Jan 2024 | Athera's Odyssey: Navigating New Frontiers
Jan 2024 | Athera's Odyssey: Navigating New Frontiers
Deep Dives into Gen AI Innovations, RBI's Regulatory Moves, Savaari's Success Saga, and more
In this edition of Athera’s Odyssey, we’re dishing out -
VuNet Systems: An Insight into VuNet's strategic innovation in integrating Gen AI to redefine the data processing landscape for maximal market impact
RBI's Latest Move: Analyzing RBI's strategic pivot to mitigate systemic risk and enhance fiscal sustainability
Savaari ki Savaari: All about Savaari's rollercoaster ride; from value proposition, market fit, to a high-value exit
Logic in our Daily Lives: Delving into the ubiquitous influence of logic, from everyday decision-making to complex problem-solving
Portfolio Perspectives 🔍
VuNet Systems emerges not just as a player but as a pathfinder - in the whirlwind that we call technology. With its roots deep in the realm of real-time data processing, VuNet isn’t just riding the waves of tech evolution—it is creating them.
But what does VuNet do?
Vunet works in "observability" - a way of helping businesses keep an eye on their digital services.
Every business is an app at the front end and a digital journey at the backend today.
Having a smooth experience with these services is super important. If a payment fails or takes too long, customers get frustrated and might switch to another app—it's just a tap away.
The reality is that - the engineering stack consists of a bunch of layers when it comes to a simple click. The consumers know nothing about what goes into building a single workable CTA button, or a swipe. And that’s what VuNet solves for - seamless operations through impeccable, real-time data processing ensuring high customer satisfaction.
As a category creator, VuNet specialises as a real-time digital service or a business journey observability platform, offering advanced solutions that combine a pipeline layer, storage layer, and data modelling. With an AI led approach, VuNet stands out by integrating advanced technologies like ML models and recently LLMs into their platforms, fundamentally changing how businesses approach data processing and drive insights.
Harmonising and Humanising AI
What sets VuNet apart in the AI gold rush is its masterful integration of domain centric ML models and the recent Large Language Models into their systems. Amidst the unmatched fervour for Gen AI, VuNet has carved its niche, merging technological sophistication with intuitive application - where humongous amounts of data *actually* make sense in implementing actionable insights, especially reducing the last mile friction of using deep tech enterprise products!
Drawing inspiration from revolutionary products like the iPod, their story is about transforming tech challenges into consumer delights. They operate at the confluence of business acumen and technological innovation - as their signature, making their solutions impactful.
Building In India, for the Globe
Operating from India while strategically targeting the global market, VuNet has been showcasing a profound grasp of diverse market dynamics, adeptly transforming geographical challenges into opportunities for exponential impact.
Building robust stacks for seamless ops of banks and payment gateways in India has given them a unique edge. These experiences are proving instrumental in shaping the company's comprehensive global strategy and approach - to solve varied challenges across continents.
Envisioning the Future
The path to AI mastery is one of relentless learning and agile adaptation. Ashwin emphasises the need to be focused on solving real problems that customers are willing to pay for - and for skill enhancement and strategic innovation, guiding the next generation of tech visionaries.
“It's crucial to stay informed about both macro business and technology vectors. It’s a sweet melange of both.”
As most businesses have witnessed rapid digital adoption (especially after COVID-19), and the remaining are stepping up - 2024 will see a remarkable shift in how businesses perceive and utilise real-time data processing. It will soon be a main category in deep-tech digital transformation.
As we look towards a future where technology and business become increasingly intertwined, VuNet stands as a shining example of what is possible when ingenuity meets opportunity.
Ecosystem Stories and Discoveries 📖
The Reserve Bank of India (RBI) has curtailed risky lending by banks and NBFCs by some strong regulatory moves that will directly impact many players in the space.
Here’s everything you need to know:
Turning up the heat on Consumer Credit
The RBI has raised the risk weight for consumer loans (excluding housing, vehicle, gold, education, and microfinance loans) from 100% to a whopping 125%. For cards, it goes to 150%.
