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In today’s newsletter:

• Elon Musk's X sues India
• Founders’ ESOPs safe despite promoter tag
• UPI subsidy cut hints at MDR

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Elon Musk’s X is back in court, this time challenging what it calls an unlawful and unregulated censorship mechanism by the Indian government. 

The company has filed a petition in the Karnataka High Court, arguing that authorities are using Section 79(3)(b) of the IT Act and the Sahyog Portal to bypass legal safeguards and impose takedowns without due process.  

• X says the government is sidestepping the framework under Section 69A for issuing takedown orders.  

The petition also claims that the government’s Sahyog Portal allows officials to order takedowns without transparency or oversight  

• The petition comes as the Central government has asked X to clarify the responses generated by its AI chatbot, Grok

The first hearing took place on Monday 

The government told the court it hasn’t acted against X for not joining Sahyog 

• The court has granted liberty to X to move the court if the government takes any preemptive action against X 

P.S. This is not the first time X has filed a case against the government.

The company wants the court to:     

• Restrict content removals under Section 79(3)(b) 

• Suspend enforcement of Sahyog Portal orders 

• Reaffirm Section 69A as the only valid legal process for blocking content

With tensions rising over platform regulation and free speech, this case could set a major precedent for how India governs online content.

Find out more

Founders of initial public offering (IPO)-bound companies can now breathe a sigh of relief as their employee stock option plans (ESOPs) may be in safe hands.

The Securities and Exchange Board of India (SEBI), on March 20, proposed that promoters in IPO-bound companies be allowed to hold their ESOPs if issued a year before the firm’s public listing.

• Currently, SEBI regulations disallow company employees to be classified as promoters. Moreover, once categorised as promoters, individuals cannot receive ESOPs

This is detrimental to founders, who are classified as ‘promoters’ or ‘members of promoter group’ if they, individually or collectively, hold more than 10% stake in their companies.

• SEBI’s proposed amendment will allow founders to hold ESOPs even if they are labelled promoters, provided these options are granted a year before IPO

The proposed changes will likely give a boost to ESOP payouts, which have already been increasing steadily over the past year.

• As many as 26 startups announced ESOP buyback programmes in 2024, up from 19 in the previous year, as per data compiled by Qapita

Given the proposed amendment, coupled with India’s buoyant public markets and a recovering funding landscape, industry experts project ESOP payouts to go up further this year.

Dig deeper

The growth came first. Then came the pain. The spectacular growth of UPI also means that the government’s subsidy bill also ballooned for the current fiscal.

• So, the central government’s Rs 1,500 crore UPI subsidy for the current fiscal came as a shock for the payments industry

However, the paltry subsidy allocation has also rekindled hope that this could be an indication that the government might be finally willing to let banks charge for UPI. 

• The government pays 15bps or 0.15% subsidy for UPI transactions below Rs 2,000

• Industry estimates a subsidy bill of Rs 5,500 to Rs 6,000 crore as per the calculation

Usually, the subsidy is for all transactions below Rs 2,000. This year, the government limited this to small merchants.

• The industry has been talking to RBI and the finance ministry about allowing MDR on large merchants

Earlier, the government was categorical that UPI must be supported. With the bigger subsidy burden, there seems to be a rethink.

“Judicious balance of both the growth of UPI transactions and the minimum financial burden on the Government exchequer,” says the government statement. 

A clear indication that the subsidy is slowly disappearing.

Now the industry is hoping that the MDR on large merchants will help them subsidise the UPI payments at the small merchants.

Dig deeper

• AI startup Fractal has made a strategic investment of $20 million into one of its product companies, Asper.ai, an AI platform for consumer goods and manufacturing.
  
  
• SoftBank has signed a deal to purchase US-based chip designer Ampere Computing for $6.5 billion, the latest in a series of investments to advance its AI initiatives.

Abu Dhabi can't get enough of Bollywood as it taps into the fandom of the classic Bollywood flick Zindagi Na Milegi Dobara for its largest tourism project Yas Island.  

• After Ranveer Singh's never-ending energy turned out to be a perfect match to come out of the Covid lull, Yas looks to replicate similar success with Hrithik Roshan, Abhay Deol and Farhan Akhtar trio

India is the top performing market for Yas Island with 7.8 lakh visitations, a double of 2019 numbers. 

Find out more

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