ClearTax Acquires Karvy’s GST Filing Arm In All-Cash Deal

Y Combinator-backed fintech startup ClearTax has announced the acquisition of asset management platform Karvy’s goods and services tax (GST) filing business in an all-cash deal for an undisclosed amount.

Karvy’s stockbroking arm was already looking to sell assets of the company to repay the dues of banks and investors. Post-acquisition, ClearTax will onboard 25 employees and 200 enterprise customers associated with Karvy’s GST filing business which works under Karvy Data Management Services. ClearTax will integrate Karvy’s electronic invoicing and e-way bill software with its GST filing platform GST 2.0 to provide clients with an efficient way of filing GST. ClearTax claims that it has over 400 customers who are already using its GST filing software. 

ClearTax will also sell other tax filing services such as reconciliation and E-Way bill solutions to Karvy’s customers which was only providing them GST filing services. ClearTax cofounder and CEO Archit Gupta said that the company was looking for such an acquisition to grow inorganically.

While ClearTax has bought the online GST filing platform, the ownership of the entity will remain with the Karvy group of companies. Gupta said that the company is buying the tech assets, the employee assets and customer asset, but the entity will remain with Karvy. “It made sense this way as we didn’t need another entity to take over their business,” he added.

According to Gupta, the acquisition will help ClearTax to drive consolidation in the tax filing space. The acquisition has come at a time when the government has made it mandatory for all large companies with a turnover of over INR 100 Cr to file their GST invoicing electronically from April 1, 2020. The acquisition move is hence expected to bring more users for ClearTax.

Moreover, this acquisition has also come on the heels of Karvy’s stock trading entity Karvy Stock Broking coming under the scanner of Stock Exchange Board of India (SEBI) for allegedly misusing assets under management and failing to repay investor payouts. However, SEBI’s scrutiny on Karvy Stock Broking might not come underway to this transaction as Karvy’s GST filing business is associated with a different entity. Also, the deal is expected to close within the next two months.

ClearTax To Integrate Music Into Fintech

Founded in 2011 by Archit Gupta, Raja Ram Gupta, Srivatsan Chari, and Ankit Solanki, ClearTax provides a range of services to clients including tax preparation, e-filing, accounting and investment planning solutions for individuals and businesses.

While Karvy’s GST filing business acquisition aligns with the business interests of ClearTax, the company in past has also acquired startups from other segments. In October last year, ClearTax had acquired Mumbai-based audio streaming platform Dose FM for an undisclosed amount.

At that time, Gupta said that the purpose of this acquisition is to utilise the team’s potential to build mobile focussed products for simplifying financial lives of businesses and individuals. It is yet to be seen how ClearTax is going to leverage audio-focused content for its next phase of growth will be an interesting watch.