Fintech unicorn Razorpay, on Thursday, announced its third ESOP (Employee Stock Ownership Plan) buyback program worth $10 million (₹73 crore) for its 750 employees.
All existing and former employees of Razorpay who hold vested stocks will be eligible to sell up to 33 per cent of their vested ESOP shares. Sequoia Capital India and GIC, two of Razorpay’s key investors will be the buyers involved in this development.
ESOP buybacks in the start-up industry have been a source of significant wealth creation for employees but it is not something that companies usually offer as an annual event. Razorpay is one of India’s youngest start-ups to have facilitated the ESOP buyback program consequently for the last three years.
The share sale is expected to benefit employees across roles – from team leaders to support executives to administrative staff. Razorpay’s 1,350 people team raised their $100 million Series D funding in October last year and the ESOP buyback plan is a reflection of the faith that the company and its employees have instilled in each other.
“We’ve always said and believed that our employees are the reason for every success that we have had. They turned an unprecedented year into one of the strongest years for Razorpay. And this ESOP Buyback is our little way of giving back to the employees for their contribution and a form of wealth creation for all, as it is important for us to ensure that our employees also grow along with the company. Our current and former employees, even as young as 23, will be eligible for this incentive, irrespective of rank. The compensation will be rolled out to all our employees, be it software engineers, product managers, customer experience agents, or administrative staff. I believe there’s no better time than now to recognise the team for all their efforts and having trusted us in this journey,” said Harshil Mathur, CEO and co-founder, Razorpay.
Razorpay’s first liquidity event through ESOP encashment occurred in November 2018 for its 140 employees then. The transaction was done at a 50 per cent premium to the valuation. The second ESOP sale event occurred in November 2019, during which approximately 400 employees were eligible. To date, the company has awarded ESOPs to 1,000 employees, with current employees holding a majority share.
Currently powering online payments for more than 5 million small and large businesses such as Facebook, IRCTC, CRED, Zerodha, Indigo among others, Razorpay has clocked in a healthy growth rate of 40-45 per cent month-on-month and is geared to increase its merchant count to 10 million by next year.
Razorpay registered 3X growth in payment volume through SMBs that went online for the first time during Covid in 2020.
Cryptocurrency is currently directionless in India. The uncertainty has left investors, traders, stock exchanges and also start-ups working in the blockchain space puzzled. The government has formed an inter-ministerial group and there is a talk that the government will ban cryptocurrencies. Experts believe India will lose a big chunk of foreign investments if the government passes the cryptocurrency bill.
Cryptocurrency status in India
India has a total of seven exchanges for crypto trading and more than seven million people have invested in it. Also, around 200-250 startups are working in blockchain associated with the cryptocurrency segment. Currently, digital assets and cryptocurrencies have a global market capitalization of $ 1.5 trillion. People are finding cryptocurrency exciting due to the gigantic returns and also because it is an emerging asset class. But the Reserve Bank of India and the government have clarified that they are not in favour of cryptocurrencies or any private digital currency. But the Supreme Court quashing the RBI appeal have given new hope to cryptocurrencies. While the government is in the process of making a cryptocurrency decision very soon, experts believe India will lose foreign funds if it disallows the new currency.
Uncertainty over the fate of cryptocurrency industry continues as the Government is yet to take a final call on the banning and regulation of cryptocurrency.
Foreign investors
“The foreign investors from the US want to invest in India and not China. And if the government bans crypto, they will not come. This will see India losing large funds. Many other countries have passed cryptocurrency bills. Many countries have already added rules and regulations and allowed the cryptocurrency,” said Sankalp Shangari, an Angel Investor. In India, cryptocurrency stock exchanges have raised $5 million and the startups in this space are gaining interest from investors.
“Some of the largest global brands like Tesla Motors, BNY Mellon or even investors like Tim Draper maintain a portfolio of their wealth in crypto assets. They are also investors in India. If the Indian government takes a positive decision on crypto, FDI by global brands into India will increase. However, if the decision is negative, the same brands will pull out of India and go with countries that have friendly regulations. This will lead to massive job losses for India’s emerging economy and young population,” said, Atul Khekade, Co-founder, XinFin, XDC Network, which is building a platform for global trade finance. Cryptocurrency in other countries
Many countries including the US, Singapore, Malaysia, Indonesia, South Korea have framed regulations around cryptocurrency and allowed it. Foreign investors have pumped in funds in these countries as the prices of cryptocurrencies like Bitcoin and Ethereum are skyrocketing.
