No more flash sales

Also in this edition: A decentralised Facebook, Online shopping grows, Japan may allow spectators at Olympics.

Good morning! There’s a chance you haven’t heard of Vini Cosmetics. But you have probably heard of their brand, Fogg. Its very annoying ad became a punchline to all conversations. Now KKR wants a controlling interest in the company and will value it at INR 85 billion. That’s a lot of money to smell good.

Anyway, on to the day’s stories.

  1. The Fed may have popped the tech bubble.

  2. Reliance’s AGM is expected to have more twists than an O’Henry story. 

  3. Maruti shrugs and raises its prices.

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E-commerce Gets Nailed

The Indian government has proposed major changes to the Consumer Protection Rules: 2020, which apply to e-commerce firms. Following are some of the notable changes:

  • All e-commerce companies are required to register with the Department for Promotion of Industry and Internal Trade

  • They cannot hold ‘flash sales’ on any goods or services

  • Companies selling imported goods must clearly identify and allow customers to filter by country of origin

  • The companies shall be responsible for “fallback liability” where sellers fail to deliver goods or services

  • No entities that are related to a marketplace can directly sell on its platform

  • Tighter rules will be applicable for private label products which are associated with the selling platform.

  • Every e-commerce firm will have to appoint a Grievance Officer and a Chief Compliance Officer, somewhat similar to those for social media platforms under the new IT Rules.

The stakeholders have been given until July 6 to submit their views on the proposal.

Some backdrop: Many trade-unions, especially the Confederation of All India Traders, have repeatedly called for the reining in of e-commerce firms. Two of the biggest e-commerce firms, Amazon and Walmart-owned Flipkart, are currently facing a probe from the Competition Commission of India.

Earlier this year, an explosive Reuters investigation claimed to expose Amazon’s efforts to dodge Indian regulators. Just last week, The Guardian reported that Cloudtail — a joint venture of NR Narayana Murthy’s Catamaran Ventures and Amazon India, and one of the biggest sellers on the platform — was slapped with an INR 560 million tax notice.

There were signs that the screw was turning. Now it appears a nail has been hammered in.

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Gear Up To Pay More

Maruti Suzuki, India’s largest carmaker, has announced a hike in vehicle prices starting July. Increasing input rates are seemingly behind this decision. This is the third price hike this year from the market leader, after increases in January and April.

Costly inputs: This trend is not exclusive to automobile manufacturers. Companies across industries are preparing to push up prices as it gets more expensive to source raw materials. For instance, the costs of metals like aluminium, lead, nickel, and tin have rocketed as much as 55% in the last six months. Crude prices have also been on an upward trajectory. Chemicals that are used to make paints, detergents, soaps, and other consumer goods, are also getting pricey.

Everybody pays: This means everyday consumer goods and even consumer durables like fridges and TVs will become expensive. Hindustan Unilever has already raised the prices of its products in the last two quarters. Asian Paints has also said it will push prices up by 2% in July.

Add all of this to depressed spending capacity and companies may need to brace for lower sales.

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Is The Bubble Ready To Pop?

In 2020, as the pandemic came to dominate our lives, Big Technology companies, the Amazons, Googles, Facebooks, and certainly Netflixes, weren’t complaining. Their stocks bucked the wider trend and did particularly well. Why? Because they were less affected by the pandemic. The year ended with Big Tech making up nearly 20% of the S&P 500, and most of it came together.

Six months into 2021, that might be changing. A Wall Street Journal report highlighted how some companies, particularly Facebook and Alphabet (Google’s parent) have diverged from the rest of the Big Tech flock in recent times. While Facebook and Alphabet enjoy the advantage of being an advertising duopoly, Netflix got a boost from people practically staying at home. This explains part of the divergence in stock performance. There are other reasons too. One, as the US economy opens up, investors are looking beyond technology across industries. Two, the fact that Big Tech is attracting the levels of scrutiny isn’t quite helping its cause. Indications that the Federal Reserve may revise interest rates by late 2023 or even earlier likely set off new dynamics in capital allocations.

Meanwhile: The Fed’s move to taper bond buying that was pumping liquidity into the system may change the momentum of markets across the world. Easy money helped the flow of investments into myriad assets in the past two years. The exuberance was evident in private equity and venture capital as well with investors pumping money into growth-stage startups. The fact that venture capital has made a $17 billion bet on cryptocurrency despite its legal status being on an unsure wicket tells its own story. 