What does this mean for banks and NBFCs? If they lent out Rs. 100 with a 20% Capital Adequacy Ratio (CAR) - their own capital being Rs. 20 - that Rs. 100 is now considered Rs. 125 in terms of risk. The bottom line? Their CAR takes a nosedive, dropping to 16%.
SBI Cards and The Domino Effect
Take SBI Cards, for instance. They have large credit card receivables, and with the increased risk weight, their CAR will take a hit. If they want to keep expanding, they'll need to find some more capital and issue more shares, thus diluting existing shareholders. That's a tough pill to swallow.
NBFCs and Fintechs in the Crosshairs
The RBI isn't just stopping at banks. They've cranked up risk weights for bank loans to NBFCs too. This is big news, especially for consumer lending NBFCs and almost all fintech players, who largely borrow from banks. They're going to feel the squeeze with higher capital needs and might need to hike up interest rates or face higher rejection rates for personal loans.
Specific Impact on Credit Card and Personal Loan Financiers
With the RBI cranking up risk weights, these players are in for a bit of a jolt. Particularly for credit card issuers, the leap in risk weight means they need to beef up their capital. .
We're talking about significant changes for startups that specifically target unsecured loans. Those already skating on thin CAR ice? They're going to feel this the most, because the obvious intent of the RBI is to slow the growth here - without growth, the startups can’t attract capital, and if they continue to grow, the RBI will make things worse in the future.
AIFs and the Evergreening Saga
Another new RBI rule that’s causing a stir: stopping NBFCs from using Alternative Investment Funds (AIFs) for evergreening loans. For instance - a builder is about to default on a loan from an NBFC. The NBFC, not wanting to recognise this bad loan, gets an AIF involved in buying the builder's bonds, essentially keeping the loan from going sour.
But the RBI is calling foul on this play. They've laid down the law, saying if an NBFC invests in an AIF, that fund can't lend to any company the NBFC has lent to in the past year. And if they've already done so, they've got just 30 days to dump those AIF units or face some serious financial consequences.
Broader Financial Sector Implications
The RBI's latest shake-up is about to ripple through the financial sector big time. The popular zero-cost EMIs in digital lending might lose their shine as interest rates climb. For consumers, this means coughing up more for loans and facing tougher times snagging easy credit. They're basically telling banks and NBFCs, "Hey, it's time to get your act together."
In a nutshell
The RBI's tightening rules are more than just regulatory tweaks; they're a strategic move to prevent a bigger financial crisis. With personal loan numbers soaring, increasing risk weights is like adding speed bumps to slow things down and keep the financial sector on a steady course. It's a smart, forward-thinking play by the RBI.
Well, if you're in the banking or NBFC, it's time to rethink your strategy. And for investors and borrowers alike, brace yourselves for some changes in the lending landscape.
It's going to be an interesting ride, for sure!
Athera’s Almanac 🗺️
Our portfolio company Savaari - a name synonymous with inter-city travel in India, has recently marked a significant milestone (Nov 2023). Its acquisition by MakeMyTrip signifies more than just a business transaction; it's a testament to a journey characterised by impeccable leadership, resilience, innovation, and strategic foresight.
Here’s a bit more on the troughs and crests leading to a successful exit:
The Initial Run:
Savaari's inception coincided with the emerging digital marketplace era, a time when local car rental services were predominantly region-focused. We saw in Savaari the potential to aggregate this fragmented market and, with the help of technology, build a digital marketplace that would provide customers with a superior road travel experience. The Series A funding in 2012, a modest amount by today's standards, set the stage for rapid growth and an impressive, swift Series B round within just 18 months.
Facing the Giants:
The road thereafter, however, turned bumpy. Savaari's racecourse suddenly had new contenders with deep pockets and aggressive growth hacks. Under the leadership of co-founder & CEO Gaurav Aggarwal, Savaari found itself navigating a challenging landscape. But it was their laser focus towards inter-city road travel that redefined their trajectory, carving out a niche for themselves.
