Namaste, Sat Sri Akaal, and Salaam. 🫡

Hope you guys have been having a lovely start to your summers - do keep some nimbu paani on hand. It’s a sweltering one.

I’m excited to bring Cutting Chai back after exams season, so it’s back to daily, freshly brewed stories sent direct to your inbox. Enjoy!

Today we’re diving into -
- Zepto’s intensive, cash-hungry plan to go all-out on quick commerce,
- OYO’s 76% drop in valuation from $10bn to $2.3bn,
- and Astrotalk’s stellar (pun intended) revenues.

Our read time is 4 minutes and 57 seconds - faster than Rohit Sharma’s slog took Australia to the washers… 🏏

Let's dive in. 👇

Market Vibe Check

Zepto’s wonder boys set out to snag some MORE cash. 💸

TLDR -
- Days after closing $665mn at a $3.6bn valuation, Zepto is looking for $400mn at a $5bn valuation.
- Their peers Zomato and Swiggy have $1.5bn and $850mn in cash respectively, with Swiggy’s IPO likely to bring in $500mn more.
- Dark stores are an expensive game yet profitable on scale - and the war has only just begun!

One of the craziest founder stories of our generation just got crazier…

Two Dubai boys rejected Stanford to go build an internet company in India - and just after raising $665 million last week, they’re hunting for almost $400 million more at a $5 billion valuation.

This deal is priced pretty fairly - Zepto is already doing an annualized GMV (gross merchandise value) of $1.5 billion, which is up from the $1.1 billion they reported just 5 months ago. That’s growth of over 33% in under half a year.

Just one quick yet important distinction to make - GMV is different from revenue. 

If you sold a 100Rs item for 80Rs, your GMV would be 100 while your revenue would be 80. A lot of folks confuse the both, and these buzzword KPIs are usually just invented to justify poor business growth.

But that’s not Zepto.

These guys are delivering a staggering $300mn of annualized gross profit off a base of just 350 dark stores - from which over 100 only opened last quarter.

When you keep in mind that Zepto plans to double their number of locations to over 700 by this time in 2025, you can already start to imagine the kind of revenues they’re targeting just by focusing on Tier 1 cities in India.

If they manage to close this fundraise (which it seems like they’ll have no issue with), the founders will be heading into battle with a war chest of ~$900 million. This is pretty comparable to Swiggy and Zomato, who have cash piles of $850 million and $1.5 billion each.

The former is also getting ready to go public, which would probably give them around half a billion more dollars to go crazy with.

Just last year, most wrote off 15-min delivery as a ‘fad,’ and today VCs are suddenly jumping at every single chance they get to invest in the industry.

The business of convenience is cash-hungry, but when done at scale works wonders.

Insane. 🔥

OYO closes a much-needed fundraise at a dismal valuation. 📉

TLDR -
- OYO is raising $50mn at a $2.3bn valuation - 76% fall in price tag.
- Their prediction: increase in bookings from $1.8bn→$2.4bn→$3.8bn.
- This is also most likely a pre-IPO round, which will let existing investors breathe a little easier!

Down… but not out!

Ritesh Agarwal has always been known for killing it. He became one of the first Indians to receive the Thiel Fellowship, he built India’s fastest decacorn, and quickly grew famous for being the wealthiest yet most humble person on Shark Tank.

But over the last couple of years, things have started going awry for OYO - the company that brought him here.

OYO just picked up a pre-IPO round of funding, and it’s a pretty big shock to most people who invested in them. This fundraise is a $50mn check at a valuation of $2.3 billion, which is a 76% drop in their ~$10 billion valuation before the pandemic.

It’s part of a larger round which is still underway - albeit at the same valuation. In fact, OYO cut down on their required check size, with each investor having to put in only $120,000 as compared to the $2 million minimum before.

Their targeted fundraise is of $150 million, of which around $80-90mn is gonna come from HNIs and family offices.

And for some background, OYO has 2 main business arms - the hotel aggregator model, and the home rental model.

Over the last year, they booked over $820mn from hotel aggregation and $486mn from home rentals, giving them a final booking value of $1.3 billion. This in turn led to a net revenue of almost $700 million, on top of which they are generating $300mn in profits and $110mn in adjusted EBITDA.

They’re raising funds over a predicted 40% increase in booking value to $1.8 billion around this time next year, and almost $4 billion in 4 years.

Projections definitely do seem lofty - but one thing is for sure. Never bet against a guy like Ritesh Agarwal.

AstroTalk smashes past an annualized 1,000Cr run rate. 💫

TLDR -
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There ain’t no business like the business of faith…

One of the most interesting success stories of modern India’s startup scene is AstroTalk.

They started out with one product - enabling users to talk to astrologers on a pay-per-minute basis, and that single product has snowballed into a mammoth that just crossed the 1,000 Cr/year revenue mark.

The best part - they’re doing it all at a sustainable, profitable rate: operating profits stood at just over 15% (about $20 million).

And when it comes to getting their investors excited, there are 3 major highlights.

1/ International market expansion

The Indian diaspora is the largest in the world - with almost 20 million Indians living overseas. A good chunk of this population is affluent, yet has similar beliefs and value systems, which means that they’re happy to spend on tech like this.

International markets currently produce 20% of AstroTalk’s revenue, with NRIs in the UAE, US, and UK bringing in about $2 million/month of top line.

In fact, founders reckon that international markets will be bringing in about 50% of revenue over the next decade.

2/ Astrology-related Ecom

Earlier last year, the company intro’ed their in-house e-commerce wing. They only had one type of product - gemstones.

In just under 12 months, that gemstones market is already bringing in over 4 Cr INR per month with a pretty healthy profit margin.

The power here is in the brand - anyone who’s using AstroTalk’s services already has cultivated some form of ‘trust factor,’ which is incredibly key when it comes to businesses like this that rely so heavily on faith.

3/ Capital flows.

Investors are seeing all this action and are happily pouring money into their coffers.

Just last week, AstroTalk raised about $15 million at a $300 million valuation as part of an extended round from February, where they raised another $30 million.

Some of India’s finest investors are backing them, which helps others believe in the story just a little bit more!

In other news… ☕

Mubadala’s $600mn sale of fintech Wefox meets strong founder opposition (BBG)

YouTube locks horns with record labels to license songs for AI music creation (FT)

Flipkart launches their payments app as part of a broader fintech push (TC)

Indian equity markets add $1tn in ‘value’ over last 6 months (Mint)

American brands start pushing hard for China+1 strategies (NYT)

And that’s the tea the chai for today.

Thanks for reading, and we hope you enjoyed it.

Lots of ❤️,

Team CC