M&As in the Indian start-up ecosystem

M&As in the Indian start-up ecosystem
M&As in the Indian start-up ecosystem

With the recent Walmart acquisition of Flipkart as a base, an industry expert analyses the mergers and acquisitions (M&As) activity within India's start-up landscape. The recent acquisition of Flipkart by the US retail giant Walmart is the buzz word in the start-up ecosystem in India. Walmart picked up 77 per cent stake in India's largest online retailer, Flipkart, for $16 Billion. Experts have categorised this as the country's largest acquisition and the world's biggest purchase of an e-commerce company. This has led to a discussion around M&As as a trend, which offers an easy and quick exit for start-ups and early stage investors. In recent times, India has seen the M&As scenario change drastically - from big acquisition or acqui-hires to M&As between start-ups which have raised angel to Series B funding. Over the years, the latter has gradually and steadily been on the rise. As reported by media platform Inc42, until November 2017 the start-up ecosystem of India had witnessed 123 acquisitions as against 155 in 2016 and 117 in 2015. What has been interesting to see is that not all M&As are hostile. Some of them have been a game-changer for the existing market. These acquisitions have been by larger corporates, established as well as fast growing start-ups and global giants and venture capitalists (VCs).

Big Move: Start-ups acquired by established ones
Acquired by Company Acquired
Flipkart eBay India
Byju's Edurite
Paytm Nearbuy India
Zomato Runnr
Swiggy 48East
BookMyShow Burrp!
Flipkart F1 Info Solutions & Services
Ola Foodpanda
Big Boys Go Shopping
Acquired by Company Acquired
Bharti Airtel Ltd Seynse Technologies Pvt Ltd
Marico Limited BEARDO
Times Internet House of God
Global Giants Shop in India
Acquired by Company Acquired
Ebix Inc. Via.com
Dentsu Sokrati
OMA Emirates MobiSwipe
APUS Siftr
Google Halli Labs
Espacio The Tech Panda
Mara Group Nimbuzz
Alibaba Pictures Group Limited TicketNew
Strategic acquisitions within start-ups are on the rise both in terms of the number of deals as well as exit value for investors, the data available indicates. Another important aspect of the evolving M&A landscape are companies acquiring bootstrapped entities with a strong performance track record and global companies buying Indian start-ups to strengthen their tech products and expand in the Indian market. Over the coming years we will see more start-ups consolidating their energies and resources to either survive the growing competition or to become market leaders. This will also result in lesser number of Start-ups closing shops. As the Indian Start-up ecosystem continues to grow and attract greater foreign interest, we may expect the value of M&A deals to increase commensurately in times to come. India has been a fertile landscape for innovative and globally
The right environment, regulatory support and consolidation will allow start-ups to embed themselves as key components of India's rapidly evolving, technologically-oriented economic growth story.

India calling

The payment infrastructure developed in India over the last eight years is second to none. Additionally, there is a massive digital drive taking place in India as a result of the Pradhan Mantri Jan-Dhan Yojana, an increase in smart phone penetration and demonetisation. India also happens to be the largest remittance receiver in the world. In the “
” series this month, we review a FinTech company with a twist. Co-founders of Yooz - Arunjay Katakam and Lara Gilman - recognised the need for having low-value money transfers within minutes, with no hidden fees and most importantly without hassles. The Yooz team is made up of people who live far from home, hence understanding that sending money can help one feel closer to family and friends, as well as to one's goals. Arunjay Katakam, CEO & Co-founder, is a payment expert and consulted with the GSMA′s Mobile Money programme for three years, where he provided a comprehensive understanding of the evolution of mobile money, including analysing the impact of new technologies and business models. Prior to the GSMA, Katakam built and sold two businesses and invested in another, which was acquired by Twitter. He spent the first five years of his career counting beans at Ernst & Young. Gilman, the COO & Co-founder of Yooz, has also joined from the GSMA Mobile Money team. At GSMA, Lara provided operational support to more than 25 operators across 18 countries, including eight in-depth consumer research projects focused on driving adoption. Prior to GSMA, she worked in financial services and, in 2009, earned her MBA from INSEAD. The software that powers Yooz has been developed by an in-house team based in Bangalore, India. Yooz aims to be the world's first remittance company that does not rely on transaction fees and focuses instead on ecosystem-based revenue streams. Their mission is to help migrants send more money home, whenever they need to and as fast as possible. Yooz believes that
should do more for financial inclusion and reducing the poverty trap. The cost of remitting from the UK varies per destination country and transfer method. The major money transfer operators in the UK typically charge from 7 to 11 per cent of the total amount remitted. In international remittance, people who send the lowest values often pay the highest fees as business models cater to high-value senders. As a percentage, it can cost up to 10 times more to send £50 than it does to send £1,000. Therefore, instead of sending money when they need to, migrants bundle their funds or use risky informal channels to make the economics work. Yooz focuses on the UK to India corridor worth $3.6-billion. According to the latest figures available from the World Bank, the UK's biggest remittance corridor is to India. The amount of remittances each year, works out to roughly 16 per cent of the total remittances from the UK. Considering India is the second most common country of birth among migrants to Britain, this shouldn't come as a surprise. In addition to the market size, it is one of the few corridors that allows for instantaneous cross-border transactions. By reinventing the business model and leveraging new payment infrastructure, Yooz aims to unlock the commercial and social value in the long-tail of cross-border transactions. It is a single corridor (UK to India) focused start-up, looking to leapfrog its competitors using new payment infrastructure available in India. The company plans to build deep links with Indian recipients and help them on their journey to financial inclusion by offering micro-credit and micro-insurance products through their partners. While UK to India is their first corridor, as the company grows it will open other corridors such as Singapore to India, Australia to India, Middle East to India and the US to India. The company is developing the Yooz proposition to test the following hypotheses in 2018:
  • By enabling low-value transfers, the frequency of transactions will increase as they will be driven by demand rather than cost structures.
  • Low-value transactions will unlock an opportunity for exponential growth and increase the incentive to send money digitally rather than informal or cash-to-cash.
It would be interesting to closely monitor the progress the company makes in testing the hypotheses and change the remittance landscape. What would be more important to see is the impact the company makes in financial inclusion of the recipients and stand out from the competition.
Dr Param Shah is Director - UK, Federation of Indian Chambers of Commerce & Industry (FICCI).

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