Digital pharmacy 💉
IPL fallout, Disney streaming, and old businesses crushed.
Hi 👋, Tanvi here.
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Stock summary:
US - S&P 500 - up 0.64%
India - Sensex - up 0.75%
Byju’s scooping up WhiteHat Jr. 📚
Armed with new capital in its coffers, Byju’s will make a splashy buy, acquiring edtech startup WhiteHat Jr. for a whopping $300 million in an all cash deal.
WhiteHat Jr. is barely 18 month old and an exit of this size makes the transaction kinda unprecedented in our times, and goes to show 1. How hot the ed-tech market currently is and 2. Byju’s is playing for absolute dominance in the space.
WhiteHat Jr. basically teaches coding online to students going to school and operates in India as well as in the US. Its plans are kind of pricey and the company mostly appeals to kids from affluent families.
Apparently, the company has an annual revenue run rate of $150 million and has so far raised $11 million from Omidyar Network, Owl Ventures and Nexus Venture Partners. Quite impressive! Read more.
Reliance expanding portfolio 😎
Taking a page out of Amazon’s book, reports suggest that Reliance is looking to acquire online pharmacy marketplace Netmed in India, as the conglomerate looks to aggressively diversify outside of its core business.
The acquisition comes very close to Amazon’s purchase of PillPack in the US for $750 Million in 2019.
Pharmaceuticals are an essential category of goods but have mostly been an out of reach category for generic ecommerce platforms given heavy regulatory oversight. But owning such platforms can be a deep strategic advantage as it gives the owner tons of secondary data on consumer health habits.
Recognizing Jio’s pivot to a consumer tech company, RIL is obviously playing for the long haul.
The opportunity: Online pharmacy is barely getting started in India with sales in 2018 of just $500 million. Over the next 5 years the market is expected to grow at 50% rates to over $5 billion in revenues. Reports suggest that other large players in the online pharma space including PharmEasy and Medlife are exploring possible M&A opportunities. Hear that Flipkart, Amazon? Read more.
Old businesses struggling 🙁
Richard Branson’s Virgin Atlantic Airways Ltd. filed for bankruptcy protection trying to protect its assets from US creditors. Virgin claims it has negotiated a deal with stakeholders “for a consensual recapitalization” that will get debt off its balance sheet and streamline the airline for growth in the post covid world.
Virgin Atlantic had earlier announced a $1.57 billion private rescue package in July to secure its future beyond the coronavirus crisis but had not finalised the deal.
Since the pandemic, Virgin’s reservations are down 89% vs. previous year and current demand for the second half of 2020 is at approximately 25% of 2019 levels. Goes to show how terribly the airline industry is suffering.
In similar news,
Oil giant BP reported a $16.8 billion quarterly loss from operations in the last 3 months. For comparison, in the second quarter of 2019 the company had reported a $1.82 billion profit.
As global travel comes to a standstill, and with oil reserve facing a surplus worldwide, BP claims they’re operating in an unfavorable and challenging trading environment. Management remains committed to leading a transformation away from oil only to a diversified energy business. Interestingly, the company plans on being net-zero in carbon emissions by 2050.
BP also axed 10,000 jobs since the beginning of the pandemic, showing how terribly anything not-technology is hurt by the crisis.
Disney’s disastrous performance 🎡
The pandemic ran a train through Disney’s businesses, decimating growth and destroying its profits. Total revenue for the company declined 42% in the second quarter, far below estimates.
Disney’s theme parks business was down 85% this quarter as consumers stayed away. Studio entertainment business was down 55% as movie releases were halted. Cable TV business declined 10% as consumers cut cable connections in favor of streaming.
Disney’s digital businesses however showed a ton of promise. Streaming service Disney+ is now at 60 million paid subscribers, up nearly 6 million this quarter alone. Remember, Disney owns Hotstar in India too which is giving strong competition to Netflix. Read more.
Takeaway: old businesses are making considerable progress adapting to the new reality. Disney has successfully built a 60 million subscriber based streaming service in a record 3 years. But will that be enough to save the long term decline? COVID changed everything. Read more.
China’s backlash reaching IPL 🏏
Despite widespread backlash on social media, BCCI had claimed that it would retain Chinese brand Vivo as the official sponsor of the IPL. But then Vivo took it upon itself and recognizing the changing sentiment, decided to pull out as the main sponsor of this year’s IPL.
Vivo however still has 3 years left on the sponsorship deal worth Rs. 1,320 crore, and analysts believe the brand will likely return to sponsor the T20 tournament from 2021 to 2023.
Vivo has been a major contributor by paying Rs. 440 crore annually to BCCI as part of a 5 year long title sponsorship since 2018, in addition to ads under BCCI’s banner on uniforms, stadiums etc., Vivo also spends a lot on television advertisements and other channels to the tune of about Rs. 150 crore during the tournament.
All that capital is now under threat and BCCI is also forced to evaluate its deals with other Chinese brands.
Bottomline: Chinese brands contribute around 20-25% of total IPL revenues. The pain will be felt hard. However, given an optimistic India growth outlook in ecommerce and digital economy, it may not be that hard to find a replacement for India’s crown jewel sporting tournament. Read more.
What else are we snackin’ 🍿
🚕 Autonomous casualty - Anthony Levandowski, a former Google engineer has been sentenced to 18 months in prison after pleading guilty to stealing trade secrets before joining Uber’s effort to build robotic vehicles for its ride-hailing service. Levandowski was also ordered to pay more than $850,000 in fines.
🏨 OYO to pay furloughed employees - the company has announced it is restoring full salaries of employees with a fixed compensation of upto Rs 8 lakh and will gradually restore salaries of all other employees by December this year. Good job.
🍎 Reshuffle at Apple - after a momentous run over the last decade, Apple is reforming ranks. Phil Schiller, one of Apple’s most well known executives, is leaving his post as senior VP of worldwide marketing to become an "Apple Fellow". Greg Joswiak, who previously oversaw marketing of Apple's products, will take over for Schiller as senior vice president of worldwide marketing.
🧐 Data investigations gain steam - The Joint Parliamentary Committee (JPC) that is examining the Personal Data Protection Bill has called representatives from social media behemoth Facebook for a deposition. The committee is looking to ascertain whether best practices are put in motion to protect consumers from misuse of their personal data.
📉 Travel platforms crumbling - Booking Holding, the U.S.-based company that owns travel website Booking.com, intends to reduce its 17,000 workforce by 25% as a result of business lost during the coronavirus pandemic.
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