A total of 597 deals, amounting to $30 billion, were reported in Jul-Sep, reflecting the upbeat market sentiments, according to Grant Thornton Bharat Dealtracker.
The quarter also witnessed the highest number of IPO issues in over a decade, with 18 issues amounting to $5 billion. There has been an 86% increase in deals, compared with a year ago amid the subsiding COVID-19 and rise in daily inoculations.
The sustained economic growth is due to the rapid expansion in the services sector and accelerated manufacturing activities.
Mergers and acquisitions
M&A deals were valued at $12.8 billion for Jul-Sep, a 10% fall compared with a year ago. The dip in deal values was due to the absence of high-value deals.
The IT sector dominated the M&A deal values, followed by banking and financial services, of which two major deals accounted for over 52% of the total M&A values in Jul-Sep.
PE deals witnessed a robust growth in Jul-Sep, with an all-time high deal activity in volumes and values at $17.1 billion, across 486 investment rounds. Startups claimed a major share in deal volumes at 64%, according to the report.
Both volumes and values saw twice the increase compared with Jul-Sep last year. Compared with the previous quarter, volumes were up by 44% and values saw a strong 24% growth.
Startups claimed a major share in deal volumes at 64%, while e-commerce led in deal values with 30% share, followed by IT, banking, telecom, and others.
Despite the impact of the COVID-19 pandemic, the country witnessed a record number of IPOs this year , with 42 issues amounting to $10.3 billion.
Jul-Sep recorded the highest number of issues in any given quarter, since 2011, with 18 issues amounting to $5 billion. The quarter saw only seven QIP fundraises, reflecting a trend reversal in 2021, compared with 2020 when QIPs dominated the market, the report said.
New Delhi, Tech giant Microsoft on Wednesday launched a new programme Microsoft AI Innovate for nurturing and scaling startups that are leveraging Artificial Intelligence (AI). The 10-week initiative will support startups in India leveraging AI technologies, helping them scale operations, drive innovation, and build industry expertise.
Both B2B and B2C startups from various industries, including financial services, healthcare, education, agriculture, space, manufacturing and logistics, retail, and e-commerce can participate in the quarterly cohorts of this programme.
“AI is increasingly transitioning from artificial intelligence into augmented intelligence that ensures efficient, faster, more targeted experiences for everybody.
“AI has a tremendous potential to empower people and institutions to do better, understand customers more deeply, share information more quickly and enable scientific breakthroughs,” Microsoft India President Anant Maheshwari said at a virtual event.
He added that India has the third-largest AI startup ecosystem in the world.
“AI adoption can add more than USD 90 billion to the Indian economy by 2035…to maximise AI’s potential and mitigate its risks, we need to develop AI in a way that is responsible and fosters trust.
“As creators, users and advocates of technology, it is important for us to make careful choices so that technology ultimately translates into benefits and opportunities for all,” Maheshwari said. Trust is non-negotiable and everyone is accountable for creating a responsible, trusted and ethical tech ecosystem, he noted.
Through its latest initiative, Microsoft will focus on providing tech and business opportunities to startups for improving their solutions, transforming organisations and building responsibly to make AI accessible to everyone, Maheshwari said.
The programme will also enable startups to reach out to newer customers and geographies with Microsoft’s sales and partner networks.
The selected startups in each of the cohorts will have access to industry deep-dive sessions and AI masterclasses by industry experts, mentoring by unicorn founders, skilling and certification opportunities, among other benefits.
Catering to technical and business audiences, the programme will bring together leading-edge tech know-how, global GTM (go to market) partnerships as well as engineering and research experts from Microsoft.
Qualified seed to series B startups will be provided with technical enablement benefits, including Azure benefits (in addition to free cloud credits) and product engineering support among other benefits. They will also receive support with business and sales acceleration needs such as marketplace onboarding. Startups with enterprise-ready solutions will be provided opportunities to build their solutions alongside a dedicated team of professionals.
They will get go-to-market support as well as co-selling benefits with Microsoft’s sales team and partner ecosystem. The startups will also get access to top partner and customer events to strengthen their networking reach.
