Beauty lies in the eye of the retailer
Also in today’s edition: MPL’s new avatar; Sebi spring cleans IPOs; Farmers’ key demand unlikely to be met; Sharif out, Sharif in
Good morning! Typos can cost you a lot. Just ask the investors of Lyft. As per The Wall Street Journal, the ride-hailing company mistakenly added an extra zero to a key profit margin metric in its earnings release. Meaning, while this profit margin was expected to increase by 50 basis points, a typo made it 500 basis points. Automated trades inflated Lyft’s share price by 60%, only for it to come down when the CFO announced the mistake. Our prayers for the person behind the typo. 🙏🏻
Dinesh Narayanan, Adarsh Singh, and Roshni Nair also contributed to today’s edition.
The Market Signal
Stocks & Economy: Indian indices had a wobbly Wednesday through the day before ending in the green. This was largely due to indicators from the US market, which slumped due to higher-than-expected inflation data. European stocks followed suit.
Bitcoin briefly followed a similar trajectory before regaining its $1 trillion market cap Wednesday evening, breaching the $51,000 mark for the first time since December 2021.
Uber shares rose following the company’s share repurchase plans to the tune of $7 billion, while Nvidia dislodged Alphabet to become the third most valuable US company by market capitalisation. Closer home, Paytm continued its freefall, with a further 10% decline, resulting in an aggregate loss of ₹26,000 crore ($3.1 billion) for shareholders in 10 days.
Japan slipped into a surpriserecession after its economy shrank for two consecutive quarters, losing the world’s third-largest economy spot to Germany. That didn't deter Asian markets from bouncing back after their Wednesday slump. Gift Nifty opened in the green.
GAMING
New Tax? New Me!
Mobile Premier League aka MPL is slowly morphing into a major gaming studio. But unlike the tortoise, slowness isn’t exactly winning them the race.
Tax shock: MPL’s bread and butter was real-world gaming but the government’s decision to impose a 28% GST has severely affected the company. Its tax burden has risen by 400%. To cut costs, MPL has already halved its workforce and shuttered two Web-3 gaming ventures.
Strategy in mayhem: MPL has invested close to $40 million in its in-house gaming studio, Mayhem. The studio is tasked with the creation of AAA-games like PUBG. However, inability to hire developers, high attrition at middle-management levels, and an unsuccessful merger with GamingMonk have meant that the studio is more than a year behind on its first game.
These problems are forcing the company to shore up its business in foreign markets.
REGULATION
No Bluffing For IPOs
Markets regulator Sebi is getting tough with companies wanting to sell shares to the public, even making them drop initial public offers (IPOs).
Why: Sebi wants to ensure companies use the funds they raise only for the purpose they tell investors. That is because there are different lock-in periods for promoter holdings depending on the end use. The lock-in is 18 months if the IPO is to repay loans and three years if it is for capital expenditure. Many promoters, the regulator found, are misdeclaring the purpose to enjoy a shorter lock-in period.
Taking back: Hospitality startup Oyo Hotels & Homes is reportedly shelving its $1 billion IPO. The issue size was already reduced after Sebi made the company refile papers.
Boom boom: Fifty-seven companies raised ~₹50,000 crore in 2023. Their collective value has now risen 870% to about ₹4.8 lakh crore (~$58 billion).
BEAUTY & PERSONAL CARE
Myntra’s Disadvantage
For years, Myntra has been synonymous with affordable fashion. Now, it’s serious about pricey makeup and skincare. The problem is Myntra is late.
Pretty tech: Although Myntra has been selling personal care goods for years, it only began scaling it up in the last few years. It now has a separate Myntra Beauty vertical with over 1,500 brands. A fourth of its beauty sales comes from luxury and international brands, Mint reports.
Fashionably late: Still, Myntra has room to grow in beauty. Personal care multinationals such as L’Oreal and Shiseido flagged India’s importance to their growth. India’s personal care market here is expected to grow $30 billion in three years, per The Economic Times.
The Signal
Myntra faces deep-pocketed competition in the beauty business. Reliance launched Tira last year and also won the India franchise rights to beauty chain Sephora, previously run by Arvind Fashions. Meanwhile, department store chain Shoppers Stop is rapidly launching SS Beauty stores, with rights to premium brands including MAC, NARS, and Bobbi Brown. In the December 2023 quarter, it made nearly ₹300 crore (~$36 million) in beauty sales (pdf).
Technology is great, but in beauty, the name of the game is exclusivity. Unlike Nykaa and Shoppers Stop, Myntra doesn’t yet have exclusive rights to sought-after brands. What’s more, it will be up against stiff competition from Reliance in its quest for fancy makeup makers. After all, Reliance franchises the biggest network of luxury brands in India. And it hasn’t even started on Sephora yet.
POLITICS
Digging Their Heels In
At the time of writing this, Union Ministers Piyush Goyal, Arjun Munda, and Nityanand Rai are video conferencing with farmers participating in the Dilli Chalo protests. No side has blinked yet. Government officials asserted that guaranteeing a Minimum Support Price (MSP)—one of the farmers’ key demands—would be a “fiscal disaster” for India because there wouldn’t be much left for social and development goals, The Economic Times reported. Others opine that crop diversification, minimum income support, crop insurance, and timely claims payments are the need of the hour over MSP.
