Also in this letter:
📚 Byju’s second-largest acquisition
💰 The race to buy Hexaware
🎮 Netflix’s gaming push
Policybazaar to raise up to Rs 6,500 crore in IPO
PB Fintech, the parent entity of SoftBank-backed online insurance aggregator Policybazaar, has approved a resolution to raise up to Rs 6,500 crore, or $870 million, via an IPO.
What’s the plan? The IPO is expected to be a mix of a fresh issue of shares and an offer for sale (OFS), wherein existing investors can sell their stakes directly through exchanges, as per regulatory filings.
- PB Fintech also operates an online lending marketplace PaisaBazaar that allows users to compare and apply for loans and credit cards.
Details: Policybazaar is eyeing to go public by December this year and plans to submit its IPO documents soon, sources tell us. The firm is also expected to raise a pre-IPO round, which could include a secondary transaction for existing investors to dilute their stakes.
The Gurugram-based startup counts SoftBank Vision Fund, Naukri owner Info Edge, private equity firm True North, Premji Invest, Tiger Global and Temasek, among others as investors. It was valued at $2.4 billion when the firm executed a secondary share sale worth about $45 million in March this year.
Financials: Policybazaar posted a loss of Rs 218 crore in FY20 against Rs 213 crore in the previous fiscal. The financial results for FY21 are not out yet.
- In March 2021, the company claimed it conducts one million transactions a month, accounting for nearly 25% of India’s life cover, and more than 7% of India’s retail health business.
Status upgrade: Last month, Policybazaar had surrendered its web aggregator licence and acquired an insurance broking licence from the insurance regulator, the Insurance Regulatory and Development Authority of India (IRDAI). This will allow the company to set up its physical network while also significantly expanding its product and service offerings.
Earlier this month, we spoke to several influential founders and investors on our chat show, The Rundown by ETtech, on the significance of these upcoming IPOs, the state of the startup ecosystem, and how investors deal with rapidly rising valuations. You can read the key takeaways here and listen to the entire episode here.
Byju’s Epic acquisition
Edtech major Byju’s has made its second-largest acquisition as it looks to make a big foray into the overseas market.
What’s the news? Byju’s has acquired US-based kids learning platform Epic in a $500 million cash-and-stock deal. The startup has a user base of 50 million kids in the United States who access digital books for free as well as through paid subscriptions. Founders Suren Markosian and Kevin Donahue will continue to run the business.
Major international foray: This acquisition is expected to help strengthen Byju’s international footprint, where it expects to generate annual revenue of $300 million this financial year, cofounder Byju Raveendran told us. The edtech firm aims to invest around $1 billion in North America over the next couple of years.
Future School: In April this year, Byju’s had announced a new product called Byju’s Future School that is available in the US, the UK, Brazil, Indonesia and Mexico. The product is being headed by WhiteHat Jr founder Karan Bajaj and initially offered maths and coding tutorials. It was expected to offer science, music, English and fine arts classes in the forthcoming future.
Acquisitions: In April, Byju’s had acquired brick-and-mortar coaching network Aakash Institute in a $950 million deal. It had also snagged coding tutor WhiteHat Jr in a $300-million deal amid the pandemic last year and purchased educational game maker Osmo for $120 million in 2019.
Funding spree: To fund these acquisitions and finance its rapid expansion, the Bengaluru-based firm has been on a fundraising spree since last year. After having raised $1 billion in 2020 from global and domestic investors, the decacorn has mopped up almost $1.5 billion from investors such as UBS Group, Blackstone, Abu Dhabi sovereign fund ADQ and others in the last few months.
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The race to buy Hexaware
Private equity groups Bain Capital, Carlyle and KKR are in the fray to acquire Hexaware Technologies for $2.5 billion from Baring Private Equity Asia in what could potentially be the largest IT services buyout in the country.
Also in the race is French outsourcing company Teleperformance SE which owns the BPM firm Intelenet, several people familiar with the matter told us.
Why the sudden interest? Financial investors are scouting for scaled technology sector assets to take advantage of rising corporate IT spending on cloud services across the US and Europe. PE investments in the technology sector soared in the final months of 2020, with investors spending $65.17 billion last year on 2,138 deals involving only US-based IT companies, outpacing investments in any other sector, according to S&P Global Market Intelligence.