Despite two waves of the Coronavirus pandemic that unleashed devastation across most areas, India has an 87% Fintech adoption rate that is substantially more than the world’s average adoption rate of 64%.
By Kapil Rana
Fintech organizations have a wide scope of business in India, particularly around payment lending, personal finance management, and regulation technologies. Needless to say, that nations’ immense population, expanding the number of web users, and the government’s endeavours to make the nation digital are bringing numerous new opportunities for Fintech and new companies. Financial organizations, new businesses, investors, and controllers are accepting Fintech and utilizing those opportunities to stand in the competition and grow fast. In recent years, India has seen the development of various new start-ups, regulators, the public and private financial institutions that have made the Indian Fintech market the fastest developing business sector in the world.
Despite two waves of the Coronavirus pandemic that unleashed devastation across most areas, India has an 87% Fintech adoption rate that is substantially more than the world’s average adoption rate of 64%. India has witnessed 2.7 billion dollars of Fintech investment last year. This was the second largest investment close to 3.5 billion dollars in 2019 as confirmed by Professional Service Firm KPMG. Likewise, the report of Florida-headquartered ACI worldwide uncovered that 25.5 Billion constant exchanges were made in India in 2020 that is the highest in the world.
It goes without saying that the increased adoption of Fintech technologies powered by artificial intelligence (AI), machine learning (ML), data analytics, process automation, and Blockchain has transformed the financial world. These advancements empower Fintech to run colossal measures of information through calculations designed to distinguish patterns and risk, fake practices, spam information, and make or suggest the right moves.
FinTech organizations utilizing these innovations to assist organizations to manage and control activities like managing and controlling their finance, fulfilling tax compliance, paying and accepting bills, and utilizing other financial administrations according to the requirements. They additionally empower customers, organizations, and entrepreneurs to have a superior comprehension of investment and purchasing risk. Till today, countless new businesses and financial institutions are accepting Fintech to control and manage their financial operation and decrease their functional expense. However, still there are many difficulties and bottlenecks in the adoption of financial technologies, which are making it hard for organizations to use its benefits entirely.
Key Challenges for Fintech Start-ups Companies
Cyber security is the biggest challenge for Fintech businesses. The risk of information leakage, malware, security break, cloud-based security risk, phishing, and identity threat is making the Fintech businesses helpless at some point or others. Such dangers are unwarranted by clients, therefore, Fintech associations need to advance their technologies, teach customers, and make powerful policies to eliminate such dangers.
Fintech organizations work in a joint effort with traditional financial institutions in different manners like association, incubation, and acquisition, and so on. This joint effort poses many obstacles like the two players have their own arrangement of rules relating to size, productivity, and acknowledgments. Likewise, Fintech organizations are essentially intended to work with a modern working model. So, it is a bit hard for them to keep a smooth relationship with traditional banks and other financial institutions. Also, Banks fear working with Fintech as they risk losing their reliability.
Further, banking and other monetary foundations are strictly regulated. Similarly, Fintech organizations in India should be intensely managed with policies that will assist them with moderating the possible dangers of network safety. However, many existing monetary laws and government strategies are not completely favorable for Fintech start-ups in the Indian financial sectors.
Most of the Indian clients are still utilizing cash rather than tech-driven options like UPI transactions. Fintech is attempting to assemble a credit-only economy and this will be a significant snag for them to handle, particularly to push conventional Indian buyers to embrace digital payments. Dependency on cash, cybercrime, and poor internet services are a couple of obstacles among others that are making it hard for Fintech organizations to do business in India.
Summarizing
Post demonetization, the number of Fintech businesses in India has been substantially increased. These businesses are vivaciously working on different sub-areas like mobile POS (point of sale), internet banking solutions through neo banking, managing compliance-related issues on a solitary platform, credit management, and so on. Thanks to the innovative Fintech plan of action that is bringing great advancements in the fields of finance and technology to help organizations and small businesses in their processes.
The fintech business model is working with a remarkable and consistent framework that permits entrepreneurs, business owners, and proprietors to go through huge information and make better choices in their businesses. There is no denying that Fintech is forming the future of next-generation financial solutions, and despite the way that there are a few obstacles that Fintech companies are coming across in the current business landscape, they have certainly a thriving future in India.