“Finding a balance and fair regulation around crypto-assets can make India’s economy and rupee stronger. It is not the other way. After the Covid catastrophe, the global economy needs more connectedness through digital trust. If one wants to make their country economically stronger, one has to connect to this new layer of trust and not disconnect itself from it. A disconnect from a new form of trust would be disastrous,” Khekade said.
“By banning cryptocurrencies, India may go backwards. We should understand that cryptocurrency and blockchain as technology have made huge progress in the last five years. Maybe even I would have said no to crypto then. But now the world is moving forward and India should stay behind,” Shangari said.
In India, cryptocurrency stock exchanges have raised $5 million and the startups in this space are gaining interest from investors.
Regulations over cryptocurrency
Cryptocurrency experts believe that banning cryptocurrency is very easy, but the government should think of regulating it. They also claim that cryptocurrency transactions are very transparent.
“Cryptocurrency transactions can be tracked online since they use blockchain technology, which is very transparent and practical for such usage. There have been various research reports that have data that unlawful activities are still funded through traditional cash. All cryptocurrency transactions can be tracked online. It is practically impossible for unlawful activities to be carried out using cryptocurrencies without getting caught,” Khekade added.
Being a regulator RBI wants to protect the interest of the large audience. The challenge with cryptocurrency is its volatility. It has been rising significantly compared to any asset class. While many have made money, there is always a fear, what if customers lose money.
Sovereign digital currency
“A sovereign digital currency wouldn’t solve India’s problem of sustaining its imports and exports to support India’s population. Digital assets and cryptocurrency technology can be used to act as payment obligation and cover collateral risk for millions of Atmanirbhar MSMEs entrepreneurs so that they can be more competitive in the global marketplace,” Khekade said.
Regulators across different jurisdictions are exploring how a central bank digital currency can be adopted.
Experts believe India already has the best payment system in the world. UPI is widely used by people in India. It is not clear why the government would want conflict with its own very successful system, they say. In terms of applications like global trade and finance, export funding that can support the Atmanirbhar Bharat initiative, the government should look at working with existing digital asset players and bring them under regulation. A sovereign digital currency wouldn’t solve India’s collateral problem to sustain its imports and exports to support India’s population.
In 1991, India had to physically transport half of India’s gold Reserves Bank of England to provide collateral to cover the risk for India’s import and exports. Digital assets and cryptocurrency technology can be used to act as payment obligation and cover collateral risk for millions of Atmanirbhar MSMEs entrepreneurs so that they can be more competitive in the global marketplace.
The time is apposite for private investment to come alive as fiscal policy, with the largest capital expenditure budget ever and emphasis on doing business better, has offered to crowd it in, according to an article in the Reserve Bank of India’s (RBI) monthly bulletin.
“All engines of aggregate demand are starting to fire; only private investment is missing in action…Will Indian industry and entrepreneurship pick up the gauntlet?” per the article “State of the Economy” put together by RBI Deputy Governor MD Patra and 19 other RBI officials.
The authors underscored that there is little doubt today that a recovery based on a revival of consumption is underway.
“The jury leans towards such recoveries being shallow and short-lived. The key is to whet the appetite for investment, to rekindle the animal spirits…,” they said.
GDP reclaims positive territory
Referring to real GDP in Q3 (October-December 2020) shrugging off the contraction of H1 (April-September 2020) and reclaimed positive territory, the article observed that with this emergence from recession as businesses reopen and consumers venture back to offices and shops, the Indian economy has turned a corner.
“These developments are all inflation positive. With pulses production 6 per cent higher than a year ago, inflationary pressures on the food front are set to ebb, but core inflation will warrant deft and dogged attention,” the article said.
While disproportionately high excise duties on petroleum products are hostage to the state of public finances, buoyancy in other heads of revenue could loosen this stranglehold, bring down pump prices of petrol, diesel and of cooking gas to more internationally comparable levels, improve the inflation outlook and expand consumer welfare, it added.
“From an internationally competitive perspective too, it is important for India to recover from being an inflation outlier and turn to structural reforms that reposition the economy to reap the gains of productivity and efficiency,” the authors said.
