Written by by Vasudevan Sridharan at scmp.com
The Indian tech landscape is undergoing a significant transformation marked by the struggles of two major players Paytm and Byju’s as concerns mount over the fragility of the country’s start-up ecosystem.
Over the past two decades, India’s services exports, particularly in IT and business process outsourcing services, have been a crucial driver of the country’s economy.
However, the ambitions of tech start-ups have been hit by setbacks in the past year as the broader sector recorded a sharp drop in investments.
While the reasons behind the challenges faced by digital payment and financial services platform Paytm and education tech firm Byju’s differ, their simultaneous downturns have sounded alarm bells in the Indian sector with analysts expecting the repercussions to intensify.
Paytm is grappling with a crisis rooted in persistent non-compliance. The Reserve Bank of India (RBI) has mandated an abrupt clampdown on Paytm’s payment services, citing extensive non-compliance with regulations and failure to address supervisory concerns.
The company is required to cease all banking services from March 15. Its share price has plummeted by 40 per cent since the RBI’s initial announcement on January 31.
RBI governor Shaktikanda Das reiterated on February 12 that the decision was final, emphasising the central bank had carefully considered the matter.
Byju’s, once the world’s most valuable ed-tech start-up, is facing a long-anticipated calamity primarily driven by investor-related issues.
The ed-tech firm is mired in legal conflicts, financial mismanagement, reduced valuation, and internal disputes among investors and the leadership team. Two years ago, Byju’s had a valuation of US$22 billion. When the company floated a rights issue last month to raise fresh funding, its valuation had dwindled to around US$220 million.