PhonePe is in talks with the founders of Indus OS to buy out their 20 per cent stake in the startup as part of a plan to increase its shareholding to 92 per cent. PhonePe currently owns 32 per cent in Indus OS and wants to take full control. PhonePe is also in talks with Samsung Ventures to acquire a part of the 20 per cent stake it holds in Indus OS.
“As per the initial conversations, Samsung Ventures is likely to continue as a stakeholder and investor in the startup, but might be diluting its stake,” a source in the know told BusinessLine seeking anonymity.
Investor dissent
This comes even as mobile marketing company Affle Global, which owns 25 per cent stake in Indus OS’ parent firm OSLabs, has objected to the low valuation being offered by PhonePe to acquire controlling stake.
Affle recently said it has won a legal case at a Singapore court, which ordered Indus OS’ parent OSLabs to hold an extraordinary general meeting (EGM) with all the existing investors.
The source cited above mentioned that the term sheet floated by PhonePe in March 2021 valuing Indus OS at $60 million was agreed upon by all the investors including Affle Global which then held 8 per cent and venture capital firm Ventureast having 15 per cent stake. “All the investors selling their stake had shared “written resolutions as they couldn’t hold a face-to-face EGM due to lockdown,” said the source.
Affle Global, however, said that the deal was taking place at a reduced valuation and Indus OS’ valuation stood at over $90 million instead.
“Affle is hoping that at the EGM, some investors would change their minds and decide in their favour,” the source said
According to Affle’s statement on June 26, It had “achieved the SIAC emergency arbitration interim order on May 15, 2021, that restricted OSLabs, its founders and key shareholders from transferring approx. 20% equity ownership to PhonePe until the Right Of First Refusal is duly offered to the existing shareholders of OSLabs.”
Why is Indus OS lucrative?
Founded in 2015 by IIT Bombay alumni Rakesh Deshmukh, Akash Dongre and Sudhir B, Indus OS’ key offering is its vernacular app store called Indus App Bazaar, which reportedly has over 100 million users in the Tier-2 and Tier-3 towns and beyond. Its app store has more than 4,00,000 apps and AI capabilities to offer many languages beyond the 12 vernacular languages it offers today in India.
“Indus OS powers Samsung Galaxy App Store. The whole mission of trying to create an alternative app store is a big thing. PhonePe is just the company acquiring it. The real people behind them are Flipkart and Walmart,” said a second source.
“Focus of Indus OS was always on localisation for India. They are not pushing any and every app. They are trying to bring relevance to the apps that are offered on their app store, based on the user’s requirements. That’s where they primarily differentiate. This in turn also helps the developers reach the right target consumers. Today, app makers spend around ₹15-40 per installation. If that is not done with the right customer, you don’t just lose money but the entire lifetime value of recall. That’s why Samsung has been investing in the company,” Faisal Kawoosa, Founder and Chief Analyst, Techarc told BusinessLine.
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