Rock and hard place dilemma
The article assessed that the evolution of financial conditions as 2020-21 draws to a close and the new financial year commences will pose a challenge.
The authors opined that fiscal policy authorities face the ‘rock’ of stimulating the economy and the ‘hard place’ of ensuring sustainable finances.
Monetary authorities encounter a similar dilemma of conflicting pulls – ensuring an orderly evolution of the interest rate structure in the face of still enlarged borrowing needs against the need to remain accommodative and support the recovery.
“While policy authorities exhibit resoluteness in their commitment, markets are assailed by uncertainty and sporadic shifts between hunts for returns and flights to safety.
“A shared understanding and common expectations will likely be the anchor in this turbulence,”the article said.
The authors feel the markets have to rely on the track record of authorities during the most trying year in a century – of keeping markets and institutions functioning; of easing borrowing costs and spreads; of keeping finance flowing – “in fact, there is very little else to hang a hat on.”
They emphasised that“An orderly evolution of the yield curve serves all. A vibrant and self-sustaining economy will lift all boats and markets can do no better than supporting policy authorities as they struggle to regain that stride.”
General and health insurers have so far paid Covid-19-related claims worth ₹7,500 crore. There has been a slowdown in the demand for corona-specific cover these days while at the same time the health insurance segment is also witnessing a greater demand for regular health insurance, according to industry experts.
“The industry saw high demand for corona-specific policies in September-November period but now people are looking beyond Covid cover,” Sanjay Datta, Chief-Underwriting, Claims and Reinsurance, ICICI Lombard GIC, told BusinessLine.
In June last year, the Insurance Regulatory and Development Authority (IRDAI) had asked general and health insurers to offer a standard corona cover policy, Corona Kavach, with the sum assured ranging from ₹50,000 to ₹5 lakh. The policy period is from three-and-a-half months to nine-and-a-half months.
Citing industry estimates, Datta said the total claims that have been paid so far on account of corona cover policies were to the tune of ₹7,500 crore. “For this financial year, it could be ₹8,000-9,000 crore out of which ₹7,500 crore has already been paid,” he said.
While the corona-specific policies were short-term policies, they had created a greater awareness on the need for long-term and regular health insurance, Datta said, adding: “Overall, they have created large-scale awareness among general public.”
Prasun Sikdar, MD and CEO, Manipal Cigna Health Insurance Company Ltd, said given the gravity of the Covid pandemic and the panic surrounding it, more than ever before, people are now concerned about their health and that of their families.
“In the hierarchy of needs, health today has claimed primary position and the role of insurance has moved from priority to necessity,” he said.
Post the pandemic, the conversation on insurance has finally changed from “do I need health insurance” to “how much do I need”, Sikdar observed.
Profit or loss?
What will be the final impact of corona on the bottom line of insurers? It may take more time to answer this question.
According to the CEO of a major non-life insurance company, an understanding of the net impact of Covid on the business of general insurers may differ from company to company.
“As of now, we can say that health insurance business has certainly got a boost and it has overtaken motor segment. But the real picture will only come out with full-year numbers,” he added.
More and more companies are taking up cyber insurance in recent years and those with existing policies are looking to hike their covers, said TL Arunachalam, Director and Head, Cyber and Emerging Risks Practice, Bharat Re Insurance Brokers.
“There has been a good response to cyber insurance in the last two to three years, It has been growing in two aspects — those who had bought a cover in the past are looking for increased limits for insurance. There are also new buyers in sectors apart from banking,” he told BusinessLine.
Companies in sectors like manufacturing, pharmaceuticals, e-publishing and service providers are also now buying cyber insurance, he said.
While companies with clients in Europe or the US now insist on having cyber insurance before any business activity takes place, there has also been an increase in incidences of ransomware, especially during the pandemic, he said.
Most companies in the banking and insurance sector had been taking cyber covers in recent years but other corporates had been slow to adapt, according to industry watchers.
The Insurance Regulatory and Development Authority of India too had recently noted that the economic situation owing to Covid-19 pandemic has seen an exponential increase in cyber attacks across the globe and, in particular, the financial sector. The IRDAI has also formed a committee now to review its insurance and security guidelines.
