Swadeshi outta control
IT spending, Rajan’s issues, and fintech infra.
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Market summary: 📊
Hopes of a vaccine continue to buoy global markets, with major indices close to making new highs to end 2020.
US:
S&P 500 - up 1.62%
Nasdaq 100 - up 1.46%
India:
Nifty 50 - up 1.00%
Sensex - up 0.44%
To begin with 💳
Raghuram Rajan is blowing the horn once again—this time over the government’s decision to allow select few leading business houses to open banking operations. Calling the decision a “bombshell” (the other kind), Rajan in a joint article with ex-deputy Governor of RBI Viril Acharya, asked the government to best leave the proposal on a shelf.
And maybe they are right—so far India has little evidence that corporations can display fiduciary responsibility and manage themselves well enough to bear the burden of broader financial health of the nation, without the regulator sharing the burden of policing. But opening up the markets a bit is important too, and to begin with, it can best be done when the government holds its most trusted corporate houses on a tight noose and experiments with them.
But then, this is the same establishment that wouldn’t trust innovation in banking and finance coming out of disruptive startups with similar enthusiasm—so yes, their motivation to experiment and action-plan does need more clarity. ☝️
Swadeshi getting out of hands 🐦
Twitter now has a swadeshi clone—ingeniously called “Tooter”, the app promises to replace Dorsey’s control over our minds, presenting domestic users with a regionalistic, and patriotic alternative to safely voice our ideas.
The operational mechanics are the same—create an account, get a username, with access reserved via a web app and an Android app. The app uses a blue conch as its icon, and that’s the only distinction it has from its parent clone, with the color schemes and everything else pretty much copied pixel to pixel.
Chalega kya?—last time when Ramdev launched a Whatsapp clone, it was a total dud. Catching the scale and network effects necessary to make engagement viable on the platform will be expensive, and impossible without cash on hand. But other Indian apps have done the impossible in TikTok’s wake, so we wouldn’t write off the odds of Tooter making it big just yet.
What’s up on Venture Street? 💰
Zerodha-backed fintech incubator, Rainmatter, has pumped in ₹10 crore into ERPNext, an interesting open-source enterprise resource planning suite project being built in India.
The open source initiative is building a customisable ERP that offers modules for inventory management, payroll, sales and support, customer relationship management etc.—all basics of running a large scale enterprise, with a focus to bring the end cost of usage down considerably for users.
ERPNext, the funded startup, sells a managed cloud version of that project to enterprises, while a self-managed tool is also available for enterprises with the tech-capacity to handle their own deployment.
Worth noting—if you’ve ever purchased SaaS, you know that some of the pricing for even the most basic software is ridiculously expensive, and it's only getting worse. Expect innovative products like this to attack from the bottom and continue to drive overall prices of software down over the next decade. It's amusing that Zerodha finds this interesting, perhaps useful for back office operations?
Moving onto a hot Series B,
Payments infrastructure vendor Cashfree scooped up some $35 million from London’s Apis Partner, taking its valuation to a massive $200 million. Existing investors, Y Combinator, and Korea’s Smilegate bought in as well.
Founded in 2012, and having struggled to get investors interested for a long time, the company eventually has grown to raise over $42 million in all, servicing some 55,000 businesses across 12 products, including the likes of Cred, Zomato, BigBasket, HDFC, Ixigo and Dream 11. Also exciting that the company claims it's the only startup in the payment gateway space to be profitable for the past 3 years.
To date, they boast processing some $12 billion in payments volumes, ringing in revenues of ₹100 crore and profits of about ₹19.5 crore. Super promising!
Takeaway: with India’s digital landscape set to grow on steroids over the next decade, payments infrastructure is not going to be a winner take all market, with plenty room for multiple players to succeed. Judging by its speed and positioning, count on Cashfree to continue to put up a good show and thrive alongside RazorPay, PayTM and others.
Slump and the rebound 🖥️
IT spending coming from Indian corporations will drop 8.4% in 2020, bringing total spend to $79.3 billion for the year—with IT services and maintenance squeezed hard. But latest forecasts breathes some hope for next year, with spending expected to return to 6% growth.
The transformation mandate—for the past few years, the majority of growth in IT spending has come from the pocket that enables digital transformation. When COVID hit, although enterprises continued to pour capital into digitization to facilitate work from home and just stay alive, the other pockets of IT were deprioritized.
Enterprise buyers struggling with revenue shortfalls and other cash problems in the pandemic cut back on IT services, or maintenance contracts for legacy infrastructure. As a result, while cloud players like AWS, GCP, Salesforce and your favorite SaaS tool won big, IT consultants like INFY, TCS, or even old enterprise hardware vendors like HP, Dell felt the hard squeeze and had a terrible 2020.
Anyway the year looks done, and most of these companies used the slump to “optimize” their expenses. With a strong broad market recovery looking imminent post-2020, the traditional IT industry is hoping for a breather next year.
What else are we snackin’ 🍿
🌱 Biotech going green - Biocon made a move to acquire 26% of stake in Hinduja Renewables for ₹5.91 crore, to help to drive its clean-energy agenda. Hinduja was set up to build, generate and develop a captive powerplant in Karnataka.
🤝 The odd-partnerships - Mercedes will work with SBI on a special partnership to provide car finance at accessible rates to SBI’s HNI customer base, as the company seeks to further its penetration and share in India amidst violent competition in the category.
👻 Snap clones Tok - Snapchat is planning to roll out a tiktok-like endless short vertical video feature called Spotlight. To help drive initial engagement, the company will feature popular videos and in return will pay $1 million a day to creators of the top-performing posts everyday until the end of 2020. WTF!
Hit that 💚 if you liked today’s issue.
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