Saving an Elephant 🔥
The week ahead, snapping benefits, and a deep tech raise.
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Let’s go ahead and get started:
An awfully quiet news day yesterday.
Let’s quickly run through things from the weekend and things to expect next week, and then leave you to more important things of your Monday… 🙌
Taking temperature 🌡️
1️⃣One of Dalal Street’s most favorite holdings—HDFC Bank reported a respectable quarterly earnings report over the weekend. In all, the bank beat expectations comfortably, grew its profits, while managing to not lose control of its assets, which is commendable in the middle of a generational economic slump. Quick highlights:
Net profits up 18% to ₹7,513 crores (almost 20% higher than analysts were expecting)
Net interest income up 17% (loans are being paid off by consumers, a good sign)
Capital adequacy ratio at 19.1% (a tiny improvement)
In summary, things are looking much better than expected with the leader in Banking and hopefully rest of the pack resonates the momentum. Here’s a thorough coverage.
2️⃣Winning hearts—the flamboyant PM of New Zealand, Jacinda Ardern, secured herself another term in the NZ PM elections. The news bears little surprise considering her mass appeal, thanks to outstanding management of every curveball thrown her way, be it terror attacks, COVID-19 outbreak, or an earthquake rocking her office while she was on live TV. Cool as a cucumber.
For the week ahead:
3️⃣Wall Street + Silicon Valley’s quarterly soiree begins—starting with IBM and Netflix this week, tech earnings will start rolling out with other big tech including Google, Microsoft, Facebook, Amazon, Apple, Tesla soon to follow in the upcoming weeks. Eyes will be on the continued benefit of COVID for cloud, e-commerce, digital advertising, media streaming and other secular shifts accelerated by the pandemic.
Who raised over the weekend 💰
Contract renewal and management SaaS startup from Pune called Renewate raised a sweet $272K pre-seed round from Better Capital.
Renewate has an interesting value prop—the company’s SaaS suite makes it easy to create, sign, enforce, and validate contracts, relevant to the construction and real estate industry. Combining computer vision with collaborative powers of the cloud, the company is solving for a niche yet high TAM industry which we think is super cool! Fresh funds will fuel product development and help set go-to market agenda.
Turning heads to an old-school raise 🏠 —
Real estate developer DLF has successfully secured a promising ₹2,400 crore from SBI to consolidate and refinance its debt and keep its cash-tap from running dry on its ongoing construction projects.
The funding will directly go to DLF’s commercial and office rentals business, which remains absolutely devastated in the wake of the pandemic, with malls shutting down and offices sticking with work from home for as long as they can—all of which hurts new lease signings. Anyway, SBI has signed off on these loans for an attractive 7.75% interest rate, which should help take the heat off of DLF.
What matters: good for DLF that they can secure cheap capital, but there are millions of developers across the nation who lack this firepower and without government intervention could soon find themselves in a financial limbo. Who takes care of them?
Turning around an elephant 🔥
COVID transformed the trajectory of technology companies all around the world, with many recording 2 to 3 years worth of growth in under 6 months.
Except for one—good ol’ IBM. The old dog got left behind big time, limping along weighed down by the burden of its legacy businesses that make little sense to enterprise customers in the cloud era. Outcome? Revenues declining 3% each quarter, despite making acquisitions and trying several growth initiatives.
Enter a new coach—shareholders made their concerns well known (you see, IBM is a stock that’s well LOVED by old people, retirees, and big institutions for its generous dividend). So IBM’s board responded. Arvind Krishna, a seasoned tech-lieutenant and mastermind behind IBM’s Red Hat acquisition was elevated to the role of CEO to save the giant from crashing and burning.
Investors were cheering and celebrations ensued, hoping for India-born Krishna to pull off a magic trick from under his hat and rein in the big-blue giant! One couldn’t stop drawing parallels with Satya Nadella’s magic turnaround of old-Microsoft. Expectations were lining up.
Coach makes a move—so after much ado, Arvind finally spoke with his pen, signing off to spin off one of IBM’s legacy franchises—infrastructure services (basically a slow-growing IT services business like Infosys or TCS that was within IBM’s belly), while consolidating the empire around its high-growth franchises, specifically hybrid cloud, AI, and web services.
The move is estimated to cost IBM about $2.2 billion. Investors are cheering the bold action and stock was up as much as 5% in the aftermath of the update. IBM is now scheduled to report earnings this week and all eyes will be on Krishna’s commentary about his broader vision and execution plan.
Bottomline—new IBM will be a slimmed-down $55 billion revenue company, suited for the new era of computing. Its new cause will be to help enterprises struggling with multiple cloud vendors adopt a hybrid future.
For Arvind, this could turn into a big mess in no time or earn him a seat in the “tech turnaround CEO” hall of fame— a coveted club with few members. With the IBM’s earnings release coming out this week, more clarity will be offered.
Snapping off benefits 🤞
The government took some flack over the weekend for choosing not to extend an MSME credit guarantee program that it had put in place beyond October 2020, despite the program being just 65% full so far.
The ₹3 lakh crore emergency credit line scheme put in place to give financial support to micro and other small businesses via banks has so far seen about ₹1.9 Lakh benefits being availed.
While its true such schemes can’t perennially run with no end in sight, one has to take into account the “inability” of micro and small businesses in understanding application processes and navigating red-tape.
FWIW, the center had continuously updated the scheme to accommodate more businesses broadly, including revising upper limits of business size by turnover and such, hoping more people would apply. We hope that was enough. Here’s a thorough coverage.
Tweet of the day 🐦
This is a thought-provoking chart and a good article outlining the global audio-media opportunity and who could end up winning it.
What else are we Snackin’ 🍿
🚀 Feather in defense cap - Supersonic Cruise missile Brahmos was successfully test-fired this weekend from the Indian Navy’s stealth destroyer INS Chennai, with a target successfully hit in the Arabian sea. Aggressive neighbors must’ve gotten the message.
📺 Breaking TV records? - Doordarshan is likely to comeback to life, all thanks to its telecast of “Ram Leela” live from Ayodhya. The live streaming has been organized in collaborations with the tourism and cultural department of the UP government.
🚕 Countering Uber - Ola has plans of setting up a new Technology Centre in Pune and hiring about 1,000 engineers in the coming few years. This will be the second dedicated tech center for the company after Bangalore.
💉 Cleared for testing - Dr. Reddy’s labs has received a nod of approval from DCGI to conduct late-stage trials of Sputnik V in India. It will be a multicenter and randomized controlled study. Global health professionals continue to remain cautious about Russian vaccines though.
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Real estate developer DLF has successfully secured a promising ₹2,400 from SBI, I hope you meant in crores, or else that would be a bit too less 😅