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In today's newsletter:

• An unappetizing tale of cloud kitchens
• How Byju’s makes money
• CRED invests in LiquiLoans

Bonus: We have a great show recommendation based on one of the biggest corporate busts of all time. Scroll down for more deets!

Two weeks back, a blog post revealed a cloud kitchen which was running 200 brands. This obviously caught the attention of Twitteratis and us. We then visited these kitchens, one in Marathahalli and Electronic City of Bengaluru. Here’s what we unravelled.

The first kitchen is one of many doors in a small corridor. It is set up in a space no larger than a bathroom in a regular apartment. Thousands of orders have been parcelled from this dingy, dark room with no proper facilities and questionable hygiene.

A number of things happened as a result of the blog post. Owner Ramzani Khan received a memo from food regulator FSSAI directing him to follow the rules after they conducted checks. Even aggregators discontinued some of his brands. The FSSAI will also be keeping an eye on the kitchen.

When Khan spoke to us, he was first combative, then reticent, and then told us how he got here.

“We started our kitchens during the lockdowns when people could not find food. Back then, no one said anything. But now everyone seems to have a problem. We are not cheating anyone. It is not as if I took the money but did not deliver.” 

Running 3–4 brands from a single cloud kitchen is common. According to experts, creating a single brand name is fairly challenging, thus adding additional digital brands from the same kitchen increases revenue.

But, Khan even tried to piggyback on the well-known restaurant chains. For instance, he named his brands, Empair Restaurant, Box A8 and so on.

His kitchens are, however, rated between 3.5-3.8, whereas many do not have any rating at all. Usually, building a brand is a tenuous process, but these kinds of strategies help these smaller players to garner more eyeballs on the apps.

This only reminds us- “Success has no shortcut..”

Read the story

Byju's, the most valuable company in India, shocked everyone earlier this week by disclosing a decline in revenue for FY21.

Even though the revenue decline was slight, it was alarming still because even the smallest of the internet companies saw their revenues increase dramatically during FY21 as a result of the first wave of the Covid-19 pandemic's quick tech adoption.

Byju's attributed its dismal performance to changes in accounting practices. However, a closer examination of its complete financials, accessed by us, revealed that the $22 billion behemoth still faces numerous obstacles. Here’s an explainer on Byju’s income and expenditures

• Byju’s still continues to generate most of its revenue from the sale of laptops, SD cards and tablets, and this was down 10 percent from FY20
  
  
• The company had a new expense head--course fees--and it generated Rs 321 crore from that in FY21. Byju’s’ streaming services revenue was also down 25 percent in FY21 over FY20
  
  
• Byju's had operations in three geographies as of FY21. The company's India revenue dropped significantly to Rs 987 crore in FY21.
  
  
• However, its revenue from the US and the Middle East increased by about Rs 1,300 crore. This shows that Byju's' overseas operating revenue contributed to more than 50 percent of its India revenue, indicating that India's biggest edtech company may be experiencing market stagnation.

Also read: Byju Raveendran shifts his focus to global operations amid stagnation in India operations

• Byju’s expenditures swelled to more than two times in FY21 over FY20
  
  
• Byju’s spent 2.5 times on advertising and marketing in FY21 over FY20. Just to be sure, this wasn’t the year when it was one of the lead sponsors for IPL, had not renewed BCCI’s sponsorship contract and was neither FIFA World Cup’s official sponsor
  
  
• Byju’s employee benefit expenses swelled nearly five times during FY21 over FY20
  
  
• Byju's spent close to Rs 300 crore on teacher salaries in FY21. The company had none in FY20 and it also didn’t provide any note for it
  
  
• The company also spent Rs 774.64 crore on the purchase of edutech products, which comprise tablets, laptops and SD cards against Rs 457.7 crore in FY20
  
  
• Byju’s also spent Rs 237 crore as commissions on its Middle East countries’ sales to an unrelated party. The edtech giant’s auditor fees also swelled four-fold in FY21

The pace of CRED and its founder Kunal Shah's investments in startups has recently slowed, similar to how major venture capital firms are becoming more cautious about making bets. With an investment in peer-to-peer (P2P) lending platform LiquiLoans, CRED is back in the spotlight after a lengthy absence.

• CRED has invested $10 million to acquire a minority stake in LiquiLoans, valuing the company at $200 million.

The two players have been partners since August 2021, when CRED launched its P2P product CRED Mint in partnership with LiquiLoans. Shah had backed the lending platform when it raised its seed round in 2018.

• Cred Mint offers users returns of up to 9% per annum. Members can lend/borrow in between Rs 1 lakh- Rs 10 lakh in under two minutes, commission-free, and also request withdrawal in one click, partially or in full at any time with no penalty, and earn interest for the period invested.

Despite their relative success, traditional P2P lending platforms have come under fire since they attract borrowers with poor credit histories and low incomes. By allowing P2P lending among those with credit scores over 750—India's most creditworthy citizens—Shah intends to turn things around.

While CRED intends for this investment to boost its Mint product, LiquiLoans said that CRED's support will aid in the development of its tech capabilities.

• Since its inception, LiquiLoans claims to have been profitable, and it claims that its network has fewer than 1% non-performing assets.

Unreasonable employers will find it difficult to attract and retain talent, writes Artha School of Entrepreneurship co-founder TN Hari in a column for Moneycontrol.

No one for a moment is saying that employees can go work for a direct competitor in their free time or disclose information that is confidential. Every employer would be fair in saying ‘no’ to either of these. But using this bogey to curtail the freedom of their employees to do what they wish to do in their free time (paid or unpaid) is patently unfair, he says.

Read the column

• Pune-based game development firm SuperGaming has unveiled its first Web3 game called Ethernia which will be available to be played on desktop and mobile from October 2022.
  
  
• In an effort to raise money for its operations, bankrupt cryptocurrency lender Celsius Network on Thursday filed a request for the sale of its stablecoin holdings. A total of around $23 million worth of stablecoins are now held by Celsius in 11 different forms.

Payments firm Wirecard’s collapse in 2020 was one of the biggest corporate busts in history.

A new financial crime documentary Skandal! Bringing Down Wirecard chronicles the extensive, multi-year probe into the German payments processor by the Financial Times reporter Dan McCrum.

• Watch it on Netflix.

P.S. You can read McCrum's articles on the case here or get a copy of his book Money Men: A Hot Startup, A Billion Dollar Fraud, A Fight for the Truth.