Also in this letter:
■ Advisory firm IiAS opposes Sharma’s reappointment as Paytm CEO
■ Zomato Hyperpure acquires Blinkit’s warehousing business
■ India outperforms peer markets on growth for Equinix
New lending rules will force fintech firms focus on NBFC ops
The Reserve Bank of India’s (RBI’s) latest digital lending guidelines have increased the pressure on new-age lending businesses, forcing them to focus on their non-banking financial company (NBFC) units and book building, as the regulator gives importance to regulated entities.
This is a shift for the digital lending industry, which has largely focused on growing the lending-distribution platform to show scale and rely on loss guarantee cover practices such as first loss default guarantee (FLDG) to participate in lending through risk-taking with banks and financial institutions.
Yes, but: While the RBI guidelines give a relative advantage to those lending fintech firms with an active NBFC, building the required capitalisation to lend more won’t be easy.
“The digital lending guidelines have clearly taken the sheen away from technology innovation that platform-lenders were providing and put the focus on NBFCs and regulated entities,” said the founder of a digital lending firm, who didn’t wish to be named.
New rules: The central bank on Wednesday released the first leg of the digital lending norms, allowing loan disbursals and repayments only among borrowers and entities that it regulates.
Any fees payable to a loan service provider are to be collected by the regulated entity directly from the borrower. This makes it clear the RBI is keen on encouraging those entities that it can govern.
While fintech firms are still evaluating the guidelines, for some the immediate priority has been to shift lending contracts from their platform business to their NBFCs.
Advisory firm IiAS opposes Sharma’s reappointment as Paytm CEO
Institutional Investor Advisory Services India Limited (IiAS), an advisory firm, has advised shareholders of Paytm to vote against the reappointment of Vijay Shekhar Sharma as its CEO, as well as his remuneration.
What: “Vijay Shekhar Sharma has made several commitments in the past to make the company profitable, however these have not played out. We believe the board must consider professionalising the management,” the recommendation report said.
Paytm’s annual general meeting is slated to be held on August 19.
Why: IiAS said in its note that Paytm’s shares have fallen 63% from their issue price of Rs 2,150, resulting in wealth destruction for shareholders. Paytm shares were at Rs 825.50 apiece at the end of Thursday’s trading on the BSE.
It also said Sharma’s remuneration is higher than that of the CEOs of all S&P BSE Sensex companies – most of which are profitable.
AGM agenda: At its annual general meeting with shareholders on August 19, Paytm will discuss the appointment of Elevation Capital’s Ravi Adusumalli as director and the reappointment of group chief financial officer Madhur Deora, apart from seeking shareholders’ approval for Sharma’s reappointment and remuneration.
If shareholders approve, Sharma is expected to take home Rs 4 crore in remuneration for the financial year, including benefits such as company-leased accommodation.
Zomato Hyperpure acquires Blinkit’s warehousing business
Zomato’s B2B restaurant supply business, Hyperpure, has acquired Blinkit’s warehousing and ancillary services business, Hands On Trades Private Limited (HOPTL).
Driving the news: In a disclosure to BSE on Thursday, Zomato said the acquisition of the ancillary business, as well as Blinkit (formerly Grofers), was complete. It acquired Blinkit in an all-stock deal for Rs 4,447 crore. About 97% of shareholders voted in favour of the deal on July 27.
Details: Zomato acquired the ancillary service for about $8 million in cash. It, however, didn’t acquire HOTPL’s B2B trading business as it no longer fits into the company’s plans, according to its June 24 shareholder letter.
Zomato will now begin integrating with Blinkit on multiple fronts, starting with customers and delivery fleets. We reported on July 18 that Blinkit is expected to shut most of its own backend fulfillment warehouses and merge them with Hyperpure.
Criticism: Zomato has been under fire for buying BlinkIt at a valuation considered exorbitant by many. The announcement of the acquisition caused its stock to go into freefall in June, though it rose 20% in a single day in August after the company announced better-than-expected quarterly results.
TWEET OF THE DAY
India outperforms peer markets on growth for data centre operator Equinix
Data centre operator Equinix said its growth in India is significantly higher than the global average.
“An elevated growth rate in India is quite likely over the coming years as we expand into new markets and continue to invest in them,” Charles J Meyers, chief executive officer, Equinix told us.
“India is a fast-growing market for us and one we think will be a big contributor to our overall growth,” said Meyers, who is in India for the first time since it launched operations here through the acquisition of GPX Data centres in 2021.
The company said recently that it would invest $86 million to expand its presence in Mumbai to build its third data centre in the city. It is also in the process of setting up another facility in Chennai, for which it acquired 5.5 acres earlier this year.
Other Top Stories By Our Reporters
TCS wins digital transformation deal from Five Star Bank: Tata Consultancy Services (TCS) has won a deal from Five Star Bank, a subsidiary of Financial Institutions Inc, to help it determine lending risks and deliver personalised customer experiences. TCS will leverage its Customer Intelligence & Insights (CI&I) analytics platform to help Five Star Bank engage with its customers across multiple channels, real-time, it said.
Venture capitalist Prashanth Prakash signs up with IISc: Karnataka Startup Vision Group chairman and venture capitalist Prashanth Prakash on Thursday entered into an MoU with the Indian Institute of Science (IISc), pledging to set up a geriatrics wing at the Bagchi-Parthasarathy hospital coming up at the IISc’s sprawling campus in Bengaluru. The size of the donation was not disclosed.
Global Picks We Are Reading
■ After years of sameness, phones are getting delightfully weird again (The Washington Post)
■ The Roomba’s unpredictable, oddly mesmerising path to Amazon (WSJ)
■ How workout studios embraced the hybrid model for more money and less effort (Rest of World)
