Too Hot to Handle?

Markets this week?

The March quarter earnings season is shaping up to be a tough test of investors’ resilience. Expectations have so far run ahead of earnings.

Minutes of the RBI rate-setting committee's last meeting this week showed that most members were waiting for a sustained moderation in inflation. So a pause was "tactical" but not a pivot at the moment.

Meanwhile, it's official now. India is now the world’s most populous country in the world, surpassing China. The timing seems to be perfect. China’s population is shrinking and industries are looking to cut their dependence on the Chinese economy. Plus Beijing faces diplomatic tensions with the West. Time to seize the moment.

Let's now give you a heads-up on some of the important news that made headlines this week.

Too hot to handle?

Threat level: Dangerous:?From unseasonal rains, thunderstorms, and hailstorms in March, India now stares at a severe heatwave which is expected to get worse in the coming summer months. The rising temperature puts 90% of our 1.4 bn strong population at risk. Deaths, illnesses, and crop failures are just the tip of the iceberg. Indis is however not alone.

As the mercury crosses 40°C in India and Bangladesh, it has breached 45°C in Thailand—a record for the country. Temperatures in China also exceeded 35°C. Stifling heat has set in unusually early this year. Climatologists have labelled this the “worst heat wave in Asian history”.

Are we ready?

Many states do not have a heat action plan. Delhi does not have a plan at all. Earlier this week, 12 people died from heatstroke and many others were admitted to hospital after attending a government-sponsored event in an open ground in Navi Mumbai. Photos of the event showed thousands sitting directly under the sun with no roof or covering to offer shelter. Despite Delhi simmering under record temperatures, very few people are seen carrying umbrellas. Clearly, we are still not taking the heat seriously enough.

Our Take

At what cost:India is one of the countries most exposed and vulnerable to heat. Hot days and nights have risen significantly, and are projected to increase between two and four-fold by 2050. Heatwaves are also predicted to arrive earlier, stay longer and become more frequent.

The increased heat is going to put an unprecedented burden on agriculture, the economy, and public health. About 75% of India’s labour force is heat-exposed and could cost 2.8% of GDP by 2050. IMF predcits that India will contribute ~13% to global growth until 2028. But, until we get our heat action plans in order, though, our economic ambitions will remain just a pipe dream.

World

Apple climbs up the value chain

Another step forward:?Apple partners with Goldman Sachs to introduce a new savings account paying 4.15% interest, more than 10X what US banks are paying (even higher than what Indian banks pay!). The savings account will be available for Apple Card users in the US. Its like Apple saying, “Hey, you trust us with your sensitive information already, why not let us store your cash too."

An ecosystem:?4 years back the company launched Apple Card (also in partnership with GS). Then, just last month it rolled out Apple Pay Later, which lets customers spread out payments on purchases up to $1,000 over 6 weeks. And now a savings A/c.

Basically, if you buy an iPhone from Apple, and use your Apple Card with Apple Pay, the company will give you 3% cash back on the purchase. Then that money will be automatically deposited into your Apple Card savings account, which will earn 4.15%. A pretty nice closed deal.

But, like with everything else, there is a catch here. You can only get an Apple savings account if you have an Apple Card. Apple will automatically deposit the cash back earned from using the credit card.

Is Apple then turing into a bank?:?As our friends at Moneyfitt explains, NO, they are not. And why would they want to get into such a regulated biz? Apple is already 6x bigger than JP Morgan Chase, the biggest bank in the world and earns far better returns on their equity capital (ROEs). The money in this new savings account will actually be sitting at Goldman Sachs.

If today you go about asking 1,000 random people on the street who they trusted more, their bank or Apple, I bet a lot of them would say Apple (especially after the whole Silicon Valley Bank fiasco)

Our Take

The new savings account or the Apple card are all eventually tied to the Apple iPhone. The tech giant is adding more and more services tied to its flagship iPhones. Expand its ecosystem and create lock-in with its customers = Make the iPhone an indispensable part of lives of its customers.

TECH

Coca-Cola Thriving

Thriving on:?Coca-Cola made its first investment in an Indian company by acquiring a 15% stake in Thrive, a food delivery SaaS platform. This is the second big investor for the startup after Jubilant Foodworks (Dominos) acquired 35% of Thrive for ?24.75 cr in 2021. This stake is now reduced to 29.75%.

Why so much interest:A barely 3 year old startup attracting so much attention, wondering why? A food discovery and delivery platform, Thrive partners with restaurants, provides them tech support like digital menu, online orders, WhatsApp ordering and delivery. They also offer tools for restaurants to build their own sub-portals on its platform and get direct online orders. It has partnered with more than 14,000 restaurants in 80 cities and competes directly with Swiggy and Zomato. But it is still far far smaller than them: Swiggy (250,000 partner restaurants) and Zomato (200,000+). Then why the fuss?

Low commission:?While the duo are infamous for their high commission (18%-25% per order), Thrive charges just 3%. Thats because Z + S also does marketing for the restaurants.

More control?for the restaurants as customer data will now rest with the restaurants —something that has restaurants been fighting with Swiggy and Zomato. Now you get it!

Logic to everything:?Meals are a critical consumption point for the cola giant and hence this strategic investment. Coca-Cola have been at war with its arch rival Pepsi in food brands partnership. While Burger Singh, Biryani by Kilo and Wow! Momo have partnered with Pepsi, Coca-Cola has joined hands with McDonald’s and Wendy’s.

Our Take

Thrive is too small to break the duopoly yet. But it is emerging as an important player in the food delivery space. No wonder bigger players are grabbing a share. But whether it can chart out a road to profitability is yet to be seen.

Hope you liked reading this week’s wrap. See you next week. Till then, hope you have a great weekend!