Read More on LongShorts on Transfin.

Transfin. Podcast E26: Glitch, Translate, NewTube

Professor S

LongShorts Mar 18, 2019

   We like to talk Business and Finance. Figured we should do it for a living.   Sunday kicked off the Festival/Dance/Carnival (you get the point!?) of Democracy. But we spent our time discussing:     The Troubles of Boeing   Boeing’s reputation has once again come into question following the recent Ethiopian Airlines crash that came barely six months after the Lion Air crash late last year. The proximity of these two crashes involving the same aircraft model has led to countries around the world grounding the Boeing 737 MAX. We discuss what this could mean for Boeing and how its competitors potentially stand to gain from the entire episode.   How RBI's Rate Cut Not Hitting your Loan has Something to Do with Your FD     Of late, mutual funds have witnessed an increasing churn and FD is emerging as the favoured asset class. One reason could be equities and riskier asset classes not performing in line with expectation. Another could be the slump in savings which has naturally incentivised banks to have a high deposit rate. Within this background we discuss why RBI's rate cut is not translating on ground despite multiple reminders from the Central Bank.      YouTube's Two Pronged Indian Foray   Google recently launched its YouTube Music, YouTube Music Premium, and YouTube Premium services in India. The ad-supported version of YouTube Music will be free, YouTube Music Premium will cost users INR99 per month, and YouTube Premium will cost INR129 per month. However, will YouTube's latest offerign for India be able to survive under thick competition from rivals such as Amazon Music, Apple Music, JioSaavn, Gaana and Spotify. Listen in.    More on the Comet Aircraft: de Havilland Comet   (We are now on your favorite messaging app – WhatsApp. We strongly recommend you SUBSCRIBE to start receiving your Fresh, Homegrown and Handpicked News Feed.)

Boeing 737 Max 8 Crash: An Escalating Crisis

Professor S

LongShorts Mar 16, 2019

Background: Less than six months after the crash of the Lion Air flight which killed over 189 people, Boeing finds itself in hot water yet again. This time around post the unfortunate crash of the Ethiopian Airline-operated aircraft last Sunday, which left no survivors.   Not the First: The Ethiopian Airline-operated flagship model 737 MAX 8 carrying 149 passengers aircraft heading for Nairobi crashed barely six minutes after its takeoff. The same model was involved in another crash late last year when a Lion Air flight from Jakarta crashed into the Java Sea killing all 189 passengers onboard. The proximity of these two crashes coupled with the questionable MCAS (Maneuvering Characteristics Augmentation System) anti-stall flight control system has put the spotlight back on Boeing.     Big Earner: The 737 MAX series launched by Boeing in 2016, was built with the aim of providing better fuel economy for short distance fights, in a bid to take on its rival - Airbus A320neo - a similar offering, which then dominated the market. The 737 MAX series has been the most popular of Boeing’s offerings with airlines around the world, having delivered 354 of the jets globally, and with 2,912 still on order. However, it needs to be noted that many of the orders in line may now have been put on hold or been cancelled in the aftermath of the tragedy.   Faulty System: As per the  US Federal Aviation Administration, at the center of both the crashes is the MCAS (Maneuvering Characteristics Augmentation System) anti-stall mechanism, a system that takes in data from various sensors to adjust flight parameters in order to ensure that the engines do not stall and the plane keeps flying.    After the first crash, it was found that the system could be triggered by erroneous data from sensors, which could have led it to operate in an unintended manner. Data from the second crash also shows evidence that faulty inputs from the system might have contributed to the crash. If investigations could conclusively prove that MCAS had a hand in the crash, all 737 MAX models would need to be grounded. This could mean serious trouble for Boeing for whom the 737 MAX series of aircraft have been the most successful. It has been estimated that Boeing’s more than $600bn worth orders for its 737 MAX models hang in balance as customers threaten to reconsider their purchases.     Pilots Unaware: Another grim picture is painted by the pilots who have previously flown the 737 and claim that the MCAS was not included in the training program, and that most of them came to know of the system only after the first crash. This would mean that pilots operating a 737 flight would not have had adequate knowledge or training to correct any deviation caused by the MCAS.   But the MCAS might not be the only malfunctioning component of the 737. Some pilots report that they had other issues with the plane concerning the autopilot system, which is independent of the MCAS. This could mean that there could still be some unknown variable other than MCAS which is affecting the aircraft.   Dire Consequences: In light of the incident, several countries including US, EU, China, Indonesia, India and Ethiopia have grounded all MAX aircrafts. Boeing is likely to be the most affected by the ban in China as more than half of the 737 MAX orders come from the country. Analysts predict that if investigations lead to grounding of all 737 models, Boeing could lose up to $5bn, which amounts to 5% of the company’s annual revenue. Ironically, Boeing stock had recently ridden to nearly a record high on the 737 Max’s early sales.   Meanwhile, rival Airbus stands much to gain from Boeing’s affliction, whose similar offering - the A320neo has had a better service history than the 737.   (We are now on your favourite messaging app – WhatsApp. We strongly recommend you SUBSCRIBE to start receiving your Fresh, Homegrown and Handpicked News Feed.)

