Tuesday, 15th September ’20
Good morning, welcome to TMT Tuesday. Retail inflation stood at 6.69% in August. This is a drop from the former 6.73%. Now the best cash and fixed deposit schemes give us an interest of 5-6%. The obvious equation tells us that money standing alone is money diminished. That’s why understanding finance becomes critical. At the same time, it is imperative to understand markets have consistently beaten inflation by a large margin.
So, is stock markets a better form of investment? Yes, it is according to Peter Lynch. Here are a few words of wisdom from Peter to kickstart our day,
People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.
MARKETS
Markets: The markets started strong on Monday before waning off due to the selling of banking and finance stocks and a few FMCG stocks. Tech stocks gained due to the management commentary by HCL. In the US, the stocks surged due to the few multibillion-dollar deals and the news of the rapid development of the COVID-19 vaccine. The near-term negative trend will continue to remain active for the market.
TECHNOLOGY & INNOVATION
- Dream Sports, the parent company of Dream11, has secured fresh funding of $225 million from Tiger Global Management, TPG Tech Adjacencies, ChrysCapital and Footpath Ventures. The secondary investment has valued Dream11 at about $2.5 billion.
- Japan’s SoftBank Group said Monday it is selling British chip designer Arm to US chip company NVIDIA for up to $40 billion, potentially creating a new giant in the industry. This will propel NVIDIA to the forefront of the semiconductor sector.
- The European Commission has begun testing backend infrastructure that’s needed to make national coronavirus contacts tracing apps interoperate across the bloc’s internal borders. It will developed and set up by T-Systems and SA.
WHAT ELSE IS COOKING
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- Govt seeks Parliament nod to infuse ₹20,000 crore in PSBs via recap bonds: The Union finance ministry on Monday sought Parliament’s approval to infuse ₹20,000 crore into public sector banks through recapitalisation bonds. The step assumes significance as capital infusion will offer support to state-owned lenders to handle the country’s deepening covid-19 crisis that has put borrowers under pressure, increasing the threat of higher non-performing assets. Capital infusion through recapitalisation bonds, however, will not impact fiscal deficit in the current financial year as there is no cash outgo.
- Japan ruling party elects Yoshihide Suga as PM successor: Japan’s ruling party on Monday elected chief cabinet secretary Yoshihide Suga as its new leader, making him all but certain to replace Shinzo Abe as the country’s next prime minister.A powerful government adviser and spokesman, 71-year-old Suga is seen as promising stability and a continuation of Abe’s policies.
- Infosys to acquire Europe-based GuideVision for 30 million euros: Infosys Ltd on Monday said it has entered into a definitive agreement to acquire Europe-based GuideVision for up to €30 million (approximately $35 million) to augment its Cobalt portfolio of cloud services and further strengthen near-shore delivery presence in the European region. GuideVision’s training academy and near-shore capabilities in Czech Republic, Hungary, and Poland, and presence in Germany and Finland will strengthen Infosys’ ServiceNow capabilities for its clients in Europe.
BUSINESS LOUNGE
The Story of a Royal Ride
What is the best mid-size(250cc to 750cc) in India? Ask anyone and the answer would be Royal Enfield. From one of the best bikes to a stage when the business was about to be shut, and then again a market leader, the journey of RE hasn’t been an easy ride but then the distance covered was totally worth the mileage.
Started in 1892 in England by Eadie manufacturing company RE became the bike of choice for European countries. Seeing the phenomenal success during World Wars Russia ordered RE bikes for its personnel. The British authorities also signed a big contract with them for military motorcycles.
They entered India in 1949 and partnered with Madras Motors in 1955. The Indian government decided to use these bikes for the army and police personnel. After incurring heavy losses, RE England shut down and RE India was bought by Eicher motors to continue operations in India. After incurring losses for 5 years Eicher motors decided to shut down operation of RE in India too.
This is when Siddhartha Lal,(the son of Vikram Lal, the CEO of Eicher motors) came in the picture. He insisted on saving the bike business. Due to his foresightedness, Siddhartha stopped Eicher’s 13 out of the 15 business to focus solely on the trucks and bike business. In 2008, Eicher’s truck business saw a success overhaul due to their partnership with Volvo whereas RE continues to evolve into a global brand. Many motorcycle models like Continental GT, Thunderbird, Bullet Electra, etc. were launched. Siddhartha himself rode his RE for miles to engineer it better for the users.
Eventually, RE surpassed Harley Davidson in global sales in the mid-bike segment. They continue to be a symbol of pride for the youth with the multiple off-road rallies, adventurous rides, and the biker clubs. Today, Royal Enfield generates 80% of the revenue of Eicher motors.
TMT VARSITY
Private Equity
We have commonly heard the terms PE/VC investments when it comes to startups. Let’s study in detail what Private Equity is. PE refers to investment funds that buy and restructure the companies that are not publicly traded. Strictly speaking, PE is a form of equity that consists of equity securities and debt of the operating companies.
PE investments are provided to the firm by PE firms, Venture capitalists, and angel investors. All of them have their own criteria of investment and strategies but they provide working capital for expansion, new product development, or restructuring of the companies’ operations and management.
The various strategies of Private Equity include
- Leveraged buyout: Here, the business units or the business assets are acquired using financial leverage.
- Venture capital: This capital is usually given to a less mature company like a seed or early-stage funding.
- Growth capital: This form of capital is usually given to more mature companies for expansion, entering new markets, or for an acquisition without a change in control of the business.
- Distressed investment: This is for special situations where a company is distressed financially. This could be a “Loan-to-own” or a form of rescue financing.
Written by Kumar Sourav Mohanty, Akansh Bhatt, and Shashank Dobhal
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