Credit slump 📉
Smart home, edtech win, and crushed retail.
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Stock summary: 🤔
US - S&P 500 - up 0.72%
India - Sensex - down 1.77%
Doubling down on smart home future 😎
The future of personal computing is much beyond smartphones and big tech is already making plans. Google has announced a strategic investment in one of the US’ largest home security solutions providers, ADT Security Services, investing about $450 Million in exchange for 6.6% ownership in the company.
ADT sells security solutions to homeowners in the US. Think security cameras, alarm systems, temperature sensors and a range of other similar equipment. Google on the other hand owns Nest in its hardware portfolio, a smart temperature control system that it acquired for $3.4 Billion in 2014.
So far Google had been selling Nest mostly online but now with the ADT deal, Google gets access to nearly 20,000 of ADT’s on the road sales force - which can now bundle Nest and sell it alongside ADT’s other products.
Also, while ADT is great at hardware and sales, Google is great at software and the company gets access to a sizable installed base of devices to work with directly and deploy its smart home assistant technology. In the long run, Google could even buy ADT if things work out well. Read more.
Bottomline: smart home is touted as the next frontier of consumer computing, where every device is centrally connected and synced. Google is thinking way ahead of the game.
Apple makes a payments bid 🤝
Apple silently acquired a payments company this weekend which allows literally anyone to accept credit card and other card payment types using just their mobile phone.
The startup called Mobeewave, uses NFC technology to read credit cards and processes payments, kind of a payment terminal baked into a smartphone. All iPhones come equipped with an NFC module now so by acquiring the startups technology, Apple could integrate and launch the functionality directly through a software upgrade.
Apple reportedly paid around $100 Million for the company and the team will be working closely with Apple R&D to explore wider use cases. As always, Apple is secretive about the transaction. Read more.
Bottomline: Accepting payments on a smartphone without the need for additional hardware could be a blessing to millions of small business owners across the globe, who due to prohibitive costs of hardware and software refuse to digitize. For Apple, services is the next level of growth and with this move it could build a Payments business with small businesses.
Credit slump at banks 📉
COVID has virtually put a stop of consumerism in India and as a result lending activity at banks has momentarily paused. Credit growth has dropped to nearly 5.8% YoY for the month of July, against a 12.8% growth rate during the same time in 2019.
All banks have been reporting consistently weak numbers. State Bank of India for example came up with 6.6% growth rate, while ICICI bank came out with 6.5% growth rate - highlighting the slump across regions, income classes, and consumer types. Analysts suggest that the slowdown in lending indicates a struggling broader economy.
On the brighter side, deposit growth has been outshining credit growth with a 10.8% growth rate over last year for the month of July, as consumers look to save as much as possible to deal with pandemic uncertainties. Read more.
Takeaway: credit slump implies poor consumer spending environment. Which means those at the bottom of the economic chain are likely struggling to make ends meet. However, the middle class and upper middle class might be saving some cash due to reduced spending.
Retail apocalypse brewing 🧐
Much before the pandemic, the shift to e-commerce had already dealt a debilitating blow to brick and mortar stores. Now COVID may have finally put the last nail in that coffin.
In the US, 25 major retailers have filed for bankruptcies since March 2020. Many of these stores are giants that survived through the great depression, Word War 2, and so far Amazon’s onslaught but succumbed to COVID. Apparel sales are down 25% in June 2002, and almost 25,000 stores are expected to close across the country.
In India we’re seeing early signs of this. Future Group, one of the largest retail players in India, had to sell off to RIL as poor demand forced them to default on some debt. H&M is closing 300% more stores than it had planned in India. 7 Lakh kirana stores are believed to have shut shop so far. Will they ever come back?
Large malls are not immune either. Usually financed using lots of debt, more mall owners are buckling under pressure. Leasing activity across malls in India is set to decline 64% in 2020. Many builders are already walking back on their projections.
Bottomline: US is fully experiencing a retail meltdown. India is showing early signs. It will take at least 2-3 years for demand to return to pre-pandemic levels. With the pandemic only prolonging, we’re still far from assessing true economic damage domestically at least.
Byju’s living the dream 💪
Russian billionaire entrepreneur and venture investor, Yuri Milner, who has backed companies including Facebook, Alibaba and Twitter in the past, will now invest $400 Million in India’s Byju at a whopping $10.5 Billion valuation.
The talks are still ongoing and the investment will be announced as soon as this weekend. Milner will put the capital through his investing arm DST Global.
Riding the pandemic driven boom in India’s edtech sector, Byju’s now serves over 57 Million registered users on its platform with about 3.5 Million paid subscribers. India has about half its population under the age of 25, which is a good proxy for total addressable users for edtech platforms, which indicates these platforms are just getting started.
Byju’s had raised $400 Million this year alone from Mary Meeker’s Bond Capital. Je baat! Read more.
Tweet of the day -
What else are we snackin’ 🍿
✈️ IT benevolence continues - Wipro ferried back around 700 employees and their family members who were stranded in different countries such as the US, Australia due to the pandemic.
🤞 Bandhan bank sells shares - Bandhan Bank sold 337.4 million shares at 323.1 Rs. each in a block trade worth $1.4 Billion to meet the regulators ownership rules. The regulator had been pressuring the banks holding firm to reduce its ownership to improve government standards for a while now.
💉 Any permission granted to kick off testing - Drugs Controller General of India (DCGI) has granted permission to Serum Institute of India (SII) to conduct phase 2 and 3 human clinical trials in India on the potential COVID-19 vaccine. The vaccine was manufactured by SII under technical collaboration with Oxford University/AstraZeneca and is called COVISHIELD.
🛣️ Highway consolidation - Convenience store chain in the US, 7-Eleven, is buying Speedway chain of gas stations from Marathon Petroleum (MPC) for $21 billion in the United States, in one of the largest energy deals of the year.
🛒Flipkart’s asset utilization strategy - after overtaking Walmart’s wholesale business, Flipkart is now exploring ways to consolidate its operations and this could include shutting down the wholesaling “Best Price” stores or turning some of them into full-fledged warehouses with a greater focus on their e-commerce operations.
🏛️ Bytedance takes on Facebook - the owner of TikTok has accused Facebook of plagiarism and smears although it did not elaborate on the accusation. The Beijing-based company made the comments in a statement late on Sunday posted on its official account on Jinri Toutiao, a news aggregator app it owns.
😷 Virus tracing next level - Singapore will make some incoming travellers wear an electronic monitoring device to ensure that they comply with coronavirus quarantines. The devices will be given to incoming travellers, including citizens and residents, from a select group of countries who will be allowed to isolate at home rather than at a state-appointed facility.
🤧 India marches on - India's COVID-19 tally reached 18 Lakhs today, with 52,972 cases being reported in a day. Recoveries rose to 11.8 Lakhs including 40,574 in the past 24 hours. Recovery rate has gone up to 65.76%. This is the fifth consecutive day that COVID-19 cases have increased by more than 50,000.
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