?? Regulators strike back

Regulations in India and globally often struggle to keep pace with tech-led startups. When governments finally wield the hammer, though, companies in a particular sector end up facing an existential crisis.

Ecommerce, ride-hailing and fintech players witnessed a delayed but severe reaction, which many thought would sound the death knell for their business. All those sectors survived by adjusting to new rules, even as the pool of companies shrank.

Online gaming is the latest to fall into upheaval after the Goods and Services Tax Council brought it under a 28% tax rate. Platforms are warning of the worst-case scenario, but the reality will be apparent only after a few quarters.

Real-money gaming generates over 80% of the Indian gaming market’s revenues, and it is responsible for creating highly profitable and capital-efficient companies, a rarity in the internet economy.

• Gameskraft, which runs Rummyculture, scaled to $262 million in revenue and $113 million in net profit by FY22 without any funding.
• Games 24x7, which owns RummyCircle, earned $190 million by March 2021, making do with just $15 million in funding at the time. It was profitable before reporting losses in March 2022.
• Dream11 was expecting a record operating profit of $400 million in FY24 before the GST announcement. That would have been the highest level among venture-backed startups in India, putting it at par with Zerodha and Zoho.

Bad news on the tax front was the last thing the tech ecosystem needed amid a cash drought and corporate governance issues. Funding was down by 72% to $5.5 billion in the first six months of 2023 compared to the year-ago period, according to Tracxn.

There are questions about the fate of edtech major Byju’s, one of India’s most valued startups, and dozens of unicorns.

As one venture-capital investor put it: “India’s startup landscape needs divine intervention right now.”

The Arc Outline features: new VC rush, Dream11, Swiggy, OneCard, CarTrade, and Byju’s.?

Madhav Chanchani

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Arc Notes

• Options trading app Punch, a part of Market Pulse Technology, is in advanced talks to raise $5 million from Stellaris, Prime Ventures and SIG. Market Pulse, founded in 2016, offers real-time share prices, equities tracking and options analysis, among other features.
• Dale Vaz, a former Swiggy CTO, has picked up $6-7 million for his wealthtech startup in a round led by venture funds Elevation and Accel, say sources.?
• Groww, which started as an app for mutual funds, has reached an annual revenue run rate of $200-250 million, The Arc reported in April. About 70% of its monthly income comes from customers who deal in futures & options.?

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OneCard eyes fresh funding as credit card market hots up?

OneCard was targeting revenue of over $100 million in the year ended March 31, 2023, and breaking even on a contribution margin basis, as per a source.?Go deeper (3 mins)

Dream11 cuts operating profit target by 80% after GST gut punch?

For FY24, Dream11 had earlier projected gross revenues of nearly $1 billion and EBITDA of $350-400 million, two people briefed on the numbers tell The Arc. It anticipated a boost from the Indian Premier League and ICC World Cup.?Go deeper (3 mins)

Swiggy buys kirana-commerce player Lynk for $39 mn in stock?

The deal, likely to be completed by August 14, is a share swap: Lynk’s stakeholders will own 0.42% of Swiggy, according to estimates by The Arc Research. This will be worth about Rs 320 crore ($39 million), going by Swiggy’s last valuation of $10.7 billion.?Go deeper (2 mins)?

CarTrade to buy Olx’s auto biz for $65 mn

The acquisition marks the first major consolidation in auto classifieds in the country, where well-funded players like Cars24, Spinny, CarDekho, Droom and CarTrade compete.?Go deeper (2 mins)?

Byju’s appoints Mohandas Pai and Rajnish Kumar to advisory council

TV Mohandas Pai’s Aarin Capital was the first investor in Byju’s. Aarin, formed with Manipal Group’s Ranjan Pai, put Rs 50 crore in the company and made over 5X returns of Rs 264 crore from three tranches of share sales, according to filings reviewed by The Arc.?Go deeper (1 min)?

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