India creates 11 unicorns in 2020 - the year of WuhanCoronaVirus

India has seen a record number of startups becoming unicorns in the year 2020. 

The year that began with shock of lockdowns 

The year which began with the fear of Wuhan Corona Virus spread all across the world saw the longest lockdowns ever.  This had a major impact on the economy - especially of India - as it imposed one of the strictest lockdowns. 
However release of liquidity (money) by Central Banks of various countries ensured that easy money was available to businesses. 
And many businesses, the ones sensing higher business due to lockdown, quickly went into expansion mode.

Indian Startups weather the storm

Some Indian startups managed to weather the storm, post impressive revenue figures and raise funding to gain a valuation of more than $1 Bn and enter the unicorn club.

In all, 11 Indian startups —  

1. Unacademy, 
2. Pine Labs, 
3. FirstCry, 
4. Zenoti, 
5. Nykaa, 
6. Postman, 
7. Zerodha, 
8. Razorpay, 
9. Cars24, 
10. Dailyhunt and 
11. Glance — 

became unicorns this year. As experts have pointed out, the core propositions of these startups were ones that actually solved challenges for individuals and businesses during the lockdown for a large portion of the year. 

3rd largest number of unicorns

India is home to 32 Unicorns, making it the 3rd largest country with most Unicorns. Delhi NCR, the city with most Unicorn activity, alone has 14 unicorns.

On an average it took 5.5 years for Unicorn companies in India to achieve the status of a "Unicorn"

Aileen Lee first wrote about Unicorns

According to Investopedia - A unicorn is a term used in the venture capital industry to describe a privately held startup company with a value of over $1 billion. The term was first popularized by venture capitalist Aileen Lee, founder of CowboyVC, a seed stage venture capital fund based in Palo Alto, California.

Aileen Lee first wrote about unicorns in the venture capital world in her article, "Welcome to the Unicorn Club: Learning from Billion-Dollar Startups." Here, she looked at software startups founded in the 2000s and estimated that only 0.07% of them ever reach $1 billion valuation. Startups that managed to reach the $1 billion mark, she noted, are so rare that finding one is as difficult as finding a mythical unicorn.

(Disclaimer : This blog is for information purposes only)

Remote working trends due to Wuhan Corona Virus - excerpts from McKinsey Report

Some work remotely 

• For most workers, some activities during a typical day lend themselves to remote work, while the rest of their tasks require their on-site physical presence.

• According to a study conducted by McKinsey In the US workforce, just 22 percent of employees can work remotely between three and five days a week without affecting productivity, while only 5 percent could do so in India. 

• In contrast, 61 percent of the workforce in the United States can work no more than a few hours a week remotely or not at all. The remaining 17 percent of the workforce could work remotely partially, between one and three days per week.

Change can have far reaching consequences 

• Currently only a small share of the workforce in advanced economies - typically between 5 and 7 percent - regularly works from home.

• A shift tp 15-20 percent of workers spending more time at home could have profound impacts on economies. 

• More people working remotely means fewer people commuting between home and work every day. This could have significant economic consequences including on transportation gasoline and auto sales, restaurants and retail urban centres, demand for office real estate and other consumption patterns. 

As changes got announced, changes happened 

• As tech companies announced plans for permanent remote work options, the median price of a one-bedroom rental in San Francisco dropped 24.2 percent compared to a year ago, while in New York City, which had roughly 28,000 residents in every square mile at the start of 2020, 15,000 rental apartments were empty in September, the most vacancies in recorded history.

• Remote workers may also shift consumption patterns. Less money spent on transportation, lunch, and wardrobes suitable for the office may be shifted to other uses. Sales of home office equipment, digital tools, and enhanced connectivity gear have boomed.

Is remote work good for productivity?

• So far, there is scant clarity—and widespread contradiction—about the productivity impact. Some 41 percent of employees who responded to a McKinsey consumer survey in May said they were more productive working remotely than in the office. As employees have gained experience working remotely during the pandemic, their confidence in their productivity has grown, with the number of people saying they worked more productively increasing by 45 percent from April to May.

• With nine months of experience under their belts, more employers are seeing somewhat better productivity from their remote workers. Interviews with chief executives about remote work elicited a mixed range of opinions. Some express confidence that remote work can continue, while others say they see few positives to remote work.

