Reels from unkills 📷
BABA shocker, Ripple's issues, and a Mayor at 21.
Hi 👋, Tanvi here.
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Market summary: 📊
Investors returned from the christmas weekend with renewed fervor. Indian markets made a move higher, and US stocks had an even better day overall.
US:
S&P 500 - up 0.87%
Nasdaq 100 - up 1.01%
India:
Nifty 50 - up 0.90%
Sensex - up 0.81%
What’s brewing hot ☕
1️⃣ Hold your driverless cars—India launched its first driverless train on one of the Delhi metro’s lines yesterday, setting stage for more launches to follow in the following years. With automation, the rail operators are expecting a drastic reduction in human errors, cost savings driven by efficiency, and improvements in overall quality of rides.
2️⃣ Dealing with recession aftereffects—the storm has passed and it's time to count how many chickens we’ve got left in the coop. Ratings agency ICRA believes Indian banks will be dealing with about ~10.3% gross non-performing assets (loans gone bad because people and businesses can’t pay back during COVID-recession) by March 2021. Government support will drastically reduce the end burden on banks, and things are expected to sail smoothly with little direct effect in the retail markets. Banks seem pretty confident that they have the situation under control.
Music for short videos 🎵
Facebook becomes the latest to sign a global music licensing deal with Tips Music, allowing users of FB and Instagram apps to directly use Tips’ inventory to create stories, video posts and reels within apps.
Over the last couple of months several such deals have been forged with most major short video app platforms in India (Chingari, Rizzle, MX Taka Tak), that shot to fame in the aftermath of TikTok signing major music deals with TSeries, ZeeMusic and others. High-quality exclusive music, especially old hits, and chart toppers is slowly becoming a “differentiating” edge in pulling and keeping new users particularly from semi-urban and rural regions.
For the producers owning music (like TSeries, Tips), this is a double edged sword. While they get to mint commissions from platforms like FB for every time a song is played, longer term they risk getting obsolete as data-driven algorithms slowly gain control over how “hits” get manufactured and achieve popularity.
Meanwhile, if 7 selfies with the same angle from cha-chaji weren’t enough to get you off FB by now, unkils humming 90’s bollywood bangers on reels should do the trick. Brace yourself.
SBI Life wants some digital lending 📱
SBI Life, the insurance operation of the State Bank, surprised the markets by buying a 9% stake in a digital lending venture, Paisalo Digital, for about ₹186 crores. Stock of Paisalo shot up 20% when the news broke out in yesterday's trading session.
Paisalo has been running operations since 1992, servicing SMEs, and other businesses, as well as individual customers with a range of lending options including asset backed loans, cash-flow financing, personal loans etc.
The company has had a decent run in the markets, but when COVID hit stock had been absolutely crushed over concerns of defaults during a recession. But the market rally thereafter shot the stock up nearly 5x from the lows, which means SBI Life did pay a decent premium for its purchase.
Surprisingly, LIC, another market leading life insurance vendor in India also owns about 3.5% of Paisalo already. The backing of two large financial services players is a strong vote of confidence for the brand and its operations.
Takeaway: hard to read why insurance vendors are in love with digital lending, but one potential reason is the ability to cross sell and upsell products. People walking in to buy loans are likely making a high-ticket purchase with the cash, and they could be lured into buying insurance products from Paisalo’s partners at the same time. And vice versa. Do all you can to grow that share, it's a tough market.
Stop yo shenanigans ✋
That’s the word China’s central bank left for Alibaba-backed Ant Financial, which was due to list the world’s biggest IPO last month, until it was stopped at the last moment by the Chinese regulators over concerns of “doing too much and getting too big”.
Ant’s end-to-end digital financial services empire, spanning insurance, asset management, lending, and online payments was almost valued at over $300 billion. The company vividly dreamt of displacing banks from the lives of the average Chinamen, but faced repulsion when the old school banks cobbled up together and (allegedly) lobbied to stop Jack Ma in his tracks. The Chinese traditionalists are still wary of disruption around the business of “money”, and Ma’s vocal criticism of the regulators wasn’t helping the cause either.
So when the regulator hammer came down, allegations knew no bounds, Ant was accused of everything from basic stuff such as disdain for regulatory requirements, inadequate measures around liquidity and solvency, to hurting smaller competition and making anti competitive moves to put up high barriers.
Anyway, now in the latest blow bankers are asking Ant to limit focus in other businesses, and return to its core payments service business only, otherwise actions may be taken to break up the empire. The regulator has laid out a 5-point compliance agenda that demands more transparency, user data protection, revamping credit practices and such.
Under these circumstances, the IPO is a lost dream. Investors have already begun dumping Alibaba shares big time.
Takeaway: the pace of Chinese tech growth and the government’s moves to foster innovation had made other jurisdictions sweat over the past decade. But now the world realizes there is an upper limit to how far the government is going to allow a free run. Or perhaps, Ma’s pushback on government control over businesses is the reason his baby is selectively victimized. In any case, these moves send a bad bad signal to global investors.
Closing out — Ripple’s funeral 👋
The US securities and exchange commission is tearing into cryptocurrency project Ripple for issuing coins without proper compliance procedures, looking to make an example of the project to clean up the rest of the crypto ecosystem.
The SEC is basically arguing that the founders intentionally sold securities to deceive and defraud investors. Markets have abandoned the currencies, and Coinbase (the largest app to buy coins) is now delisting them.
What else are we snackin’ 🍿
🗼 Dude bombs 5G towers - a bomb exploded in an RV on a downtown street in Nashville, USA, close to an AT&T (mobile carrier) facility. Upon investigations, officials believe the man was disturbed about the consequences of 5G radiation on citizens, linking it to the spread of COVID, which eventually drove his actions. (Yep, there’s silly conspiracy theories around how 5G waves are harmful, but this incident puts this fake propaganda under a new lens). Tragic.
😎 Kerala delivers a young mayor - 21 year old Arya Rajendran became the youngest Mayor of Thiruvananthapuram, the largest urban district in the state. Post civic polls win, the CPI party had recommended her name for the job. Arya is still pursuing her second-year graduation studies in a college.
💉 Indian pharma continues to deliver - The Serum Institute of India has launched its first indigenously developed vaccine for pneumonia which is priced at $3 per dose. It is the first such vaccine 100% made locally, and will be critical in helping children battle against pneumonia especially in low income regions nationwide.
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