King of Cloud ☁️
Earnings galore, Tata's moves, and venture deals.
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Market summary: 📊
This week is quickly turning out to be a sour one. US and India both turned lower big time on Wednesday, with the S&P 500 reporting almost 5% losses so far for the week.
US:
S&P 500 - down 3.53%
Nasdaq 100 - down 3.93%
India:
Nifty 50 - down 1.34%
Sensex - down 1.48%
Latest from Dalal Street 📈
Tis’ the season of earnings baby and we can’t be a business newsletter without at least glancing through the ones that matter most -- so here’s a quick look:
Investor’s favorite company, Titan, showed ample signs of good underlying business recovery, as Indian consumers buy more jewellery, watches, and eyewear coming out of the pandemic -- all of which helped revenue recover to ₹4,389 crores, just 2% down year over year. They saw profits decline some 38% year over year though, mostly because the company had to provision for a small financial charge.
Dr. Reddy’s had a somewhat mixed quarter -- net profits dropped 30% because raw material costs spiked, but India specific revenues grew a solid 21%, aided by a recent acquisition they made and demand for meds during COVID. Investors seemed satisfied with the results as post-pandemic healthcare tailwinds look bright in India.
Lastly, there was Axis bank -- again a respectable quarter that saw net interest revenue for the bank grow nearly 20%. Also, profitability for the bank improved considerably, which is a good sign given the bank’s problems with bad loans.
What’s the takeaway: category leading businesses in India have either hit it straight out of the park during this pandemic (like those in FMCG, or Insurance) or have been humming along one-day-at-a-time (like in auto, banking, other consumer goods etc.) -- but ALL so far have shown phenomenal resilience in combating this economic slump, despite little government incentives and support. Corporate India deserves a pat on the back. 👏
Onwards soldier...
Satya of House Nadella...first of his name. King of the Cloud. 👑
Microsoft absolutely crushed it for the 3rd quarter of 2020. Despite a generational slump gripping the global economy, the software giant aided by secular tailwinds that help pretty much ALL of its diversified businesses, grew revenues by more than 12% to $37 billion in the quarter!
There wasn’t one blip worth calling out, take a look for yourself --
Total revenues $37 billion, up 12.4%
Azure Cloud revenue up 47%
LinkedIn Revenue up 16%
Xbox content and services revenue up 30%
Surface device revenue up 37%
In addition to that, Microsoft streamlined costs, expanded its profit margins, and bumped up dividend to investors by a notch. In all, a straight conquest for Nadella and his lieutenants, and to think that this $1.5 trillion company can keep growing bigger is just mind boggling.
What matters: overall, global analysts and investors learnt a few key things from Microsoft’s earnings -- 1. Demand for cloud software remains strong worldwide 2. Sales of hardware like PCs and other devices, helped by work-from-home buyers, is still looking strong. 3. Gaming continues to grow in the aftermath of COVID
These learnings will prove super useful as people reallocate their portfolio in preparation for 2021.
Latest from the Venture oven 💰
GetVantage, a revenue-based financing platform, has raised $5 million in a mix of equity and debt raise from Chiratae Ventures and Japan’s Dream Incubators. The company essentially provides capital for digital entrepreneurs and based on their revenue trajectory.
Some context—in simple terms, businesses usually raise money by selling equity or taking out a loan against assets. But sometimes that’s not ideal, as founders may need cash for a short term problem, or just to fuel growth. This is particularly true in the digital age -- banks for example would ridicule you if you told them you need capital for Facebook ad campaigns.
This rapidly evolving landscape has created room for a breed of startups to come alive who offer short-term debt backed by revenue and growth metrics. D2C brands or ecommerce companies are ideal suitors.
Anyways, GetVantage, founded barely a year ago, is looking promising and the founders claim business has spiked nearly 70% due to mass digitization in the aftermath of COVID. Fresh funds will help expansion into new markets across Southeast Asia, starting with Singapore.
Turning heads to SaaS for a bit,
NoPaperForms, a SaaS company automating the college admissions and student enrollment processes, has quietly made another acquisition -- buying out Parents Apply, a Delhi based company playing in the same arena.
ParentsApply works with schools in the capital region, with as many as 44 schools using its product to manage 30,000+ enrollments. For NoPaperForms, the acquisition will be key in bolstering its product offering that is used by some 300+ universities nationwide, many of which are big name giants including SRM, Manipal etc. Impressive!
We called this! 😎
Few days ago we mentioned how Tata’s decision to pitch in for BigBasket’s capital raise could be the first step for an eventual takeover bid. And we’re there finally. Tata apparently is eyeing a majority stake in the platform for even up to a billion dollars in cash, offering China’s Alibaba group and some PE firms an exit.
The wars for ecommerce dominance in India have completely shifted—cash rich platforms are dishing it out, with Amazon, RIL and Walmart backed Flipkart with the deep pockets and unlimited resources having altered the trajectory of the game altogether. A lone BigBasket without formidable partners on its side was playing from a relatively weaker position.
That changes entirely with the Tatas in the picture—they have a wide product portfolio, battle tested operational expertise, a deep bench of credible management, as well as deep cash troves. Moreover, for the Tatas, Big Basket is a natural low-risk “learning on the job” deal, as they navigate a hard turnaround of their empire to a digital future.
Bottomline: this could very well be a match made in heaven considering all synergies. As far as India’s roughly $75 billion ecommerce market goes, more competition is better for everyone involved.
Times of “revenge travel” ✈️
Bored Indian citizens are boldly flexing that the coronavirus can’t do them as much damage as the lockdowns have done already, as travel reservations in key holiday locations across the country have started to show a surprise bump.
Several major hotel chains have registered ~80% levels of occupancies in key vacation places in India such as Goa or Kochi, for the first time in the past 6 months. Oyo Rooms for example, saw a staggering 72% spike in reservations over the Oct 2nd weekend for leisure destinations, with nearly 2 Lakh residents staying at its properties.
The return isn’t limited to leisure with corporate travel showing decent week on week bounceback as well. Several city hotels in key metropolitan areas are recording 20-30% growth in occupancies. Here’s a thorough read from MoneyControl. You don’t need us to tell you that this very likely won't end well.
What else are we snackin’ 🍿
🖥️ WFH bug bites Reddit- Reddit has announced plans of offering its staff the opportunity to work remotely going ahead. The company will also give the employees the option of working from the office although the physical spaces will be reimagined.
🚲Ewwww Harley - Harley Davidson has started a business dedicated to electric bicycles. The company is planning to bring the first product to the market by 2021 and will call it Serial 1 cycle company. The company is struggling to sell its motorcycles and hopes the booming e-bike industry holds key to its continued survival.
🤝 Micromax and MediaTek join hands - Mircromax’s latest phones to be released soon in India will have MediaTek’s flagship gaming processors, MediaTek Helio G Series. Both companies have joined hands to further develop and research smartphone processing hardware in Micromax’s BLR R&D Center.
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