Followed by that was a tough Series C in 2015, but that never happened. With a focus on responsible spending, and a small bridge from Athera (formerly Inventus India), the company regained its mojo and turned profitable.
From Trials to Triumphs:
Then came COVID-19, a crisis that brought businesses to their knees. Savaari's revenues plummeted to zero, but this very adversity showcased the team's indomitable spirit.
Savaari not only weathered the storm but emerged stronger, innovating and optimising with services like one-way rentals and refining their focus on inter-city travel. The period was marked by prudent cost management, technological enhancements, and strategic decisions that avoided drastic measures like massive layoffs.
Setting cash boundaries and strategizing how to limit costs without necessarily laying off too many people proved to be the apt approach. From leaders to junior executives, everyone took a pay cut and saved each other’s jobs.
During the pandemic, the team proactively focused on strengthening tech capabilities - which proved beneficial in the long run.
The Exit Lane:
Savaari’s consistent efforts, commendable agility and foresight paved the way to building good cashflows in the post-covid times. During FY23, despite travel in India not fully rebounding to its pre-pandemic levels, Savaari's performance demonstrated remarkable growth, achieving a significant 40% increase compared to the pre-pandemic figures, which piqued MMT's interest.
Savaari ki savaari culminated in an exit, with MakeMyTrip acquiring the company for its strong brand, superior operations, and positive cash flow. The acquisition is not merely a financial success but a validation of a vision that withstood the test of time and circumstance.
The future is bright for Savaari under MakeMyTrip, and for Athera, this is a proud moment of having nurtured another venture that was "Built to Last."
Pathways 🌄
Logic in our Daily Lives
From this edition we’re introducing a dedicated section for sharing recommendations, encompassing books, podcasts, films, television shows and more.
There is, however, a small twist - all our recommendations will be structured as pathways; bundled into sets of three, meant to take the reader (or viewer) along a journey of discovery. Hopefully, then, beginners and experts alike can hop on.
Here are three reads that take you from a playful surface to the very heart of “reason”:
Start with Around the World in 80 Games by Marcus du Sautoy
It is a light, offbeat read where the British mathematician lifts the veil over some of the most loved games around the world and exposes the maths behind them. Games have been one of the most democratic ways for humans to explore and enjoy math subliminally - and Dr. Sautoy delivers insights in an accessible, uncomplicated manner.
Next, consider reading The Master Algorithm by Pedro Domingos.
In just 300 pages, writing like a novelist, the noted professor takes us on a progressive journey through the methods of logic, thence to algorithms and finally to learning. He charts a page-turning route (with a light amount of math) through various schools of thought that seek to teach algorithms to auto-learn, inspired by our minds. By the last page, a lay reader would have had a 0 —> 1 primer on machine learning - and a concise but narrative demystification of the algorithms that surround us.
And finally, Logicomix by Apostolos Doxiadia and Christos H. Papadimitriou
The last recommendation on this pathway will surprise you. We started with games (application of logic without realising so), continued with algorithms (acknowledging logic, without understanding it), and ended with Logicomix by Apostolos Doxiadia and Christos H. Papadimitriou.
It is, funnily, a graphic novel! Yet, take it lightly at your peril. Logicomix is the intellectual and emotional story of Bertrand Russell - the prominent mathematician, a founder of analytic philosophy, and the doyen of logicians. The story tracks Russell’s journey of attempting to understand the foundations of logic, reality and mathematical truth; tripping repeatedly, and weaving through love, insanity, family and rivalry. A remarkable cameo by Wittgenstein (and his paradigm-shifting ideas) awaits, as the reader progresses through this battle of pure reason vs. flawed reality, written like a thriller, in an easy-to-consume, artful format. The story is presented with humour and lightness, making it accessible and engaging to a wide audience, without trivialising a highly layered, complex question of philosophy. This one will stay with you for some time.
Read on, and do let us know if you liked any of these. :)
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