Draft National E-Commerce Policy: Treading the Thin Line Between Regulation and Restriction

Professor S

LongShorts Mar 11, 2019

Backdrop: The government recently released a draft e-commerce policy for stakeholder comments, barely two months post rollout of its new FDI policy which shook the nascent industry, especially major players. The Draft deliberates upon a comprehensive framework aiming to preserve consumer interest by creation of suitable regulatory mechanisms.   However, like most policy actions, it walks on a fine line of managing citizen interest at the expense of creating a less-than-conducive regulatory environment for the industry at-large - one that may not allow the country to reap the maximum benefit from the rapid digitalization of the domestic, as well as the global economy.   Let’s Start from the Start: India’s burgeoning e-commerce market was valued at $38.5bn in 2017 and is estimated to rise to $200bn in 2026. Electronic commerce and data are emerging as key enablers and critical determinants of India’s growth and economic development, facilitated by cheap smartphones and even cheaper data.   Here’s a rundown of the key points:   On Point?: Six broad issues have been touched, including i) data, ii) infrastructure development, iii) e-commerce marketplaces, iv) regulatory issues, v) promotion of domestic digital economy and vi) export.   Data is the New Oil: There’s an overwhelming push for a robust administrative, regulatory and legal mechanism to control data flows. The word “data” itself has been quoted more than 200 times within the 42 page document. The principal case has been that an individual consumer/user who generates data retains ownership rights over it.   Viewed in conjunction to the Personal Data Protection Bill submitted to the government (for consideration by the Justice BN Srikrishna Committee on 27th July 2018), the policy at the least envisages to regulate cross-border data flow while enabling sharing of community data (data collected by IoT devices installed in public spaces like traffic signals or automated entry gates).     Breaking it Down:   No data collected or processed in India shall be made available to a third party or to other business entities outside India, for any purpose, even with the consent of the customer. Neither can it be made available to a foreign government, without the prior permission of Indian authorities. The document, however, is light on details around potential implementation mechanisms. Push for a three-year data localization requirement    Backbone: Development of data-storage facilities/infrastructure is another vital part of the value chain recognized.   Data centres, server farms, towers and tower stations, equipment, optical wires, signal transceivers, antennae etc. will be accorded ‘infrastructure status’ – facilitating access to longer maturity loans, easier lending terms, and even cheaper foreign currency funding through the external commercial borrowing route. An ‘infrastructure status’ also seeks to streamline the regulation of the sector. Budgetary support to be provided for the exploration of domestic alternatives to foreign-based clouds and email facilities   Supply Chain Transparency:    To streamline functioning of the e-Commerce sector under the FDI Policy, e- commerce websites/applications are required to ensure that all product shipments from other countries to India must be channelized through the Customs route. The Policy provides for integrating Customs, RBI and India Post systems to improve tracking of imports through e-Commerce. All ecommerce sites/apps operating in India must have a registered business entity in India as the importer on record or as the entity through which all sales in India are transacted. All parcels under the ‘gifting’ route to be banned, with the exception of life-saving drugs. This move comes in light of companies exploiting India’s “gifting” rule whrein personal gifts priced below INR5,000 are exempt from duties. Several red flags have been raised in the recent times over numerous “gift” deliveries being made to the same address and heavy 15 kilogram parcels being brought in with a declared value of just INR3,000.     Watchdog: Given the inter-disciplinary nature of the sector, a Standing Group of Secretaries on e-Commerce (SGoS) would be appointed to regulate the issues effectively. No standalone regulator proposed, so far.   Bonus: The Policy also proposes regulation of advertising charges in e-commerce (including social media platforms), to create a “level-playing field” for small businesses, who otherwise have to allocate an excessively high proportion of their budget and working capital to advertising to find their potential customers. In our view such a stance borders on regulatory overreach and we’d be very wary of its detailed wording, whenever it comes out.   In Conclusion   While the draft ecommerce policy means well for MSMEs and startups who seek to break through the competitive space, it is also likely to increases their compliance costs having to restructure means of how they store and share data.   Giants such as Amazon and Flipkart will likewise be hit in a significant manner, forced to make huge changes to comply with the proposed rules, even as they have often been known to find legal or other ways to circumvent potential downsides.   The enhanced cost of compliance may also have an adverse bearing on the rate of investment in Indian e-commerce, specifically on FDI inflows.   As for the consumers, the policy seeks to offer some respite with strong anti-counterfeiting and anti-piracy measures, pushing e-tailers to publicly share all relevant details of the sellers listed on their portals and ensuring speedy redressal of consumer grievances.   While the draft at multiple instances reiterates the need for the creation of a facilitative regulatory environment for growth of e-commerce sector, it falls short of providing specific details on implementations or addressing any operational nuances.     Moreover, the manner in which the policy addresses the question of ownership of personal data has been termed as “unusually parochial”, often directly at odds with the recommendations of the Justice Srikrishna Committee and the decision of the Supreme Court in its right to privacy judgement.   With the Department for Promotion of Industry and Internal Trade having kicked-off a round of stakeholder consultations on the draft policy, one can only hope that the future iterations don’t propose ham-fisted solutions to problems, rather push for a more definite and implementable framework.   (We are now on your favourite messaging app – WhatsApp. We strongly recommend you SUBSCRIBE to start receiving your Fresh, Homegrown and Handpicked News Feed.)

