A thread on my experience and observations of the grocery delivery apps in India.

@Grofers @bigbasket_com @JioMart @flipkart supermart, @amazonIN and DMart Ready.

Live in Pune. So my experience is of this city. User experience may vary according to location.

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When a consumer company advertises only on biz channels and not on GEC and mainstream channels, you should be alert about the management's intentions.

#investing

There is no doubt that many new age businesses will do fantastically well for quiet a while.

But, will they turn out to be good stocks, is up for debate.

One needs to see how much of the growth has already been built up in the current price.

Risk-reward 🤔

Sugar Industry Insights (Feb 25, 2020)
Last few years sugar industry has been a beneficiary of government largesse. Sugar cycle turned in 2015. Post that there has been surplus production.

Government has helped the industry by various incentives like export subsidy, ethanol blending, allowing cane juice to ethanol conversion, msp, etc. UP and Maharashtra are the 2 major states in sugarcane plantations.

The 2 largest players in the world are Brazil and India. In Brazil sugarcane is used for ethanol a lot lot more than in India. Brazil is way ahead of any country in ethanol from cane.

US is the largest producer of ethanol in the world followed by Brazil. US uses mainly corn for making ethanol.

Indian sugar scenario: Sugar still constitutes 85% of revenue in sugar companies. So, essentially it has to do well for sugar companies to be profitable. We have had record production in last couple of years. Sugar opening stock at end of last sugar year was 14.5 mt.

Accidents happens when one doesn't look at valuations.

A supposedly platform stock listed in 2019. OFS price was 320 Rs. High of 6396 made yesterday.

Mcap crossed 1 lac crore.

Company was affected by CoVid so will talk a bit on pre-CoVid nos.

1/3

Sales of 2300 cr in FY20. NP 730 cr. Company has a monopoly given by the govt. Business is good and many extensions taking place, which will take time to bear fruit, if at all. But valuation-wise it had gone bonkers.

2/3

Stock corrected 40%+ in 2 days. This is what can happen when one doesn't heed valuations. And ignores the risks to the business. And only looks at blue sky scenario.

A good company may not be a good investment, at any price.

3/3

1/x The window we have been targeting for 2 months has officially opened... i Can not imagine a more textbook display of the power of Vanna at expiration as we saw on Friday. The capital building was overrun by an insurrection, but all that that meant was a bigger late day rally.

2/x that ended at ATH on the close. Between Gary the 🦍 & his RVol suppression & his hand off to late day Ivol compression & the Vanna index bid, the 🐻’s never had a chance... but Gary’s getting tired after 2 months battling complacency & Vanna’s 2 week vacation, 1 of her only

3/x 2 week departures of the year (a 5 week OpEx) is quickly approaching on 1/15 morning. That means she’ll be increasingly absent as she prepares for her trip. W/ a $59 1 week straddle & $50 1 day range on Friday, & another $30 overnight drop, it’s hard to see why you wouldn’t

4/x want to take a chance on a little long gamma at this juncture. Especially given the obvious warning signs coming from the steepening of the yield curve, underperformance of the Growth complex, complacency in sentiment & positioning, anecdotal signs of bubbles in BTC & TSLA,

5/x NTM the growing exuberance surrounding a fiscal stimulus deal near $2 Trillion. The wall of worry of 3 months ago is gone. The vaccine is being deployed, the election is resolved, fiscal stimulus was passed & w/2 Georgia 🍑 🍑, ever moar 🚁💰is on the way. But what happened

I interviewed 5 billionaires this week

I asked them to share their lessons learned on startups, life and entrepreneurship:

Here's what they told me:

A startup idea isn't "one" idea

It's a 10000 ideas, 100,000 decisions and 1,000,000 headaches

You will lose some friends. Kiss most of your high school friends goodbye

Certainties of life:

- Death
- Taxes
- Losing friends

A sign of wealth:

No longer needing an alarm clock to wake up

When in doubt, please don't send that angry email response

Wait 24h. Go for a walk

Angriness makes you drunk. Send emails sobers

I’m a firm believer that more & more entrepreneurial ‘builders’ will evolve their operating company into a HoldCo

Scaling initial capital light successes (like a service co) & redeploying cash flow into concentrated bets leveraging existing know-how, infrastructure, & expertise

Why?

- lower barriers than ever to building asset light/capital light co's
- existing co infrastructure makes acquiring/building another co easy
- more non-dilutive funding options available
- talented operators/investors can use brand, capital, & know-how to scale meaningfully

But first… what is a HoldCo?

It’s fancy term for “holding company” which is an entity that owns/controls the assets of other different companies

Most HoldCo portfolio companies operate autonomously... with their own team, balance sheets, systems, processes etc.

Major capital allocation decisions are performed at the “TopCo” (ie, primary owners of the HoldCo)

Most HoldCo’s are C-Corps due to structural/tax advantages, but sometimes you see them operate as LLCs

Distributions to shareholders are less common, w/ free cash flow used instead for new acquisitions, spinning up new products/services, or using for existing portfolio co needs

Young, early stage founder asked for any hiring thoughts - figured worth sharing with the twitter-verse if they can be helpful.

1a) Make people do the work they are going to do for you during the interview process.

1b) People talking about work and experience is basically useless, except to evaluate whether this job "makes sense" for someone at this stage of their life - do the dots connect or not? If you can convince people to do a contract project for a month first, even better.

2) Optimize for IQ/horsepower. Talent overruns experience in like 3-6 months and never looks back. If you love someone, but they are missing a skill, you're better off getting them to learn it than hiring someone more skilled but with less upside.

3) Optimize for low drama and ease to work with, in all ways. You want people who just want to get shit done and enjoy themselves, not people who want to bring their personal drama into the workplace.

4) People who went to the best state school in the state they are from, and were overqualified for that school, tend to be undervalued and have a great low ego/high execution/high IQ ratio. They have ivy league brains with middle class values.

#PolicybazaarIPO Long thread: There is monetary printing by RBI, there is lending by banks & finally there is the Indian IPO. “Foreign owned” company with ~1 Bn investment is selling “Indian” unicorn to “savvy” Indians for $ 6.2 Bn. Want to know how this printing works? Let’s go-

The basics: Rs 6017 Cr being raised by new shares (Rs 3750) & re-selling (Rs 2267). Face value Rs 2 offered at Rs ~1000 per share is one of a kind. Who decides the price? Examine the valuation ladder below.
With ~$ 150 Mn invested till 2017, we see $ 525 Mn rushes in after 2018

So, a company valued $1 Bn in 2018 & $ 1.5 Bn in 2019 by key investors like Tencent, suddenly “needs money” in March 2021. Falcon Edge “invests” all of $ 75 Mn in March at valuation of $ 2.65 Bn.
Enter IPO bankers a couple of months later & they value the company at $ 6.2 Bn

Why does PolicyBazaar need $ 75 Mn just 6 months before IPO & give away 2.5 times in returns? And it doesn’t even use that money as the B/S reflects appx Rs 1000 Cr in cash lying around.
What kind of a favor is that? Why do they need US investment bank for this just before IPO?

Notice 50% rise in shareholding of promotors here & a 1: 500 bonus share issue. After all, how do you print money & still keep share price at “reasonable” Rs 1000?
Without bonus issue in June 2021, each share would have costed Rs 50,000. Heard of circular valuation?