#7: A sassy affair, dry-powdered hospitals and boring global IBs
Being on TOP feels great, right? (IYKYK!) Get right there as you read through all that caught our eyes this week...
Some of you might have reconsidered higher education from the US after Nikhil Kamath’s post highlighting our western peers in high probabilities of recession vs India (here). To keep you further ahead of the curve, we take you through what’s brewing in different sectors
New Marketplace in town!
Account Aggregator (AA) and Open Credit Enablement Network (OCEN) set to disrupt lending like UPI has done to payments.
AA is an RBI registered NBFC which collects data w.r.t Bank statement, Mutual funds holdings, Insurance, Income tax and GST of the Financial information provider (FIP) for financial information users (FIU - which could be lenders, wealth management firms etc.)
- Currently, RBI has licensed 10 NBFC’s and an in-principle approval to 7 companies.
- The data moves in a Blackbox (like a funnel from FIP to FIU- which even Account Aggregator doesn’t have viewing rights).
- The revenue which AA earns is on a per data call (Rs 3 per data call).
- On OCEN platform, lenders are registered which plugs in to AA to get the data of FIP. This makes lending a marketplace! The one with lowest rates to offer would turn out to be the winner which is a major benefit for the borrower.
Third 👁️ on the lookout for spirits
Third eye distillery (Stranger & Sons Gin), with presence in 10+ countries, is looking to grow inorganically.
- Gin is the fastest growing liquor category in India and is expected to grow at a CAGR of 10% (21-26).
- Premium gin segment is far outpacing the growth of regular gins in India.
- Brands will be acquired under the umbrella domestic business ‘Short Story Spirits’, which recently launched mass priced rum, vodka and gin.
- They have acquired 51% stake in tonic maker Svami for ₹100cr last year who has launched the brand in UAE, Singapore & Thailand.
- The company is also in early stages to acquire 2 more liquor businesses.
Logistics & Warehousing- Move…Store…Repeat
- India to add 30M sq ft of warehousing space, being the highest in the APAC region.
- Leasing of industrial and warehousing space being highest in Delhi-NCR and adjoining areas.
- 3PL players have leased 60M sq ft in 2022.
- Warehousing rentals to see 5-7-% jump in FY24.
- Bobba Group have forayed into the warehousing space by setting up a 75k sq ft facility in Bangalore.
- Blackstone acquired 2.5M sq ft of warehousing space for Rs 700cr in Delhi.
- Average monthly rentals in metro cities is around Rs 22 per sq ft per month.
- Warehousing space has seen overall $5.6B investments between 2019-2022.
- Lodha in partnership with Bain and Ivanhoé Cambridge has set up $1B JV to develop industrial and logistics parks.
- PLI scheme in manufacturing to give boost to logistics and warehousing across the country.
Increasing Dry Powder in Hospitals
- Temasek has bought additional 41% stake (totaling to 59%) in Manipal hospital, thus valuing the company at an EV of INR 40,000cr.
- In FY22, private hospitals reported an all-time high operating profitability of 19% due to COVID-19. Revenue of private hospitals is expected to grow by 10-11% in FY23 & FY24, supported by increasing domestic demand and pick-up in medical tourism.
- This has attracted the PE players, loaded with dry powder, to invest and streamline the business by improving operating margins by cost cutting and improving supply chain efficiencies, not only in India but globally as well.
- Key deals in India include OTPP – Sahyadri Hospitals; IIFL - Kauvery Hospitals; KKR-Max hospital (exited).
A SaaSy Affair
India SaaS Market 2022:
• India is 2nd largest SaaS market by no. of firms.
• India’s SaaS market has been growing at 30-35% CAGR compared to 15-20% of the US market.
• The ARR of Indian SaaS firms has grown 2.5x to $12–$13B in 2022 in the past 3 years. This figure is predicted to reach ~$35B in ARR by 2027.
Outlook for 2023:
• 8 out of 10 CXOs target above 50% ARR growth
• 1 out of 3 Indian SaaS companies have <1x burn rate
• Product innovation
• Partner-led expansion
• Delay in customer closure cycle
• Rain, a developer of a financial platform, raised $116M of funding in a deal led by QED Investors.
• Video-editing SaaS-based company Video Verse has acquired social media firm Reely.in
Why do Global Investment banks want to be boring?
Investors always prefer stable recurring revenues to risky one-off gains.
So banks still make trades for clients, but take much less trading risk, and your Balance sheet has more equity, so your ROE is low.
Move to new business models:
Proprietary trading - bank doing trades for its own account based on its own market judgment has moved to asset management for clients.
Market Makers - banks used to take the other sides of trades and act as a market maker in lot of transactions. Instead of using its balance sheet to own assets and take market risk, it now lends against assets, takes senior claims on them, and ideally does not lose money.
Focus on Infrastructure Sector:
Infra sector is a key driver for the Indian economy & includes power, bridges, dams, roads, railways and urban infrastructure development.
Govt.’s thrust on Infra sector can be seen from the recent reforms undertaken. Allocation to Infra sector of $122bn for 2023-24 is 33% higher than previous year & is 3.3% of the GDP.
Out of this spend, transport infra will be ~1.7% of GDP around twice the level in America and most European countries.
This push at such a massive scale will help India achieve its ambition to become $5Tn economy by 2025-26, up from $3.5Tn today.
Alongside an increase in expenditure on infrastructure, reforms such as Gati Shakti has been a forerunner to bring about systemic and effective change in the sector.
Compiled by Hanu Bansal, Tushar Khandelwal & Aditi Korgaonkar
Contributions by Arnim Dhakad, Amay Solanki, Ashish Purohit, Anand Vadia, Mukund Maheshwari, Parin Detroja, Prachi Malpani, Tanay Lohia, Shlok Sanghi, Harshil Shah.
Member of the week: Sonia Lalwani (#most helpful)
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