SPACs close to home 🙌🏻
GAP seeking buyer, Byju wants more, and Clubhouse's nightmare.
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Market summary: 📊
Stonks only go up—phenomenal day in India, kicking off yet another week on a high, as the budget momentum refuses to give in. US markets were closed for Presidents’ day.
India:
Nifty 50 - up 1.00%
Sensex - up 1.18%
What’s hot? ☕
✅ China’s up yo ass, again—a bunch of researchers from Stanford highlighted some embarrassing vulnerabilities in Clubhouse’s security, which could “possibly” be allowing the Chinese to snoop in on conversations. Clubhouse uses Agora, a popular Chinese company supplying backend infrastructure for real-time audio communications, and Agora is apparently seen relaying some “metadata” to servers hosted in mainland China. Moreover, Clubhouse was also found transmitting member ids to Agora in plain text, which could let the company (and the Chinese) to match members to audio transcripts and listen to who said what! Unfortunate that Clubhouse let this mess grip the headlines, just when everything was going so perfect.
The real pain however will be felt by Agora stock investors, who had been beating the drum on the company’s revolutionary tech, taking stock up 175%+ in the past one year—only for it now to be accused a Chinese lackey. Bloodbath’s coming.
✅ “taalis lakh”—$40 million, is all that Amazon wanted to walk away from the Reliance and Future marriage. In docs submitted to regulators in Singapore, Amazon claims it asked for the sum as damages in exchange to forego its right to invest in Future Group—a right they had acquired couple years ago while investing in Future Coupons (one of Future Retail’s subsidiaries). A $3.4 billion acquisition, held up over a $40 million tiff (barely under 2% of deal value), while thousands of Future employees have no clue if they’re going to see a paycheck next month? Seems a lil too much.
Myntra closing the GAP 🛒
GAP, the apparel brand, is looking to either offload its India operations or form a deeper working partnership with Myntra, as the company continues to painfully struggle to appeal to the average Indian consumer.
GAP’s expansion in India was led by Arvind Lifestyle Brands (ALB), with promises of scaling the brand to hundreds of millions in revenues here by 2020. Most plans failed to catch wind and GAP’s total revenues barely scaled beyond ~$25 million. So last year, GAP fired ALB from the franchising agreement they had going on.
And to be fair, it’s not all ALB’s fault—GAP is getting crushed everywhere worldwide. Their products pale out in front of the optionality and rapid iterations of fast fashion brands like Zara and H&M, and they’ve never really managed to recover from the ecommerce assault.
The total GAP empire, which includes a bunch of other brands, has barely grown revenues by 2% or so over the last 5 years.
So why’s Myntra interested—despite its problems, GAP is a well renowned brand, albeit with a weak digital commerce strategy. With Myntra’s battle hardened digital retailing expertise, that problem is put to an end right off the bat. Myntra on the other hand gets to beef up its catalog with a popular product.
Moreover, GAP’s 20 something stores across the country could strengthen parent Flipkart’s omnichannel retailing strategy, or even double up as last mile fulfillment centers. Depending upon the transaction price, could be a win win.
SPACs getting too close to home 🙌
No day goes by without a SPAC headline, but now things have begun getting too close to home.
ReNew Energy, one of India’s leading renewable energy companies, is looking to go public in the US via a merger with holding company RMG Acquisition corp.
ReNew builds, manages, and operates utility scale solar and wind power plants in India. They currently run close to 110 facilities across 8 states in the country, generating 8 GW of power, and plans to scale up to 20 GW of generation capacity over the next few years.
It's oddly unusual for a company that was perfectly okay to list in India, to instead go do a SPAC listing in the US—and just last week had we seen Softbank trying to come after Grofers with a SPAC, which makes us wonder if we’re at the beginning of a long trend. Definitely not one off events. And, most importantly, who’s next?
Bottomline for ReNew: the global green energy space is at the hottest it has ever been, so if the ReNew SPAC does go through, its flying off the shelf in no time! India’s push to cut down reliance on coal and in favor of renewable channels has created an ideal operating environment for these businesses here.
Byju’s wants it all 📚
Byju’s will spend $150 million on acquiring its test-prep platform Toppr, as the ed-tech space continues to consolidate around the leaders.
Toppr runs an online competitive test-prep service, targeting students right from KG to the 12th grade. Another vertical runs a coding bootcamp, with one segment even sells school-management software to institutions. Some 16 million students use the service in total, and last we know Topper had been valued at about $80 million.
The deal extends Byju’s string of high-profile acquisitions—just months ago they’d acquired offline tutorial king Aakash, and before that came the notorious acquisition of WhiteHatJr and his poster child Wolf, with all 3 deals costing nearly $1.5 billion.
Bottomline: with hordes of cash in the bank from some big profile raises in 2020, and a hyper-growth market at its disposal, Byju is basically working overtime to make his service impenetrable while he can.
Edtech is one of the most crowded and well funded segments in India, and there is no guarantee that lack of aggression today won’t get you punished tomorrow by a new startup that explodes overnight. Switching costs are low, and most users still free. So go grab some market shares, while you can.
But at some point, we’d be extremely surprised if the government’s anti-competitive sirens don’t go off on the rampant consolidation of the market that’s happening around 2-3 top leaders. It ain’t ideal.
👋 otherwise a quiet news day last night, especially since our friends in the West are sleeping in for a 3 day weekend, with Monday being a holiday for President’s day.
Tweet of the day 🐦
Insurance is the first step towards accessing broad financial services in India for hundreds of millions of people—and post-COVID, the digital insurance game has heated up significantly. Quick thread on an entrepreneur leading charge 👇
What else are we snackin’ 🍿
📈 Wholesale inflation’s stubborn - for the month of January, wholesale inflation grew 2.03%, a substantial jump from the 1.22% levels we had seen in December 2020. The increase primarily comes from manufactured items, while inflation coming from food articles cooled off a bit. Rates are expected to cool off as gridlocks ease out, demand comes back to normal, and manufacturing ramps up near term.
👏 Making it easy for regional sellers - Amazon Merchants will now be allowed to register and operate their stores completely in Marathi, and the move is believed to onboard lakhs of new sellers overnight from the hinterlands of Maharashtra. Platforms competing to increase supply have been passionately embracing regional languages to simplify things.
Hit that 💚 if you liked today’s issue.
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