During the interim budget, Union finance minister Nirmala Sitharaman announced Rs 1 lakh-crore corpus to encourage the private sector to scale up research and innovation — “Our youth have contributed a lot in building capacities for themselves” — expressing optimism about fintech.
However, the sector is on tenterhooks courtesy the Paytm crisis as well the Byju’s saga.
“For our tech-savvy youth, this will be a golden era,” she said.
The question is if the “transformative impact of new-age technologies and data” — that is how News 18 quoted her as defining fintech or startups — can survive the times of despair and rekindle hopes amid the twin crises?
CRISES AND BEYOND
Following “falsified compliances”, the Reserve Bank of India (RBI) last week barred the PPBL from accepting deposits or top-ups in any customer account, wallets or FASTags after February 29.
The RBI action was a fallout of the KYC anomalies as well as related-party transactions.
Paytm founder Vijay Shekhar Sharma has reassured that the company would continue its operations beyond February 29, dispelling any concerns about a potential shutdown.
Sharma has allayed layoffs concerns too. On the other hand, Byju's is facing a lawsuit from its overseas lenders over payment deadlines.
The lenders filed an insolvency petition against the company in a US court even as Byju's Alpha unit declared bankruptcy.
According to an HT report, the company is aiming to raise $200 million through the sale of new stock to shareholders, as announced on Monday, with a valuation set at just $250 million.
Byju's experienced a peak valuation of $22 billion in 2022, but underwent a significant decline in 2023.
A salary payment dispute, which has currently been resolved, coupled with a financial crisis was instigated by the Enforcement Directorate (ED) conducting numerous raids at Byju's office premises.
The ED alleged multiple violations of the Foreign Exchange Management Act (FEMA), prompting several key leaders to resign from the company.
Amid ongoing legal battles with lenders, Byju's founder and CEO Byju Raveendran sent an email to all company employees announcing the resolution of challenges, stating that January salaries have been disbursed after facing significant hardships.
Meanwhile, Mint, quoting the ET, has reported that the ed-tech company's three-year deal with footballer Lionel Messi as global brand ambassador has been put on hold. Messi had been roped in for an estimated $5-7 million per year.
This comes amid the company not renewing its endorsement contract with actor Shah Rukh Khan.
But can the two startup giants turn the tide in their favour — and send a strong signal across India’s startups — with Byju’s founder and CEO Byju Raveendran talking of "moving mountains" and Paytm founder Sharma reassuring that the company would continue its operations beyond February 29?
That is the moot point!
Meanwhile, the verdict among fellow startups is "divided" so far, Business Standard reported on Monday, adding, "An industry executive said that investors tended to have a herd mentality. When things were going well for Byju’s, they kept pumping money into the firm and inflated its valuation to about $22 billion, the executive pointed out."
“There are bad eggs everywhere, but it doesn’t mean that investors are not bullish on India,” the daily quoted said an executive — this even as Raveendran told employees on Sunday, “This fight is only against a few vested interests, who were trying to sabotage the company by impeding the rights issue.”