Transfin. Podcast E25: Hit, Herd, Hope

Professor S

LongShorts Mar 09, 2019

    We like to talk Business and Finance. Figured we should do it for a living.   Silver Jubilee Banter. Woah! Mind Explodes. Big day as very evident from this emphatic Podcast description! Ok, let's calm down now. Today we talk of:   How India Showed Up for America's Trade War - Can China Serve as a Lesson?   All eyes are set on India as it tries to replicate China's defiance against US tax policies by imposing retaliatory tax on $10bn worth goods entering the country form US. The move comes in response to Trump administration’s decision to terminate duty benefits on $5.6bn worth of exports from India.  However China who might have pushed too far now finds itself towing the US line. How much push back will Trump be willing to accept this time? Find out here.   Is Paytm First Really the First?   Paytm launched, what it claims to be the first aggregator of loyalty programs bringing different service providers under a single roof, in a bid to improve customer retention. But is it really the first such program to have been launched in India? Tune in to find out.   CCR5 and the London Patient Chronicles (Second Person to get Cured of AIDS, Allegedly!)   All hope may not be lost for AIDS patients, as a second individual dubbed as the English Patient has reportedly been cured of AIDS through a combination of bone marrow therapy and genetic engineering. We give our take on the potential perspectives of such a breakthrough and also the possible implications that might follow.   (We are now on your favorite messaging app – WhatsApp. We strongly recommend you SUBSCRIBE to start receiving your Fresh, Homegrown and Handpicked News Feed.)