(Disclaimer : This blog is for information purposes only)

Wuhan Corona Virus aka COVID 19 pandemic - data and new learnings - Courtsey Mckinsey

Chronology

17th November 2019 - According to The South China Morning post the first case of the 2019 Corona Virus - also called as Covid -19 was first discovered in Wuhan.

20th December 2019 - There were at least 60 confirmed cased of the Virus and a lockdown was imposed. (Source : The Guardian)

31st December 2019 - China informed WHO of the situation calling it a "pneumonia of unknown cause" (Source : The WHO website)

10th of January 2020 - WHO issued its first guidance - calling the virus as "Novel Coronavirus" (Source : The WHO website)

23rd January 2020 - The Chinese Govt. announced lockdown of Wuhan (Source : Wikipedia)

30th January 2020 - First case of Corona Virus is discovered in India as a student from Wuhan travels to Kerala, India and tests positive. (Source : Wikipedia)

11th March 2020 - WHO declares Novel CoronaVirus also called as Covid -19 a "pandemic" (Source : The WHO website)

24th March 2020 - The Govt. of India announces a 21 day nationwide lockdown. (Source : Wikipedia)

NIFTY (past 1 year) - fall due to lockdown and after impact 

Situation now and Analysis - Wuhan Corona Virus 

(Disclaimer : This blog is for information purposes only)

How good are Covid-19 - WuhanCoronaVirus; vaccine candidates

Race for the Vaccine 

Researchers worldwide are working around the clock to find a vaccine against SARS-CoV-2, the virus causing the COVID-19 pandemic.  

To date, just two coronavirus vaccine has been approved.

1. Sputnik V – formerly known as Gam-COVID-Vac and developed by the Gamaleya Research Institute in Moscow – was approved by the Ministry of Health of the Russian Federation on 11 August. Experts have raised considerable concern about the vaccine’s safety and efficacy given it has not yet entered Phase 3 clinical trials.
2. A second vaccine in Russia, EpiVacCorona, has also been granted regulatory approval, also without entering Phase 3 clinical trials.

Operation Warp Speed 

The pandemic has created unprecedented public/private partnerships. Operation Warp Speed (OWS) is a collaboration of several US federal government departments including Health and Human Services and its subagencies, Agriculture, Energy and Veterans Affairs and the private sector. 

OWS has selected three vaccine candidates to fund for Phase 3 trials: 

1. Moderna’s mRNA-1273, University of Oxford and AstraZeneca’s AZD1222, and 
2. Pfizer and BioNTech's BNT162.

Pfizer and BioNTech were the first to release early findings on November 09 when they reported that their BNT162b2 vaccine is 90 percent effective against Covid-19. 

There was more good news yesterday when Moderna stated that their candidate is 94.5 percent effective. 

 
In both cases, the shot is administered twice over the space of several weeks. 

Despite the positive results, there is no data regarding whether the candidates prevent the coronavirus from being transmitted as well as for how long protection lasts. 

The Moderna vaccine does have an advantage over the Pfizer/BioNTech one in that it can be stored at temperatures of between 2C and 8C for 30 days, making distribution easier. 

The Pfizer/BioNTech vaccine, on the other hand, must be stored at -80C, exacerbating logistical challenges. 

 

Within OWS, the US National Institutes of Health (NIH) has partnered with more than 18 biopharmaceutical companies to accelerate development of drug and vaccine candidates for COVID-19 (ACTIV). 

COVPN and COVAX

The COVID-19 Prevention Trials Network (COVPN) has also been established, which combines clinical trial networks funded by the National Institute of Allergy and Infectious Diseases (NIAID): the HIV Vaccine Trials Network (HVTN), HIV Prevention Trials Network (HPTN), Infectious Diseases Clinical Research Consortium (IDCRC), and the AIDS Clinical Trials Group.
 

The COVAX initiative, part of the World Health Organization’s (WHO) Access to COVID-19 Tools (ACT) Accelerator, is being spearheaded by the Coalition for Epidemic Preparedness Innovations (CEPI); Gavi, the Vaccine Alliance; and WHO. 

The goal is to work with vaccine manufacturers to offer low-cost COVID-19 vaccines to countries. 

