Also in this letter:
■ Legal experts raise concerns on proposed M&A rule
■ NCLAT dismisses NGO’s appeal in WhatsApp antitrust case
■ UpGrad raises $210 million during layoffs season
Binance-WazirX spat leaves 15 million users in the lurch
A public spat between global cryptocurrency platform Binance CEO Changpeng Zhao, known as CZ, and WazirX cofounder Nischal Shetty has dealt a blow to the 15 million or so users of the Indian crypto exchange.
Meanwhile, Zanmai Labs, which operates WazirX in India, is exploring the legal route amid an ownership dispute with Binance, the world’s largest exchange by volume, sources told us.
Catch up quick: The ED on Friday conducted searches on one of the directors of Zanmai Lab Pvt Ltd, which operates WazirX, and issued a freeze order on its bank assets worth Rs 64.67 crore.
Since then, a war of words has ensued between Binance’s CZ and WazirX founder Shetty on Twitter over the ownership claim of WazirX and Zanmai Labs and what that ownership entails.
After announcing the acquisition of WazirX in 2019, CZ distanced himself from the operations of the Indian exchange for the first time on Friday after the ED action.
The two companies agree that Zanmai Labs is fully operated and owned by Shetty and cofounders and that in 2019 Binance acquired WazirX Technology (IP). The dispute stems from Binance denying it has any control over WazirX’s trading operations.
Investors concerned: Young crypto investors whose portfolios have been hammered by a decline in the prices of cryptos and the prohibitive tax regime in India have expressed concern over the safety of their funds on WazirX and the consequences of a soured relationship between the two companies.
Aditi Khandelwal from Jaipur withdrew all her funds from WazirX on Saturday. “My decision has been building up since Luna’s collapse. This week’s events were a tipping point,” the 24-year-old said.
WazirX’s vice president Rajagopal Menon told us the cryptocurrency of its users was safe. “There is no issue in terms of the structural viability of the company,” he said.
Legal experts raise concerns on proposed M&A rule
Global mergers and acquisitions in the digital space with an India connection are set to come under the purview of the country’s anti-trust regulator.
Driving the news: In amendments proposed to the Competition Act, the government said any deal with a value exceeding Rs 2,000 crore needs to be notified to the Competition Commission of India (CCI) if either of the two parties has a substantial business presence in the country.
CCI has been tasked with framing the definition of what will be construed as ‘substantial business presence’.
Yes, but: Legal experts are wary about how this India connection will be defined, as a low threshold could inadvertently bring hundreds of global deals with only a tenuous India connection under the purview of new law.
To avoid uncertainty in ongoing deals, the government should hold off on notifying the rules until the Commission frames the definition, they say.
“It will be critical for the CCI to define “substantial business operations in India” with a great degree of certainty and objectivity, to ensure that only transactions with a strong enough local connection to India are brought under review,” said Shweta Shroff-Chopra, partner – competition law at law firm Shardul Amarchand Mangaldas.
As it stands: Currently, corporate deals including mergers and acquisitions need to be notified to the CCI only if the parties involved have assets or turnover exceeding a certain threshold.
The addition of asset value is aimed at bringing ecommerce and startup companies under the ambit of the rules.
Until now, such deals were not required to be notified since the companies in the sectors were typically asset-light and fell short of the minimum threshold prescribed.
NCLAT dismisses NGO’s appeal in WhatsApp antitrust case
The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal by a non-governmental organisation (NGO) against a decision by India’s antitrust regulator that instant messaging platform WhatsApp had not been abusing its dominant position in the country.
In a judgement dated August 2, the NCLAT said there was no reason for it to doubt the Competition Commission of India’s (CCI’s) 2017 order.
Catch up quick: Fight for Transparency Society, the NGO had complained to the CCI in 2017 saying that the Meta-owned platform’s privacy policy update of 2016 would force users to share their data with social media platform Facebook and its other group companies.
The complainant also alleged that by dropping an annual subscription fee earlier charged to WhatsApp users, the instant messaging platform had engaged in predatory pricing.
Significance: This is likely to strengthen Meta’s claims that its privacy policy is not due to any abuse of the dominant position it enjoys in the Indian market.
UpGrad raises $210 million during layoffs season at edtech firms
India’s largest online higher education company upGrad has raised $210 million from marquee investors in a fresh funding round.
The round is believed to have valued the firm at $2.25 billion, though the company did not officially comment on the valuation.
This comes at a time when a bunch of edtech startups are facing a cash crunch and have even fired employees recently.
Existing investors Temasek, IFC, and IIFL invested in the round on a pro-rata basis.
The family offices of Bharti Airtel’s Mittals, Narotam Sekhsaria, and ArcelorMittal’s Lakshmi Mittal have also joined the cap table, as did ETS Global, Bodhi Tree, and Singapore’s Kaizen Management Advisors Pvt Ltd.
The founder group of upGrad, which includes cofounder and chairperson Ronnie Screwvala, and managing director Mayank Kumar, has also invested $12.5 million in the round to maintain their ownership of over 50%.
Scripbox deal: Meanwhile, online wealth management platform Scripbox has made a strategic investment in Pune-based wealth advisory platform Wealth Managers.
Over the past six months, Scripbox has actively focused on inorganic partnerships to grow its customer base, strengthen its team and build its network of financial advisors.
Govt to issue SOPs after IT industry flags work-from-home rules in SEZs
The government will soon release standard operating procedures (SOPs) that special economic zones (SEZs) must follow regarding new work from home (WFH) rules.
The SOPs, which will be issued by the Ministry of Commerce and Industry, will factor in concerns raised by the $200-billion IT industry around onerous and rigid compliance requirements.
According to the IT industry, a clause in the existing WFH policy for companies operating in SEZs – which allows 50% or more employees in these zones to work from home, subject to prior clearance – is ‘impractical and burdensome’.
Under the clause, companies need to inform in advance which employees will be part of the group that will work from home.
Tech companies, faced with high attrition, say the clause will take away the flexibility they offer employees on WFH.
TWEET OF THE DAY
India SaaS firms face moment of reckoning on US belt tightening
Owing to the current belt tightening in the United States, Indian software-as-a-service (SaaS) vendors are sharpening their focus on products, hiring judiciously and reining in marketing spends even as they explore new market and geographic niches, according to top entrepreneurs and executives.
As the first-order macroeconomic headwinds reach Indian shores, several SaaS companies say there has been heightened churn in the small business segment.
Macroeconomic worries have been identified as a clear and present ‘risk factor’, though businesses claim operating margin levels for the Indian SaaS industry are higher compared to global peers and cross-country rivals in the consumer segment.
Nasdaq-listed business software company Freshworks said in its quarterly performance report that the business mix was steadily gravitating towards larger deal sizes, lending resilience to its business model, even though the small and medium business (SMB) segment was seeing more customers leave.
Other Top Stories By Our Reporters
The bad, and the good, of utilisation benchmark: Indian IT service providers are facing a peculiar situation these days. While attrition rates and travel costs are trending higher unlike in the early days of the Covid-19 pandemic, utilisation levels are falling.
Intel reaches net positive water status in India: Intel has achieved net positive water status in India. This means the company restored and returned more freshwater than it took in, one of three countries globally where it has been able to do so.
Global Picks We Are Reading
■ Judge in Twitter, Elon Musk Case Known for Quick Work (WSJ)
■ Inflation is helping gig companies like Uber — and hurting their workers (The Washington Post)
■ Another court case fails to unlock the mystery of bitcoin’s Satoshi Nakamoto (The Guardian)
