Rajan’s warning 👀
GDP concerns, telco moves, and online pharma getting ready.
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Market summary: 📊
Indian markets opened weak but showed surprising strength in the final hour of trading, ending the day in on a positive note. US markets were closed Monday due to labor day holiday. Perhaps why it was a quiet world news day.
India:
Nifty 50 - up 0.19%
Sensex - up 0.16%
Telco moves of the day 🗼
Vodafone has wrapped up its merger with Idea cellular, rebranded itself and has decided to call the combined entity VI. We have mixed feelings about the logo to be honest. The combined brand is now left with about 280 million subscribers, after losing almost a 100 million to Reliance's Jio in the last few years.
However, looking ahead things may start to look a bit bright. Rebranding is done, the company has received the OK of its board to raise ₹25,000 crore from investors, and it has been granted a relief of 10 years from the government to pay back dues owed. Management has little excuse to not return to growth now.
Turning our heads to global telecom for a bit,
Samsung has received a gigantic $6.6 billion 5G wireless equipment contract from US telco giant Verizon, as western companies look to avoid the installation of networking gear from Chinese vendors Huawei and ZTE. Both Chinese vendors have been banished on charges of snooping and for being under proxy-control of the Chinese CCP, despite their technology being deemed superior.
Samsung’s contract is one of the largest of this size, and the company as well as other equipment makers like Ericson and Nokia are expected to be prime beneficiaries of the backlash against China.
Arming up for battle 💊
Online Pharmacy 1MG is in talks with private equity company Gaja Capital to infuse about $100 million into the startup, to help drive expansion and better equip the platform to take on incursion from Amazon, Flipkart, RIL and other startups.
Tata Capital and Europe’s Partners Group are also looking to participate in the deal. If the transaction goes through, it could mark Gaja’s first investment from its recently raised $400 million fund. 1MG’s existing investors, which include Sequoia Capital and World Bank investment arm IFC, are also expected to participate.
What's the big deal: India’s digital pharmacy market is still nascent, yet growing rapidly and presents a massive opportunity ahead. Some 9 million citizens are said to have tried online pharmacies in India so far, 6 million of which only did so post COVID. This will be a passionately fought battle and is likely to attract BIG dollars near term.
Offloading PSUs to pay bills 🤝
Government’s been planning the LIC IPO for a while now, and early reports suggest the stake sale could be much larger than anticipated. The government is looking to offload about 25% of the insurer, partly moved by a bulging budget deficit that needs immediate cash to be fixed.
To entice retail investors to participate, the government is also considering offering ~10% odd discounts to retail buyers. There is no doubt this will be a hotly contested issue.
Technically, LIC is apparently not a “company” per the LIC Act of 1956, which limits the scope of how the company manages or raises capital. The government will pass a series of bills amending the LIC Act of 1956 before it proceeds with the IPO deal. Not to forget, Deloitte and SBI Capital were recently retained to help with the share sale.
Takeaway: for decades, India’s PSUs have been fertile ground for lethargic performance and corruption. By adding retail investors as shareholders, the government brings a significant amount of oversight and accountability. This may work out well eventually.
Rajan blowing the horn, again! 📉
India’s recently released GDP numbers should “haunt us all”, says former RBI governor Raghuram Rajan, via a post on his LinkedIn account.
Context: India’s GDP contracted some 23.9% in the most recent quarter, alarmingly higher than other countries. On one hand, Analysts are worried. On the other hand, supporters of the government say the numbers are distorted, because India reacted to the pandemic quite differently from other nations.
For example, we went into a total freeze for the first few weeks, unlike other nations, and then we dealt with a unique migration of labor force throughout the industrial belts. Anyway, in the end, it seems like we have found ourselves with the second most cases, and the worst jolted economy.
Rajan claims that the picture may be far worse than that, as numbers from India’s informal sector are yet to surface. Considerable economic activity in our nation is unorganized with no ways to track the actual beneath the surface and lasting damage that may have occurred.
Then Rajan goes on to pointing flaws in the government’s approach and suggests ways to improve things :
Prioritize employment guarantee at the bottom
Provide cash infusion for most vulnerable households
Recapitalize at risk PSUs
Better systems to financial distress situations coming out of this
Clearing out government dues… etc. etc. Here’s a more detailed account.
Bottomline: it's the job of economists like Rajan to foretell dire outcomes when they see minute faults on the horizon. It's the job of the government to digest it and present a consistently optimistic message. Between the two ends is where reality lies, where a thinly stretched India's unassuming middle and lower class is struggling to make it by each day.
China’s live streamers are killing it 📱
“I am pursuing my dream of becoming an online star” is what one of China’s rising e-commerce live streaming stars told CNN. The 27 year old who quit her job post COVID has jumped on the “creator” bandwagon to go solo, and is making a great living selling things online on live-video.
The live-stream shopping craze has gripped China at lightning speed. Even Kim Kardashian live-conducted a sale for Alibaba sometime ago. Influencers are conducting audiences on shopping platforms, demoing products (think makeup, merchandise), raking in orders worth thousands of dollars on the go. Basically your overage insta influenca on steroids. And Twitter is going all gaga over the phenomenon.
Analysts believe live streaming allows buyers to visualize a product better than a plain shopping listing would do, adding a dimension that even the hottest emerging technologies fail to do. But most importantly, buyers form a bond with the sellers, almost adoring them, very much like the connection formed between celebrities and fans. It's crazy.
Bottomline: live-streaming commerce is expected to be $66 billion in market size this year. To give context, that’s roughly 10% of all of India’s retail market. Investors are widely bullish on the trend and several platforms like Simsim, Bulbul are looking to pioneer this in India. Will we catch on?
Tweet of the day -
What else are we snackin’ 🍿
🔌 Getting EV ready - Bosch, the auto component major has acquired a 26% stake in SUN Mobility, an Indian EV equipment supplier. Both the companies plan to address critical challenges related to adoption of electro mobility on a global scale.
⚒️ Production is back - Tata Steel says its production level is 100% back to pre-pandemic levels, thanks to a good monsoon and solid rebound in the local economy. Manufacturing has been showing a solid revival despite a weak macro outlook looming.
🤑 Taking on Zerodha - Paytm money, the investment app from PayTM, claims it has surpassed Zerodha to have a consumer base of 6.6 million. 70% of Paytm’s user-base is first- time investors, with 60% from smaller towns and cities. Zerodha, on the other hand, claims to have 3 million users (last disclosed), of which 65% are first-time investors.
💉 India’s own trials - Bharat Biotech is gearing up to start trials of Covaxin, its potential COVID-19 vaccine candidate, after it received approval from Central Drugs Standard Control Organization. The trials will be conducted on over 380 participants and they will be observed for 4 days.
👟 Digital transformation -Sports company Adidas will be hosting a 5k virtual race, allowing runners to participate from anywhere in the world and compete against each other. The brand is encouraging people to experience the transformative power of running. Well, can’t help notice the odd ways (and genius ways) old companies are finding to stay relevant.
👀 Sneak peek - Epic gave a sneak peek into its iOS engagement numbers - the company says Fortnite has 116 million registered users on iOS, about a third of all 350 million registered users Fortnite gets. Epic also says about 63% of these users play Fortnite only on iOS, and with Apple’s ban, those people are left hanging.
😷 Damn COVID - The International Olympic Committee claims it will go ahead with the Tokyo Olympics next year with or without COVID-19. Opening and closing ceremonies could be simplified and spectators could be limited. The games originally scheduled for July 2020 have been facing massive setbacks because of COVID.
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