Full basket 🗑️

Stripe’s bet, Biyani’s integrity, and portfolio woes.

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Market summary: 📊

Indian markets turned red after a solid run up this week, giving away substantial ground on Thursday. US hovered relatively flat with growth tech taking some damage.

US:

  • S&P 500 - down 0.15%

  • Nasdaq 100 - down 0.72%

India:

  • Nifty 50 - down 2.43%

  • Sensex - down 2.61%


Quick update from the data-mills… 🗞️

Too many data points lately trying to give a read on the economy—the latest being Wholesale Price Index (wholesale inflation), which, consistent with the trend in consumer inflation, has now risen for 7 months straight.

For the month of September, wholesale inflation stood at 1.32%, up nearly 8 times from the 0.16% levels seen in August, yet below the 3% levels from January 2020. Inflation in food articles specifically rose to a staggering 8.17%, while increases in manufactured products and other primary articles was much more palatable. Here’s a thorough look.

Where do we land—investors got most of their insights from the retail inflation data points released earlier. The bottom line read here is to expect food and other essentials to remain highly-inflated short term, but to slowly cool off to normalcy over the next few months, as agri-production and logistics gets back to pre-COVID levels.


Tata filling up its basket 🗑️

The Tata Group will scoop up a piece of BigBasket, in a deal that’s likely to value the online-grocery marketplace at over $2 billion, a 40% premium to its last fundraise 6 months ago. 

Earlier having announced plans for a “super-app” and now with this investment, the Tatas have made their digital ambitions amply known. And in fact, we think this bet on BigBasket could be a great strategic win before the grander plans come about.

You see, going through a transformational growth phase right now, BigBasket needs capital, and formidable partnerships on its side to take on well rooted competitors. The Tata’s offer all of that, in addition to a deep bench of level headed executives for big decision support.

On the other hand, the Tata’s receive a front row ticket to a digital warfare that could help them learn about and anticipate what they’re getting themselves into. Sounds like a match made in heaven in that sense. Anyway, this round will also see Singapore’s Temasek Holdings and Generation Investment Management pitching in for a piece. Exciting!

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Capital talks 💰

Stripe makes a grand entry into Africa. The Collison-brother led empire picked Paystack, a Lagos Nigeria based company to advance its mission in the Saharan continent. Paystack was founded 5 years ago and provides API based payment processing services to entrepreneurs, SMBs as well as enterprises, with ambitions to most recently offering basic banking services as well. Stripe will pay north of $200 million for the company.

Much like India, Africa is a hopeful, young, energetic region with a ton of local pride, that’s counting on tech to change the fortunes of its economy. And so far, global investors have been pleased with progress. Digitization is affront vigorously, with eCommerce, fintech, edtech all winning huge from a rapidly growing smartphone user base.

It’s inevitable that big tech companies would want to secure a future in this region already, including perhaps those from India as well in a few years.

Softbank’s love for India SaaS - 

Masa Son’s in love with one of India’s SaaS companies, Mindtickle, that operates a platform for sales enablement and sales performance augmentation. Softbank is looking to put as much as $100 million into the company, at a whopping $600 million valuation, marking one of the first SaaS investments for its India team.

Founded in 2011, MindTickle offers as-a-service offering around building sales capabilities including sales training and onboarding, practicing, and identifying areas for improvement using technology. The company reports some $20-25 million in revenue run rate for the current year.

What explains Softbank’s interest—in addition to being an exciting growth investment, Mindtickle has a natural fit with Softbank’s other portfolio companies, specifically enterprise software plays, who could use all the help to effectively manage their salesforce as they struggle to sell from their dining rooms, thanks to COVID.

Sales is moving to the cloud, and having a company in your portfolio that can “optimize” outcomes for a jolted function helps. In all, it's a BIG WIN for Indian SaaS👏

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Dat’s what it’s about 🛒

Kishore Biyani gave some color to what forced him to abandon his crusade and sell off Future Retail to RIL as quickly as possible—Future was apparently losing money by the boatloads, taking a ₹7,000 crore hit on revenue over 3-4 months when peak lockdowns hit

While a regular slump could’ve been easy to survive, what made things worse was Future’s debt-fueled rise—the company had literally swollen this big by gobbling up other players, with acquisitions that were powered by outside capital. 

Drop in retail footfall meant no revenue through the door and as a result, no money to pay banks and financial institutions. Honestly, this could’ve gone a LOT worse, turning into another Kingfisher-type fiasco, so HUGE props to Biyani for swallowing his ego and signing his baby off to RIL, despite him and Ambani not gelling too well personally. It was the right thing to do for employees and shareholders. 

On the last note, this severity of the cash crunch underlines why Biyani openly flouted his agreement with Amazon, which has now resulted in a lawsuit. It’s not unimaginable to think that perhaps Mukesh Bhai walked in with a clause that if this goes to a bidding war, he’s leaving and never coming back, just to spite Big Daddy Bezos.

Bottomline: we write too often about nefarious businessmen, but there are often those that still carry integrity and passion for the trade, regularly prioritizing employees and shareholders over rest. When we see them, we have to ensure they’re more widely known. 

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What stumped Wall Street last night 🤔

This happens more often than not—a stellar tech company comes on the horizon, it's heralded as the next big thing, next you know stock pops like 700%, and then suddenly shit hits the fan.

That’s what happened last night when Fastly, one of the fastest-growing companies, providing edge-platforms that work in tandem with data centers to ensure high-definition media gets served to consumers without lags, threw a surprise.

Management came out and said they were expecting revenue to be slightly weaker than expected before because TikTok and some other customers haven’t used their services as much. Investors ran for cover with tails up their butts, and FSLY took a 30% shave overnight.

Now Fastly is no “scam”, it's a legit high-tech company, but the episode is a reminder of how emotions grip retail investors regularly even as they try not to succumb. Stay safe out there with yo portfolio in India!


What else are we snackin’ 🍿

🙌 You Tube joins misinformation crusade - YouTube will remove videos from its platform which contain misinformation about COVID-19 vaccines. The platform already has rules in place to tackle false conspiracy theories about the pandemic.

📱 Brick and mortar when others not looking - One plus is planning to invest ₹100 crore to ramp up its offline presence in India, along with opening 3,000 new stores as it looks to grow in tier 3 and tier 4 cities and reach out to a much wider user base. 

👀 Settled behind closed doors - Citigroup is dropping the lawsuit against Investcorp which supported the recovery of nearly $1 billion that it mistakenly sent to Investcorp a few months ago. This payment happened after an operational error caused the bank to transfer the amount from account holder Revlon, to its creditors.


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