to help creators — including artistes, influencers and freelancers — make money directly from their audiences despite several cultural barriers, such as a lack of awareness about ways to earn money other than brand partnerships and advertisements, and audiences unwilling to pay for content.

Creator

Infographic Insight

According to creators and industry experts, startups are building for novice creators looking for sustainable revenue streams, as income from ads and brand sponsorships are skewed towards the top ones.

revenue split

SoftBank leads $90 million investment in Whatfix

Khadim Batti and Vara Kumar

Khadim Batti and Vara Kumar, cofounders, Whatfix

SoftBank Vision Fund II has led a $90-million financing round in Whatfix, a software-as-service (SaaS) digital adoption startup founded in 2014. ET was the first to report the deal on April 20.

Valuation soars: The new funding round values the startup, headquartered in Bengaluru and San Jose, at around $600 million, up from $150 million when it raised funds a year ago.

SoftBank’s SaaS deals: SoftBank has been actively scouting SaaS deals in India, especially firms that have an annual recurring revenue of $10-15 million. It had led a $100-million round in sales enablement platform MindTickle last November.

SoftBank also recently invested $250 million in neobanking startup Zeta and led a $300-million investment in social commerce startup Meesho. It has held talks with Flipkart to invest around $600-700 million as part of a larger $2 billion round, we reported last week.

In related news, SoftBank Vision Fund II has sought approval from India’s anti-monopoly watchdog to invest in food delivery app Swiggy. The technology fund of Masayoshi Son-led SoftBank Group Corp is finalising a $450-million investment in the online food delivery platform at a pre-money valuation of $5 billion, ET reported on April 16.

Also Read: SoftBank Vision Fund invested $2 billion into India startups this year: CEO Rajeev Misra

Meanwhile, US private equity major TPG has led a funding of $80 million in SaaS startup Zenoti.


Infosys working to fix issues with I-T portal, says Nilekani

Infosys is working to resolve technical issues it faced on day one of the rollout of India’s new income tax e-filing portal, its co-founder and chairman Nandan Nilekani said. He said he expected the system to stabilise within the week.

Sitharaman’s tweet: Earlier on Tuesday, finance minister Nirmala Sitharaman tagged Nilekani on Twitter after receiving a large number of complaints about the website from users. She said she hoped Infosys and Nilekani would not “let down our taxpayers in the quality of services being provided”.

Response: “We have observed some technical issues on day one, and are working to resolve them. Infosys regrets these initial glitches and expects the system to stabilise during the week,” he said in response to her post.


India’s second-largest IT firm had won the bid to develop the new portal for filing income tax returns, which went live on Monday night. Users complained they were unable to log in until late on Tuesday night.


Other Top Stories We Are Covering

Fastly fixes CDN glitch that caused a global internet outage: Several prominent websites, including Amazon, Reddit and Spotify, experienced a brief but global outage due to glitches in cloud services provider Fastly’s content delivery network (CDN). Websites of several international news websites, including Financial Times, The New York Times, CNN, The Guardian and Bloomberg, also faced hour-long downtimes, according to data from real-time internet outage tracker Downdetector.

Zoho focuses on India-first products: Zoho, India’s largest software-as-a-service (SaaS) firm, has started building products for the domestic market first, looking to tap into businesses that are adopting digital tools to grow. The SaaS company recently said it would provide its Zoho Invoice facility free to all its small and medium enterprise (SME) customers.

Staffing firms see rising demand for managed services: Teamlease, Quess Corp and FirstMeridian are seeing an increase in demand for managed services talent and projects as companies across sectors like pharmaceuticals, BFSI and telecom increasingly digitise their operations.


Global Picks We Are Reading

■ Apple is encroaching on Facebook’s territory like never before with new social features (CNBC)

■ Farewell, millennial lifestyle subsidy (NYT)

■ How an obscure company took down big chunks of the Internet (Wired)

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

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