#8: Today's pizza toppings: SLBM, OEM, ARV & DC (not the comics)
Our newletters are like a box of chocolates, you never know what you're gonna get ~Not Forrest's mom
India’s IT sector is bleeding, courtesy to the knife largely made of US recession & banking turmoil. Catching this falling knife might bleed you as well. To keep a check, lets learn what’s cutting edge in other sectors…
Free ka paisa utha lo (SLBM)
- Investors with idle stocks in their portfolio managed to earn INR 325 crs in FY20. They did this through lending their stocks SLBM (Stock lending and borrowing mechanism)
- This is a mechanism where you 'temporary lend / borrow' your securities in exchange for a fee
- As an investor, you would continue to remain the owner of the shares and continue to earn dividend, bonus etc
- The typical yield by lending ranges from 3-6 p.a
- There are no risks involved with SLBM as its an exchange traded product and its settlement is guaranteed by Clearing Corporation. This ensures that stocks are safe
- The lending fees differs for each stock depending on the length of the lending/borrowing period as well as the market conditions
The price sensitive Indian Consumer?
Consumers are ready to pay a higher price for healthier lifestyle choices
Recent deals in this space:
1. HUL's acquisition of Oziva for ~INR 2650m (Health nutrition)
2. HUL's investment in Wellbeing nutrition ~INR700m (Organic nutrition)
3. Fundraise by The Whole Truth of ~INR 1200m from Sequoia, Matrix (Healthy snacks)
4. Marico's acquisition of 54% stake in True elements (Healthy breakfast and snacks)
5. Fundraise by Happilo of ~INR 1850m from MO PE (Healthy snacks)
6. ITC's acquisition of Yoga bar
-Increased popularity of Organic products indicates shift towards healthier lifestyle choices, also it is observed that 40% of Indians are willing to pay more for wellness products, compared to 29% globally.
Agriculture…in Nature we trust!!
>India needs to up maize prod by 10M tons in next 5 years.
>Output in sugar fell 3% YoY to~30M tons, India; 2nd largest producer of sugar.
>Record wheat prodt expected @112M tons.
>Atal Innovation Mission & NITI Ayog to collaborate with stakeholders.
>Centre to allow 5 firms for cluster farming;50K hectares. Total outlay;Rs 750 cr.
>Diesel sales has gone up @15% in April on demand from agri sector.
>Bank credit to agri space has grown 15% YoY in April 2023.
>Atal Innovation, NITI Ayog to collaborate with ATMAs to promote agri innovation.
Emerging Trends in the Automotive Aftermarket
> Online Digital Market places for spares & services (imagine amazon/flipkart providing filters, brake pads, lubricants, wiper blades or door step car servicing)
Industry players - MyTVS, Boodmo, Koovers, Autozilla, Go - Mechanic (Recently in news for wrong reasons)
> The Aftermarket represents sale of all vehicle spare parts and services after the vehicle has been sold by the Original Equipment Manufacturer (OEM - Tata, Mahindra, Maruti Suzuki etc)
> Once the car is out of warranty, people prefer to go to local garages for their spares and servicing requirements
> Approximately 48 mn four wheeler cars (PVs) in India currently
> Out of warranty ( Cars > 3 years age) - 30 mn
> Addressable market size - Rs. 72,000 crores (considering a car owner spends > Rs. 2k a month on service and maintenance)
> Market currently tapped by the emerging Aftermarket E-commerce platforms is less than 1%
Tech - Enabled Disruption has just started in the Indian Automotive Aftermarket. Imagine the level of data and inputs these online E-commerce platforms will gather over the next decade!
Evolution of India’s Data Centre Industry
1. India’s DC industry has witnessed tremendous growth in the last 3 years, with capacity doubling to 722MW in 2022 from 350MW in 2019
2. ~700MW of capacity addition expected by 2025 that will translate to 9 mf of real estate demand
3. Focus on data storage and protection, roll out of 5G and growing demand for e-services will aide the future growth
4. The Digital Personal data protection bill underway to regulate the sector and storage norms
5. The sector has seen keen interest from global funds and local developers
6. Major headwinds were the supply chain constraints leading to higher input costs, expected to stabilize in 2023
Is your product Mission Critical for Enterprises?
- Mission Critical SAAS: The top ten most purchased products fell into three categories during Q1 2023: Sales and Revenue (CRM), Data, Compliance and Security(Cybersecurity), Communication and Collaboration (Project Management)
- Sales force led CRM deals; Crowdstrike led Cybersecurity and Asana was
leader in Project Management
- Critical Products can control their prices: This is most true of Salesforce. Where only a handful of the top-purchased SaaS tools make it past the $250K, Salesforce’s average negotiated price is a true outlier compared to other products at $850K+
- Zoom, Slack, NetSuite, and GitHub had an average negotiated price ranging from $50K to $250K
- 2023 be the year for price hikes largely due to higher costs incurred by inflation, coupled with a tough funding climate
- In 2023, the ACV rose to $137K, representing a 23% increase from the ACV for all transactions in 2022
Anti-retroviral Market: Chronic Disease, Difficult Margins
•Anti-retroviral drugs (‘ARV’) are used to treat viral infections, particularly HIV. ~80% of generic ARV medicines produced by LMIC are manufactured in India.
•Supply of ARV drugs in LMIC are mostly a tender-driven process by Organizations like WHO making ARV market high volume - low margin segment. Civil society activism and competition from manufacturers of generic drugs have driven down the prices of ARVs.
•Laurus Labs has been in focus due to their volume certainty for the next few years for their ARV portfolio, but their realizations remain a question mark.
Global players - Gilead Life & ViiV Health- Innovators, Lonza & Catalent (CDMO)
Indian players- Wockhardt, Hetero Labs, Matrix Laboratories
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: Nihal Kunder (#most helpful)
Join our community waitlist here.