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Happy Thursday! Stockbroking platform Groww, had its valuation reduced as part of its flip back to India, said sources. This and more in today’s ETtech Morning Dispatch. Also in the letter: ■ VC support for AssetPlus, ZFunds ■ Zomato vs Swiggy market share ■ Microsoft Ignite 2024 ETtech Exclusive: Reverse flipping trims Groww’s valuation, Razorpay may see similar reduction Harshil Mathur, CEO, Razorpay (left) & Lalit Keshre, CEO, Groww Stockbroking platform Groww, which recently completed the reverse flipping of its parent entity to India from the US, saw its fair market valuation slashed to under $2 billion , said people aware of the matter.
Driving the news: Groww paid Rs 1,340 crore ($160 million) in taxes to the US government, based on the new fair market value (FMV), which is more than 30% lower than its $3 billion valuation during its last funding in 2021, sources said. Another major fintech, Razorpay, which has sought board approval to shift its domicile to India, could face a similar 30-40% cut in FMV , said a person familiar with the matter. The final figure may vary as the tax calculations will depend on the difference between common and preferred stock and the total funds raised over the years.
Preferred stock, or preference share, offers several benefits not available to common stockholders. Adding context: In October, Groww said the tax payout in the US led to a net loss of Rs 805 crore for FY24. At an operational level, the fintech reported a profit of Rs 535 crore, up from Rs 458 crore in FY23.
ET has been reporting on Kreditbee , Zepto, Eruditus and Meesho being in various stages of this process. Expert take: “When a US company merges into an Indian company, it pays taxes at 21% of the “fair value” of the US entity. Based on the US norms, this valuation tends to be similar to what is followed for ESOP ( Employee stock ownership plan) pricing and is hence, lower than the real market value.
Adopting this lower valuation should not by itself impact the tax outcomes if later on the Indian company raises capital, whether privately or publicly, at higher valuations..,” a legal expert who works with Indian startups said on the condition of anonymity.
Moksha buys Arzooo assets in distress deal Business-to-business (B2B) consumer electronics startup Arzooo's assets have been acquired by Mumbai-based distribution and supply chain company Moksha Group, the companies said in a joint statement. What’s happening: The distress deal, follows months of failed attempts by Arzoo to secure new funding or merge with larger competitors. Background: The startup, founded in 2016 by former Flipkart executives Khushnud Khan and Rishi Raj Rathore, had raised about $80-90 million in equity and debt .
Its investors included Celesta Capital, Japan's SBI Holdings, and Doordash founder Tony Xu. Quote, unquote: “The company’s troubles started after they overspent last year during the Diwali sales giving heavy discounts and incentives to retailers. Following this, one of their lenders pulled the credit line seeing the business was on shaky grounds without additional funding,” a person in the know of the company’s developments said.
Financial details: In FY22, Arzooo’s loss significantly increased to Rs 63 crore from Rs 18 crore in fiscal 2021. Its revenue also surged to Rs 1,118 crore from Rs 259 crore. It hasn’t yet filed its financial statements with the Registrar of Companies for FY23 and FY24.
According to Tracxn, the company’s founders hold a 32.2% stake, while Celesta Capital is the biggest external shareholder with a 10.2% stake.
Mutual help: AssetPlus and ZFunds receive venture capital support The steady growth of new-generation wealthtech firms is putting pressure on offline traditional mutual fund distributors as they turn to startups to help them build technology capabilities. Driving the news: AssetPlus and ZFunds two startups, which power mutual fund distributors with their digital platforms, have secured funding as they show steady growth and the market opens up. AssetPlus has raised Rs 50 crore from Eight Roads Venture and Zerodha’s Rainmatter.
ZFunds is in talks with Elevation Capital to raise Rs 25 crore in its first institutional funding round. Market opportunity: While a large section of the new generation investors are investing via do-it-yourself (DIY) platforms like Groww and such, there is a sizable portion of the population who needs investment advisory. These distributors offer them the right products for their long-term needs.
These platforms offer the technology stack to these distributors so they can advise their clients better. Competitive landscape: Offline mutual fund distribution is a massive business segment and there are two major non-bank players in this space – NJ Wealth and Prudent. Together they have an AUM of an estimated Rs 3.
5 lakh crore, sources told us. These startups want to replicate their success through a tech-first approach. While these startups are competing with these giants, they are also trying to create new distribution networks to cater to the needs of new-generation clients.
Other Top Stories By Our Reporters Deepinder Goyal, CEO, Zomato and Sriharsha Majety, CEO, Swiggy Zomato leads food delivery with 58% market share in Q1, Blinkit tops quick commerce: Motilal Oswal: Gurugram-based Zomato leads India’s food delivery market with a share of 58% , according to a report by brokerage firm Motilal Oswal, while recently-listed rival Swiggy has a 42% share. Microsoft Ignite 2024: AI, cloud, and more in Satya Nadella’s keynote: Microsoft Ignite 2024, the annual conference hosted by the Redmond-based tech giant for developers and IT professionals, kicked off with a showcase of advancements in artificial intelligence (AI), productivity apps, cloud innovations and other tools. Indian short-form video platforms generate $100 million in ad spends in FY24: Redseer report: Bouncing back from the post-pandemic lull, Indian short-form video (SFV) platforms generated $90-100 million in advertising revenue in FY24 , cornering 1-1.
5% of the overall spending on digital advertisements in the country, Redseer Strategy Consultants said in a report. Global Picks We Are Reading ■ Palantir becomes a ‘Trump trade’ as investors bet on higher defence spending ( FT ) ■ Get in—we’re chasing a Waymo into the future ( Wired ) ■ Why AI could eat quantum computing’s lunch ( MIT Technology Review ).
