A lot has happened at the social commerce startup ever since we first broke the story about an EY investigation on Trail on March 12 at ETTech. Today, we reported on a stake sale executed by the company, where it has sold its stake in AppsForBharat to investors to bring in some much-needed cash. All that and more in the version.
Also in this letter: New tax norms set as volumes drop on crypto trading platforms Paytm Payments Bank has not yet appointed a firm for IT audit: Minister of State for Finance Elon Musk reveals 9.2% stake in Twitter
Investors buy Trail’s stake in AppsForBharat for $7 million
Influencer-led social commerce app Trail, which has been under investigation for financial irregularities, has sold its nearly 10% stake in AppsForBharat to one of its existing investors Mirae Asset, multiple sources informed on the matter. Middle-east-based MSA Novo bought shares from Trail in a secondary transaction, a person said.,
According to Mirae’s latest shareholding, Trail holds about 11%.
Sequoia Capital is a common investor in Trail and AppsForBharat
Deal Details: Another person with knowledge of the matter said that the transaction amounting to $9-10 million is an attempt by the company to keep itself afloat while the startup has laid off around 200-300 of its employees. “It will be used as a lifeline to clean up the company… that’s enough cash to survive for the next 12 months,” said one of the sources cited above.
Troubled times: A forensic team at EY India is probing related-party transactions, misreporting of business numbers and other financial irregularities by Trail.
AppsForBharat, a product studio for spiritual and devotional content, was founded by Prashant Sachan, one of the Trail founders. Sachan left Trail last year and sold his entire stake, as first reported by ET on March 21.
description: Sachan said he first transferred most of his equity in TRAIL to Management Stock Option Scheme (MSOP) in December 2020. He later sold his remaining stake, approximately 1.5%, to LogX Venture Partners and LetsVenture Syndicate in October 2021.
Trail got 17% stake in AppsForBharat for Rs 85,000 as Sachan started working on it while at Trail. It later reduced its stake to around 10% as AppsForBharat closed two funding rounds from Elevation Capital, Sequoia Capital India, Binext and Matrix Partners India for about $14 million.
New tax norms apply as volumes drop on cryptocurrency trading platforms
After the new rules taxing digital assets came into effect on 1 April, crypto trading volumes in India have plummeted.
Trading volumes on cryptocurrency exchanges have dropped by 30-70% since hitting a monthly peak on March 31. We reported on 1 April that up to 50% of volumes will evaporate from crypto platforms once the new tax norms are fully implemented.
Yes but why? Traders liquidated their positions ahead of a new tax regime governing Virtual Digital Assets (VDA) on 1 April, as volume surged on top crypto trading platforms on the last day of the fiscal year.
According to data compiled by secondary research firm Crabaco, on April 3, volumes on these trading platforms were down 30-50% compared to March 31, but were stable compared to April 2.
Read also: Crypto investor profile changes as tax rules go into effect
Tax Issues: The new laws tax crypto revenues at a single rate of 30% and do not enable losses to be offset against gains. a Tax Deducted at Source (TDS) 1% The same will be applicable from July, when crypto platforms are expecting a big hit, as intraday traders hold a major chunk of the daily volume.
Citation: “Trading volume was highest on March 31 as users/investors closed their positions before the start of the new financial year. There has been a decline since April 1, which is a general trend at the beginning of each financial year, however. “This year we are seeing a sharp drop due to tighter tax laws,” said Minal Thukral, senior vice president, development and strategy, CoinDCX.
tweet of the day
Paytm Payments Bank has not yet appointed a firm for IT audit: Minister of State for Finance to Lok Sabha
Bhagwat Karad, Minister of State for Finance, told the Lok Sabha today that Paytm Payments Bank is yet to appoint a firm to audit its Information Technology (IT) systems.
Karad for Parliament: “RBI (Reserve Bank of India) has further informed that Paytm Payments Bank Ltd. is yet to appoint an IT audit firm to conduct a comprehensive system audit of the Bank’s IT system.”
Catch up quickly: Paytm Payments Bank has been directed to appoint an IT audit firm to conduct a comprehensive audit of its IT systems.
Earlier in March, ET had reported that the central bank would set the terms of reference for an independent technology audit of Paytm Payments Bank. This was a follow-up after the regulator banned the onboarding of new customers for alleged violations of customer acquisition and privacy rules, which could have involved potential data flows to Chinese-origin companies.
Not the first time: This is the second time that Paytm is facing a regulatory ban. In June 2018, RBI had made some comments regarding the procedures followed by the company for acquiring new users, especially with regard to Know Your Customer (KYC) norms. RBI’s reply to RTI (right to information) query also mentioned that Paytm has failed to maintain the day balance limit of Rs 100,000 per account.
ETtech Concluded Deals
Bengaluru-based agritech startup agrizzi On Monday, it said it has raised $4 million in a funding round led by Ankur Capital. The round saw participation from Omnivore and Rajesh Yabaji (CEO, BlackBuck), Zettworks co-founder Srinath Ramakrishnan, Amrit Acharya, Rahul Sharma, and Vishal Choudhary, among others.
Hyper-social gaming platform Bombay Play has raised $7 million led by Kalaari Capital. Online gaming platform Winzo also participated in the round, along with Lumikai Fund, Leo Capital and Plecco, AdventEdge VC and AMEA Ventures. The company plans to invest the new funds in expanding its existing ‘hyper-social’ game offerings, supporting upcoming projects and allocating capital for product development.
Elon Musk reveals 9.2% stake in Twitter
Tesla Inc Chief Executive Officer Elon Musk has made a 9.2% stake in Twitter Inc, potentially making him the largest stakeholder in the micro-blogging site, in a regulatory filing shown Monday.
To inspect: Twitter shares rose 26% in premarket trading following the filing, which comes close to Musk’s tweet that he was giving “serious consideration” to building a new social media platform.
Musk owns 73.5 million Twitter shares, valuing his dormant stake in the company at $2.9 billion as of the stock’s closing Friday. The shares are held by the Elon Musk Revocable Trust.
Musk, a prolific user of Twitter, has more than 80 million followers on the site since joining in 2009 and has used the platform to make several announcements, including teasing a private deal for Tesla, which brought them under regulatory scrutiny.
However, he has been critical of the social media platform and its policies of late, saying the company is undermining democracy by failing to adhere to free speech principles.
Today’s ETtech Top 5 newsletter was produced by Arun Padmanabhan in New Delhi and Aishwarya Dabhade in Mumbai. Graphics and illustrations by Rahul Awasthi.
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