Also in this letter:
■ Startup valuations fall sharply, hurting IPO plans
■ Top IT firms to post modest revenue growth in Q1, analysts say
■ LazyPay halts UPI-based buy-now-pay-later product
ED issues notices, summons crypto execs in FEMA probe
The Directorate of Enforcement (ED) has sought more details and documents from crypto firms as part of its ongoing probe into alleged violations of foreign exchange laws, if any, by these firms, sources told us.
Details: ED has sent out notices to cryptocurrency exchanges seeking information under the Foreign Exchange Management Act (FEMA), they added.
- Crypto trading platform CoinDCX’s founder Sumit Gupta joined the federal agency’s probe at its Bengaluru office earlier this month, the sources said.
- Executives at other crypto exchanges including WazirX and crypto trading platform CoinSwitch Kuber were also summoned.
- The probe agency sought information about certain transactions, two people in the know told us.
“Transaction history, relationship with foreign exchanges, how much money is going out of India — ED is examining every detail on offshore transactions,” an official said.
WazirX moves court: WazirX told us it has moved the Karnataka High Court, seeking interim relief. The court, in an order passed last month, stayed the summons, subject to the company providing the documents/information sought within a fortnight.
The law: Under FEMA, payments made to any person outside India or receipts from them, along with forex deals and foreign security are restricted.
The objective of the act is to facilitate external trade and payments and promote the orderly development and maintenance of the forex market in India.
Here a probe, there a probe: Several government agencies, including the Income Tax department, are probing crypto firms.
Last June, the ED asked WazirX to explain transactions worth Rs 2,790.74 crore involving cryptocurrencies that allegedly violated FEMA rules.
And the ED, Narcotics Control Bureau (NCB) and I-T department have all written to the government about the alleged misuse of cryptos, especially in trade-based money laundering (TBML).
Startup valuations fall sharply, hurting IPO plans
Valuations of several new-age companies have taken a beating in the market for unlisted shares as the craze for startups wanes, possibly delaying many companies’ plans to go public.
What’s going on? PharmEasy, Oyo, Boat and Ixigo have seen a sharp fall in value in the past six months, according to people dealing in the unlisted equity market.
This could make promoters and private equity investors hesitant to go for a public issue of shares. The weak stock market performance of Paytm, Policybazaar post their IPO will also weigh on investor minds, they said.
Case by case: The unlisted shares of PharmEasy (API holdings) are trading around Rs 45 each from a high of Rs 145.
- Imagine Marketing Ltd, which owns the Boat brand, has seen its share price drop to Rs 850-900 from Rs 1,250 a few months ago.
- Oyo, which hit a high of Rs 130 six months ago, is now trading at Rs 90-95.
- Shares of travel portal Ixigo are changing hands at around Rs 180, down from Rs 220-230 earlier.
Mirror image: Investment bankers said these valuations reflect the reversal of fortunes in popular new-age companies in the wider equity markets.
Shares of Zomato, Paytm, Nykaa and PolicyBazaar, which went public during the bull run last year, are all trading well below their issue price. Zomato’s stock shed almost a quarter of its value last week, after it announced the acquisition of quick commerce firm Blinkit.
Top IT firms to post modest revenue growth in Q1, analysts say
India’s top IT service providers are expected to report modest revenue growth in the first quarter as supply-side pressures including wage increments, onsite wage inflation and travel costs loom large, analysts said.
Cross-currency headwinds will also impact earnings, they said, on concerns of an impending recession in the United States, the largest market for Indian IT firms.
Friday kick-off: Tata Consultancy Services (TCS) will kick off the April-June results on Friday, followed by HCL Technologies on July 12.
According to an ET poll of five analysts, revenue growth (in dollar terms) across tier 1 companies is expected to touch 14% yoy while it is expected to grow at 4% sequentially.
Analysts expect Infosys to outperform TCS, Wipro, HCL Tech and Tech Mahindra.
Though IT companies indicate that the deal momentum will hold, analysts expect macroeconomic pressure to impact businesses by the second half of the ongoing fiscal year.
LazyPay halts UPI-based buy-now-pay-later product
LazyPay, the lending arm of PayU India, has temporarily stopped support for its buy-now-pay-later (BNPL) product LazyPlus UPI amid rising regulatory concerns for card-based credit fintech firms.
The product, launched by the company in September 2020, allowed users to pay through the unified payments interface (UPI) channel from a revolving credit line issued to the customer. LazyPay was issuing a credit line of up to Rs 1 lakh to users for online and offline transactions through UPI.
The Reserve Bank of India sent the fintech industry into a tizzy last month when it barred non-banks from loading prepaid payment instruments (PPIs) with credit lines.
We reported on June 30 that LazyPay had updated its terms and conditions after the RBI directive, asking customers to accept new terms and conditions, failing which all their transactions would be blocked across the platform.
TWEET OF THE DAY
ETtech Done Deals
- Online tax filing service provider Clear (formerly ClearTax), has acquired company compliance automation platform CimplyFive for an undisclosed sum in an all cash-deal. This is Clear’s second acquisition this year as it continues to double down on its software platform and looks to diversify services for its 4,000 enterprise customers.
Delhi government issues final draft of aggregator policy
The Delhi government has issued the final draft of its aggregator scheme, which aims to regulate tech companies in food delivery, ride-hailing and ecommerce in the National Capital Region (NCR).
The draft, an updated version of the one issued in January, clearly defines companies operating across the three segments.
Tell me more: Tech companies such as Ola, Amazon, Flipkart and Swiggy were broadly defined under the previous draft. These companies will now be categorised as last-mile delivery aggregators, passenger transport aggregators or ecommerce entities.
The updated draft also gives aggregators two more years to fully electrify their fleets.
The Delhi government is the first to look at implementing such a policy. If successful, it could set a precedent for other states to emulate.
Other Top Stories By Our Reporters
UK crypto exchange Nexo gives Vauld a lifeline: London-based crypto exchange Nexo will acquire crypto lending platform Vauld, pending due diligence — marking the latest sign of consolidation in the crypto market amidst falling prices. On Monday we reported that Vauld had suspended all deposits and withdrawals owing to market volatility and financial troubles.
Smartphone makers extend production cuts: Makers of consumer electronics and smartphones have decided to extend their production cuts till August and defer their plans to ramp up production for the festive season by a month, as demand remains subdued.
Global Picks We Are Reading
■ Crypto’s free rein may be coming to a close (Wired)
■ Amazon, Microsoft, Google strengthen grip on cloud (WSJ)
■ Fifa will track players’ bodies using AI to make offside calls at 2022 World Cup (The Verge)