Transfin. Podcast E23: Unmanned, Redeal, Rebalance

Professor S

LongShorts Feb 22, 2019

    We like to talk Business and Finance. Figured we should do it for a living.     While Sachin Bansal is out shopping, our capabilities are limited to talking. We wonder:     Why IndiGo and India Have Difficulty Hiring Pilots and Air Traffic Control Personnel?     Indigo last week announced the cancellation of 30 of its flights every day until March, on back of pilot shortage and operational challenges.     Indigo is India's biggest airline - expecting almost 100 new aircrafts in the next one year, translating to a requirement of 1,500-2,000 new pilots. However, the story has been that the domestic airline's capacity expansion uptick has not quite been in line with its hiring uptick, due to the which the airlines is obviously suffering.     We throw some light on the quandary that has hit the aviation sector in India.    What's the Point of Manipal's Redeal, Now for Medanta?   Manipal Group was a forerunner in the acquisition of Fortis Hospital, however, was outbid by Malaysian–Singaporean private healthcare group IHH Healthcare. Now, they are trying to get their hands on Naresh Trehan's Medanta.   We discuss the motive behind the deal and how it could play itself out.    How Govt is Managing its Deficit via Buybacks and Divis from PSUs/Regulators?    The RBI recently announced a transfer of INR28,000cr as interim dividend to the government. The government is additionally trying to push regulators such as SEBI, IRDAI to transfer more and more surplus back to the government.   We talk about how the government is trying to meet its fiscal deficit by looking at the non-tax side of the revenue mix.   (We are now on your favourite messaging app – WhatsApp. We strongly recommend you SUBSCRIBE to start receiving your Fresh, Homegrown and Handpicked News Feed.)

Transfin. Podcast E22: Coerce, Chase, Climb

Professor S

LongShorts Feb 15, 2019

  We like to talk Business and Finance. Figured we should do it for a living.   While briefly touching on RBI's rate-cut philosophy and then questioning what 'Customer Acquisition Cost' encompasses, we throw our take on:   Qatar's LNG Strategy and It's Push for a GST Catalyst   Qatar's exit from OPEC was propelled by its heightened focus on natural gas development. Against this backdrop, it has urged the Indian government to include natural gas in the GST regime.   Qatar being the single largest supplier of imported gas for India supplies over 8.5 million tonnes of liquefied natural gas to the country every year, and hence is pushing towards making it a more lucrative proposal for the end user.   Swiggy's Chase for Top-Line Growth   Following Ola's cue, Swiggy recently announced its foray into on-demand product deliveries with the launch of its newest offering Swiggy Stores, which will offer products from more than 3,500 stores including fruits and vegetables, kiranas and supermarkets, florists, baby care, health and supplements, among others.   We discuss how Swiggy's latest attempt to chase top-line growth is likely to play itself out.   Paytm's Pole Position in a Three-Horse Race   Paytm marched ahead in the UPI transaction race having clocked more than 221 million transactions in January. Rivals, Google Pay and PhonePe were at about 220 million transactions each.    We throw some light on the expanding payments ecosystem in India.    (We are now on your favourite messaging app – WhatsApp. We strongly recommend you SUBSCRIBE to start receiving your Fresh, Homegrown and Handpicked News Feed.)

Transfin. Podcast E21: Dichotomy, Disclosure, Dove

Professor S

LongShorts Feb 08, 2019

  We like to talk Business and Finance. Figured we should do it for a living.   Between WhatsApp & Walmart's "plans" to leave India (yeah, right!?) and chatting on the Super Bowl, we also touch:   RCom's Attempts to Game the System   The Telecom space, in general, is rather distressed in India. After kicking the can down the road for over one and half years, Anil Ambani's Reliance Communications, unable to sell its assets to Mukesh Ambani's Reliance Jio recently filed for bankruptcy.   However, with the delayed filing for insolvency, the government is staring at a potential loss of spectrum dues worth INR2,900cr. We discuss how RCom's insolvency is a classic example of the double standards omnipresent within India’s legal framework - the benefit of selective memory to create holy cows.   The Politics of Data   Business Standard recently quoted an NSSO survey which has not been made public yet, reporting that the national unemployment rate had reached a 45-year high in 2017.   Immediately after, Prime Minister's Economic Advisory Council Chief Bibek Debroy announced that the government will conduct a new national sample survey on employment, discounting the creditability of the data. The report has been the centre of controversy since.    We discuss how politics of data plays itself out in a country like ours.    The Dove has Returned to Mint Road   As per popular expectation, RBI yesterday announced a 25 basis points rate cut to 6.25% in a 4-2 vote, changing its stance to “neutral” from “calibrated tightening” .   We do a deep dive on the factors that facilitated this cut.     (We are now on your favourite messaging app – WhatsApp. We strongly recommend you SUBSCRIBE to start receiving your Fresh, Homegrown and Handpicked News Feed.)

