One quick thing: Ola Electric shares lose steam

In today’s newsletter: 

• IPO breaches: Sebi issues notice to Vijay Shekhar Sharma, Paytm directors
• India probes Telegram over hosting gambling, extortion
• Rebel Foods eyes $120M round from Temasek

Was this newsletter forwarded to you? You can sign up for Tech3 here

A new chapter in the Paytm saga has unfolded. 

The Securities and Exchange Board of India (SEBI) has issued show-cause notices to Paytm founder Vijay Shekhar Sharma and board members involved in the company's 2021 IPO.

SEBI is questioning the accuracy of the IPO documents and whether Paytm complied with promoter norms. 

• The investigation was triggered by inputs from RBI, which conducted a review of Paytm Payments Bank earlier this year

SEBI contends that Sharma should have been classified as a "promoter" rather than a non-promoter during the IPO. 

• Despite his direct shareholding being below 10%, his substantial control over the company warranted this classification

If Sharma had been a promoter, he would not have been eligible for employee stock options post-IPO. 

• Additionally, the Paytm directors who endorsed his non-promoter status are also under scrutiny

In response, Paytm said the issue is not new and was disclosed in the latest quarter results. The firm said it is in contact with SEBI and confirms no implication on previous financial results.  

• Paytm's stock took a hit following the news, dropping 8.88% to a day's low of Rs 505.55 on the NSE

The probe comes three years after Paytm's listing, raising questions about SEBI's delay in addressing these concerns. 

“Sebi knew about the shareholding arrangement ever since the offer document was filed in 2021. Proxy advisory firms also red-flagged the issue,” sources told us.

PhonePe, a rival to Paytm, has reported a significant 73% increase in revenue, reaching Rs 5,064 crore for FY24, on the back of cost efficiency and product diversification.

• The firm had clocked Rs 2,914 crore revenue in the previous fiscal

PhonePe also reported an Adjusted Profit After Tax (PAT) of Rs 197 crore, a significant improvement from the Rs 738 crore loss incurred in the previous fiscal year.

Find out more

Picture credit: Microsoft Copilot

Remember when the Indian government targeted the end-to-end encrypted email platform ProtonMail? 

• The website was on the verge of being banned in India due to its misuse by bad actors

Now, the government has set its sights on a popular messaging service for similar reasons.

The Indian government is investigating Telegram for its alleged role in facilitating criminal activities, like extortion and gambling.

• A government source said that blocking the app is a potential outcome of the probe, depending on the findings

The probe, led by the Ministry of Home Affairs and the Ministry of Electronics and Information Technology, focuses on peer-to-peer communications on the app.

• While Telegram complies with IT Rules, officials face difficulties due to the app’s lack of a physical presence in India

The recent leak of the UGC-NEET exam question paper on Telegram, which led to protests and Supreme Court’s intervention, has further added to its woes. 

• In addition, the IT Ministry directed Telegram to remove child sexual abuse material (CSAM) in October 2023

The investigation into Telegram comes at a time when its CEO Pavel Durov was arrested in Paris over the app’s alleged moderation failures.

• Prominent tech leaders, including Edward Snowden, Balaji Srinivasan, and Ethereum co-founder Vitalik Buterin, have criticised the arrest 

Find out more

Picture credit: Microsoft Copilot

First it was edtech startup Eruditus and now cloud kitchens operator Rebel Foods – two large ticket funding rounds are brewing in the Indian startup ecosystem.

Rebel Foods is in talks to raise $120 million (around Rs 1,000 crore) from Temasek, sources told us.

• Only about half of the total amount will be in primary capital, while the remaining will come from secondary share sales
  
  
• Existing investors Lightbox and Coatue are diluting their stake in Rebel Foods
  
  
• The round will value the company at $1 billion, about 29% lower than its $1.4 billion valuation in 2021

The round has been in the works for over a year and is finally coming together because Rebel has cut losses by reducing staff and undertaking cost-saving measures.

• Rebel’s monthly cash burn has reduced from Rs 50 crore a month in FY23 to Rs 25 crore a month now, sources said

In an email response to us on August 24, the company denied the funding talks.

Despite the edtech industry experiencing a downturn, Eruditus has emerged as a standout. The company is nearing a deal to close a $150 million funding round led by TPG, sources told us yesterday.

• The initial plan was to do a smaller $50 million round but improved financials made a case for a larger round
  
  
• The company wants to close the round before flipping its base from Singapore back to India which is slated to take around 12 months

Picture credit: Microsoft Copilot

• China's tech giants, including Alibaba and Tencent, have doubled their capital spending to $7 billionin the first half of the year for AI infrastructure, despite US sanctions aimed at curbing Beijing’s technological advancement.

• Scientists are using AI to analyse over a million brain scans to develop a tool that can predict a person's risk of dementia.

Tired of your boss pinging you on weekends or after hours? Well, if you live in Australia, you're in luck. 

• Australia has introduced a groundbreaking "right to disconnect" law, giving employees the freedom to ignore work emails and calls outside of their official hours

Imagine a world where you can actually disconnect from work, even when your boss is seemingly glued to their phone. Perhaps it's time to consider a move Down Under! 

Picture credit: Microsoft Copilot

Note: By subscribing to Tech3 you have already made the right choice. Top it up with a premium offering, the Moneycontrol Pro Panorama, a newsletter that gives you a sharp take on macros, markets, business and finance. Sign up for Pro from this link to get this newsletter in your inbox and also a host of content enjoyed by 700,000+ subscribers.