Happy Friday!
India’s food delivery startups have fallen on hard times. As the country went into lockdown, their order volumes fell 70%. After several weeks of shutdown, a large number of restaurants have already closed permanently. And, according to Zomato, that’s just the tip of the iceberg.
Food ordering apps have realised that there’s no going back to the normal. Zomato, in a blog post today, said its focus now is on building for the new normal.
Calling Covid-19 as a black swan event where the worst might be around the corner, it emphasised on preserving as much cash as possible to weather the storm.
The online food delivery platform said it will let go of 520 people or 13% of its workforce and undertake up to 50% temporary pay cut for the remainder of the staff. Instead of a direct severance package, the people affected by the layoffs will get half of their salaries along with health insurance for the next six months or till they find their next job, whichever is earlier. The company will help with outplacement. To save rental costs, the food aggregator said it’ll make partial or full work from home a permanent feature for its staff.
Business revamp
Over the past few months, Zomato and its rival Swiggy have forayed into grocery delivery with rapid expansion, and also held talks with state governments for home delivery of alcohol. On Thursday, ET reported that Zomato is preparing to launch consumer-facing pick up and drop service, mirroring rival Swiggy’s Genie service. The food delivery app is also exploring opportunities to expand its logistics services to businesses outside its platforms. Read more.
The Covid-19 pandemic has decimated businesses across the country. But India’s Software-as-a-Service (SaaS) sector may emerge as a rare bright spot for investors. Read more.
SaaS supremacy
According to the 2020 edition of Bain & Co’s India Private Equity report, co-authored with the Indian Private Equity and Venture Capital Association (IVCA), the Indian SaaS market is expected to grow around 50% annually to over $20 billion in 2022 from about $6 billion in 2019.
The secret
The report credits the broader business strategy of Indian SaaS companies—of targeting both enterprises and small and medium businesses (SMBs) across domestic and global markets, as companies seek to harness big data, advanced analytics and machine learning by turning to software on demand based in the cloud.
The projection comes at a time when enterprise technology companies have raised significant amounts of capital in 2019, with a number of them being valued at $1 billion and upwards. Read more.
Demand slump
While there is a pent-up demand of non-essentials products such as smartphones, laptops, air conditioners, coolers and home furnishings, but it could be short-lived as a majority of consumers would refrain from spending on non-essential items, according to a survey that gauged the purchasing sentiment in 124 red zones
By the numbers
19% of the respondents said they were looking to buy electronics items such as laptops, mobile phones and tablets,
19% said they were looking for office and school supplies such as books and stationery.
5% of respondents said they would buy appliances such as ACs, coolers and refrigerators.
23% respondents said they would buy home furnishings and other home supplies. Read the full story here.
Tech comes to rescue
The technology driven platform that makes it possible for ration cards to be used across India will enable everyone, including migrant workers, to draw their monthly quota of grains and pulses from anywhere in the country. The One Nation, One Ration Card scheme announced by finance minister Nirmala Sitharaman on Thursday will be driven by ration cards seeded with Aadhaar data of each family member.
Why it matters
It will also reduce corruption and plug leakages by doing away with monopolistic and rent-seeking behaviour by ration shop owners. Additionally, family members will be able to avail of their quota of subsidised ration from any place at the same time. The idea of portable ration cards was first mooted by committee headed by Nandan Nilekani, the them chairman of the Unique Identification Authority of India. Read more.
TDS cut
The 25% reduction in tax deducted at source (TDS) on e-commerce participants from October is expected to benefit merchants or sellers. TDS of 1% on e-commerce gross sales was introduced in the budget in February, aimed at bringing more online sellers and services providers under the tax net.
Sellers and e-commerce marketplaces still say that the TDS levy should be removed altogether as it will lock up liquidity and add to compliance costs. They also flagged that the government should clarify whether the deduction will be on gross or net sales. Read more.
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