(The author is founder and chairman Hostbooks. Views are personal and not necessarily that of Financial Express Online.)
NEW DELHI – Apple Inc is facing an antitrust challenge in India for allegedly abusing its dominant position in the apps market by forcing developers to use its proprietary in-app purchase system, according to a source and documents seen by Reuters.
The allegations are similar to a case Apple faces in the European Union, where regulators last year started an investigation into Apple’s imposition of an in-app fee of 30% for distribution of paid digital content and other restrictions.
The Indian case was filed by a little-known, non-profit group which argues Apple’s fee of up to 30% hurts competition by raising costs for app developers and customers, while also acting as a barrier to market entry.
“The existence of the 30% commission means that some app developers will never make it to the market … This could also result in consumer harm,” said the filing, which has been seen by Reuters.
Unlike Indian court cases, filings and details of cases reviewed by the Competition Commission of India (CCI) are not made public. Apple and the CCI did not respond to a request for comment.
In the coming weeks, the CCI will review the case and could order its investigations arm to conduct a wider probe, or dismiss it altogether if it finds no merit in it, said a source familiar with the matter.
“There are high chances that an investigation can be ordered, also because the EU has been probing this,” said the person, who declined to be identified as the case details are not public.
The complainant, non-profit “Together We Fight Society” which is based in India’s western state of Rajasthan, told Reuters in a statement it filed the case in the interest of protecting Indian consumers and startups.
In India, though Apple’s iOS powered just about 2% of 520 million smartphones by end-2020 – with the rest using Android – Counterpoint Research says the U.S. firm’s smartphone base in the country has more than doubled in the last five years.
The Apple case in India comes just as South Korea’s parliament this week approved a bill that bans major app store operators like Alphabet Inc’s Google and Apple from forcing software developers to use their payment systems.
“MIDDLEMAN IN TRANSACTIONS”
Companies like Apple and Google say their fee covers the security and marketing benefits their app stores provide, but many companies disagree.
Last year, after Indian startups publicly voiced concern over a similar in-app payments fee charged by Google, the CCI ordered an investigation into it as part of a broader antitrust probe into the company. That investigation is ongoing.
The India antitrust case against Apple also alleges that its restrictions on how developers communicate with users to offer payment solutions are anti-competitive, and also hurt the country’s payment processors who offer services at lower charges in the range of 1-5%.
Apple has hurt competitors by restricting developers from informing users of alternative purchasing possibilities, thereby harming “app developers’ relationship with their customers by inserting itself as middleman in every in-app transaction,” the filing added.
In recent weeks, Apple has loosened some of the restrictions for developers globally, like allowing them to use communications – such as email – to share information about payment alternatives outside of their iOS app.
And on Wednesday, it said it would allow some apps to provide customers an in-app link to bypass Apple’s purchase system, though the U.S. firm retained a ban on allowing other forms of payment options inside apps.
Gautam Shahi, a competition law partner at Indian law firm Dua Associates, said that even if companies change their behaviour after an antitrust case in filed, the CCI still looks at past conduct.
“The CCI will look at recent years to see if the law was violated and if consumers and competition were harmed,” said Shahi.
The CCI has plans to speed up all cases involving big technology firms such as Amazon and Google by deploying additional officers and working to more stringent internal deadlines.
Mumbai: At a time when startups and new-age companies are garnering huge investor interest along with robust responses for IPOs, the Reserve Bank of India (RBI) has said that the interest will sustain only if the companies are able to breakeven, increase cash flow and turn profitable.
In its Bulletin for August, RBI has lauded the recent IPOs of tech-based companies such as Zomato which received enthusiastic investor interest and said that 2021 could well turn out to be India’s year of the initial public offering (IPO).
Debut offerings by Indian unicorns — unlisted start-ups — kicked off by a food delivery app’s stellar IPO that was oversubscribed 38 times, have set domestic stock markets on fire and global investors in a frenzy.
