Exclusive: Sebi may review compliance for VC, PE funds; Cred‘s rejigging its lending strategy

By Kevin Colleran On May 29, 2023

Happy Monday! Capital markets regulator Securities and Exchange Board of India (Sebi) has sought suggestions from venture capital and private equity funds to potentially simplify regulations for the sector. This and more in today’s ETtech Morning Dispatch.

Also in the letter:
■ Top-level exits continue at Swiggy
■ Accenture jumps on to the AI bandwagon
■ AI4Bharat puts India on the map of cutting-edge AI innovation

Exclusive: Sebi may ease compliance for PE and VC funds

Things may get easier for venture capital (VC) and private equity (PE) funds, which have emerged as large pools of risk capital for businesses.

Driving the news: Last Friday, India’s capital markets regulator Sebi wrote to 20 fund officials and senior professionals that it would conduct a “comprehensive review” of regulations to “simplify, ease and reduce cost of compliance” for alternative investment funds (AIFs) – the regulatory term for VC and PE funds. The regulator has asked the funds to suggest ways to lessen their compliance burden, which, many in the industry believe, has led to a regulatory overkill, two persons told ET.

AIFs have grown, bankrolled many Indian businesses
Sebi wants rules to avoid blow-ups
But the compliance burden is hurting many funds

Quote, unquote: “There’s a feeling that the extensive intermediation by merchant bankers has led to administrative excesses… Participation in the investment committee is also fraught with regulatory obligations. There have been a series of rulemaking exercises which have progressively limited the scope for investment managers and investors to write their relationship playbook, including the scope of ‘side letters’. Perhaps, more than ‘light touch’ the AIF regime requires a ‘right touch’ regulatory and compliance framework,” said Richie Sancheti, founder of the law firm Richie Sancheti Associates.

Jargon Buster: A ‘side letter’ spells out the differential treatment to larger investors. The fund industry argues that while this may apparently seem iniquitous, an AIF is no mutual fund managing retail money – PE/VCs across the world offer different terms (like lower fees and higher upside) to investors with fat cheques. Some funds feel even mandatory demat of multiple classes of units would add to the cost.

Catch up quick: In the past year, Sebi has brought about many changes in AIF regulations. These include a code of conduct for fund directors, manager, and intermediaries; rules on closing of funds; treating all investors at par; segregation of assets and liabilities of various schemes; confining the tenure of funds to what is stated in the fund document; and rules on disclosing and addressing investor grievances.

ETtech Deep Dive: How Kunal Shah’s Cred is rejigging its lending strategy to widen user base

Cred plans to tap into a large market of consumers who are new to credit with the help of its CreditVidya acquistion.

Driving the news: Cred plans to target users who have never taken any formal credit in the past, two sources in the know told ET. It wants to go beyond pure-play personal loans and explore new opportunities around consumer durable loans and check out finance.

Tell me more: The fintech major is leveraging Prefr, a digital lending platform, which merged with the company through the acquisition of CreditVidya and Newtap Technologies, an in-house non-banking finance company owned by founder Kunal Shah. Newtap Technologies, which acquired NBFC Parfait Finance and Investment, will be one of Prefr’s partner lenders, even as Newtap gears up for an equity raise from Cred’s existing investors, followed by plans to raise debt against it, sources told ET.

Background: The Prefr app provides loans of up to Rs 3 lakh with an average ticket size of sub-Rs 1 lakh range. The average tenure of these loans is between six months and three years. The company claims to offer an interest rate of 18% to 36% beyond the processing fees.

Top-level exits continue at Swiggy, SVP Anuj Rathi likely to leave

Anuj Rathi, senior vice president, revenue and growth, Swiggy

Swiggy, hit by valuation markdowns and an overall slowdown in food-delivery business, is likely to witness another top-level exit.

Driving the news: Anuj Rathi, currently senior vice president, revenue and growth at Swiggy is set to leave the company. Rathi directly reports to founder and CEO Sriharsha Majety and he is currently working out details of his exit with the management, sources told ET. Rathi led efforts in growth marketing, customer management, Swiggy One, food marketplace, merchandising, social, design solutions, financial services, and partnerships among others.

Other exits: Rathi will join a list of top executives at Swiggy who have left the company in recent months including Karthik Gurumurthy, head of Instamart, chief technology officer Dale Vaz, vice president of marketing Ashish Lingamneni and vice president and head of revenue and growth at quick commerce unit Instamart Nishad Kenkre.

Valuation markdowns: Baron Capital Group Swiggy’s reduced valuation by another 10% to $6.38 billion as of March 31, 2023, after marking down Swiggy’s valuation by 34% to $7.1 billion as of December 2022. On May 9, ET reported that the lead investor of the round, Invesco had slashed the food-delivery company’s valuation by 33% to $5.5 billion from $8.2 billion.

‘Accenture spots more than 300 use cases where Generative AI can deliver’

Accenture has joined its peers in the IT sector in putting generative AI to use, and has identified nearly 300 use cases across 19 industries where the trending technology can deliver significant results, Bhaskar Ghosh, Accenture’s global chief strategy officer, told ET. These include service delivery, consulting and technology.

Also read | IT clients push for generative AI-based solutions to drive productivity

Fast adoption: Ghosh said the company is seeing early adopters in the financial services, retail and government sectors start trial projects, adding that cost would be key in determining how fast enterprises adopt these tools. Accenture has teamed up with a global broadcast company to explore how generative AI can help drive audience engagement and growth. The company is also working with a multinational bank to use the technology to route large numbers of post-trade processing emails and draft responses.

Tweet of the day

AI4Bharat: Putting India on the global map of cutting-edge AI innovation

An open-source language artificial intelligence (AI) centre based at the Indian Institute of Technology (IIT), Madras, AI4Bharat has impressed many. Launched a year ago, the Nilekani Center at AI4Bharat has set up a team of close to 200 translators across the country covering 22 Indian languages.

More about AI4Bharat: Tech billionaire philanthropist Nandan Nilekani is the primary sponsor of the Nilekani Center at AI4Bharat with a focus on developing open-source language tech as a public good.

With a corpus of 230 million parallel sentences between English and 22 Indian languages, the centre is pursuing a goal to collect data from more than 700 districts in India.

AI4Bharat’s products:

Jugalbandi is a chatbot that leverages language models from ‘AI4Bharat’ to help get information on government schemes in local languages.
Supreme Court Vidhik Anuvaad Software (SUVAS) translates judgments and orders into Indian languages
Chitralekha is an open-source tool for AI-assisted video subtitling and translating.