The Red Day of Losses & More

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The Red Day of Losses

Yesterday, history was made. Unfortunately not in the most happy circumstances. In it’s 17 years of listed history, this turned out to be the first quarter when Maruti Suzuki announced a loss of Rs. 249 Crores. As per management, there were almost just two regular weeks of work with production starting slowly in mid-May with all safety protocol in place.

There’s more: With a 71% YoY drop in units sold and a 68% drop in revenue, TVS Motors was also in the red. For the April-June quarter, the company announced a loss of Rs. 139.1, almost a mirror reflection of their profit (Rs. 142.3 Crore) in the same quarter last year. Then there was Ceat with a better than expected quarter, considering only a 36% revenue shrinkage and a Rs. 35 Crore loss.

Wait for the worst: This red parade ain’t over yet. Yesterday’s numbers brought out yet again that aviation is really going through a crisis of survival. India’s most profitable airline Indigo announced it’s result showcasing a 91.9% drop in operating revenue YoY to a net loss of Rs. 2844.4 for the quarter.  Indigo CEO Ronojoy Dutta made the point on the call that fare caps extended by the government till November 24, is an additional pressure. On the other hand, Spicejet reported it’s highest ever loss of Rs. 807.07 Crores. But, there is a catch. This number is for Q4 FY20 which ended in March and had only about 10 grounded days. In fact, auditors for the company have now raised a concern at the airline being a “going concern” or in simpler terms whether it will survive.  

A happy partition

Now, get ready to experience the feel of a limousine – like partition from the driver in our humble 3-wheeler Autos. Uber India and Bajaj Auto have partnered with 1 Lakh auto drivers to install a transparent, plastic sheet safety partition just behind the driver seat. Not just that, they will also equip these drivers with safety kits including face masks, hand sanitisers and vehicle disinfectants.

Friends with benefits: This is a partnership that is beneficial to all three players – Uber India gets people to trust the very visible measures, Bajaj Auto gets their product back on the road and of course the auto drivers get help in making public transport feel safer again. This is in continuation to the 20,000 premier sedans where Uber India plans to install these partitions. While it is still in an experimental stage, partitioned public vehicles could become a more accepted element in the “new normal”.

What else is Uber up to? Nothing unheard of, really. The usual coronavirus stuff. Cut down 25% of the staff, told the Mumbai staff to work from home till December and then went on to shut their Mumbai office altogether. It’s also doing some introspection and taking tiny, tentative steps in the business of B2C and B2B logistics, which could be an opportunity to balance out the hit to their core ride hailing business.

Do you trust these four giants?

Wednesday saw a historic anti-trust hearing with the four big tech CEOs – Sundar Pichai of Google, Mark Zuckerberg of Facebook, Jeff Bezos of Amazon and Tim Cook of Apple – questioned by the Congress on their predatory and monopolistic practices. Some allegations included squeezing control of a distribution channel like ads or ecommerce or apps, using data and ideas from other companies to kill potential competition and unfairly using their own platforms to make themselves bigger with sometimes predatory pricing.

What did they have to say for it? While the four of them submitted opening remarks the previous day, most of what they said sounded like stalling politically correct responses. Tim Cook was grilled sparingly probably because Apple’s presence and it’s hold through app store is not as invasive in our lives as the other three. The Congressmen were prepared with instances like internal emails and partner interviews. This article from Verge is a nicely done, detailed piece about the hearing which also gives a window into some of the unfair practices adopted by these companies. These include the policies adopted by Amazon in their private label business by using third party seller data, Facebook acquiring potential competition, Google stealing data from small businesses and Apple blocking apps from it’s store where it sees them as competition.

What next? While the committee will publish a report which will drive the way forward, the concluding remarks by David Cicilline summed up the hearing quite well – “This hearing has made one fact clear to me: these companies as they exist today have monopoly power. Some need to be broken up, all need to be properly regulated and held accountable.”

IN SNIPPETS

Unlock 3.0: Late last evening, the government announced Unlock 3.0 which lifted the restriction on movement of goods and individuals at night as well as intra and inter-state. However, everything is not suddenly open. Metro rail, cinema halls, swimming pools, entertainment parks, theatres, bars, auditoriums and assembly halls continue to remain closed atleast for the month of August.

Myntra goes beyond India: Yesterday, Myntra announced the launch of it’s foray into Middle East (a market expected to triple in size by 2022 to $28.5 Billion) in partnership with Emaar group’s two ecommerce platforms – Noon and Namshi. The collection that they are entering the market with? Work-from-home wear! Apparently it’s a thing, or so says Myntra.

Two bad boys face off: Very rarely do you see two entities known to make news for the wrong reasons lock horns like this. Yesterday, Anil Dhirubhai Ambani Group or ADAG saw it’s big headquarters building in Santacruz East and another building at Nariman Point (both in Mumbai) possessed by Yes Bank for non-payment of loans amounting to Rs. 2892 Crores.

Rolls-Royce plans share issue to bolster finances: British aviation engineering company (no, luxury cars is not their main business), Rolls Royce plans to raise 1.5 Billion GBP through a rights issue with discounted new shares to existing holders, to make up for the hit the business is taking from the pandemic.

Cameras to medical imaging is the new engineering to MBA: Trump administration plans to lend $765 million to Kodak (which filed for bankruptcy 8 years back) for using it’s existent infrastructure to manufacture ingredients for generic drugs instead. Much like it’s erstwhile competitor, Japanese company Fujifilm which made the shift in 1986 by acquiring a medical diagnostic imaging company. Healthcare now makes up 43% of the company’s revenues. Olympus also recently announced their moving away from the camera business to solely focus on diagnostic imaging business.   

MARKET PULSE

Bears gripped equity market as investors booked profit in Reliance Industries and auto industry seemed to give a picture of doom and gloom.

US Dollar also remained pretty flat on fears of a second wave.

The only green in a sea of red was gold, yet again. Although some industry players are beginning to fear whether it has gone too high, too soon.

WILD CARD

The annual hajj which attracts 2-2.5 million pilgrims over 10 days, has a different look in the times of coronavirus. For the first time in years, the floor is visible since only a total of 10,000 people will be performing the haj with a 5-feet distance between each other. All pilgrims were from within the Kingdom, chosen by an online vetting process.

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