Coming in hot 🔥

Banks are okay, FB retreats, and some global news.

Jan 18, 2021

Hi 👋, Tanvi here.

Filter Coffee hits your inbox every morning with notable tech and business news scoops to jump start your day.

Let’s go ahead and get started:

Kickin off the week ☕

✅ Why shame yoself like this—the much debated privacy policy roll out from Whatsapp has been called back, with the company outlining in a shy blog post that they’ve decided to postpone it because of popular misconceptions around its impact. Well in this business, “postponing” generally means digging a grave and burying it to be never seen again.

Weird that FB would plaster ads advocating in favor of the update across literally every newspaper in India, and then try to slip news of a withdrawal in a sly “blog” update. SMH. The real fools are the newspapers who plastered this garbage on their Page 1 without second thought. An uncalled for PR debacle!

✅ Banks set firm stage for 2021—when the banking business takes a dump, everyone else downstream starts stinking. Quite literally. With a recession year and everything, people were definitely a bit uneasy about how things would pan out near term. But JP Morgan, Citibank, and American giant Wells Fargo came up with pretty promising earnings reports for last quarter, which should put global financiers and economists at ease.

Profits are up, deposits are up, digital interactions are up, and funnily the millennial-traders gambling with financial markets to kill lockdown boredom is driving some serious profits. It's hilarious, but it's paying the bills so.... If you’re a finance nerd, here’s a thorough look.

Onwards sailor!

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Good numbers from our big bois too📈

HDFC bank smashed expectations for the last 3 months of 2020, with revenues beating market projections, profits rising 18%, and bad loans actually declining by a tad bit showing things are very well under control.

Quick look at the numbers:

Total revenue came in at ₹23,760 crores, up about 12%, which is admirable in these times
Interest income grew 15.1%, showing people are paying their dues
Finally, bad asset quality actually declined by a tiny bit (not that it was ever a big issue with HDFC—they pretty smooth)

HDFC is an exceptionally well managed company, there is no doubt about that, and they do get the benefit of serving the wealthy and the upper middle class who are relatively a bit better insulated from the shocks of COVID’s economic carnage.

In any case, these numbers essentially tell investors that India’s largest lender is not at risk of any implosion or damage from the pandemic led economic devastation, and that odds are that other similar financial services companies should probably be okay too.

While we’re here,

IT giant HCL showed similar enthusiasm, following the footsteps of TCS, Wipro by slowly returning to growth, improving profitability, and making moves to adapt to a cloud software future.

Quick look here:

Revenues up a respectable 3.2% to ₹19K crores
Profits jumped a massive 27%—not an easy feat while juggling with sudden shifts to work from home, spending on buying new devices, and with leases going bad
Company announced 13+ major new deals in key verticals

If you own these companies, it does appear the runway is relatively smooth from here on out. Enterprise spending on IT will only improve and that should drive outsized impact on a much leaner, smoother operating structure.

Both earnings reports set a good stage for Sensex’s 50K+ run. So stop looking at yo portfolio, resist temptations to move in and out, and buckle up for a ride. And, FYI, don’t go and invest coz the morons over at filtercoffee told you to. 🤷‍♂️

Railway bois storm Dalal Street 💰

We have a couple major IPOs opening their bids this week, one of em is the Indian Railway Finance Corporation (IRFC) which is essentially what its name suggests, a company that finances infrastructure projects of the Indian railways.

Despite Indian Railways’ century-long existence, we still have a lot more tracks to build, and platforms to construct, and we need faster trains, and more goods carriers for logistics. In the most laymen terms, IRFC basically goes out in the capital markets, and brings private capital from investors to finance these projects.

Quick look at the bid here:

Last year, they made about ₹13.5K crores in revenues, Profits of about ₹3.7K
Grew revenues at nice ~20%+ rates, while profits grew nearly 50% last year
In total, they’ll be raising over ₹4.6K crores in the IPO
About 35% of the IPO is meant for the average investor like you and I, rest goes to big banks and institutional investors

Also, the way their operation is structured is kinda intriguing—instead of directly loaning money they raised from investors to the railways, IRFC goes out and buys assets that the Indian railways needs for expansion, and then leases the assets out to the Railway folks, selling the assets off to the railways in due time, while earning on interest rates (like rent) for its use in the meantime.

The IPO will bring down government’s ownership in the business to about 86%, and kick cash over to the Railways to finance more projects. Overall, investors so far seem to like the story and the outlook appears quite positive for this launch. The only overhang is, the business is 100% reliant on the Indian Railways—one bad year there, and nobody eats here.

But betting against the Indian Railways’ financials? Pfft.

Unicorns hustlin insurance 📱

India got its first insurance-unicorn over the weekend, when fintech startup Digit picked up a ₹135 crore check from existing investors A91 Partners, TVS Shriram Growth Fund, and Fearing Capital.

Post deal valuation was bumped up to $1.9 billion, a 2x jump from the $800 million levels they raised at last. Digit basically sells an end to end portfolio of insurance coverage from health to motor to property to fire. Founded by an insurance industry veteran back in 2016, the company early on managed to entice big money investors, including Canadian billionaire Prem Watsa.

So far they’ve managed to scale to over 15 million users, with top-line growth sustaining at 30%+ rates, clocking in $186 million in annual premiums, and claims of profitability. Rumors are, another $80 million follow on round is coming in pretty soon. This startup legit AF (if you can call it a startup).

Takeaway: the insurance game in India has forever been altered. COVID’s fury and existential threat drove masses to buy insurance for the first time, particularly millennials, and gave digital vendors particularly a huge boost in the process, forever tilting the scale in their favor. We’ll see ripple effects last here for years! We’re massively bullish on the entire space.

What else are we snackin’ 🍿

🖥️ Tech giants step up - most global tech giants are aggressively throwing their resources in cloud-technology to help governments build tools to monitor and coordinate vaccination campaigns. Google, Amazon, Microsoft have already been active in the US. IT giants and domestic tech players are expected to jump on a similar crusade in India.

👀 Dudes taking on Putin - Russian opposition leader and activist, who was poisoned with a nerve agent for taking on the government, returned to Moscow yesterday after taking months long treatment in Berlin. The guy basically knew he was walking into a trap, despite that chose to return to his country to keep the anti-government fight on, and got arrested the moment he landed. The world is watching closely and the US and others have denounced his arrest.

Hit that 💚 if you liked today’s issue.

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