“Yet, this explosion of interest in these companies will only be sustained if they are able to convert innovative ideas into metrics such as breaking even at the level of earnings before interest, taxes, depreciation and amortisation (EBITDA) level without expensing business development costs, followed by cash flows and profits,” it said.
Expanded and dynamic exploitation of innate advantages such as data and logistics will be essential to live up to investors’ starry-eyed expectations, as per the Bulletin.
“The jury is still out. Investors will closely scrutinise their stories. Analysts will put it down to stock markets’ idiosyncratic behaviour, investors’ greed and bandwagon effects, including myopic pursuit of listing day gains.”
It noted that there are already warnings of systemic risks to financial stability that monetary policy authorities should not ignore as the unicorn IPO party gets going.
The bursting of the dotcom bubble in 2001 showed that many startups could go bust, but risk management practices have changed to diffuse this risk over many newcomers, it said, adding that, those that survive can go on to become the Googles, Facebooks and Amazons of the future.
The RBI report also noted that IPOs of new age companies arrive as bullishness about India mounts, especially around Indian tech
“These listings coincide with a broader rush by Indian companies to tap the market and the fomo (fear of missing out) factor driving investors, which have taken the benchmark indices to records.”
It is estimated that India has 100 unicorns, with 10 new ones created in 2019, 13 in 2020 in spite of the pandemic and 3 a month in 2021 so far, it added.
The platform is being readied by Sidbi, which already manages a fund for startups, with LIC and EPFO evincing interest during a meeting of the National Startup Advisory Council chaired by commerce and industry minister Piyush Goyal.
NEW DELHI: Till now, Bitcoin and other cryptocurrencies are seen largely as an asset class to invest in to gain from price appreciation.
In the US, some businesses have also started accepting them as currencies for payments. Tesla famously started accepting it and then stopped it a few months back, citing environmental concerns. But CEO Elon Musk now says they may accept it again soon.
Microsoft, Coca Cola and AXA Insurance have also shown willingness to accept cryptocurrency as payment for select services and products in some territories.
In India, amid heavy resistance from the government and the Reserve Bank of India, cryptocurrencies are yet to gain a broader acceptance.
But one Indian startup has ventured out to start accepting cryptocurrencies for payments. The Rug Republic – a homegrown décor brand – is one. The Okhla, Delhi-based firm said it would accept top 20 cryptocurrencies for payments, but only from Indian customers.
Cryptocurrencies are neither legal, nor illegal in India. Lately, banks, likely on the insistence of RBI, have started disassociating from cryptocurrency exchanges. Other government agencies have also started tightening their noose against these tokens.
Their major concern is the anonymity that the blockchain network — the technology on which cryptocurrencies are based on — will lead to tax evasion, terror funding or any other nefarious activity. However, businesses are taking additional measures to track where the money is coming from.
“It is a misconception that crypto transactions cannot be tracked. It is easily verifiable on the blockchain, as opposed to the incredibly difficult ways money can be hidden in the real world. As we have seen with so many people during the Panama Papers episodes. Our invoices clearly mention that money was taken in certain currency on this date and at this price. Everything is absolutely above board,” said Raghav Gupta, Director at The Rug Republic.
Some sovereign countries such as Nicaragua and El Salvador have embraced cryptocurrencies, with the latter becoming the first country in the world to adopt Bitcoin as legal tender.
Gupta, who exports his products outside India as well, said his firm will not accept crypto payments outside India, as such transactions could be in violation of the Foreign Exchange Management Act (FEMA), as they constitute cross-border payments in a currency not recognised by RBI.
Is it a publicity stunt? Why else is he taking such a risk when the rules regarding cryptocurrencies are not clear? The promoter says he believes these tokens will eventually gain prominence in India. And, it will form a good asset base for him in some years.
“It is clear that not even 5 per cent of my revenue will come from it. I am extremely bullish on it in a 5-10 year scale. I am very happy to take this risk. Ethereum will be much more valuable by then,” said Gupta.
