Our Top Reports For Today
- <00:56> Foreign investors have pumped in $15 billion net this year, IMF ups growth forecasts.
- <03:22> In Unusual Step, Venture Fund Says It Will Work With The Govt To Uphold Shareholders Interests in Ed Tech Company Byju
- <05:55> Are IT Companies Geared To Deliver The Guidance They Promise?
- <15:04> India’s film exhibition industry braces for a perfect storm as Hollywood pipeline is set to slow down and Bollywood films don’t do as well.
- <27:34> A very good explanation of how AI works and why it is changing our lives?
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
Foreign Investors Are Pumping In Money
Foreigner investors may continue pouring money into Indian stocks, driving indices to new highs in an extended bull market, according to HSBC Holdings PLC quoted by Bloomberg.
Indian markets have seen around $15 billion in net foreign inflow this year, another $2 billion and it would erase last year’s record outflow, according to Bloomberg data. Thanks to which, the Sensex as we have been quite breathlessly recording in The Core Report, is up 15% from a March low, doing much better than many emerging markets.
Overseas investors are poised to be net buyers of Indian stocks for a fifth-consecutive month, the longest streak of inflows since March 2021. While domestic investors have become a formidable force in deciding the market’s direction, foreigners remain a big driver, a story which of course goes back to the early 1990s when foreign investment began to be counted.
If you want to know why, here is one fresh reason.
This is from the IMF which raised the FY24 growth forecast for India by 20 basis points to 6.1 per cent, citing the country’s stronger-than-expected growth momentum in the March quarter of FY23.
“Growth in India is projected at 6.1 per cent in 2023, a 0.2 percentage point upward revision compared with the April projection, reflecting momentum from stronger-than-expected growth in the fourth quarter of 2022 as a result of stronger domestic investment,” said IMF in an update to its 'World Economic Outlook' (WEO) released in April.
Meanwhile, the Sensex ended the day with a 29 points drop at 66,356. The Nifty ended 8 points higher at 19,680.
All in all a calm day at the markets.
It wasn’t so calm elsewhere though...
VC Fund Says IT Will Work With Govt To Safeguard Investors in Byjus
The police are at the door, what do you do? Bury the body first and open the door or open the door and say you will cooperate fully in the investigation that follows.
Venture investor Prosus which calls itself a global consumer internet group and one of the largest technology investors and operators in the world did something to this effect when it announced that it would collaborate with government authorities to safeguard the long-term interests of Byjus and its stakeholders.
Knowing how these statements would have gone back and forth between, among and around lawyers and general counsels, I would think the words are quite carefully chosen.
Prosus also said as a shareholder it would continue to assert its rights and collaborate with other shareholders, all of whose representatives quit together with Prosus from Byju's board. To back up a little, auditor Deloitte and three board directors representing close to $5 billion in investments quit from the board, leaving it in the hands of the founders.
An advisory board has taken over with Mohandas Pai, ex-Infosys CFO and Rajneesh Kumar, former SBI Chairman leading it. Their role, given their limited clout, at least on paper, is not very clear to me as yet.
Prosus also explained why its representative resigned from Byju’s board saying the decision to exit was taken after it became clear that the executive leadership at the edtech firm regularly “disregarded advice and recommendations relating to strategic, operational, legal, and corporate governance matters”.
“The decision for our director to step down from the Byju’s board was taken after it became clear that he was unable to fulfil his fiduciary duty to serve the long-term interests of the company and its stakeholders,” a statement from Prosus said. The investment firm holds less than 10% of Byju’s total stake and recently marked down the valuation of that investment.
Of course, I meant dead bodies figuratively and not literally and a reference to the financial and governance mess which has become a good example of how not to run a company, perhaps world over.
Meanwhile, The Economic Times says that Byju’s has shuttered some of its offices in Gurugram and Bengaluru and is currently in the process of shutting down an office in Noida.
Many employees were given the option to relocate to Bengaluru or sit at Byju’s Tuition Centres (BTC) which double up as offices and tuition centres of which there are 302 such centres across 143 towns pan-India.
Which in some senses seems to be where Byjus started the big digital journey.
Are Companies Geared To Meet The Guidance They Provide To Investors?
Last week, IT stocks went into a bit of a tizzy after Infosys put out guidance saying it was likely to report lower revenues for the year in contrast to what was expected.
This caused, though there were other factors, the markets to pause after a happy, jolly bull lasting weeks.
This was a bombshell, said some and added it was a rude shock. Why they were reacting so dramatically to something that was in the offing with the writing on the wall so to speak was not clear to me. But markets are markets and one should not question them, at least beyond a point, as I have learnt.
The top five Indian IT companies (by market capitalization) have seen their sequential revenue growth in $ terms at between -2.8 percent and 1 percent, very different from the near the high single-digit and double-digit growth seen last year.
