Calm Before The Storm?

Tale of the Tape

Good evening guys! Markets continue to edge lower. 📉

Nifty and Sensex closed lower for a third straight day. Concerns over rising inflation, and Omicron’s rapid spread made investors nervous. Midcaps (-0.2%) and Smallcaps (+0.2%) traded mixed. The advance-decline ratio was split evenly. 😐

Most sectors closed in the red. PSU Banks and Real Estate fell the most, down ~0.8%. Pharma companies (+1%) continued their outperformance. 💊

Lupin (+7%) received a clean chit from the US Food and Drug Administration (USFDA) for its Goa plant. ✅

Shriram Group stocks were in focus. The company announced a complete overhaul of its financial services business. Read more below. 🔄

ITC’s (-3%) analyst meet failed to excite the Street. Markets were hopeful management would announce the demerger of its IT services business. Unfortunately, investors were left high and dry. 😥

Greenlam Industries (+7%) will invest Rs 950 cr to enter the plywood and particle board business. Also, the company approved a 5:1 stock split. 💰

Aditya Birla Fashion (+6%) acquired exclusive rights to sell Reebok products in India. 👟

Axis Bank (+1%) denied reports of acquiring a stake in rural focussed NBFC, Spandana Spoorthy. 🙅‍♂️

IPO updates. Anand Rathi Wealth made a solid debut on Dalal Street. The stock closed at Rs 584 per share, +6% from its issue price in a weak market. Metro Brands IPO sailed through on the final day. Data Patterns IPO received 2.5x more bids on day 1. 💸

Cryptos continued to grind lower. Bitcoin dropped 4%. Ethereum slipped 6%. Doge jumped 16% after some much-needed love from Elon Musk. 🐕‍🦺

Here are the closing prints:

Nifty	17,324	-0.3%
Sensex	58,117	-0.3%
Bank Nifty	36,893	-0.1%

Putting In Order

Shriram Group will merge its retail finance business into one entity as part of its mega restructuring plans. The merger will create India’s largest retail-focused NBFC. Also, its insurance business will be carved out into a separate company. Details about the shareholding status are here. 🧐

The merger would bring together all its lending products like commercial vehicles, gold, and personal loans under a single roof. The merged entity will have combined assets under management of Rs 1.5 lakh crore+, more than 3,500 branches pan India, and +50,000 employees. Post-merger, the company expects profits to increase 10% over FY22-24. Lower borrowing cost plus its ability to cross-sell products across its vast customer base are key reasons. 📈

DV Ravi, MD at Shriram Capital said:

The merger will enhance our distribution footprint across all business lines without incurring any incremental capex. The benefits likely to accrue due to synergy benefits and the digital initiatives are immense. This merger will also simplify our holding structure eliminating multiple layers.

Meanwhile, investors weren’t all that excited. The deal is expected to pave the way for the exit of large investors Piramal Group and private equity (PE) fund TPG. Both Piramal and TPG have been looking to exit the company after its failed merger attempt with IDFC Bank in 2017. Doubts over the “super app” execution and expensive share swap also left investors unhappy. Shriram Transport Finance and Shriram City Union dropped ~6% each. 👎

Bingo

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Adding IPO To Its Cart

Amazon-backed More Retail is weighing an IPO at a $5 billion valuation. Reports say it could raise $500 million on listing. 🤑

More Retail is an omnichannel grocery brand. More is the fourth-largest supermarket chain in India after Future Group, Reliance and Dmart. It sells everything from groceries to home decor and essentials, across 600 retail stores. More Retail may use these funds to strengthen both its online and offline reach. FYI: Amazon and Samara Capital purchased More Retail from Aditya Birla Group in 2019. 🤓

The Indian grocery market is expected to touch $790 billion by 2024 (vs $570 billion in 2021). 📈 Market share gains from the unorganized sector, changing shopping habits and rising income levels are key growth drivers. But, it won’t be an easy task. 🤼‍♂️

While the market size is huge, the space is equally tricky to navigate. Only large players with deep pockets can afford to be in the game. Margins may be low and it’s a scale game. Besides traditional players, Swiggy, Grofers, and Dunzo have also emerged as a serious threat. Meanwhile, Flipkart and Walmart have pumped $145 million more into Ninjacart. Watch out for this space. 👀

Cheap Thrills

Good news for all those planning to binge-watch shows on Netflix! The streaming giant has slashed prices for the first time since its entry into India. 🤯

Netflix packs were seen to be expensive compared to its peers. As a result of this, its market share has remained stagnant at ~5% for several years. That’s exactly why Netflix has cut prices by a whopping 60%. 👍

Big picture: The Indian OTT industry is estimated to hit $15 billion by 2030, as per RBSA Advisors. The Covid-19 pandemic has obviously changed the way we consume media. Affordable smartphones and cheap data prices may drive the growth. 🍿

While India is a big market for OTT companies, it’s also one of the toughest to generate revenue from. Users are accustomed to watching content for free on YouTube or through pirated channels. Stiff competition from the likes of Disney+ Hotstar, Zee5, and Amazon Prime Video plus lack of local content is also a concern for Netflix. ⚠️