Paytm books profit, WeWork IPO & Dharma's acquisition in 3 mins.

Interesting week in India's business pop-culture.

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Oct 24, 2024

We are back with our new newsletter edition, which covers the three biggest business topics in one go. Today, we discuss the secret behind Paytm’s first-time quarterly profits, WeWork India’s IPO: the success of a failed US model in India, & the unusual acquisition by Adar Poonawalla in Dharma Production. Let’s begin.

Paytm reports profit 💰

First, quick context.
Paytm showed quarterly profits of ~₹920 crores for the first time. That’s a big win, especially after its rough ride lately, thanks to the RBI’s crackdown on Paytm Payments Bank Limited (PPBL). But….there’s a catch!

What did RBI do to Paytm?
In January, RBI found non-compliance happening with Paytm's banking business and halted its entire banking business. This meant freezing all user onboarding and transactions, including accepting deposits, top-ups, wallets, and FASTags etc. The banking business contributes to only ~10% of entire Paytm’s revenue but the whole PR nightmare/ distrust caused a lot of core users to churn. ”The monthly transacting users (MTUs) fell from ~10 Crore in January to ~7 Crore”

So, how come the profit?
The profit is a result of selling the “entertainment ticketing” business to Zomato— one time massive gain of ~₹1,350 Crores. Yes, a one time exceptional gain as you’d call it. If there’s anything that the Coldplay fiasco has taught us is that country’s aspirational youth is - willingness to spend 2X of monthly income on a one-time concert. Zomato’s acquisition will now directly compete with BookMyShow’s longtime undisputed monopoly a good fight.

Is Zomato creating a superapp?
Zomato knows one thing well — in India, superbrands do 10X better than superapps. That means India’s will use one app for one purpose. And that’s exactly what Zomato is doing with Spinoff the ticketing business → Launch a new app named “District” for this → Create a House of Brands → Have 3 big brands (BlinkIt, Zomato & District).

WeWork India’s IPO 🏢

First, quick context.
WeWork USA is one of the most notorious startup stories — went from the worlds’s most valued startup at $47 billion valuation to filing for bankruptcy in 2023. But, there’s an anomoly: WeWork India has been profitable since 2021 and is also filing for ₹3,000-4,000 crore IPO soon.

What worked for the desi Indian WeWork?
WeWork India founder, Karan Virwani, is the son of Jitu Virwani – a Real Estate icon and the MD & founder of one of India’s biggest real estate companies “The Embassy Group”. Karan had had his basics right and did few things different:
Asset-light models: a blend of Revenue Share Agreement or Hotel Operator Agreements with landowners instead of only using long-term permanent leases. This has allowed to share risk & cushion cashflow problems.
No confusing verticals: WeWork India didn’t have unneccesary verticals like WeLive and WeGrow (co-living and schooling models). It stuck to one thing.
Not expanding blindly: Andrew Neumann literally opened WeWork everywhere in the US. Karan has gone for a smart narrow expansion — focused on Tier 1 cities, picking spots with high footfall and a proven product-market fit.
Is co-working/ managed office space still hot?
Try finding a managed office space in Bengaluru, Mumbai, Delhi. Its supply constrained right now & will be as more companies move from remote to in office setups - especially the large ones that are WeWork India’s majority customers. For WeWork to really drive preferance in enterprise customer will come from the brand value it will compound this IPO - they don’t really need money immediately.

Dharma’s 50% stake sale to Adar Poonawalla 💰

First some context.
Adar Poonawalla (the founder of Serum Institute of India) has entered the bollywood world by acquiring 50% of one of the biggest production giants of the country — Karan Johar’s Dharma production for ~₹1,000 crore.

But, why is Dharma selling out?
Last year Dharma did Rs. 512 Crores & barely 0.6 Crore profit. Compare that to Maddock films Rs. 1,300 Crores revenue & a 8-10% profit (~130 Crores). Dharma’s balance sheet isn’t healthy & it talks about something deeper.

Disruption.
Smaller product houses (like that of 12th Fail) are spending 20 Crore & clocked 70 Crore. Here the revenue pools might be disintegrated across TV + OTT + Theatrical but the OTT is covering the base cost. This is giving chance to a lot more production houses. Very similar to what’s happening in large VCs in India & a set of founder driven microVCs.

This is circle of life.
You will see unorganised sector getting organised and then again fragmented into unorganised - it happened first with e-commerce organising the unorganised SME/MSME & then D2C fragmenting the likes of Amazon/Flipkart & then reorganising with players like Mensa brands.

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People who taught GrowthX® members in October 🤯

- Kailash Nadh (CTO, Zerodha)
- Sarath Kummamuru (SVP, Razorpay)
- Swapnil S Kumar (Head of Marketing, Pernod Ricard)
- Amit M. (Chief Growth officer, Velbio, ex-AbinBev)
- Dharmesh BA 🕵🏽‍♂️ (Founder, 1990 Research Labs)
- Abhinav Krishna (Head of Design RazorpayX)
- Sairam Krishnan (Head of Marketing, Atomicwork)
- Arindam Paul (CBO, Atomberg)
- Seshadri Vyas M (Principal PM, Amazon)
- Ritvik Sharma (SVP Growth, Mikoai)
- Vignesh Ramani (ex-Performance Head, Razorpay)
- Chris Hatfield (Director of Product, LinkedIn)
- Jeetesh Agrawal (VP Global Business, Lenskart)

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This is now changing the game for the companies our members work at every week—this is just the beginning. If you have been on the edge about joining GrowthX, jump in - you will regret why you didn't join sooner. November is going to be even better.

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