Week 1

The Ant fiasco, covid anti-bodies, platforms

1.       The much anticipated Ant financial IPO didn’t go through in the end! It seems regulators pulled the plug after Jack Ma managed to annoy them in a speech a few days before the IPO – calling traditional banks nothing more than “pawn-shops” for insisting on collateral based lending. The word on the street is that Xi Jinping personally pulled the plug on the IPO. https://www.wsj.com/articles/china-president-xi-jinping-halted-jack-ma-ant-ipo-11605203556

a.       This goes to show that the biggest threat for these new age quasi-monopolies is government regulation. Some powerful feathers get ruffled when earth-quake sized disruptions take place. In a similar vein, the EU is investigating Amazon for anticompetitive behaviour, with a potential fine of $28bn on the cards (though it seems unlikely at the moment). https://www.businessinsider.in/tech/news/the-eu-just-hit-amazon-with-a-major-antitrust-complaint-that-could-cost-the-tech-giant-28-billion/articleshow/79151608.cms

2.       India unveiled a Production Linked Incentive (PLI) scheme for various industries to attract manufacturing investment. Uday Kotak called it “transformational and timely”, which “will facilitate India becoming a global manufacturing hub”. Things are moving in the right direction. https://www.outlookindia.com/newsscroll/pli-scheme-timely-transformational-says-india-inc/1974520

3.       Whatsapp got approval to launch “Whatsapp Pay”. In my view, Whatsapp is in pole position to become India’s “everything app” – and this could eventually be looked back upon as a huge moment. They now have the users/data (400m+), policy navigating ability (Reliance partnership) and deep pockets. One of the main things I have learnt about platform tech companies is that the larger they get, the harder they are to compete against because the product gets better with size (network effects, data crunching etc)

a.       In a similar vein, I was watching an Elon Musk interview from a few months ago. He mentioned that Tesla has 100x the self-driving automobile data vs the entire competition COMBINED. That is huge and perhaps an unassailable lead… and maybe suggests the move in the Tesla stock is not as silly as most claim. They are on to something.

4.       Another week, another study that claims that hundreds of millions of Indians have already had Covid. An IDFC institute study found that 53.8% or urban and 44.1% of rural people in Karnataka have Covid antibodies. If we assume 40% of Indians have antibodies – that is 540m people… vs the official count of 8m! I find it amusing that so many serious sounding people still cite the official case count data to make whatever point they want to make. That data is redundant.

5.       The Indian earnings season this quarter has been good! On average, companies have reported -9% YoY revenue but +20% Yoy EBITDA, with almost every company giving commentary that month on month data has improved (i.e. October was better than September, which was better than August etc). There may be pent up demand pushing the numbers up – but we should celebrate this moment anyway! Only 6 months ago, there was doom and gloom, with people expecting the apocalypse. As it happens, the NIFTY hit an all time high on Mahurat trading day yesterday.

a.       Which brings me to this point: the NIFTY is up 15% vs Jan 2018… but more than 75% of all companies are down more than 25% from the highs of Jan 2018… it’s been a narrow rally.

6.       I came across this really thought provoking chart last week. It charts the reaction of Delta airlines vs Zoom when the Pfizer vaccine was announced. Look at the almost perfect symmetry. Who would have thought a few months ago that one of the biggest direct competitors for airlines (in a way) would be a video conferencing app? Of course now in hindsight it makes sense – but I found it interesting nonetheless.

7.       Reliance bought out UrbanLadder for $25m. Urban Ladder has raised approx. $115m over the years! They were apparently trying to sell the company for a while for around $200m and no one was interested. Maybe some more start-ups will see this reality in the coming years – things are not so easy when the funding dries up.

8.       Enough and more has been written about the US elections, so I won’t write more. I think markets have held up because the immediate “threat” of a Blue Wave has passed. The thing the markets feared most was Democratic control of the Presidency and the Senate, which could have meant a potential doubling of capital gains tax (among other taxes). That looks like it won’t happen but it seems like things are still uncertain about the Senate (I believe Georgia still hangs in the balance, but I am not an expert).

Have a good week!

Gautam