It’s raining IPOs in the market and pipeline for the remainder of the year is only robust. By all counts, this fiscal should see IPO fund-raise of at least $10 billion (without including mega LIC IPO) if the current trend is anything to go by, says V Jayasankar, Senior Executive Director and Head-ECM, Kotak Mahindra Capital Company (KMCC). He would know better with KMCC having managed the top three (₹10,200 crore) of the total six IPOs (₹12,423 crore) that hit market in April-June 2021. July itself is going to see IPOs worth ₹24,000 crore. Edited excerpts:
What explains this IPO rush? Is there a good pipeline and will this momentum continue?
Last fiscal was a record year for Equity Capital Market (ECM) business. Overall, ₹2.45-lakh crore was raised and about ₹25,000-30,000 crore was initial public offering (IPO) business in the country. IPO was about 15 per cent of ECM activity which was very robust.
I expect this year to be a record one for IPO market and my estimate is that in excess of $10 billion (without including the mega LIC IPO) will be raised. Even if the overall ECM activity remains similar to last year, there would be better proportion of IPOs in the equity raise.
So what is creating this shift?
There are five sectoral themes playing out in the market though the investor appetite stretched beyond them. These are the new age or consumer tech start-ups, financial services, speciality chemicals, consumer and healthcare sectors. The Indian start-up system has matured and become very robust. We see good number of listings in the coming years.
Can you elaborate on the other four trends?
We expect to see large number of well-managed companies in the financial services space to tap the market for listing across the spectrum of lending, insurance and others. A number of speciality chemical companies will continue going public as they have the scale and become more export-oriented. Also, benefiting from China plus one strategy. Similarly, there are numerous consumer and healthcare companies that we expect to go public as the addressable market has been growing.
Do you think Internet-based tech companies can garner better valuation by listing in overseas market like the US?
Indian equity markets have matured over the years and have depth of institutional investors’ participation. Investor universe is similar for well-run and well-managed tech companies, whether you list in India or abroad. You have the added advantage of Indian MFs and insurance companies participating in India listing.
The valuation peers, benchmark and methodology are similar irrespective of listing destination. Often we see institutional investors pay better value for Indian companies factoring in higher growth prospects that India may provide. You are likely to see several Indian digital and new age companies list here in the coming years reflecting the strong appetite.
Importantly, consumer brands benefit from retail participation. A successful listing can enhance the power and visibility of a brand.
Indian Bank is looking forward to extend financial support to startups in Telangana and is likely to team up with T-Hub, according to its Managing Director and Chief Executive Officer, Padmaja Chunduru.
She was speaking at the formal lunch of ‘Prerana’, the flagship business mentoring programme of Indian Bank to create awareness among micro, small and medium enterprises, in Telangana on Tuesday.
“We have already started startup-financing in various States and are planning to enter into an understanding with T-Hub to do the same in Telangana,” the Indian Bank Chief said.
Prerana initiative
On the Prerana initiative, she said there were many ‘hindrances’ faced by MSMEs in the form of lack of awareness about various schemes of the government/banks, language barriers and lack of market knowledge and updates. The on-line program is intended to bridge this gulf, she said.
Referring to Telangana’s potential in MSMEs, Chunduru said there was huge scope for growth in areas like Pochampalli, Siricilla where there are hubs of weavers and other artisans.
After formally launching the scheme, KT Rama Rao, Minister for IT & Municipal Administration, Government of Telangana said the Telangana State Finance Corporation was ready to collaborate with Indian Bank to evolve some innovative mechanism to help small businessmen in the areas of providing collateral.
He also requested Indian Bank to increase lending to priority sectors especially to weaker sections and MSMEs apart from farmers.
The Minister had also requested Chunduru to join the board of We-Hub which has been set up by the State government to empower women.
Imran Amin Siddiqui, Executive Director at Indian Bank said despite contributing 30 per cent to the Gross Domestic Product (GDP) they were unable to derive many benefits of schemes due to lack of awareness and Prerana initiative will address the issue.
The Prerana initiative was first launched by the bank in October last year and has already been launched by the bank in Tamilnadu, Maharashtra, among other States. Going forward, Indian Bank plans to expand the program.