Currently, CEPI’s candidates from companies 

1. Inovio, 
2. Moderna, 
3. CureVac, 
4. Institut Pasteur/Merck/Themis, 
5. AstraZeneca/University of Oxford, 
6. Novavax, 
7. University of Hong Kong, 
8. Clover Biopharmaceuticals, and 
9. University of Queensland/CSL 

are part of the COVAX initiative. There are further candidates being evaluated in the COVAX Facility from the United States and internationally.

(Disclaimer : This blog is for information purposes only) 

Global Money Supply Surge, Rise of Stock Markets, What Next?

What is Money Supply? 

Money Supply is the total value of money available on an economy at a point of time.  The most standard measure of money supply is total of currency in circulation (not only notes but also money circulating through wire transfers, net banking etc.) and demand deposits (fixed deposits, other kind of deposits etc.) 

What's the use of Money Supply?

Bank regulators or central banks (in the Indian context the Reserve Bank of India) influence money supply by placing requirements on banks to hold their reserves.  They also make and change regulations (rules) for banks to lend etc. 

An increase in supply of money typically lowers interest rates.  As money supply increases banks have more money to lend and hence they can lend at lower rates. 

Businesses respond by ordering more raw materials and increasing production. 

On the other hand more money in the hands of consumers (by reduction of taxes etc.) can also increase demand.  

A rise in production and rise in consumption is perfect for economic growth.  Simple; but mostly it doesn't play out like that - there is always a time lag.  

The pandemic and increase in money supply 

As lockdown's hit the world due to the Wuhan Corona Virus, factories and offices  shut and people lost jobs.  Fearful of the economic fallout, Governments and Central banks all over the world increased Money Supply. 

Increase in Money Supply in the USA

Increase in Money Supply in Europe 

Increase in Money Supply in Japan 

Surely most Central Banks and Governments believed (and rightly so) that increase in money supply will help people tide over the difficulties of a slowdown.  

There were tax cuts, loan moratoriums , incentive schemes and even payments of monies directly in bank accounts of the poor (cash transfers). 

All this surplus money which was released however did not go immediately to buying new things (some did).  A part of this money also found its way in the stock markets. 

The Global Liquidity Rally  

As money flowed into the stock markets, the markets rallied.  A clear correlation between increase in money supply and rise of stock markets (after the sudden fall due to the sudden lockdown) is evident. 

The rise of US stock market - Dow Jones

The rise of Indian Stock Market - Nifty 

What Next?

The increase in global liquidity during the Wuhan Corona Virus pandemic has happened at a much faster pace than the 2008 crisis. 

The total money created could exceed $15 trillion or more by the middle of next year. 

However there an impending event which is going to make life difficult for traders and investors - the US elections. 

The other fallout of the pandemic is that voting will also happen by postal ballot in the current US elections - much more than the previous ones. 

This means that election results will be delayed - it takes time to count postal ballot.  This also means that there are chances of more ambiguity, charges and counter charges - regarding the efficacy and impartiality of elections. 

As it is election time is an "uncertain" time as its impossible to predict the election outcomes with accuracy.  Voter behaviour (swings) can change quickly as election nears. 

So it will only be reasonable to  expect markets to remain volatile specially when a vaccine is still some time away.    

(Disclaimer : This blog is for information purposes and not to solicit any business or provide any kind of advise)

Paradigm shift - in a Covid world.

Many Unknowns 

As the world seeks to comprehend a new normal, we face many unknowns 

1. Will the job come back?
2. How will the world travel?
3. How will the recovery happen?

All these questions cause a lot of uncertainty and hence a lot of anxiety.

Exposed 

#WuhanCoronavirus has exposed, rather painfully, many existing economic and social divisions and created new ones. 

It has increased disparity amongst workers especially amongst the educated and uneducated.  

It has also exposed the "digital divide".   Those aware and used to of managing their lives on the internet in a digital economy are poised to do, and have done, better.

It has also challenged governments which now face higher spending needs and ballooning debts.

Changes 

The crisis has forced us to change the way we engage and do business with each other - bringing into the fore front the use of technologies to overcome travel restrictions. 

Another important feature of the current landscape is the historic collapse in oil demand and oil pries.  Even as demand recovers the oil prices are unlikely to rise much as. 

