Yellow bird
Ruptured supply chains, crypto win, and gaming boom.
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Market summary: 📊
After a rather mixed start to the week, India had a decent session yesterday. US had a positive day as well, as investors slowly warm up to the adventure of growth stocks once again.
US:
S&P 500 - up 0.19%
Nasdaq - up 0.75%
India:
Nifty 50 - up 0.61%
Sensex - up 0.75%
What’s brewing hot? ☕
✅ Yo bruh we need that dough—the pandemic is seriously squeezing GOI’s pockets. For the second straight year, the center will be forced to borrow money from the central bank, nearly $21 billion more, to compensate states for loss of revenues from GST collections. Global fiscal policies and budgets have been thrown into shambles, and the impact of the squeeze on India’s long term growth plans are barely visible just yet.
✅ Kids burning the house again—crypto’s been beat numb, so the kids are back into stonks… Meme stocks AMC (up 60%) and GameStop (up 40%) again saw a massive rally this week, which apparently has now landed short sellers, basically professionals on Wall Street who were betting that the bubbles would burst, into a $750 million hole! Reddit wouldn’t stop yelling war cries.
Tiger wants that yellow bird 🐤
Less than 24 hours after the Twitter shakedown, Tiger Global has now led a $30 million Series B round in Twitter’s desi clone, Koo, alongside Mirae Asset, IIFL, and Blume Ventures, valuing the company at $100 million.
The backdrop—the investment couldn’t have come at a better time for Koo, as western social platforms in India, which dominated the social game for better part of the last decade, now broadly lock horns with GOI on data sharing, localization, and other policing issues, as demanded by compliance with the new IT rules, and the whim of the government.
So far, Koo’s playing its shots well—the app has managed to scale up to nearly 6 million users, a fraction of the 55 million+ users Twitter has in India, but we doubt there’s a serious overlap between addressable bases anyway.
Fresh funds will go to accelerate growth, and improve platform functionality.
Bottomline—hard to see Koo become a Twitter alternative in India, especially as the latter transforms around a better use case, as a “discovery” layer for the creator economy. But we’re certain Dorsey is going to wake up with an “India” engagement problem in a couple of quarters, after losing a “certain” faction of politically argumentative users.
While we’re on raises, 📈
Polygon, the homegrown crypto project that recently shot to fame after its token 10x’ed in value in a couple weeks time, raised some dough from Billionaire Mark Cuban.
Cuban is apparently integrating the platform for his project Lazy.com, a marketplace that allows anyone to create and sell NFTs around their artwork, and we’re guessing that’s when he saw more potential.
Great for the local ecosystem!
Bring those supply chains home 💪
Peloton, the $3,000 workout equipment maker with a cult-like following, is investing nearly $400 million to build itself a new factory in the US, cutting reliance on foreign supply chains.
Why the move—although the majority of the company's customers reside in the US, products as always were manufactured in Taiwan to shave costs. But, with the pandemic freezing supply chains, and unpredictable events like a goddamn ship stuck in a freaking canal in the middle east, Peloton began running a HUGE backlog of orders.
In fact, backlogs became one of the only reasons the company wasn’t growing at better than the current 100%+ rates, resulting in losses of nearly $100 million in canceled orders, refunds, and angry customers. Add to that the global semiconductor shortage which is making it hard to secure chips!
Why do we care though—high growth brands are slowly understanding that the cost savings achieved by outsourcing production to remote corners of the world, no longer outweigh or match the problems one has to assume because of globally dispersed supply chains.
Big picture—we may be at the early end of a massive trend that could see sizable amounts of manufacturing return back to on shore markets, with effects reverberating through the value chain, from small merchants, SMEs, manufacturers, to service providers and financial services.
Quick look down banking street 💰
Entering rough waters sire…
The CEO of HDFC Bank, Sashidhar Jagdishan, sounded the bugle yesterday on the possibility of large loan defaults coming from retail investors, and the risks emerging from the 2.0 mess.
“First time in so many years, we may not have any grip on what is going to happen"
Those are pretty harsh words from one of the finest managed corporations in India, which will likely weigh for a considerable time on how investors think about any stock that has anything to do with lending, or even broad banking.
Then, quick raise as coffers dry up
HDFC Bank is also raising a billion dollars via debentures (unsecured loans) for a non-banking financial services unit in the bank’s belly, HDB Financial Services.
HDB basically does everything besides regular banking services—offering personal loans, credit cards, gold loans, and other commodity financial products staple to the middle class boom of India.
The business was hoping to IPO earlier this year, but COVID threw offline-first financial services players in a weird twist, with foot traffic falling, and new business stalling, so the cash raise is now a way to survive and get by until then….
Big picture—2021 was going to be another major IPO year on record, but without clarity on when the 2.0 economic haziness will clear, all plans will need to be postponed, while preemptive raises like these will be inevitable.
Otherwise a super slow news day yesterday…. be back with more tomorrow! Take it easy.
What else are we snackin’ 🍿
👋 See you in court - WhatsApp is suing GOI in the Delhi High Court against the new digital rules, citing violation of users' privacy. Exactly what pundits were demanding, and GOI was tryna avoid.
💰 Gaming boom - Sony will spend $18.4 billion over the next 3 years for expanding its mobile and online services, focused on gaming, hoping to scale PlayStation ecosystem to a billion users. We smell some Discord-pumped confidence.
Hit that 💚 if you liked today’s issue.
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