Meanwhile, commenting on the pandemic and its impact on businesses, Vijay Thyagarajan, Principal Officer and CEO, Bharat Re Insurance Brokers, said it has highlighted the need for business interruption cover.
“Business interruption cover was not being bought even before Covid. The cover should not be looked at only from the point of view of a pandemic,” Thyagarajan said, adding that business interruption could happen even due to other accidents like fire or a flood.
“People are slowly realising this,” he noted, adding that Covid has highlighted that business interruption is a real possibility.
Most business interruption covers globally do not cover the non-damage interruptions such as the Covid-19 lockdown.
The growth in commercial credit enquiries were at nearly pre – Covid levels by December last year, aided by the government’s Emergency Credit Line Guarantee Scheme.
“Commercial credit enquiries surged 58 per cent year-on-year in June 2020 and stabilised toward the end of the year, up around 13 per cent year on year as of December 2020, which is similar to pre-Covid-19 growth levels,” said the latest TransUnion CIBIL-SIDBI MSME Pulse Report.
The total on-balance-sheet commercial lending exposure in India stood at ₹71.25 lakh crore in September 2020, registering a growth of 2.1 per cent year on year, it further said.
Significantly, for the micro, small and medium enterprises (MSMEs), credit exposure grew 5.7 per cent on an annual basis in September last year, amounting to ₹19.09 lakh.
“This credit growth is observed across all the sub-segments of MSME lending,” it said adding that MSME loan originations show a v-shaped recovery with the existing to bank segment being the primary beneficiary.
Rajesh Kumar, Managing Director and CEO, TransUnion CIBIL said the resurgence in MSME credit growth, which is back at pre-pandemic levels, is a very promising indicator of economic recovery in our markets.
“Public sector banks are the leading drivers of this resurgence as they have astutely wielded data analytics and credit information solutions to swiftly comply with the ECLGS guidelines and dexterously implement lending to MSMEs,” he further said.
PSBs registered a 30 per cent year growth in loan originations in September 2020, which was nearly double their pre-Covid level of 16 per cent in February 2020.
For private banks, the YoY originations growth stood at 16 per cent in September last year.
The report however, said that recent enquiry trends for December 2020 and January 2021 show a reversal of this trend. Private banks have resumed MSME lending and are closing the gap rapidly, it said.
To facilitate privatisation of public sector banks, the government is likely to bring amendments to two legislations later this year.
Amendments would be required in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 for privatisation, sources said.
These Acts led to nationalisation of banks in two phases and provisions of these laws have to be changed for privatisation of banks, they said.
As the government has already announced the list of legislative business for the Budget session, it is expected that these amendments may be introduced in the Monsoon session or later during the year, sources added.
The ongoing Budget session is scheduled to take up as many as 38 Bills including the Finance Bill 2021, Supplementary Demands for Grants for 2020-21 and related Appropriation Bill, National Bank for Financing Infrastructure and Development (NaBFID) Bill, 2021, and Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.
Finance Minister Nirmala Sitharaman while presenting Budget 2021-22 earlier this month had announced privatisation of Public Sector Banks (PSBs) as part of disinvestment drive to garner ₹1.75 lakh crore.
“Other than IDBI Bank, we propose to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22,” she had said.
Later in one of the post Budget interactions, the Finance Minister had said the government will work with the Reserve Bank for execution of the bank privatisation plan announced in the Union Budget 2021-22.
“The details are being worked out. I have made the announcement but we are working together with the RBI,” she had said, when asked about the proposal.
The government last year consolidated 10 public sector banks into four and as a result the total number of PSBs came down to 12 from 27 in March 2017.
As per the amalgamation plan, United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank, making the proposed entity the second largest PSB. Syndicate Bank was merged with Canara Bank, while Allahabad Bank was subsumed in Indian Bank. Andhra Bank and Corporation Bank were amalgamated with Union Bank of India.
In a first three-way merger, Bank of Baroda merged Vijaya Bank and Dena Bank with itself in 2019. SBI had merged five of its associate banks – State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Hyderabad- and also Bharatiya Mahila Bank effective April 2017.
Mastercard and Razorpay have launched a strategic partnership to empower Indian micro, small and medium enterprises (MSMEs) in digitising their operations, maintaining business continuity in the challenging environment and preparing for the future beyond cash.
