Banking marriage 🤝
Pollution relief, unstoppable IPOs, and Airtel makes moves.
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Market summary: 📊
BLOODBATH everywhere. India gave up serious gains, trading lower now on a weekly basis. US markets followed down as politicians continued to toy with fiscal stimulus.
US:
S&P 500 - down 1.86%
Nasdaq 100 - down 1.61%
India:
Nifty 50 - down 1.36%
Sensex - down 1.33%
First things first—promise of better air 🙌
The government is finally going to do something about the menace of air pollution that plagues the National Capital Region. GOI told the Supreme court that its in the midst of drawing up a thorough action plan to cut back on emissions in the NCR region and a permanent commission will be appointed to lead the agenda. There’s little clarity on the specifics as yet, but the news brings a relief to citizens.
North India, specifically around the NCR region, has been tested for some of the worst air quality in the world, with toxic air from the industrial belts apparently costing India a staggering 8.5% of its annual GDP. Something had to be done.
Aight, onto the bizness stuff…
Another fast food IPO cooking 🍔
Burger King India, the entity running Burger King restaurants locally is the latest hot-bid going public, eyeing a raise of about ₹542 crores from public investors. Just last week had one of the key suppliers in this segment, Mrs. Bector’s Foods filed for its IPO. The market seems warm, and managements are making the best of it.
Anyway, the sale will see QSR Asia, the current holding company of Burger King India book a partial exit by selling 6 crore units of shares. Proceeds from the capital raise will go towards the rollout of new self owned outlets across the country.
The company aims to own about 700 restaurants, including sub-franchised outlets by the end of 2026, 2.7x up from 261 locations it has across the country right now.
Bottomline: India’s exploding middle class is demanding more fast-food and quick service restaurants than ever before, and western brands continue to resonate very well with the public. COVID certainly has presented a near term roadblock, but more like an easily manageable hiccup in the long run. I mean, its fries, its gotta make money.
Latest from venture street 💰
Direct-to-consumer beverage brand from Mumbai, Svami scooped up ₹6.5 crore in a bridge round led by Mumbai Angels Network—a welcome change from the too many edtech and fintech raises we see lately.
The company sells self-branded non-alcoholic beverages, appealing to the “low-calorie” market that’s slowly catching wind in India. Despite COVID hurting sales, they’ve successfully navigated to return to growth, combining an online and offline strategy. In addition to being available across 8 states, the company sells in some international markets as well and new capital will go towards geographic expansion and product diversification. Sounds kewl. 👏
The big picture here: direct to consumer food or personal care categories have seen explosive growth in India, helped by a vibrant millennial and Gen Z consumer base foraging for cool brands they identify with. Aggressive estimates even suggest DTC brands could swell to over $100B in consumer spending in India by 2025!
Meanwhile, Airtel pulls off a local-Twilio —
Airtel has launched a cloud-based communications platform called ‘Airtel IQ’, making a surprise yet strategically sound entry into the communications-infra market in India. The platform, like Twilio, will enable brands to embed messaging, calling, and other communications capabilities into their applications programmatically.
So far companies such as Swiggy, Justdial, Urban Company, Havells, etc. have signed up as customers for the beta phase, displaying warm reception from enterprise buyers. The platform will adopt the industry standard pay-as-you-go model. Airtel desperately needs to show more bold moves like this if it cares about a comeback. 🙌
Lastly, a global biotech deal
Bayer AG, the global life sciences giant, is buying a U.S. biotech firm Asklepios that specializes in R&D and manufacturing of gene therapies across different therapeutic areas in a $4 billion deal—a $2 billion cash component and a $2 billion milestone based payment agreement.
Gene therapy is looked at as the hope against many currently untreatable diseases, and the deal will give Bayer control of critical therapies in clinical-phase treatments for Parkinson’s, Pompe disease and congestive heart failures. Here’s latest from Reuters.
Private banking marriage 🤝
Kotak Mahindra Bank is apparently holding closed-door talks with the Hinduja Family to buyout IndusInd Bank in an all-stock deal. IndusInd, struggling under the burden of weak assets and owners embroiled in a family feud, could desperately use a lifeline.
In the recent past alone, the company’s valuation in the stock markets has dropped like 60% as investors lose confidence in the bank’s ability to turn ship. If Kotak does manage to put a deal ready, they could nab a decent steal for a modest premium.
The combined entity could form India’s 8th largest financial firm by assets but hard to imagine Kotak not wanting to do some asset cleaning for the deal to happen though.
What matters: the deteriorating asset quality plague is slowly eating at Indian banks and COVID has only worsened this. It’s likely the RBI would want further consolidation at the top for some time, to ensure better control and oversight.
Meanwhile, Kotak also reported its quarterly earnings yesterday. The numbers looked great and investor reaction was positive. Here’s a quick look:
27% growth in net profits (shows signs of strength in loan book)
17% expansion in net interest income
Non performing asset ratio down to 2.55% (tiny improvements)
Lastly, while we’re talking about bad assets—
State Bank-led consortium has managed to recoup about ₹3,600 crores from Vijay Mallya, a paltry sum of the ₹14,000 crores something that the bankers believe Mallya owes them. In a Supreme Court hearing, the banks argued that the government’s enforcement directorate (ED) was wrong in attaching Mallya’s assets first and that the bankers had first right on the properties. 😴
Tweet of the day —
2020 keeps giving—researchers “turned” a notorious wasp into a spy, snapped surveillance devices on his back, and tracked him to his buddies thwarting an infestation bid. Science FTW!
What else are we Snackin’ 🍿
🖖Reliance got a surprise - Amazon showed Reliance who’s daddy outside of India, getting the Singapore’s arbitration panel to halt Reliance’s acquisition of Future Retail. Reliance claims it will continue with the transaction unhindered. In case you want to bring yourself upto speed on the arbitration, we wrote about it a few weeks ago.
😷 Relief in the making - India has registered the lowest new COVID-19 cases in 3 months. The total tally of cases now stand at 79 lakhs, out of which active cases now stand at about 6.5 lakhs with the death toll at a disappointing 1.19 lakh. Hope we get to see a good Diwali.
💉 Entering next phase - ICMR and Bharath Biotech have received regulatory nod to conduct the third phase human trial of the COVAXIN vaccine soon. The trials will be conducted at the institute of medical sciences and SUM Hospital in Odisha, involving thousands of volunteers.
🏏 DBX set to host finals - Dubai is set to host the qualifier 1 and IPL finals this year. The qualifier 1 which is between the 2 teams in league standings is scheduled on November 5 while the final will be held on November 10.
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