Also in this letter:
■ RBI’s fintech department gets new boss in P Vasudevan
■ Knight Fintech likely to close $25 million funding soon
■ India’s rising tech outsourcing share
Indian game streaming companies eyeing a bigger play abroad
Loco and Rooter, India’s two major gaming-focused streaming platforms, are expanding operations beyond the domestic market as they prepare to take on the likes of YouTube and Amazon’s Twitch in foreign territories.
First landing: Loco quietly started testing its Arabic app a few months ago in countries like Morocco, Saudi Arabia, the United Arab Emirates, Egypt, Algeria, and Tunisia. Rooter is in talks to expand its presence in multiple countries, starting with the West Asia region.
Greener pastures: In India, the average revenue per user (ARPU) from direct user monetisation — whether through subscriptions or social gifting — could settle at Rs 100 per month over the long term, industry executives said. In countries like Saudi Arabia and the UAE, this could reach upwards of $20 (Rs 1,660) per month due to higher disposable income levels.
New, but familiar: The two regions share a lot too. YouTube and Amazon-backed Twitch are the incumbents in both India and West Asia. A lot of the most popular games are common, like PUBG Mobile (similar to BGMI in India), Free Fire, Valorant, Clash of Clans, and Genshin Impact.
More work ahead: A senior executive at an Indian esports firm, requesting anonymity, said two things would decide the success of these apps: a focus on the mobile streaming market as that is where their strengths lie, and investments into local content in those countries by sponsoring tournaments and onboarding streamers.
While Rooter is still in discussions with local partners for expansion, Loco is yet to make an official announcement of its entry in West Asian markets. But there are plans around promotion, talent onboarding, and content creation.
Razorpay’s ‘reverse flip’ to India may entail $300 million tax payment in the US
Razorpay cofounders Harshil Mathur (left) and Shashank Kumar
Digital payments major Razorpay might have to shell out $250-300 million as tax payment in the US, where it is currently domiciled, as it plans to move its parent firm to India through a cross-country merger, sources told ET.
Driving the news: Razorpay and its investors have considered a merger at a lower valuation from the peak of $7.5 billion ascribed to it in 2021. At the $7-7.5 billion valuation, the tax outgo is estimated to be in the range of $250-300 million
However, advisors — both in the US, as well as KPMG and Deloitte in India — are not in favour of lowering the valuation because of the payments processor’s fast-paced growth trajectory over the last two years.
What’s reverse flipping? Reverse flipping is when companies that are domiciled in foreign countries want to return to their home country. Fintechs are reverse flipping to India now because of the tightening regulatory environment. In December 2022, PhonePe ‘reverse flipped’ to India from Singapore.
Also read | ETtech Explainer: why PhonePe investors paid Rs 8,000 crore to shift base to India?
Valuation hurdle: A lower valuation would make the tax liability relatively smaller, but sources said a steep cut may not receive regulatory clearance.
“Yes, there have been discussions to value the company at $3-4 billion, but external advisors are of the view that it may not be cleared by US authorities because of the company’s steady growth over the last year or so, even as peers in the US have seen correction in their valuations,” a source told ET.
Coming home: Razorpay’s move is driven in large part by its ambition to list on Indian bourses over the next two to three years and help it navigate the regulatory landscape better. It is said to have held discussions with government officials, too, on necessary approvals required for the process.
Groww’s plans: Wealth management platform Groww, too, is in the process of domiciling itself in India, National Company Law Tribunal (NCLT) filings reviewed by ET showed. According to an order issued on August 4 by the Bengaluru bench of NCLT, the company has secured the first set of clearances. Groww now needs to seek clearances from the Karnataka tax department, the RBI, and other sectoral regulators.
P Vasudevan named new boss of RBI’s fintech department
P Vasudevan, ED, RBI
The Reserve Bank of India (RBI) has appointed P Vasudevan, a central banker for 30 years, as the head of its fintech department. The reshuffle happened earlier this month.
Vasudevan’s CV: Vasudevan previously served as the chief general manager overseeing the Department of Payment and Settlement Systems. Appointed as an executive director on July 6, he assumed responsibilities for currency management, the enforcement department, and the corporate strategy and budget department, which will continue to be under his watch.
Regulating fintech: In 2022, the central bank established a dedicated fintech department to stimulate innovation in one of the rapidly expanding sectors within the broader financial services industry. The fintech industry is required to collaborate with this department for regulatory guidance and assistance in policymaking.
Industry insiders highlighted that Vasudevan may prioritise enhancing co-ordination among various supervisory departments that influence the burgeoning fintech sector in the country.
Knight Fintech in talks to raise $25 million led by Accel, others
Kushal Rastogi, CEO, Knight Fintech
Banking infrastructure and lending solutions provider Knight Fintech is in the final stages to close a $25 million funding round led by Accel Partners, underscoring the larger trend around venture investors wanting to back financial and banking-tech software providers.
Tell me more: Four-year-old Knight Fintech initially hit the market early this year for a $10 million-12 million raise and has expanded the round size on account of winning newer clients, according to sources. Existing investors including 3one4 Capital and Prime Venture Partners are also expected to participate in the round.
What does it do? Singapore- and Mumbai-based Knight Fintech offers a treasury suite to banks, equipping them with analytics and automation to make data-backed decisions and handle risk management, compliance, and accounting. Other products include the corporate treasury suite Knight Ascent and, lending management system Knight Utopia.
Broader trend: Risk investors have been excited about backing tech and fintech software providers on the back of an expanding addressable market, improved revenue pools, and higher predictability of outcomes for business-to-business (B2B) entities this funding winter.
IT sector’s 30% revenues may be from non-US, UK markets by 2030
The prevailing Anglo-American influence on India’s $245-billion technology outsourcing industry is expected to witness a more cosmopolitan shift. The global business share is projected to rise to 30% by the end of this decade, up from the current 20-25%.
Global resurgence: Japan, Australia, the Middle East, and the domestic market, among others, are poised to play a significant role in reshaping the industry’s global landscape. However, transatlantic anglophone clients may still have a higher spending.
ITs expanding: Both TCS and Infosys have witnessed an uptick in revenues from the rest of the world (markets outside the US and Europe). TCS recorded revenue of $1.22 billion at the end of the second quarter this year, up from $1.14 billion in the year-ago period. Infosys saw a rise from $564 million to $585 million during the same period.
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