The Signal

Has the exuberance created a bubble that might be at risk of popping because of the Fed action? Perhaps. Valuations in the public and private markets have gone through the roof. Just for perspective, Tesla’s stock price went up over 600% since the early days of 2020. Meanwhile, 16 unicorns were born in India in the past six months, most of them supported by Silicon Valley venture capitalists. A correction may be on the anvil. Investors will certainly be rethinking strategy.

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RIL’s Big Fat Corporate Jamboree

Reliance Industries (RIL), majority-owned by Asia’s richest person Mukesh Ambani, will hold its much anticipated annual general meeting on June 24. Corporate circles and stock markets are abuzz with speculation that Saudi Aramco chairman and Governor of the Kingdom’s wealth fund — Public Investment Fund — Yasir Al-Rumayyan may join the Reliance board ahead of a $15 billion deal between the two companies.

Gadgetry: RIL, India’s most valuable company by market capitalization as of June 21, is also expected to launch an affordable 5G smartphone and laptop. As always, there is also speculation of a handsome dividend and a bonus issue.

Mega event: The company, known to hold blockbuster AGMs, is organizing it online, the same as the last. Over 300,000 concurrent viewers across 42 countries and 468 cities had watched the virtual corporate event in 2020. Mukesh Ambani’s father Dhirubhai had once held an RIL AGM at a sports stadium in Mumbai with over 12,000 enthusiastic shareholders in attendance.

Deals galore: Although a potential deal with Aramco where the Opec heavyweight would pick up 20% in the refiner was first announced in 2019, the Covid-19 pandemic reportedly delayed it. In the past couple of years, Mukesh Ambani has been on a deal-making spree reducing the debt burden of his oil-to-ecommerce conglomerate and getting global players in futuristic businesses as partners. RIL sold a 49% stake in its fuel retailing business to BP for $1 billion. The company also sold about 33% stake in its digital platform Jio to a clutch of multinational giants, including Google, Facebook, General Atlantic, KKR, Abu Dhabi Investment Authority and Qualcomm.

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This Is Not A WhatsApp Forward

Scientists have managed to successfully grow liver tissue in the lab, complete with blood vessels. The tissue survived for 30 days. Even though this sounds like a WhatsApp forward, it isn’t. It was a part of NASA’s Vascular Tissue Challenge.

What: In 2016, NASA had announced this competition with hopes of finding teams that could create “thick vascularized human organ tissue in an in-vitro environment”. The agency has managed to find two such teams named Winston and WFIRM, both from the Wake Forest Institute for Regenerative Medicine.

How: The teams used 3D-printing techniques. Their approaches differed in the way vascularisation is achieved. Vascularisation is how blood vessels are formed inside the body. This impressive achievement pushes NASA a step closer to printing organs in space.

Why Space: Simply because gravity here is not our friend. It doesn’t let the good scientists reproduce complex three-dimensional tissues in the lab, but that can happen easily in weightless conditions. That’s why scientific experiments in space are so important.

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What Else Made The Signal?

Online shopping: There are now 23 million users in India who shop for groceries online, twice the number in 2019, according to a report by RedSeer.

Money, money, money: Progcap, a startup that provides last-mile retailer financing solutions, has raised $25 million in a Series B funding, led by Tiger Global and Sequoia Capital India.

Face-block? Billionaire real estate mogul Frank McCourt is pouring $100 million into Project Liberty, a blockchain-based alternative to Facebook, to reform social media.

Let the games begin: Japan is allowing domestic spectators to attend the Tokyo Olympics. Crowds will be allowed up to 50% of a venue’s capacity, unless the pandemic situation worsens.

High power: Tamil Nadu has engaged Nobel laureate Esther Duflo, former RBI governor, Raghuram Rajan, former chief economic advisor, Arvind Subramanian, and former finance secretary, S Narayan as advisors.


Fun Signals

Culinary affairs: American filmmaker Andrew Rea, popular for his YouTube culinary channel Babish Culinary Universe, recently turned the classic French toast into a boozy affair. It is inspired by the Mad Men episode where Don Draper's daughter cooks him a French toast and douses it with rum. Read here about Rea’s cooking adventures.

Written in the stars: A Nazi German scientist named Von Braun had predicted that an ‘Elon’ will take humanity to Mars in his 1953 book ‘Mars Project’. Well, Elon Musk is doing just that in the next few years. What do you know? It was predestined.

What’s hot? Fossils! Last month, auction company Bonham sold a tyrannosaurus tooth for $11,475 and a double butterfly in amber for ~$38,000. An ancient shell that over 70 million years ago housed a now-extinct creature is going up for sale this year. The natural history market is hot in America. Tell us, would you like something 50 million years old for your birthday?

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