Workers inspect smart phone components at the visual inspection area of the surface mount technology workshop inside the Realme factory in Greater Noida, India: Anindito Mukerjee | Bloomberg | Getty Images
Anindito Mukerjee | Bloomberg | Getty Images
India’s booming tech sector has suffered a major blow as startup darlings Byju’s and Paytm plunge into crisis amid regulatory scrutiny and alleged mismanagement.
“There’s been a bit of a reality check for the last couple of years in terms of how to keep corporate governance practices up at a level which is sustainable and at a world class level,” said Karan Mohla, general partner at venture capital firm B Capital Group.
Paytm, once a fintech star in India, has been mired in controversy since March 2022, after the Reserve Bank of India ordered the fintech giant’s banking unit to stop onboarding new customers with immediate effect.
A subsequent audit “revealed persistent non-compliances and continued material supervisory concerns in the bank,” the central bank said on Jan. 31.
Starting from March this year, Paytm was not allowed to continue accepting fresh deposits in its accounts or its digital wallet.
Yet to be profitable, Paytm is also reportedly being probed by the federal anti-fraud agency on possible violations of foreign exchange laws.
On Feb. 26, One97 Communications, the parent company of Paytm, said in an exchange filing that founder and CEO Vijay Shekhar Sharma had resigned from the board of Paytm Payments Bank.
During the pandemic, Paytm capitalized on the digital payments boom in India, reporting a 3.5 times growth in transactions. Investors like SoftBank, Alibaba Group and Ant Financial bet big on Paytm, but its stock price has slumped more than 70% since its IPO in November 2021.
“Venture capital investors and founders have a greater responsibility to make sure that governance in the company is sound,” said Ashish Wadhwani, co-founder and managing partner of IvyCap Ventures.
Byju’s, India’s most valuable startup at one time, is also struggling to survive. The Indian edtech startup has seen its valuation plummet from $22 billion to $1 billion, and faces a series of problems including alleged accounting irregularities and purported mismanagement.
The unprofitable company, which offers services ranging from online tutorials to offline coaching, attracted billions of dollars from investors during the pandemic when traditional classrooms were shuttered.
The company is under scrutiny after the Indian government reportedly ordered an inspection into Byju’s finances and accounting practices, according to Bloomberg on July 11.
“I think that the sector is going to be permanently scarred because of the development with Byju’s, because people are not going to look at that as an isolated problem. They will look at it as a larger edtech viability problem,” said Bhavish Sood, general partner at India-based venture capital firm Modulor Capital and former research director with consulting firm Gartner.
Inflated valuations
The Covid-19 pandemic accelerated the digital revolution in India.
From online education and food delivery to online shopping, tech companies saw a surge in demand for their products and services.
The government recognized more than 14,000 new startups in 2021 — compared to only 733 between 2016 and 2017, according to India’s Economic Survey for 2021-2022.
As a result, India became the third-largest startup ecosystem in the world after the U.S. and China, the survey showed.
In 2021, a record 44 Indian startups achieved unicorn status — valued at $1 billion or more, taking the overall tally of unicorns in India to 83.
Funding for Indian startups plunged 83% in 2023 from the record high $7 billion in 2021, as global venture funding dried up amid rising macroeconomic uncertainties, such as increased interest rates.
Byju’s valuation plummeted 95% after investors cut their stakes in multiple rounds. It was most recently slashed to $1 billion, after BlackRock downsized its holdings in Byju’s last month, according to media reports.
The regulatory crackdown also hit Paytm hard, slashing its valuation to $3 billion as of Mar. 7, according to LSEG data. That’s a sharp decline from the nearly $20 billion valuation when it was listed in November 2021.
“There is no doubt that valuations were very stretched in 2021, early 2022,” said Wadhwani from IvyCap Ventures. “Some companies have done IPOs at valuations which were just not tenable and that caused a lot of stress in the market.”
“Companies which don’t have cash are being forced to do down rounds,” said Wadhwani, referring to funding rounds in which firms raise capital at a lower valuation than a previous round.
“Companies which don’t have a sustainable model are obviously going to go out of business because no one is going to fund them at crazy valuations,” he added.
“But also again, businesses which are run on fundamentals will continue to get funding.”
Musk, the world’s richest person, started going after Navarro over the weekend, posting on X that a “PhD in econ from Harvard is a bad thing, not a good thing,” a reference to Navarro’s degree. Whatever subtlety remained at the beginning of the week has since vanished.
On Tuesday, Musk wrote that “Navarro is truly a moron,” noting that his comments about Tesla being a “car assembler,” as much are “demonstrably false.” Musk called Navarro “dumber than a sack of bricks,” before later apologizing to bricks. Musk also called Navarro “dangerously dumb.”
