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23rd September 2021
Good Morning! 

Freshworks just became the 1st Indian SaaS company to go public in the US! They raised over a billion dollars in the IPO.
Founder Girish Mathrubootham was invited to ring the Nasdaq opening bell yesterday and said he felt like an Indian athlete who has won an Olympic gold medal.

Well, considering he started the company in a small space in Chennai in 2010, and it is now a $10 billion business listed on the Nasdaq, that seems like a great analogy.
  MARKETS
 

SENSEX

58,927.33

- 0.13%

NIFTY

17,546.65

- 0.09%

US$

73.86

+ 0.34%

GOLD

46,665

+ 0.06%

10-YR

6.14%

+ 1.7 bps

OIL

5,324

+ 2.23%

*As of market close

  • Markets: A really choppy trading yesterday with the headline indexes swinging within a range and not really going anywhere. Financials underperformed, while Zee Entertainment was again the star of the show. Keep scrolling to know more!

M&A

What's The Big Deal?
Deal

And Zee Entertainment Limited is in the news again! A positive this time - the board of ZEL has announced that they’ve reached an agreement with Sony Pictures Networks India Private Limited for a merger. The stock was up 30% yesterday!

The Deal

For the deal to go through, Sony’s Japanese parent co. will have to infuse Rs 10,000 crores cash in its India arm. Don't ask us why though, that's just a part of the terms of the deal.

As per BloombergQuint calculations, once merged, the Zee+Sony entity will have revenue of Rs 14,000 crores+ with a net profit of Rs 1,341 crores

While they have not disclosed specific details about the capital structure and valuation, at the current stock price for ZEL, the combined entity’s market cap will be Rs 68k crores - more than double what it is for ZEL alone.

Sony will end up with a ~53% stake in the merged entity while existing Zee shareholders will hold ~47%. Interestingly, promoter Subhash Chandra’s shareholding will not be reduced.

Interesting Angle

Subhash Chandra, the promoter of ZEL will not see his holding be diluted. He owns 3.99% of ZEL and will continue to hold 3.99% of the merged entity as well.

This is because Sony will be giving him some extra shares from its own pocket in exchange for a non-compete agreement.

Smart move by Sony, because Chandra is a proven businessman in the field, having built Zee from the ground up. It wouldn't be great for Sony if he decided to start another competing company. Hence the agreement.

What’s next?

Well, we still have to wait for regulatory approval before the transaction is finalized. It will be interesting to see if the Competition Commission of India (CCI) has any comments, considering the 2 parties are already among the biggest players in India.

Tech

BNPL Hype Shifts To India
Making Moves
 

Buy Now Pay Later or BNPL is a very hot space for investors right now.

Square recently acquired Australian company AfterPay for $29 billion, Affirm went public in the US and Klarna is also making waves in Europe.
Did you think we'd not have our own Indian BNPL story?

The Australian BNPL company Zip has invested $50 million in our very own Indian BNPL startup ZestMoney.

What's Buy Now Pay Later?

Let's take a hypothetical example.

Imagine you want to buy the new iPhone which is for Rs 80k. Now instead of paying the full amount at once, you can pay the Rs 80k in 3-4 monthly instalments.

If you are thinking that we already have credit cards with easy EMI options for that, you're right. But credit cards charge interest on this, whereas BNPL companies usually don't charge any interest.

So now you're probably wondering how they make any money right?

It's mostly through merchant fees - the retailer that ties up with the BNPL company pays them a certain % on each transaction. So in this case Apple pays the BNPL company a low single-digit percentage.

Retailers like this because they get paid upfront, and having these easier payment options available brings more customers to their store.

Like credit cards, BNPL companies also charge late payment fees, but it's usually way lower than what credit cards charge.

Buy Now Pay Later -> BNPL

The whole Buy Now Pay Later concept is actually very old. In the 19th century, manufacturers of things like sewing machines and harvesting machines would offer easy instalments so that more people would be able to buy their products. 

Well, a lot has changed since then. We are now in the digital age which means we all carry smartphones. So now Buy Now Pay Later is offered through apps on your smartphone. These apps also give the BNPL provider the ability to collect user data and assess creditworthiness.

Zest Money's Funding

It's not like ZestMoney just saw the international trend and started. They've been at it since 2016.

They offer loans for amounts starting as low as Rs 50 and going up to Rs 5 lakh.
So far they have 11 million users and have onboarded large merchants like Amazon, Flipkart, Apple etc.

Very few people in India have credit cards. There is basically no way to know these people's creditworthiness and this presents quite a big opportunity for BNPL startups to cater to. Some believe India may even leapfrog traditional products like credit cards and go straight to BNPL.

This looks like it's going to be the 1st of many Indian BNPL startups we cover.

Foreign Tour ✈️

US Fed Meeting

The US Federal Reserve Bank meeting results were announced yesterday, and they've said the bond buying program will be tapered soon.

The Fed also published an updated version of its 'dot plot'.
This basically shows each Fed members view on interest rates - they are now pretty evenly split, with half the members of the view that they should begin raising interest rates in 2022. In June, the median result of this 'dot plot' indicated increasing rates only in 2023.

Markets were not worried by this though and the S&P 500 actually jumped a bit after the announcement.

Read more
On a Lighter Note

If you have more time ...

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