Transfin. Podcast E20: Populism, Mismatch, Stretched

Professor S

LongShorts Jan 31, 2019

We like to talk Business and Finance. Figured we should do it for a living.   With one day to go before the 2019 Union Budget, some airtime on:   The Return of Farmers. Also the Middle Class   The Interim Finance Minister Piyush Goyal is set to present the Interim Budget tomorrow. We begin by discussing Nikhil's pre-budget piece which outlines the focus areas (agriculture and healthcare) and the royal ignores (private sector and middle class) of last year's Union Budget. Further, we talk about what has transpired since, and how that may shape tomorrow's Budget.     Zee and Subhash Chandra's Debt-Asset Mismatch   Zee Group on Friday suffered a loss in market capitalisation to the tune of INR14,000cr after shares of its entertainment arm crashed over 30% in light of a media report, which alleged links between its promoter company Essel Group and Nityank Infrapower and Multiventures, a company that is under the scrutiny of the Serious Fraud Investigation Office (SFIO) for deposits of over INR3,000cr after demonetisation. We analyse the factors that led to Zee's downfall.    How Diversification Fails when Stretched too Thin   We have time and again observed how promoter-led companies and startups tend to spread themselves too thin, ultimately leading to inefficient to execution. We deliberate on how an overt focus on topline growth can comprise one's financial moat.    (We are now on your favourite messaging app – WhatsApp. We strongly recommend you SUBSCRIBE to start receiving your Fresh, Homegrown and Handpicked News Feed.)

Transfin. Podcast E19: Stopgap, Upsell, Mimic

Professor S

LongShorts Jan 24, 2019

  We like to talk Business and Finance. Figured we should do it for a living.   While looking forward to the Republic Day weekend, we throw our take on:     The Interim Budget, and its Scope     With General Elections due in June, this year's budget will be demarcated as an Interim Budget - significant for the outgoing  government as it lays down the roadmap for the next few months. We discuss the popular expectations from the document to be presented on the 1st of February.      What Ola can bring to Lending?   Ola has been pretty aggressive in looking for its next leg of growth. Taking stock of the huge consumer grab on its platform, the ride-hailing firm is now seeking to push beyond food and pharma delivery. In this light, it recently applied for an NBFC licence. Additionally, the platform also plans to expand its short-term credit service, launch a credit card in partnership with a bank and sell insurance to its driver-partners as well as riders. What does Ola's foray into the payements ecosystem mean for the likes of Airtel Money and Paytm.    John Bogle is Gone...but Index Funds will stay     John Bogle was dubbed as the father of Index Funds. We discuss how an Index Fund is different from a Mutual Fund and how they can be a cheaper alternative for retail investors.    (We are now on your favourite messaging app – WhatsApp. We strongly recommend you SUBSCRIBE to start receiving your Fresh, Homegrown and Handpicked News Feed.)

Transfin. Podcast E18: Brextinct, Breaking Bad, Hotflix

Professor S

LongShorts Jan 17, 2019

  We like to talk Business and Finance. Figured we should do it for a living.   Jet troubles, India eases, Germany slows down. But we rather talk of:   With Theresa May's Brexit Plan Out...What Next?    Theresa May on Tuesday tabled her Brexit Deal which was turned down by the British Parliament by an overwhelming 432-202 votes against her. Following the historic defeat, a no-confidence motion was tabled against May by the leader of the opposition Labour Party, Jeremy Corbyn. As she survives the motion, we discuss what awaits May's rather ambitious and much delayed Brexit deal.    Did Huawei's Woes Push China to Seek Retribution?    The present narrative in China is nothing less than the plot for a Spielberg movie. The Chinese court recently sentenced a Canadian man who appealed his 15-year prison sentence for drug smuggling to death. The sentencing was rather quick and could be considered a hit back from the Chinese government after Canada last month arrested Huawei’s CFO Meng Wanzhou in Vancouver. We do a deep dive into the ongoing geo-political turbulence.    Hotstar Digs in Original Programming. But to What Extent?     Hotstar is unleashing a INR120cr war-chest to generate ‘original content’. We talk about how a foray into original content could be an attempt by Hotstar to hedge itself against any potential business risk profile due to the dearth of original programming and limited access to distribution rights.    Also: The Fabulously Useless Share Price Chart of Jet Airways here.   (We are now on your favourite messaging app – WhatsApp. We strongly recommend you SUBSCRIBE to start receiving your Fresh, Homegrown and Handpicked News Feed.)