Vodafone finally connects

Also in this edition: 21st unicorn of 2021, Volkswagen is charged up, Bajaj gets steelier.

Good morning! Sequoia Capital has started to cash out its big bets. An Entrackr report states that the VC firm made a partial exit worth $230 million from Pine Labs during the last round. All of this is being done as the fintech company inches towards an IPO.

On to the day’s big stories:

  1. India is oiling the wheels of business. Finally. 

  2. Amazon wants More. It wants Go.

  3. Can Apple be an indicator?

The Market Signal

Stocks: Indian benchmark indices closed a volatile day in the green, while the broader market underperformed. July passenger vehicle sales saw a growth of 63% over the previous month. But concerns over US and India inflation figures due on Wednesday and Thursday respectively kept market spirits in check.


Amazon Moves Closer To Go

After Amazon Pantry and Amazon Fresh, the e-commerce giant is trying to worm its way into groceries once again: online orders and offline pick-ups. Banking on More stores, Amazon has piloted the model in Bengaluru, where customers can buy their orders on the app and pick them up in two hours at the store. 

Why is it important: This is a breadcrumb. Amazon is sampling order-and-pick-up to test India’s readiness for its ultimate game: Amazon Go, a cashierless store. 

In perspective: It’s smart to look at retail as a whole when you analyse what Amazon is doing in India. In July, DMart declared record Q1 results with profit doubling in a matter of a year. This is a clue to India’s shopping habits. Despite all available opportunities, it still prefers to shop in a store. Amazon wants the best of both worlds. Use India’s propensity to shop offline with the ease of doing transactions online. The answer: transactions and a ton of data. What’s not to like?

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Saving Private Vodafone-Idea

It looks like only taxpayer money will save Vodafone-Idea (Vi). 

Good asset: The government is in talks with Vi’s bankers for a solution to keep it afloat. They wouldn’t mind converting its debt to equity but say it will not be a sustainable option. But it’s not yet a bad asset in their books because it has not missed any repayments. Yet, it needs funds to continue operations. They see equity infusion as the only viable option. 

Owners Vodafone UK and Kumar Mangalam Birla have thrown up their hands. They want the government to save the company. 

Bankers, in turn, want the government to help. It stands to lose more if Vi collapses, they argue. The telecom sector as a whole is under stress and the government wants banks to help relieve the pain. Lenders stand to lose nearly INR 1.8 trillion if the company folds up.


Foreign Investors’ Week

Last week India may have laid the ground to move up the global Ease of Doing Business (EDB) rankings. It may not be immediately apparent but a Supreme Court judgment and the withdrawal of a law would help significantly improve the business climate in India for foreigners.

Rules are rules: On August 6, the Supreme Court upheld the sanctity of arbitration written into contracts. US retailer Amazon won an emergency arbitration award against Future Retail which tried to sell its assets to rival Reliance Retail. Future, which had earlier signed a contract with Amazon expressly forbidding it from selling to Reliance, treated the award as invalid.

Cornered abroad: The previous day, the Parliament had abolished a retrospective tax law in a hat-tip to the Scottish oil explorer Cairn Energy and UK telecom operator Vodafone which, despite winning international arbitrations, could not get India to pay. An aggressive Cairn had gone after India’s overseas assets, laying claim to Air India’s aircraft in New York and getting a French court to seize Indian properties in Paris. Another company, Devas Multimedia, too had followed in Cairn’s footsteps.

The Signal

One of the key parameters by which the World Bank ranks countries for ease of doing business is enforcement of contracts. The ranking reflects the strength of a country’s legal framework and robustness of the judicial system. Between 2014 and 2020, India improved its EDB ranking from 142 to 63. On the enforcing-contracts indicator, however, it managed to move up only a few notches during the same period, from 186 to 163. The judiciary and Parliament have now signaled that Indian governments and businesses will honour contracts and international rules, come what may.

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Chinese Crackdown Continues

After China came down heavily on its tech companies, many daring investors had rerouted their investments into hardware stocks. It appears to have been in vain. Chinese chip makers’ stocks tumbled yesterday after a warning in state media to the industry’s speculators. This follows a probe into possible price manipulation by auto-chipmakers launched earlier this month.

Yes and no: Despite the crackdown, ByteDance is reportedly going ahead with its Hong Kong IPO plans, as per Financial Times. It last raised $5 billion in December 2020 at a valuation of $180 billion and is looking to list at the end of this year or the first quarter of the next. Chinese gaming giant NetEase has taken the opposite view. It postponed the launch of a $1 billion Hong Kong IPO for its music streaming arm, Cloud Village.

Elsewhere, China has punished dozens of officials for failing to contain the fresh outbreak of Covid-19.


What Big Tech Foretells

Economic activity has many indicators but the sheer amount of data collected by Big Tech gives them a good idea of what to expect. It could then be useful to look at their decisions for a peek into what’s coming. 

Activity rises: Mobility in India picked up sharply in the first week of August, with Google workplace, retail and recreation, and Apple driving index rising by 7.4 percentage points, 5.3 percentage points, and 6.7 percentage points, respectively.

Biding time: Yet, Apple has delayed the launch of its India store. The company shut its stores last year when Covid-19 was still limited to a few cases. The Wall Street Journal then noticed that Covid-19 cases surged a few days after the stores closed. 

Other Big Tech signs of the pandemic’s long shadow are Amazon letting staff stay at home until January 2022 and Google approving 85% of its employees' WFH requests or relocation once offices open. 

No vaccine, no office: Facebook, Microsoft, and Google have also issued a vaccine mandate, meaning only vaccinated workers can return to office in September.

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What Else Made The Signal?

VW batteries: Giving Tesla competition, Volkswagen is now on track to make its own EV batteries.

You’re fired: Alibaba has fired a manager accused of rape after an employee complained on an internal discussion board. Two other employees have resigned.

Friendship ended: The Bajaj family will buy out the Shah brothers from steelmaker Mukand, ending one of the oldest joint ventures in the country.

Silicon Valley 2.0: Google is building another Silicon Valley campus that will house five office buildings, with some portion dedicated to its hardware division.

Break up: Amazon and Narayana Murthy’s Catamaran Ventures will part ways next year, shutting down Cloudtail India, one of the retailers' largest local sellers.

Unicorn fever: Another ed-tech startup joins the unicorn club. After raising $185 million, upGrad’s valuation is now $1.2 billion.

No coal: New climate report seeks an end to coal usage, a key point on which India disagrees with others in global climate change talks.


FWIW

Messi hi-hi: After leaving FC Barcelona over the weekend, Argentine footballer Lionel Messi is arriving in Paris to possibly join Paris Saint-Germain which has extended him a two-year contract.

Back from the sea: Vikrant — India’s first indigenous aircraft carrier, which set sail from the Kochi port on August 4, has returned successfully from its maiden sea voyage. It will join the Indian Navy fleet in August next year.

Attack of the iceberg: The Titanic Museum in Pigeon Forge, Tennessee, has a 15-by-28-foot ice wall that’s made of real ice. In an ironic twist, a piece of the replica came crashing down last week and injured three visitors.

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