What's next in Airlines?

Smartphone hiccup, Sundar's promise, and more digital investing.

Jul 14, 2020

Hi 👋, Tanvi here.

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Let’s go ahead and get started:

Stock market summary:

US - S&P 500 down 0.94%
India - Sensex up 0.27%

Sundar’s explosive package for India 🙌

Google will invest INR 75,000 Crore ($10 Bn) under the “Google for India Digitisation Fund”, marked for acceleration of the Indian tech and startup ecosystem. Funds will be directed towards for-profit businesses, social impact projects as well as to support the government's digitization efforts over the next 5-7 years.

The company called the fund a reflection of its confidence in the future of India’s digital economy with focus on -

Making internet access affordable for Indians in regional languages.
Building products and services to suit India’s needs and challenges.
Empowering businesses towards digital transformation.
Back the use of AI for social good in health, agriculture and education.

What else was announced during the virtual meet -

Google’s partnering with CBSE to enable more than 1 Million teachers to teach using Google’s products like Gmeet, GClassroom keeping the current situation in mind.
Google’s partnership with Prasar Bharti for creating an edutainment series on small and medium businesses in India.

Why is this interesting - the deployment of capital here is unprecedented, and is a vote of confidence in India’s potential. It is likely that other big tech companies cannot afford to ignore this mandate and will follow suit, through direct investments or through other means of capital deployment. In all, the increase in attention will boost the domestic startup ecosystem and innovation. Read more.

India’s smartphone market faces another hiccup 📱

Smartphone sales are down 30-40% in July even as post-lockdown demand was starting to pick up. The reason? Import impediments and production delays.

The Indo-China tensions prompted the government to initiate 100% manual checking of Chinese cargo at ports and airports between June 22-30, which has caused a 10-day backlog in supplies of phones and parts.

Analysts claim that both offline and online channels are short of stocks for almost all brands and that the rollover impact of custom clearance delays which started when lockdowns were eased in June will continue to impact sales throughout July. Also, slow recovery of fresh manufacturing in some parts is responsible for the hold up.

Recovery from the worst of lockdowns had been strong so far. South India’s largest multi-brand retailer for example says that 90% of business has recovered in May-June compared to pre-COVID numbers before this new slump hit. Read more.

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Qualcomm to invest in Jio 🤝

Qualcomm Ventures will invest $97 Million in RIL Jio Platforms for a tiny 0.15% equity stake and will help Jio platforms to roll out advanced 5G infrastructure and services for Indian customers.

Jio has raised more than $15.7 Billion in the past 12 weeks from big names from the valley to wall street and Qualcomm will be the 12th company to join the pack. So far, Jio has sold 25.24% stake in this prolonged capital raise.

What is unique about the deal - Qualcomm’s a global leader in making modem chips that allow your smartphone to connect to cellular internet. Now as 5G technology is on the horizon, Qualcomm holds many critical patents to 5G modem chips. Early R&D tests have shown Qualcomm’s modems to be far superior from other companies including Intel’s chips (they sold the business unit to Apple).

Jio having access to Qualcomm for deeper partnerships could cement the telco’s lead in the 5G revolution when it comes to India, enabling tight integration and research.

So far Jio has amassed 400 Million subs, undercutting Bharti Airtel and Vodafone by offering low rate voice and data plans and now it is looking to leverage other strategic assets. Obviously, RIL stock keeps soaring new highs. Read more.

Investing in digital services and ecommerce continues strong 💪

Hyderabad-based e-commerce and media startup IncNut Digital has raised $4 million in its Series A round. The company owns and operates multiple digital properties, including an online beauty and wellness community called StyleCraze, a network for mothers called MomJunction and beauty brands called SkinKraft and Vedix - with a combined reach of 100 Million plus.

The round was led by RP-Sanjiv Goenka Group backed early-stage consumer centric venture capital fund RPSG Ventures. The startup will use the funds to expand its R&D capabilities to come up with more products. Also, improving tech abilities and more content is a focus.

The company was founded by Chaitanya Nallan, Sangram Simha, and Veerendra Shivhare in 2011 and was seeded with Rs. 50 lakh by Ventureast.

Key takeaway - the direct-to-consumer revolution that took over the world and gave rise to giants like Shopify, is now slowly taking over India. Niche media and content platforms are finding consumer products an interesting pivot to boost revenues. In 2019, the top 11 direct-to-consumer brands in India saw revenues grow over 200%. With 1.3 Billion consumers in the country, and increased pushback of imports from our neighbors, 2020 should be a pivotal year and the investors are taking notice. Read more.

Traditional industries are struggling due to the pandemic and technology enablers are making bank by helping them survive. Riding the wave, airline retailing and payments platform Mystifly has raised a $3.3 Million Series B.

The company sells a turnkey platform that airlines, OTA, and other entities in the flying business can integrate to improve their customer facing applications as well as internal operations. A 140 member company, the startup was founded in 2009 as an API based booking platform and since then has pivoted.

The deal is interesting because the company is doubling down on a trend - “airline retail”. Historically, airlines have operated on the “per seat” model. Sell a seat, fly the customer, and be done with it. The pandemic has exposed the shortcoming of this model. Moreover, gas prices add immense volatility to the business.

The bet of the future is that airlines can offer a deeper “experience” package with add on services offered throughout the journey. Think Starbucks or Mcdonalds fare onboard, and then airlines get a cut for that sale. Deliver an experience that customers would love and diversify revenue streams. Some do this already, but there's a gap for a lot more. The use cases expand to hotels, in-airport experience, WiFi, other products etc. Consumerism full throttle.

Mystifly believes its infrastructure which allows airlines to track customers, create loyalty base, and others enabling this shift can be a real money maker for the company. Intriguing.

What else are we snackin’ 🍿

💊 Glenmark slashes COVID-19 drug price - the antiviral Favipiravir drug launched by the pharma in India will be available for 27% cheaper, under the brand name FabiFlu. Glenmark has just completed phase 3 trial of the drug.

😛 Cheaper, still can’t afford - Tesla slashed 2020 Model Y prices by $3,000, just four months after its launch, as the U.S. electric carmaker seeks to maintain sales momentum in the COVID-19 pandemic. The price cut will also turn the heat knob of traditional auto competition.

👍 TCS expects no change to early hiring - TCS’s campus hiring will be about the same level as last year (40,000), despite the sharp drop in revenue in the quarter ended June on account of the Covid-19 pandemic. The company will double US campus hires to nearly 2,000 this fiscal, as part of an effort to reduce dependence on H-1B and L-1 work visas.

👀 RIL now wants a piece of Arvind - After taking Flipkart’s money, Arvind Fashions is in talks with Reliance Retail to sell two of its denim brands -- Newport and Ruf & Tuff. The company has been restructuring its businesses for about a year, by trimming its global brands portfolio while digital platforms keen on expanding theirs are scooping up everything.

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

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