Peak XV shrinks fund; Paytm employee costs are rising

Have a nice Wednesday! Peak XV Partners, formerly Sequoia Capital India, is reducing the size of its 2022 fund by 16%. This and more in this morning’s edition of ETtech.

Also in writing:
■ IT Q2 Preview
■ Oyo in legal dispute with Gujarat hotelier
▪ Swiggy pricing margin

Programming Note: ETtech Morning Dispatch will be released on October 3 on the occasion of Gandhi Jayanti. We will be back on October 4th. Stay up to date with all the news and updates on ETtech.com.

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Peak XV shrinks its $2.85 billion fund by 16% annually after Sequoia US-India split

Managing Directors of Peak XV Partners

Venture capital firm Peak XV Partners, formerly Sequoia Capital India, has reduced the size of its $2.85 billion fund by 16% more than a year after separating from Silicon Valley investor Sequoia Capital.

Details: Peak XV’s eighth fund dedicated to India and Southeast Asia will see a capital reduction of $465 million, with most of the reductions in the growth phase.

Fund VIII, announced in 2022, was expected to allocate $2 billion for India and growth investments, with the remainder earmarked for implementation in Southeast Asian companies.

Fee changes: In addition to changing the size of the fund, Peak XV is also restructuring its management fee, charging limited partners 2% of the total fund size with a 20% carryover (on exit profits) for its development and multi-stage investments. The earlier fee was 2.5% fee and 30% carry for growth and multi-stage funds.

However, the 30% rollover will occur if a given fund in the growth or multi-stage category achieves a 3x distribution to paid-in capital (DPI) – a measure of the total capital that the fund has returned to its limited partners (LPs) or fund sponsors.

Reservation: While fee changes, designed to make the company competitive with other venture capitalists, will apply to all of Peak XV’s current growth investments, there are no changes to the fee structure for the company’s seed and early-stage investments.

Read also | Peak XV has an investment amount of Rs 16,000 crore; AI in the spotlight: Rajan Anandan

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Paytm parent staff costs rise 21% in challenging year

Vijay Shekhar Sharma and Madhur Deora

One 97 Communications Limited (OCL), which operates digital payments platform Paytm, has recorded a 21% increase in employee costs and has given a significant salary increase to its group chief financial officer (CFO), Madhur Deora.

Messaging: Through a board resolution passed in September 2023, Paytm increased Madhur Deora’s remuneration by 15% and fixed it for three years till FY 2026. This came after Deora got a 9% raise in the previous year. Vijay Shekhar Sharma, founder of Paytm, has been given a fixed salary in 2022 for three years till FY2025.

Understanding numbers: Deora received a salary of Rs 3.6 crore and his total compensation excluding company shares increased to Rs 4.2 crore in FY 2024. Sharma’s annual salary is Rs 4.4 crore. The company saw an increase in employee costs to Rs 4,589 crore in the last financial year, but has also committed to reducing them by Rs 400-500 crore in the current financial year.

Putting into context: Paytm is going through a difficult phase where its affiliate Paytm Payments Bank is under embargo on providing any banking services. The company slipped from its initial profitability targets and reported a net loss of Rs 840 crore in June 2024 compared to Rs 358 crore last year.

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Big IT expects the growth momentum to continue in September

Indian software services providers will report their results for the July-September quarter in the coming week, with analysts expecting them to be better than the first quarter as trading picks up and business sentiment improves in North America.

Messaging: Market leader Tata Consultancy Services (TCS) will open its earnings season on October 10, followed by HCLTech on October 14. Infosys and Wipro will announce the results on October 17.

• Infosys and LTIMindtree are likely to be major players in terms of revenue growth
• Coforge and Persistent Systems are expected to outperform in the mid-tier package

Driving force: Green shoots in the banking and financial services sector in the Americas and momentum in AI-related transactions will sustain company performance.

“The ()IT (sector) may see slightly better earnings in Q2FY25 as we see increased hyperscale (AWS/Azure/Google Cloud) growth momentum, strong growth in North America after a period of lull and momentum in healthcare,” ICICI Securities said in the report.

Read also | If IT demand rebounds, new hires could double in FY25

Healthcare boom: Meanwhile, health IT companies’ businesses are quietly leading the growth of the $250 billion industry, serving as a bright spot at a time when key industries such as financial services, retail and high-tech have been under pressure for almost two years.

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Court sharply criticizes bailiff who sealed Oyo office; describes the action as illegal

Oyo CEO Ritesh Agarwal

SoftBank-backed Oyo’s Ahmedabad headquarters was closed following legal disputes with a Gujarat hotelier, against which the startup moved a case in the city civil court.

What’s the news: The office was closed on Monday in Ahmedabad following an order issued and executed in favor of a hotelier for non-payment of dues. However, the court found that property sealed by a bailiff under a freezing order was not legally admissible.

In granting relief to Oyo, the court held that the order for enforcement of the arbitration award was immediately set aside and the writ of injunction was issued under the impression that the impugned award had become final. The court ordered the seal to be removed by 5 p.m. on Tuesday.

Fine print: “It is very strange that the bailiff of this court has executed an order which is beyond the jurisdiction of this court and certain steps have been taken contrary to the order,” said the order passed by Justice Manoj Bhailalbhai Kotak before the city civil court.

Read also | Oyo expects a three-fold increase in PAT for FY25 to Rs 700 crore

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Other most popular articles from our reporters

American investor Invesco increases Swiggy’s fair value, lowers Pine Labs’ valuation: A fund managed by U.S. investor Invesco increased the fair value of publicly traded online food delivery company Swiggy to $13.3 billion on its books as of July 31, according to regulatory filings with the U.S. Securities and Exchange Commission.

BharatPe vs Ashneer Grover Settlement: Making Sense of the Legal Battle Between Both Parties: Gurugram-based fintech firm BharatPe on Monday resolved all pending legal issues with its co-founder Ashneer Grover. The two sides have been locked in a protracted legal dispute since 2022, when Grover and his wife Madhuri Jain were forced out of the company amid allegations of corporate governance lapses and misappropriation of funds.

NCLAT adjourns hearing of Byju’s case till November 6: The Chennai bench of the National Company Law Appellate Tribunal (NCLAT) on Tuesday adjourned the case involving troubled edtech firm Byju’s and a group of its US lenders till November 6.

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Global types we read

■ Microsoft’s Copilot AI gains voice, vision and “boss” personality (wired)

s Telegram: Crypto Messaging Company (FT)

▪ Y Combinator faces heavy criticism after backing an artificial intelligence startup that admits it cloned another artificial intelligence startup (TechCrunch)