Baring Private Equity Asia had put the mid-tier IT services firm on sale in April this year, six months after taking it private from domestic exchanges. HT Global IT Solutions, the holding company of Baring PE Asia, owns 92% of the firm.
Big picture: IT spends are set to increase by 8.4% year-on-year to $4.1 trillion in 2021, according to consulting firm Gartner, indicating a resurgence in corporate IT growth. Banking, securities and insurance companies, which fared better during the crisis, are however likely to boost IT spending faster than retailers and travel firms.
These are also the biggest verticals for Hexaware. Banking and financial services account for about 38% of the firm’s revenues while healthcare and insurance contribute for 21% of the revenues. In 2020, Hexaware’s revenue grew 12.2% to Rs 6,262 crore from the year earlier and at a 15.4% CAGR in five years.
Netflix’s gaming push
Who will be the Netflix of gaming? This question has puzzled the tech industry for a while. Well, we will soon know whether Netflix itself takes this spot. The video streaming service opened up about its gaming efforts in a letter to shareholders on Wednesday, as part of its second-quarter earnings report.
- Last week, Netflix had hired a former EA and Oculus executive Mike Verdu as vice president of game development, reporting to the company’s chief operating officer and product officer Greg Peters.
What’s the plan? The video streaming major will initially focus on mobile games that will be bundled with the user’s existing plan at no additional cost.
“We view gaming as another new content category for us, similar to our expansion into original films, animation and unscripted TV. We’re in the early stages of further expanding into games, building on our earlier efforts around interactivity (eg, Black Mirror Bandersnatch) and our Stranger Things games,” the company said in the letter. “Since we are nearly a decade into our push into original programming, we think the time is right to learn more about how our members value games.”
- During the post-earnings interview, Peters said it will be a multi-year effort and they are going to start “relatively small”.
“We feel that our subscription model yields some opportunities to focus on a set of game experiences that are currently underserved by that sort of dominant monetisation models in games. We don’t have to think about ads, we don’t have to think about in-game purchases or other monetisation, we don’t think about per title purchases,” Peters said.
What’s not clear though is the type of games the company will offer and how it will be delivered to members. Peters said they will experiment with standalone games as well as those that extend the company’s IP. They will also look at licensing games to increase the volume of its offerings at launch.
Subscriber slowdown: This expansion, however, comes at a time when the company added just 1.54 million subscribers this quarter. The Asia Pacific region accounted for nearly two-thirds of its paid member additions for the quarter.
Netflix has added about 5.5 million customers for the first six months of this year, its worst slowdown in subscriber growth in eight years. Overall, Netflix’s paid member base currently stands at 209 million.
Instagram’s new Collab test
Instagram has started testing a new feature with select users called ‘Collab’ in India and the United Kingdom that aims to make it easier to co-author posts and short videos.
How does it work? Users can invite another account as a collaborator on a post or a Reel. If they accept, both accounts will appear in the header of the post or the Reel, and it will be shared with the followers of both accounts. They will also be able to view the shared feedback on the content. Only public accounts can be invited as a co-author in the test.
- In March, Instagram debuted the Remix feature on Reels, which lets users react or respond to other people’s videos—quite similar to TikTok’s Duet feature.
Last week, Facebook said it will invest over $1 billion by the end of next year to support content creators, as it aims to take on Google’s YouTube and ByteDance’s TikTok to woo more creators to its platform.YouTube Super Thanks: This test, however, comes a day after YouTube expanded its suite of creator monetisation tools with the launch of a new feature called Super Thanks that lets users tip between $2 and $50 (or local currency equivalent) for recorded videos. The Google-owned video site already offers similar tipping features for livestreams called Super Chat and Super Stickers.
The feature is available to creators and viewers in 68 countries on desktop and mobile devices. To receive tips, creators however must be a part of YouTube’s partner programme.
Today’s ETtech Top 5 was written by Vikas SN in Bengaluru and edited by Karan Dhar in Mumbai.