Kotak Institutional Equities said a slowdown is industrywide, and that TCV or total contract value wins are not translating into revenues “due to tardy pace of decision making, discretionary spending cuts and delay in ramp-ups. Infosys has taken the upfront hit in its guidance.”
You get the picture. By the way, the dust may have settled but the stocks have not, Infosys is still quoting lower after the hammering it took last week.
The issue is twofold, giving guidance obviously means a predictable understanding of how extremely unpredictable a market environment is or becoming. If not, it reflects confidence in sales success, come what may.
This can apply of course to any company in any environment, give or take.
As businesses go, the sense of growth and confidence of growth is important to investors. And management and CEOs obviously feel under pressure to project the same.
But are their processes equally robust to meet such demands of growth and deal flow particularly when they have guidance out.
Or put more simply. Can I realistically deliver what I am promising? Or the other way, what can I promise knowing what I am likely to deliver?
For example, obviously, if things are going very well and clients are in abundance, a company might adjust or book revenue up or down a little to meet its targets for the year and then hold over some part. In consultation with clients of course.
Things however change when things are not going well and revenue shrinks. And you have the equivalent of dealers sending you back stock you dumped on them at the end of the year to show higher dispatches because dealers are not sure about customers.
These of course are not simple answers. There is data of course to go by. And there is intuition. And there is confidence.
I spoke with Rahul Jain, vice president, Research at Dolat Capital and who tracks the IT sector closely and began by asking him how he was seeing IT Stocks now that matters had settled a little.
The Perfect Storm In Movies
In the last few weeks, there have been several Hollywood blockbusters that have hit cinema screens across India.
Tom Cruise's Mission Impossible 7, Oppenheimer and Barbie Doll. Just over the weekend, these films had touched close to Rs 80 crore in ticket sales at the box office. At that point, Mission Impossible itself did around Rs 92 crore at that point.
So while Hollywood has had a good run of late, Bollywood has not.
The bigger concern is that the Hollywood pipeline is going to dry up or thin out substantially because of strikes called by both writers and actors.
The problem on the Indian side is that while the pipeline is strong and many movies are going to hit the screens, they are unlikely to do well. And then there is streaming.
So it is to use a movie title, the perfect storm, particularly for cinematic exhibitions or movie halls.
How is this perfect storm going to play out the rest of the year?
I reached out to Komal Nahta, a well-known film trade analyst and also the publisher of Film Information and began by asking him how this storm was playing out.
The storm in some senses is extending elsewhere. A Wall Street Journal report on July 11 said Disney under Bob Iger is exploring strategic options for its Star India business, including a joint venture or a sale.
The talks are in the early stages and it is unclear which options, if any, Disney might pursue, the WSJ said.
Disney paid $71.3 billion in 2019 for the entertainment assets of 21st Century Fox. At the time, Star India was considered one of Fox’s crown jewels, and it was an important part of Disney’s plan to build out its fledgling streaming business globally.
The deal gave Disney the broadcast and streaming rights for Indian Premier League cricket matches as well as dozens of TV channels in several languages and a stake in a production company that makes Bollywood movies.
But later or last year Disney lost a bidding war for the rights to continue streaming those cricket matches. Revenue from broadcasting the matches on linear TV will not meet the money that has been paid for the bid.
Star’s overall revenue for the fiscal year ending September 2023 is expected to drop around 20% to slightly less than $2 billion, the WSJ said, quoting sources.
I reached out to media analyst and Business Standard columnist Vanita Kohli Khandekar and began by asking her how she was seeing the current entertainment-media landscape right now.
Here’s A Great Explanation For AI
One of the best explanations and definitions for AI I have heard, thanks to Microsoft’s Satya Nadella.
There is of course no dearth of good explanations, including on the internet and in the podcast world but I did feel Nadella put it together, the front end and the back end quite well. In a way that helps us understand why AI is powerful and what we can do with it, at least potentially.
Nadella was speaking at Inspire, a Microsoft partner conference last week where he said that we were in the midst of a massive platform shift with the new generation of AI.
The company also unveiled some new products like Bing Chat Enterprise, a version of the chatbot built into Microsoft 365 which can work within enterprises and going by what MS says, not expose your company’s data to an outside system which you have to do today when you log into OpenAI or ChatGPT. Microsoft also unveiled pricing for many of these products.
Here is what Nadella said at Inspire while talking about AI.
That’s it from me for today. My deepest thank yous for listening in and making us rank consistently in the Top 100 podcasts across India across genres now.
Thank you and have a great day ahead. Do reach out to us at [email protected] and connect us on LinkedIn or X. Not kidding, Twitter is now X. Bye for now.