Musk’s attacks on Navarro represent the most public spat between members of President Trump’s inner circle since the term began in January, and show that the steep tariffs announced last week on more than 180 countries and territories don’t have universal approval in the administration.
When asked about the feud in a briefing on Tuesday, White House press secretary Karoline Leavitt said, “Look, these are obviously two individuals who have very different views on trade and on tariffs.”
“Boys will be boys, and we will let their public sparring continue,” she said.
For Musk, whose younger brother Kimbal — a restaurant owner, entrepreneur and Tesla board member — has joined in on the action, the name-calling appears to be tied to business conditions.
Tesla’s stock is down 22% in the past four trading sessions and 45% for the year. Tesla has lost more tha $585 billion in value since the calendar turned, equaling tens of billions of dollars in paper losses for Musk, who is also CEO of SpaceX and the owner of xAI and social network X.
Even before President Trump detailed his plan for widespread tariffs, he’d already placed a 25% tariff on vehicles not assembled in the U.S. Many analysts said Tesla could withstand those tariffs better than competitors because its vehicles sold in the U.S. are assembled domestically.
But the company’s production costs are poised to increase because of the tariffs on materials and parts from foreign suppliers. Canada and Mexico are among the leading sources of U.S. steel imports, and Canada is the nation’s largest supplier of aluminum, while China and Mexico are home to major suppliers of printed circuit boards to the automotive industry.
At a recent an event hosted by right-wing Italian Deputy Prime Minister Matteo Salvini, Musk said, “Both Europe and the United States should move, ideally, in my view, to a zero-tariff situation, effectively creating a free trade zone between Europe and North America.”
Musk, whose view on trade relations with Europe stands in stark contrast to the policies implemented by the president, has a vested interest in the region. Tesla has a large car factory outside of Berlin, and the European Commission previously turned to SpaceX for launches.
Even before the tariffs, Tesla’s business was faltering. Last week, the company reported a 13% year-over-year decline in first-quarter deliveries, missing analysts’ estimates. That report that landed days after Tesla’s stock price wrapped up its worst quarter since 2022.
Musk, who spent roughly $290 billion to help return Trump to the White House, is now leading the Department of Government Efficiency, or DOGE, which has slashed costs, eliminated regulations and cut tens of thousands of federal jobs. In the first quarter, Tesla was hit with waves of protests, boycotts and some criminal activity that targeted vehicles and facilities in response to Musk’s political rhetoric and his work in the White House.
Satya Nadella, CEO of Microsoft, laughs as he attends a session at the World Economic Forum in Davos, Switzerland, on Jan. 23, 2020.
Denis Balibouse | Reuters
Apple‘s 23% plunge over the past four trading sessions has again turned Microsoft into the world’s most valuable public company.
As of Tuesday’s close, Microsoft is worth $2.64 trillion, while Apple’s market cap stands at $2.59 trillion.
While the market broadly is getting hammered by President Donald Trump’s sweeping tariff plan, Apple is getting hit the hardest among tech’s megacap companies due to the iPhone maker’s reliance on China.
The Nasdaq is down 13% over the past four trading days, as President Trump’s decision to impose tariffs on imports from more than 100 countries has sparked fears of a recession brought on by rising prices. UBS analysts on Monday predicted that the price of the iPhone 16 Pro Max could jump as much as $350 in the U.S.
Both Apple and Microsoft, along with chipmaker Nvidia, were previously valued at upward of $3 trillion before the recent sell-off.
In January, Microsoft issued disappointing revenue guidance. Nevertheless, last week, as Jefferies analysts reduced their price targets on many software stocks, they wrote Microsoft was among the “companies who we view as more insulated” from tariff uncertainty.
Technology stocks bounced Tuesday after three rocky trading sessions, spurred by rising optimism that President Donald Trump could potentially negotiate tariff deals with world leaders.
The sector is coming off a wild trading session after speculation that the White House could potentially delay tariffs fueled volatile swings. Alphabet, Meta Platforms, Amazon and Nvidia finished higher, while Apple, Microsoft and Tesla posted losses.
Trump’s wide-sweeping tariff plans have sparked violent turbulence over the last three trading sessions. Trading volume on Monday hit its highest in nearly two decades. Technology stocks gyrated after the Nasdaq Composite posted its worst week in five years and the Magnificent Seven group lost $1.8 trillion in market value over two trading sessions.
Chipmakers were excluded from the recent tariffs, but have come under pressure on worries that higher duties could diminish demand for products they are used in and slow the economy. The sector is also expected to see tariffs further down the road.
Elsewhere, Broadcom surged 9% after announcing a $10 billion share buyback plan through the end of the year. Marvell Technology also bounced more than 9% after agreeing to sell its auto ethernet business for $2.5 billion in cash to Infineon Technologies.