MDR on UPI on the cards; Emergent enters unicorn club

Happy Thursday! The government is mulling restoring MDR on UPI transactions for large merchants. This and more in today’s ETtech Morning Dispatch.

Also in the letter:
■ Ather Energy launches QIP
■ Groww’s Q1 profit jumps
■ TCS’ new deal win

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India could restore the merchant discount rate (MDR) on UPI transactions for large merchants, addressing a long-standing pain point for the online payments industry, three people aware of the matter told us.

“There have been multiple industry representations on bringing back MDR in view of the large and growing volume of digital transactions… It is being actively examined,” one of them said.

Driving the news:

• The proposal under examination may peg the turnover threshold for merchants at Rs 1-1.5 crore and Rs 2,000 for transactions, sparing small merchants.
• A final call will be made shortly at the highest level of government.
• Peer-to-peer transfers are expected to stay free.

Catch up quick: MDR, the fee merchants pay banks and payment firms for processing transactions, has been zero on UPI and RuPay debit cards since January 2020. The Parliamentary Standing Committee on Finance made a strong case in March for bringing it back.

Why it matters: Zero MDR has left the sector without a viable core business model. PhonePe and Google Pay control over 80% of the volume; new players stay away, and PhonePe’s stalled $1.3 billion IPO was weighed down partly by the lack of a monetisation path in payments.

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The Union Cabinet has approved the India Semiconductor Mission (ISM) 2.0 with an outlay of Rs 1.27 lakh crore, electronics and information technology minister Ashwini Vaishnaw announced on Wednesday. The mission represents a major escalation of India's bid to build an end-to-end chip ecosystem.

Scheme details:

• The government expects the programme to bring Rs 4 lakh crore in investments, Rs 2 lakh crore in production and Rs 1 lakh crore in exports.
• The scheme spans the entire semiconductor value chain – from sand and silicon ingot wafers to fabricated wafers, integrated circuits, and electronic bare components and subassemblies.

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(L-R) Mukund Jha and Madhav Jha, cofounders, Emergent

Vibe-coding startup Emergent has raised $130 million, valuing the company at $1.5 billion and propelling it into the unicorn club just two years after launch.

Unicorn round:

• The round was led by Creaegis, with participation from MNI Ventures, Claypond Capital, Sentinel Global, Khosla Ventures, SoftBank, Lightspeed and Y Combinator.
• The new valuation is about 5x higher than it was six months ago.
• Emergent has now raised $230 million in total.
• The fundraise, however, is smaller than the $200-250 million round Emergent had initially targeted, sources told us.

The company last raised capital in January – a $70 million round led by Khosla Ventures and Masayoshi Son's SoftBank at a $300 million valuation.

CEOSpeak: Chief executive Mukund Jha told us the startup has reached an annualised revenue run rate of $120 million, up from $100 million in February and $50 million in January.

"From December to now, our user numbers and revenue have grown almost 4x. It's becoming clear that this will be a massive global category, and only a handful of players are at the forefront. This investment reflects the size of the opportunity we're operating in."

Also Read: ETtech Explainer: What Emergent's ARR reveals about AI's numbers game

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Lalit Keshre, cofounder, Groww

Investing platform Groww reported a strong first quarter, with profit almost doubling year-on-year and revenue climbing sharply, even as much of the broking industry struggled to add active clients.

By the numbers:

• Net profit: Up 94.4% year-on-year (YoY) to Rs 735 crore from Rs 378 crore, attributable to the company's shareholders.
• Revenue from operations: Rose 66% YoY to Rs 1,501 crore from Rs 904 crore.
• Sequentially: Total income slipped 0.3% from Rs 1,505 crore in the March quarter, while net profit rose 7% from Rs 686 crore.

Also Read: Groww says it overtook Angel One in commodities trading within a year of launch

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Clean snacking brand Open Secret has raised Rs 50 crore from Desai Brothers Group and through institutional debt, with the primary equity component amounting to Rs 30 crore.

Tell me more: Founded in 2019, Open Secret is a D2C food brand building what it claims are guilt-free alternatives to cookies, biscuits, chips, protein snacks, and more.

It will use the capital to expand its offline footprint, launch new products and deploy AI agents in its supply chain.

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Ather Energy has announced the launch of a Rs 1,500 crore qualified institutional placement (QIP), the second leg of its Rs 2,500-crore fundraising plan.

Details: The floor price is set at Rs 1,169.70, a 10% discount to Wednesday’s closing share price. The electric two-wheeler (E2W) maker also said earlier in the day that it has approved a Rs 1,200-crore preferential issue as part of the broader capital raise.

Round details:

• Hero MotoCorp will commit Rs 960 crore via convertible warrants.
• India-Japan Fund (IJF) will invest Rs 200 crore through equity shares.
• Cofounders Tarun Mehta and Swapnil Jain will each infuse Rs 20 crore.
• The issue, subject to shareholder approval, increases the preferential allotment size from Rs 1,000 crore to Rs 1,200 crore.

Stake impact:

• Hero MotoCorp's stake in Ather will rise to 30.68% from 29.48%.
• IJF's holding will increase to 6.02% from 5.75%, assuming full conversion of the warrants.

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K Krithivasan, CEO, TCS

TCS’ latest deal win: India’s largest IT services company, TCS, has signed a deal worth over $200 million for a tenure of over three years with the Swedish-Swiss industrial technology company ABB Group.

Wipro looks back at FY26: Wipro chairman Rishad Premji said clients remained cautious through FY26, with spending priorities focused on efficiency, consolidation and cost optimisation.

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■ Silicon shadows: inside the black market for AI chips (FT)

■ Older adults know AI is slop. They just like it (Rest of World)

■ Midnight social media curfew proposed for UK teens aged 16 and 17 (BBC)