Unlike in 2020-2021 when the Bharatiya Janata Party rolled back agriculture laws after farmers first marched upon the National Capital Region, this time, it isn’t as wary about the timing since the Lok Sabha is set to be dissolved before the elections. But the optics remain terrible; the Delhi Police is deploying sonic weapons against farmers, NDTV reports.
🎧 Indian farmers are ready for round two. Also in today’s episode: Lyft’s stock surges thanks to a silly typo. Tune in to The Signal Daily on Spotify, Apple Podcasts, Amazon Music, Google Podcasts, or wherever you get your podcasts.
NEIGHBOURHOOD
The Same (Old) Sharif In Town
Pakistan’s government could belong to the House of Sharif after all… just not the one primed to take the coveted post: Nawaz Sharif. Instead, it will be his brother Shahbaz who will helm a fragile coalition government of national and regional parties supporting his Pakistan Muslim League (Nawaz).
Anchor ally: The Pakistan People’s Party, led by Bilawal Bhutto-Zardari, will support the government but opt out of seeking cabinet berths in favour of taking Constitutional positions such as the President’s office (possibly for Asif Ali Zardari), among others.
Bed of Thorns: Shahbaz Sharif will be greeted by Pakistan’s descent into economic chaos—28% inflation, rising fuel prices and a treasury, mired in external debt. Worse, the nature of the electoral mandate, a rebuke to Pakistan’s all-powerful establishment, is unlikely to make his term a smooth-sailing one. Sharif’s recent 16-month term as PM was marred by constant infighting among allies and indecision.
FYI
Where are the jobs? IT services major Infosys has come under fire from a Karnataka legislator for failing to create jobs in the state. Infosys had acquired 58 acres of land in Hubballi about ten years ago for a campus.
Under the lens: The Enforcement Directorate has launched a preliminary enquiry into Paytm Payments Bank while seeking details on the bank’s overseas transactions.
Cracking the whip: The Reserve Bank of India (RBI) has reportedly cracked down on fintech companies offering commercial or corporate cards, journalist Arti Singh reported on X, citing multiple sources. RBI’s latest action could impact companies such as Cred-owned Happay.
Pink slips: Cisco is slashing 5% of its global workforce, or over 4,000 jobs; the networking giant is “restructuring to focus on high-growth areas”, Reuters had reported earlier.
Left the building: Andrej Karpathy, one of OpenAI’s founding members and leading researchers, has left the AI company after a second stint. Bart Andre, Apple’s longest-serving designer, will retire from the company. Andre joined Apple in 1992 alongside Sir Jony Ive.
And the winner is…: Former Indonesian general Prabowo Subianto is all set to win the presidential election, according to unofficial counts. Subianto is Indonesia’s defence minister in outgoing president Joko Widodo’s cabinet.
Green signal: British billionaire Sir Jim Ratcliffe’s and INEOS’ purchase of a 25% stake in football club Manchester United has been approved by the Premier League. However, the Football Association is yet to greenlight the takeover.
THE DAILY DIGIT
$10 billion+
The estimated revenue generated by mobile game Clash of Clans in the last ten years, according to Supercell CEO Ilkaa Paananen (Financial Times)
FWIW
Show and tell: A bag is just a bag… until someone labels it “Made in France”. Then it’s a luxury bag, a symbol of exquisite craftsmanship. That’s what the reality is, as per MSCHF, a fashion group/collective with a cult-like following that doesn’t believe in mass production and does limited edition ‘drops’. Their latest drop is called the Global Supply Chain Telephone Bag, a dig at the connotations attached with places of production. It’s made and designed in four factories across different countries. It’s priced at $650. The gesture is nice and all… but the bag? Eh.
Style me up!: They say dress for the job you want. That age-old maxim seemed to have lost its relevance in the new economy when shorts and t-shirts replaced suits. However, as the new economy slowly ages, so do its inhabitants. They’ve climbed the corporate ladder and now need to look the part. So, what do they do? Hire a professional stylist. No, I'm not talking about high-end stylists prepping celebrities for red carpet events. These are stylists catering to the white-collar honchos and take anywhere from $3,000-10,000 to remake their clients' wardrobe. The clients can’t stop gushing about these stylists either, with many reaping the benefits of this change at work. Love, how men are literally in their Pretty Woman era.
Dream BF: The ultimate tech fantasy or nightmare, depending on how you feel about it, is here. We’re talking about AI boyfriends becoming a real phenomenon in China. Thanks to apps like Glow, Wantalk, Weiban, etc., the era of human-robot relations is mainstream now. Flocks of Chinese women are turning to AI-fueled chatbots made by the giants of China like Tencent and Baidu. These apps provide customisable ‘lovers’ with different avatars like chief executives, warriors and are thus accorded personalities. For many women, it’s an important distraction from loneliness and a tough economy. While the tech is far from perfect, it’s clear that the future will involve something like this. Maybe now’s the perfect time for a sequel to Her.