“SMEs and startups would require establishing a digital footprint to build their customer base and meet demand for secure, convenient and touch-free transactions. With the partnership, Mastercard and Razorpay will work together to cater to the needs of MSMEs,” Mastercard said in a statement on Tuesday, noting that the Covid-19 pandemic has accelerated the adoption of digital technologies.
“We are excited about strengthening our partnership with Mastercard, the global payments and technology leader, in furthering digital adoption and equipping millions of businesses, especially in tier 2 and 3 cities, with industry-leading technologies that will help ensure business resilience,” said Amitabh Tewary, Chief Innovation Officer, Razorpay.
“Mastercard is excited to extend its partnership with Razorpay, India’s youngest unicorn, on a strategic level,” said Rajeev Kumar K, Senior Vice President, Market Development, South Asia, Mastercard.
California-based fintech platform PayPal is closing down its domestic business in India, the company has announced.
Less than four years after the American fintech giant entered the Indian market, the company has decided to shut down its domestic business in the country.
“From April 1, 2021, we will focus all our attention on enabling more international sales for Indian businesses, and shift focus away from our domestic products in India. This means we will no longer offer domestic payment services within India from 1 April,” a company spokesperson said, as quoted by a TechCrunch report.
PayPal did explain why it was winding down its India business in a long statement.
The news comes as a surprise as the company last year has said that it was building a payments service powered by Unified Payments Interface (UPI).
PayPal had previously partnered with various online services as a payments option including BookMyShow, MakeMyTrip and Swiggy.
The company said that it has processed $1.4 billion in international sales for merchants in India in 2020, as per the report.
It further said that it will continue to invest in “product development that enables Indian businesses to reach nearly 350 million PayPal consumers worldwide, increase their sales internationally, and help the Indian economy return to growth,” as quoted by TechCrunch.
India has emerged as one of the most competitive market for digital payments with multiple players including Paytm, PhonePe, Google, Amazon, and Facebook.
Markets regulator Sebi on Wednesday said it has put in place the revised graded entry norms for innovation sandbox, to promote innovation in new products and services.
The new framework is also aimed at increasing participation in the innovation sandbox.
This would be achieved by giving access to both test data and test environment to financial institutions, financial technology (fintech) firms, start-ups and entities not regulated by Sebi including individuals, the regulator said in a statement.
Innovation sandbox facilitates access to an environment (testing facilities and test data) provided by enabling organisations like stock exchanges, depositories and qualified registrar and share transfer agents (QRTAs), wherein innovators (sandbox applicants) would test their innovations in isolation from the live market.
According to Sebi, capital market participants in India have been early adopters of technology. It believes that encouraging adoption and usage of fintech would have a profound impact on the development of the securities market.
Fintech can act as a catalyst to further develop and maintain an efficient, fair and transparent securities market ecosystem.
To create an ecosystem that promotes innovation in the securities market, Sebi is of the opinion that fintech firms should have access to market-related data which is otherwise not readily available to them. They should also have a test environment to enable them to test their innovations effectively before the introduction of such innovations in a live environment, it said.
Accordingly, the regulator had issued a framework for innovation sandbox in May 2019 with the intent to promote innovation in the securities market.
“Based on learnings since then and to make it even more convenient for participation in the innovation sandbox, revised graded entry norms have been designed with the objective of promoting innovation both in terms of new products and services as well as new ways of delivering existing products and services,” as per the statement issued on Wednesday.
In addition, it is aimed at creating new opportunities in the securities market and to make existing services more efficient and investor friendly.
With regard to stages of innovation sandbox, Sebi said that during the first stage, limited access to the test environment would be provided and there would be a cap on the utilisation of resources in terms of processing power, memory, and storage, among others.
During the second stage, the cap on the utilisation of resources would be removed, subject to availability of resources at that point of time.
Further, the regulator has also put in place eligibility criteria for both the stages.
In addition, a steering committee comprising representatives from Sebi and the enabling organisations has been formed to drive the innovation sandbox. The committee would supervise the operations of the innovation sandbox.
Also, it would process the applications submitted by sandbox applicants and approve or reject applications and assign lead enabling organisations.
Such lead enabling organisations would be responsible for onboarding the applicant post approval of the application and monitoring the applicant throughout the lifecycle of the sandboxing.
