PE and VC investors seek budget tax parity; Meesho is facing seller revolution because of its return policy

Venture investors want the government to cut taxes on unlisted securities in the next budget and bring them on a par with those for listed securities, saying the discrepancy distorts asset allocation decisions.

Also in this message:
■ Sellers rebelled while Meesho tightens controls on product returns
■ Indian IT firms face margin crisis in 2023: Analysts
■ Focus on rewarding and retaining talent, even amid layoffs, startups say


PE and VC investors seek tax parity in the union budget

Private equity (PE) and venture capital (VC) investors have sought tax parity in the upcoming budget, saying differential tax treatment of listed and unlisted securities distorts asset allocation decisions.

the problem: Listed stocks currently attract capital gains tax of 15% on short-term earnings (less than 12 months), while unlisted stocks attract short-term capital gains tax depending on the investor bracket.

taxes

Similarly, gains on listed shares sold after being held for more than a year attract tax at 10% if capital gains exceed Rs 1 lakh during a financial year, but that on unlisted securities attract tax at 20%. The minimum holding period for unlisted shares that are considered long-term assets is 24 months.

Internet industry body IndiaTech, which represents a consortium of start-ups and venture capital investors, said the longer holding period for over-the-counter securities to be considered long-term assets means angel investors have to pay up to four times more tax if they sell A stake in an unlisted company after being held for 18 months.

Venture capital investments

quotes: “The asset class (alternative investments) is very fundamental in terms of the nature of capital because it creates new companies, new entrepreneurs, new jobs and allows us to compete on the global stage. Karthik Reddy of the Indian Venture and Alternative Capital Association (IVCA) said:


Sellers revolt as Meesho tightens control over product returns

Meesho

Sellers fear e-commerce company Meesho’s move to tighten controls on product returns, sources tell us.

What’s going on? Merchants said that over the past few weeks, those sellers — particularly in Surat, one of the largest hubs for fashion and clothing retailers — have given Meesho negative ratings and poor ratings on its app and have stopped processing orders through the platform.

the changes: The sources added that Meesho made changes to its product return policy following feedback from its third-party logistics partners, and started implementing comprehensive checks on returned products at the beginning of the year.

It came on the heels of widespread abuse of the long-standing return policy by sellers, executives from third-party logistics companies told us. Meesho compensates sellers for products returned by customers.

Meesho expenses

Zoom out: The startup, which specializes in cheap clothing, home and lifestyle items, has streamlined its return policy at a time when internet companies are cutting costs due to funding pressures.

Meesho sellers have also seen sales drop after a spike during the holiday season last year, several merchants told us.


Indian IT firms will face margin crisis in 2023: Analysts

Margins of IT companies

Analysts said India’s top IT service providers Tata Consultancy Services (TCS), Infosys, HCLTech and Wipro will face margin pressure this year absent a significant improvement in pricing, despite lower attrition rates and staff costs going forward.

Software issuers reported sequential margin growth in the third quarter, with optimistic comments on near-term margin performance. They’ve said there’s room to improve utilization and automation to increase the effective price of delivery or execution.

Recession could hit margins: Although margins showed a modest recovery, driven largely by increased pricing power, the recession is likely to put further pressure on pricing and there may be little room in some key segments to benefit from the traditional levers of increased offshoring, hierarchical optimization and automation. , as Peter Bendor said. -Samuel, CEO of IT research firm Everest Group.

Current Margins: TCS, India’s largest IT company, saw its operating margins expand by 50 basis points sequentially to 24.5%. Bengaluru-based Infosys has kept its operating margin forecast at 21-22% for the fiscal year, but the company expects to close the year at the lower end of the range.

Similarly, in a seasonally weak quarter, HCLTech reported operating margins of 19.6%, up 160 basis points sequentially and 60 basis points annually. Quarterly operating margins of Wipro, the fourth largest Indian IT company, expanded by 120 basis points sequentially to 16.3 percent.

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Focus on rewarding and retaining talent, even during layoffs, startups say

startup employees

Amid ongoing layoffs, cost cuts and slowing funding in the startup ecosystem, a group of companies including upGrad, NoBroker, EnKash, Zepto, Cashkaro and HomeLane say that despite the challenging external environment, the focus during upcoming valuations will be on rewarding and maintaining High performance, while keeping all team members motivated.

Esops on the cards: The founders of these startups told ET that the top talent will be rewarded with Esops, special bonuses, bigger roles, excursions, and faster career advancement paths.

Overall increases will occur based on organizational growth, achievement of business goals, and industry trends. But valuations will be pretty much in line with last year across most startups.

Employee Morale: While the edtech company upGrad plans to award ESOPs worth Rs 100 crore to employee selection across levels in the upcoming evaluation cycle, for Cashkaro both fiscal caution in the interest of the business in general, and maintaining general employee morale are important.

“Good reviews are an essential part of employee motivation. Hence, cutting salary increases or employee bonuses wasn’t on our list, and it won’t be in 2023 either,” said co-founder Swati Bhargava.


Consumer Think9 is in talks to acquire several D2C brands

Ashni Bayani

Ashni Biyani, Co-Founder, Think9

Think9 Consumer, a multi-brand platform promoted by Ashni Biyani, daughter of Future Group Chairman Kishore Biyani, is in talks with nearly a dozen direct-to-consumer brands across retail, fashion, FMCG, FMCG, children’s furniture, home décor, beauty and Ayurveda to co-create Similar to the trademark Thrasio-style home, executives familiar with the plans said.

That’s in addition to existing brands like Kingdom of White, which sells white T-shirts, Italian bakery and snack brand Sorrentina, and personal care brand Beauty in Everything (BIE).

quotes: “We are engaged in creating digital-first brands with a focus on high gross margins, high average order value, and profitability. Instead of taking brands and revenue, we go from zero to one, building brands,” said Ashni Biyani, Co-Founder, Think9. business and business.”

Think9’s new ventures include Smartsters, a home office and storage space solutions focus on children’s development, The Good Bug probiotics and Panchamrit, a brand of care gummies, multivitamin tablets and strips.


Other top news for our correspondents

IT margins

Growth with bumps: A year of margin recovery for IT firms as talent costs normalize: This will be a year of margin recovery for IT companies as initial talent costs normalize, but whether that is supported by business growth or internal efficiency remains to be seen.

Senior professionals from start-ups flee to a safety net for large companies amid layoffs: Start-ups and digital startups – which until recently attracted top talent through their accelerated career path and huge wealth opportunities – are now witnessing an exodus of senior professionals who are now looking for a safety net for incumbents.

Campus blues: Mass layoffs put IITians on edge: A degree of anxiety has crept into the elite Indian Institute of Technology campus which is in the middle of recruitment season, due to news of layoffs at a number of headhunters including Amazon, Microsoft, Google and Goldman Sachs.


The global picks we read

■ The demise of Genesis marks the end of the era of Cryptocurrency Fake Banks (WSJ)
■ Microsoft’s Big Bet on AI Could Bring ChatGPT to the Masses (Washington Post)
■ Indian Teens from Small Towns Taking Short YouTube Clips (Rest of the World)

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