SaaS dreams 💭

Payments growth, IT slump, and flashy game investment.

Jul 11, 2020

Hi 👋, Tanvi here.

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Let’s go ahead and get started:

Stock market summary:

US - S&P 500 up 1.05%
India - Sensex down 0.39%

Some clarity on Payments growth last FY 🧐

The Ministry of Electronics and Information Technology (MeitY) claims that digital payments in India across all channels increased 46% since last fiscal year with a record of 45.72 billion transactions.

The expectations were set for a conservative 40.19 billion transactions which were easily shattered. All channels monitored by Indian banks such as UPI, card transactions, net banking etc. contributed heavily to the mix. People embracing digital services in the wake of the pandemic helped the cause as well.

Private banks such as ICICI Bank, HDFC Bank, Yes Bank, IndusInd Bank and payment bank Fino led the pack of institutions getting the biggest share of the volume. FY21 will be exciting.

Bottom line being, the government should get credit for taking innovative measures in terms of building out payments infrastructure over the last few years. India’s UPI infra is becoming a case study for other countries to follow. Then, India’s robust startup ecosystem deserves praise for rapidly bringing these services widely to the masses. Finally, expect the shift to digital payments to blow past all expectations over the next few years. Read more.

Domestic SaaS company makes foreign acquisition 😎

India’s SaaS environment continues to heat up. Mumbai based software-as-a-service (SaaS) company Browserstack has completed a deal to acquire San Francisco based, Percy - a 5 year old company which specializes in automated visual testing of web apps.

Simply put, visual testing is the process of detecting and reviewing how changes in a web app appear real time, spotting misalignments or other device specific visual bugs before going out to users. Percy has a pretty good list of clients such as Google, BaseCamp and Shopify.

The deal is particularly important because not everyday do we hear reverse deals where Indian startups scoop up global rivals. The pandemic coupled with reverse talent drain and a fledgling talent ecosystem in India is laying the groundwork for the next generation of cloud companies being born here. Recently, Postman raised a round. Leaders like Zoho, Freshdesk are looking to go public. It’s truly remarkable.

This deal will help BrowsterStack advance its product suite and further allow the company to serve its already enviable clientele of MSFT, Twitter, Expedia, RBS etc. much better. Read more.

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COVID’s IT casualties 🤕

The pandemic’s impact on IT business is finally sinking in as second quarter earnings start rolling in. TCS came out with a grim picture, with profits sliding as much as 21% YoY - fairly startling for an established company.

US business weakened about 6.1%, an uncommon decline given broad digital transformation mandates in the US. Retail and banking were among the worst hit segments, while travel, insurance, and others were close behind. Management believes that the worst is behind them and that the company should start tracing their path to growth from here on out.

Key takeaways are that there could be a lot of surprises like this in the making with many companies including tech bellwethers like Apple, Microsoft, Google, Intel etc. reporting second quarter performance this month. Any imperfection could crater the markets. Secondly, with business weakness, hiring and other activities will continue to take a back seat, especially for Indian IT, which will trickle down into a weaker spending environment.

However, now that everyone has more or less wisened up about the virus and how it spreads all around the world, this might really be the bottom with only recovery ahead. Read more.

Flashy gaming investment 🎮

Sony will invest almost a quarter of a billion in exchange for a minority stake in Epic Games, the company most notably known for creating “Fortnite”. Not much is known about the valuation but Bloomberg reported last week that Epic was seeking $750M at a $17B valuation from big name investors such as T. Rowe Price Group Inc and Baillie Gifford.

Global gaming industry has been brought under the spotlight due to lockdowns as casual as well as avid gamers spend more and more time playing online.

The deal is interesting for a couple reasons. Creators are getting cozier with game distributors and platform owners like Sony which could pave way for deeper partnerships and a more robust game development industry. Secondly, game streaming - just like streaming Netflix on your TV is a hot piece of tech on the horizon, which could disrupt the current gaming landscape vigorously, threatening console sellers like Sony, and the big players are looking to aggressively solidify their positions.

Regardless, the deal should bring great enthusiasm to independent developers and other creators, particularly heating up the investing landscape. Read more.

The ability to move goods across the nation, leveraging the best of technology, and in a resource constrained fashion is turning out extremely important to India’s expanding consumerism and domestic trade.

Identifying this long term trend, the Welspun Group is investing Rs. 550 Crore over the next 4 years to construct a state of the art logistics park in Maharashtra. Called the Welspun One Logistics Park, the facility will create more than 2.5K jobs, and will use the latest in robotic and warehousing technologies to streamline operations.

The setup will offer warehousing, distribution centers, storage and other facilities which it will then lease to logistics companies, ecommerce players, other retailers, FMCGs, pharma etc. on a need basis.

In 2019, the logistics industry is estimated to be about $200B, growing at a CAGR of 10% YoY, employing about 40 Million people. The need for industrial spaces especially around urban centers is rising rapidly and investors of all types and kinds are drawn to the sector. Amazon, Flipkart, RIL etc. have been major investors in the space.

What else are we snackin’ 🍿

🍾 Discounting booze - The Odisha government has slashed the "Special Covid Fee" of 50 percent of MRP on alcoholic beverages to 15 per cent. The 'Special Covid Fee' helped the Odisha government to generate revenue of ₹200 crores amidst lockdowns.

📱 India lives on Whatsapp - WhatsApp for Business is a huge hit with the platform now getting more than 15 million users on the app in the country every month. The company will continue adding more features. The opportunity to capitalize on B2B Whatsapp interactions in India is FB’s wild card.

💊 Drones for healthcare - The U.K. will use drones to deliver coronavirus testing kits to remote parts of Scotland, including islands off its west coast. Drone delivery company Skyports Ltd., based in London, is working with the NHS to deliver the tests and other medical supplies.

☕ Starbucks testing drive though in India - The store is located on the Ambala-Chandigarh Expressway and adds to the 187 outlets that the brand has across Mumbai, Delhi NCR, Hyderabad, Chennai, Bengaluru, Pune, Kolkata, Chandigarh, Ahmedabad, Surat and Vadodara.

✈️ US bans Pakistan’s International flights - The US has revoked permission for Pakistan’s International Airlines to conduct charter flights to the US citing FAA concerns over Pakistani pilot certifications.

🏍️ American poster boy Harley Davidson to cut jobs - the biker is cutting around 700 jobs from its global operations as part of its restructuring plans.

🖥️ PC shipments rebound slightly - After facing a rough first quarter due to the pandemic, according to numbers from Gartner, Q2 is seeing a small rebound in sales of PC’s with lockdowns easing and retail shops restocking their shelves.

☹️ Walgreens to cut jobs - Retail pharmacy Walgreens is laying off 4,000 employees in its UK drugstore division. This makes up about 7% of its workforce. These announcements came after its earnings fell 43% and the company posted an operating loss of $1.6 billion.

Hope you took a thing or two away from today’s edition. 😀

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