The Week That Was: 29 June to 3 July
A roundup of the week's stories
For those of you who missed one or more of our stories during the week, here is a round up on everything we wrote about this week.
On the cloud kitchen industry in India
The Old Guard have invaluable assets, brands recognized and wanted by customers. However, they do not have the technology prowess or the in-depth customer data, both critical in the cloud game. Their existing mortar business will keep taking up most of their investment-in time and cash. Their best bet looks like aligning with the aggregators.
Meanwhile, the cloud kitchen industry has not been immune to impact from the pandemic.
India shut down strongly in the wake of the pandemic, and then started loosening restrictions gradually. A look at how various sectors are performing as the economy picks up.
The pandemic has also changed consumer behaviour in other ways. Increased risk aversion means some people are loathe to touch currency notes touched by others, so digital payments had gone up. They had initially declined in April when the government didn’t permit much business to happen, but there’s been a V-shaped recovery since.
India banned 59 Chinese-owned apps on Monday. China, obviously, wasn’t happy. Users of the app weren’t happy either.
The ban comes at an especially inconvenient time for ByteDance (owner of TikTok) since it is reportedly planning an IPO this year. On the back of $5.6 billion of revenues in the January-May quarter, the firm is reportedly looking for a valuation in excess of $150 billion in its IPO.
With over 30% of TikTok’s users being in India, this ban, if it stays, can prove problematic to ByteDance in its further fundraising efforts.
Interestingly, the foreign media seems rather sympathetic to India’s ban of the Chinese apps.
A few hours after we had sent out this edition came another newsletter with a very interesting angle on India’s ban on Chinese apps. Read this as well.
It is surprising the western world that saw USSR as a mortal enemy doesn’t yet take that view of China. It has an authoritarian regime that has disdain for liberal values. It mocks democratic processes and encourages dictators and rogue regimes around the world. It has violated NPT regime to help North Korea, Pakistan and Iran with nuclear capabilities. It is capturing regimes and territory across Africa and Asia through debt diplomacy in the cover of BRI (Belt and Road Initiative). How different is this threat from the spectre of USSR style communism?
We wrote about the concept of pledged shares, and how that is leading Future Group, one of India’s largest retailers, to sell itself. Initially Amazon was seen as a suitor. Now it looks like Reliance Retail is buying Future.
Back to our story, in mid-May, Business Insider reported that Future Group’s Kishore Biyani was in trouble. His family’s “net worth has fallen from $1.8 billion to $400 million, according to Forbes”. Covid-19 had hit Future Group’s retail businesses really hard, with some stores being forced to close on account of being located inside malls, with March and April sales being down 75% from normal. Future Group’s debt had been downgraded.
What possibly saved Biyani was the government’s covid-19 related stimulus package. Monthly repayments on debt were halted until August, and the Insolvency and Bankruptcy Code was put on hold for a year, giving Biyani time to arrange for a deal.
In mid-June, Bloomberg (syndicated by Mint) reported that Mukesh Ambani’s Reliance Retail was in talks to buy Future Group’s retail operations.
On Friday, we experimented with a new format. Rather than one “deep” story, we did four “small stories”. We wrote about RPSG buying Fortune India, nomenclature battles between Unilever and Emami, an investigation into irregularities in the Mumbai Airport and (this might become a regular feature) yet another round of investment into Jio Platforms.
Indian billionaire Sanjiv Goenka, whose claim to fame so far has been knocking an “s” off his Indian Premier League team’s name after one season, is buying rights to distribute Fortune in India. This is his second investment in the media business, after the magazine Open. He has also announced that he wants to buy a lifestyle publication, and possibly an electronic media company as well (ungated version of the story).
In 2017, HUL had objected to claims in one of Emami’s advertisements. That objection was overruled by the Advertising Standards Council of India. In 2018, HUL made an ad that took a potshot at Fair and Handsome. They were so sure that they would offend Emami that they filed a caveat petition in the Bombay High Court anticipating a suit.
There is also a political angle to the case. Gautam Adani, who runs India’s largest port, and also has interests in electricity generation and coal mining, is trying to buy a minority stake in the Mumbai airport. GVK doesn’t want him as a shareholder there.