Also in this letter:
■ Flurry of exits continues at Wipro
■ Major IT firms see drop in large-client additions
■ H World sells 19% stake in Oyo
Social commerce platform Meesho’s valuation slashed by 10% to $4.4 billion
The list of Indian startups being marked down by foreign investment funds is growing by the day. The latest to see a writedown is social commerce platform Meesho, which saw its valuation cut to $4.4 billion by Fidelity Investments.
Driving the news: According to regulatory filings with the US Securities and Exchange Commission (SEC), funds managed by US-based Fidelity Investments have cut Meesho’s valuation by 10% to $4.4 billion as of March 31 from $4.9 billion in September 2021, when they had invested.
Fidelity’s funds had valued Meesho at $4.98 billion as of December 2022 an improvement over the $4.29 billion valuation as of September 2022.
Meesho’s response: Meesho said the markdown was largely the effect of an employee stock option plan (ESOP) pool applicable to the period.
“Funds attribute value to their portfolio investments, taking into account multiple factors. In this case, factors like an increase in the ESOP pool of nearly 4 percent in the applicable period have influenced the attribution of value,” said a Meesho spokesperson.
Growing troubles: Earlier this month, Meesho laid off 251 employees or 15% of its team, to turn sustainable. Cofounder and CEO Vidit Aatrey cited a “challenging macroeconomic environment” as the reason for the retrenchment.
In a deep dive last month, ETtech reported that Meesho reduced its cash burn to $5 million per month from $40 million till last year.
Also read | Baron Capital slashes Swiggy’s valuation yet again to $6.38 billion
Recent markdowns: Meesho is not the only new-age, tech-driven company to face a writedown. Swiggy, Eruditus, PharmEasy, Pine Labs, Ola and Oyo are among the others that have seen their valuations marked down.
Also read | Exclusive: Pine Labs, PharmEasy face markdowns by Neuberger Berman as tech valuations tumble
FAME electric two-wheeler beneficiary tally slashed
The government has slashed its official tally of vehicles sold under the electric vehicle (EV) promotion scheme after an investigation found that nearly every second electric two-wheeler was sold with false localisation claims, sources told ET.
Tell me more: A probe by the Automotive Research Association of India (ARAI) found multiple companies relying on imports for key parts such as electric motors, controllers and on-board chargers. These firms provided incorrect information on the locally sourced content of their vehicles, the sources said.
What now? The Ministry of Heavy Industries (MHI) has cut the number of beneficiary two-wheelers from around 989,000 to just under 564,000. The scheme envisaged subsidising 1 million electric two-wheelers by April 2024.
Also read | ETtech Explainer: Why is the government’s FAME-II scheme likely to be scrapped?
Compliance concerns: The government has stopped processing the pending subsidy claims of two EV makers until these companies submit sufficient evidence to show they are in compliance with the scheme’s conditions.
On October 7 last year, ET had reported that EV makers Hero Electric and Okinawa have been served notices by the government for not complying with requirements to claim the subsidy.
Senior-level exits at Wipro continue
IT major Wipro is facing a slew of senior-level exits. Mohd Haque, SVP and head of healthcare and medical devices for the Americas, and Ashish Saxena, SVP, and head of the manufacturing and hi-tech business unit, are the latest to exit the company, according to The Times of India.
More details: Haque worked with Wipro for two decades and managed a team of 21,000 people handling P&L, sales, strategy, delivery, consulting, and account management. He also led the inclusion and diversity council for Wipro Americas.
Saxena, who was with the IT major for six years, was responsible for his segment’s strategic roadmap, driving revenue growth, profit margin, and customer satisfaction.
Other exits: Significant exits from Wipro in recent times include Rajan Kohli, president of Wipro’s integrated digital, engineering, and application services business; Angan Guha, CEO of the Americas 2 strategic market unit; Satya Easwaran, the company’s India head, and Sanjeev Singh, the COO.
Flat Q4 numbers: Wipro missed estimates to report a flat fiscal fourth-quarter (Q4FY23) net profit while flagging uncertainties in technology spending. It guided for a revenue drop of between 1% and 3% in the April-June quarter, owing to a negative demand outlook.
Also read | Wipro’s Rishad Premji takes 50% salary cut in FY23
Top 4 IT firms log 40% drop in large-client additions in FY23
India’s top four IT companies saw a nearly 40% drop in large net client additions compared to last year as demand slows amid a weak macro environment.
ET’s findings: Tata Consultancy Services (TCS), Infosys, HCLTech and Wipro added 80 large clients, classified as deals in the $10 million to $100 million range, in the fiscal year ended March 2023 versus 132 clients in FY22, according to ET’s analysis.
Data decoded: TCS saw a 57.7% drop in large clients, followed by Wipro at 48.1%. Similarly, HCLTech witnessed a 30% drop in large client additions during the period under review.
Weak global cues: Analysts and industry experts said the slowdown in discretionary spending and weak macros compared to the demand upcycle a year earlier were the reason for the fall in client additions.
Also read | For IT firms, June quarter may be softer than Q4
Tweet of the day
H World Group sells 19% of its total stake in Oyo
Oyo founder Ritesh Agarwal
H World Group Limited, formerly known as China Lodging, has sold one crore equity shares in Oyo (Oravel Stays Limited) to a clutch of UAE-based family offices and institutional investors in a series of transactions, sources told ET.
Transaction details: The transactions, which were done in multiple tranches, primarily over the course of 2022, have earned H World Group over Rs 75 crore, the people cited above said.
H World Group’s partial exit translates to a return of 500% on the stake sale and values its residual stake at over Rs 300 crore.
No major improvement: The stake sale puts Oyo’s valuation at $6.6 billion. The last reported transaction of Oyo’s equity shares in the secondary market was in October 2022, when its shares were picked up by some family offices at a valuation of $6.6 billion.
This indicates that Oyo’s valuation hasn’t increased despite an improved business performance, amid increased scrutiny on start-up valuations.
Also read | Oyo tells employees it turned cash-flow positive in Q4 2023
Today’s ETtech Top 5 newsletter was curated by Gaurab Dasgupta in New Delhi. Graphics and illustrations by Rahul Awasthi.
