"Hello world" - 1949

Dread it. Run from it. Destiny arrives all the same. So to say, 1949's here !!

Brace yourselves tight as this Sunday you are waking to an exclusive letter from 1949.

Ah wait! the year 1949?, instead the community 1949 ! (hint about the name here)

We are a community of CAs, making noise in the field of PEs, VCs, IBs & Startups – and are here to give you a good insight on what’s brewing in this space.

You must be thinking - there are many newsletters out there – this is going to be just another brick on the wall (that’s what… nevermind)

Hell noooo!! There’s more to it that appears the eye – we are a community that gives you a platform to network, share knowledge on different sectors and make many new friends besides running a live job board (stay tuned until the next post for it)

Until now – we’ve had:

Enough ado about 1949; let us now take you through some of the key sectoral updates:

Fintech –hera pheri 3?(ab aur nahi?) 

RBI intends Banks / NBFCs to play prominent role in lending and bearing underwriting risks and not just ride and rely on fintechs

1) Disbursals and repayments to be between borrowers and Banks / NBFCs without any pass-through pool account of fintechs —> Fintechs to act only as distributor of credit

2)Fees payable to LSPs shall be payable directly by Banks / NBFCs and not the borrower —> Fintechs cannot charge hidden fees

3)All inclusive cost of digital loans in the form of APR is required to be disclosed to the borrowers —> Fintechs wanting to earn fees will have to collect it from Banks / NBFCs who in turn have to disclose it to end-user

4) Non-Bank Prepaid Instruments shall not load their wallets and cards from credit lines or preset borrowing limits —> Card companies like Slice, One Card now have to rewamp their business models

Consumer – some orders delayed, some scrapped

1. Apologies! Your order for profitability at Zomato will be delivered later than expected

-Consolidated losses widen to INR 347 Cr in Q3FY23 vs. INR 67 Cr in Q3FY22.

-Business has continued to grow at 70% YOY in the last 12 months.   

-Plans to increase commission charges by 2-6%; restaurant operators oppose

2. Fabindia scraps INR 4,000 Cr IPO amid uncertain market conditions

-Listed peers (Vedant fashions, ABFRL and TCNS) down by 12-20% already in 2023

-This follows IPO withdrawals by companies like Snapdeal and boAT.

Logistics - An opportunity in the right pathway

1)Logistics – a $216B industry moving from unorganized to organized space.

Dry logistics > 90%. Industry growing at a CAGR OF 9% to be $365B by FY26.

2)Spend on logistics as a % of GDP - developed nations->8%, India ->13%. National Logistics policy aims to reduce logistics spend from 13% to 7.5% of the GDP.

3)Organized players- 3.5% of the market. 85% of the fleet owners own < than 20 trucks.

4)As per CBRE the leasing of industrial & logistics space across eight major cities rose 8% to 31.6M sq ft in 2022 from 29.4M sq.ft in 2021.

5)Major listed players :- Delhivery, BlueDart, Allcargo, VRL, Mahindra Logistics, etc

Industrials – Kripya seat ki peti kas ke badhiye, aasman meh hulchul hone wali hai 

 - Air India under its new buyers show intent to the global aviation segment with more than 470 airplanes being ordered from Boeing and last minute entrant Airbus. 

- Airbus has Rolls Royce platform and majority of Boeings being powered GE Aviation platforms.

- The order brings niche manufacturers of critical precision parts in play

- Indian manufacturing to see change in product portfolios from large low value add products to precision parts as supply chains globally look to de risk itself from China

- Also, for folks who invest in US stocks, keep a watch on Sifco with Airbus and Boeing being top 2 clients

Infrastructure – Abhi toh aur giregaaa!!

1. The recent budget announced that the capital distributed to REIT unit holders as ‘repayment of capital’ will be subject to tax in the hands of unit holders as other income and attract the higher marginal tax rate

2. The provision would be implemented from Apr 2023 and would impact post tax returns for investors (18% - 25% impact on yields for EOP REIT and Brookfield REIT)

3. Representations have been made to authorities to tax this distribution as capital gains

4. REITs were trading at a average cap rate of ~7.0% over the last 12 months which expanded to ~7.8% pre-budget due to the macroeconomic slowdown

5. Cap rates are expected to be volatile in the near term driven by lack of clarity on taxation and slower take up of space by MNCs

SAAS bhi kabhi services thi - A global growth story from India

1) Indian SAAS Growth:

- Expected to reach $35 bn. in ARR in 2027 from $12-$13 bn. in 2022 growing at a CAGR of 20-25% 

- Share of India SAAS to Global SAAS is also expected to reach 8% in 2027 from the current ~5% in 2022 

2) Global Markets are key to achieve scale for Indian SAAS companies 

- US alone is $150 Bn. market compared to India at $2-3 bn.  

- Majority of Indian SaaS companies try to build an overseas focus, with the US alone comprising ~50% of top-20 Indian SaaS company revenues

3) India remains the 3rd largest hub globally housing 100 unicorns 

- SAAS dominated the space with 6 unicorns in 2022

- Companies such as Fractal, Uniphore, Darwin Box, Amagi, Hasura and Lead Squared are the new entrants to the club

Hospitals : Time to consolidate the “beds” (duh base)

- Hospital sector ~80% of the Indian healthcare market 

- Total bed capacity ~ 20 lakhs; 62% share with private players, only 1.7% are with major hospital chains, major runway of growth for private hospital chains

- Visible improvement in customer mix and case mix has made revenue per bed and margins sustainable post covid

- Larger chains to consolidate Tier 1 market share; target untapped Tier 2/3 location

- Expansion towards multispecialty tertiary / quaternary care on account of asset light model, shorter gestation periods and significant attraction from private equity players

- Bed Occupancies expected to improve further from a median ~ 62-65% to ~ 70-75% in the coming years

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So, we can safely summarize 1949 in below image

Compiled by Hanu Bansal & Tushar Khandelwal

Contributions by Arnim Dhakad, Ashish Purohit, Anand Vadia, Mukund Maheshwari, Parin Detroja, Prachi Malpani, Tanay Lohia, Udit Bhandari.

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