In amajor boost to private equity industry, the Insurance Regulatory and Development Authority of India (IRDAI) has now allowed insurance companies to invest in Fund-of-Funds (FoF) that invest within the country. This move is expected to open more capital raising options for the startup ecosystem in India, fulfilling a longstanding industry demand.
The latest move by the IRDAI comes on the heels of the recent decision of the government to allow domestic private retirement funds to invest upto 5 per cent of their surplus in AIFs.
While insurers can now directly invest in FoF on the lines of their making direct investments in Alternate Investment Funds (AIFs), they are barred from investing in FoFs that invest in overseas companies or funds with overseas exposure, according to a IRDAI circular modifying the guidelines for investment in AIFs. The insurance regulator has also barred insurers from investing in AIFs in which insurer has taken an exposure.
IRDAI has also mandated insurers to obtain a quarterly certificate from a concurrent auditor about their compliance with these conditions and file it along with their quarterly periodical returns.
FoF is an AIF that invests in another AIF. An AIF is basically a vehicle established for the purpose of raising capital from a number of investors with an aim to invest these funds into assets to generate favourable returns.
In its 2017 Master circular, IRDAI had stipulated that no investment will be permitted in AIFs, which are FoFs and leverage funds.
However, now the IRDAI has said that the insurer shall invest only into FoFs which comply with the requirement of Section 27E of the Insurance Act 1938. Section 27E stipulates that no insurer can directly or indirectly invest outside India the funds of the policyholder.
Siddharth Pai, Founding Partner and CFO at 3one4 Capital, Co-Chair at Regulatory Affairs Committee, IVCA said, “IRDAI has fully embraced the Atmanirbhar movement through this new move that allows Insurance Companies to invest into FoFs. This move by the IRDAI and the move by PFRDA last month shows the government’s intent to accelerate institutional rupee funding to startups, which will help in economic growth and job creation.”
The inflection point for any startup ecosystem is when domestic institutional capital is allowed to start investing into the local ecosystem.”
Ashley Menezes, Partner and COO, ChrysCapital Advisors, LLP & Chair, Regulatory Affairs Committee, IVCA said, “It is a huge win for the private equity industry that insurance companies are now permitted to make investments into funds of funds as well, similar to them making a direct investment in an AIF. This allows insurance companies to derisk their exposure. However, such capital from insurance companies cannot be utilized by an AIF to make investments outside India and this is a matter that still needs discussion.”
Social Alpha and Small Industries Development Bank of India (SIDBI) have partnered up to set up the Swavalamban Divyangjan Assistive Tech Market Access (ATMA) fund, an inclusion fund offering financial grants to Social Alpha-incubated startups working in the Assistive Technology sector.
Each startup working in this space will have access to implementation support of up to ₹20 lakh. The fund will finance up to 50 per cent of the product price for the initial users, as per an official release.
“Creating new markets in Assistive Technologies has been a big challenge and requires significant investment in ecosystem development. ATMA fund heralds a new era for the Assistive Technology sector by enabling early adoption of innovative solutions,” Manoj Kumar, CEO and co-founder, Social Alpha, said.
“We believe that the reduction in out-of-pocket expenditure will catalyse demand, which is essential for the long-term sustainability and growth of entrepreneurial risk-taking in this sector. We are happy to partner with SIDBI as its support can help scaling this fund to include pan-India incubators while offering a much-needed boost to this sector’s research and development efforts,” added Kumar.
Shri. V Satya Venkata Rao, Deputy Managing Director, SIDBI said, “MSMEs and the development sector are the worst impacted by the Covid-19 pandemic. Taking cognisance, Government, through Atma Nirbhar Bharat Abhiyan, has taken measures to boost the MSME sector to be instrumental in the economic revival of the country. With SIDBI’s vast experience in catering to MSMEs and operating various funds, developing a Social Impact fund i.e., Swavalamban Divyangjan ATMA Fund comes as an opportunity to be part of this mission.”
The startups will be able to apply for Social Alpha incubation throughout the year. Applicants will have to go through a rigorous selection process to qualify.
“Social Alpha will identify the assistive technologies that need support and evaluate the business plan. The incubatees will also be eligible for Social Alpha follow-on investment, subject to further due diligence,” it said.
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