Health service - the way they are being delivered and will be delivered will undergo steep changes - with more and more use of technology.  Public health has therefore become a priority and Pvt. sector will play a role in a more efficient public health system.

Done Well

During the crisis as habits changed some business have done very well.  

Stock price is a forward discounting mechanism i.e. it reflects what the market thinks of its future potential (or growth).  

Netflix stock has nearly doubled in the past one year.

  

Is the growth in stock price telling us something? - giving us an idea, a clue of the changing times.

 

(Disclaimer : This blog is for educational purposes only. It is not to solicit any business or offer any advise.)

First -ve growth in 4 decades - India's GDP shrinks by 23.9% in Q1 - FY21

Economic Contraction

The National Statistical Organisation released numbers for the GDP (Gross Domestic Product) on India for the first quarter of Financial Year 2020-21 i.e. Q1 FY 21.

This is the first economic contraction since 1980 - the result of lockdown due to Wuhan coronavirus. (spread all over the world due to the mismanagement by the Chinese)

First Instance 

This is the first instance of an economic contraction for the country in the last 4 decades.

It is also the first GDP decline since India began publishing quarterly numbers in 1996. 

Broadly in line 

The numbers were broadly in line with the estimates by various agencies.  The predictions ranged from a decline of 15% to 35%

Also for the April-June quarter the US GDP declined by 38% as compared to the same April-June quarter last year.

The decline in India's numbers were also a result of a "strict lockdown" during the April to June quarter in 2020.

Sectoral Performance 

Construction, Hotel Services and Manufacturing were the worst performing sectors. 

 Read the report by NSO (National Statistical Organisation) here

(Disclaimer : This blog is for educational purposes and not to solicit any business or offer any kind of advise)

Wuhan Corona Virus - its impact on countries and sentiments.

According to The South China Morning Post the first case of Corona Virus was reported in Wuhan on the 17th of November 2019.  Subsequent events unfolded and the WHO declared Corona Virus a Pandemic on the 11th of March 2020. 

Corona Virus - Events 

 

The Corona Virus has become a Global Pandemic and the situation as of now is as follows 

According to Standard and Poor (S&P) (report published on July1 2020) the trends that will dominate the Corona Crisis and after are 

"

Home Consumption -

• Robust growth in packaged food and home care, subdued demand for discretionary goods
• Well-defined customer proposition around convenience and value
• Range optimization for essentials, with product and pack size geared for home consumption

Brands –

• Consumers are seeking comfort and familiarity with big brands
• Brand equity is moving to center stage as e-commerce gathers pace
• Greater product segmentation and targeted offerings for discretionary products

Private label –

• An emerging battleground between retailers and consumer companies
• Newer challengers in niche categories
• More premiumization and innovation around products, packaging, and pricing

Supply chain –

• Increased diversity and visibility of suppliers, with more risk-based and sustainable approaches to sourcing
• Striking a balance between time, cost, quality and customer experience
• Building corporate credentials for quality, traceability, and provenance. " (Source : Quoted from -  COVID-19 Will Shape The Future Of Consumer Goods, July 1, 2020 Raam Ratnam )

According to a report Published by McKinsey and Co. on July 27th 2020 the relative confidence amongst people of various nations seem to be improving. 

read the full report here

There is no doubt that this is the biggest health crisis of the century and it will be difficult to predict the turn of events and its impact with certainty - yet certain trends are emerging.  How long will they sustain is anybody's guess.  Therefore stay focused and do what you can do best. 

DISCLAIMER :  THIS BLOG IS FOR INFORMATION AND NOT TO SOLICIT ANY BUSINESS. PAST PERFORMANCE IS NOT AN INDICATION OF THE PERFORMANCE OF STOCK IN FUTURE. EQUITY STOCK INVESTING IS A WITH RISK INVESTING INCLUDING RISK ON CAPITAL INVESTED. PLEASE TAKE AN INFORMED DECISION BEFORE INVESTING IN A EQUITY STOCK

Changed world, uncertainties, time to worry and more...

French writer Jean-Baptiste Alphonse Karr wrote “plus ça change, plus c’est la même chose. i.e. The more it changes the more it stays the same. 

Reacting to the current situation Howard Marks co-founder and co-chairman of Oaktree Capital ( the largest investor in distressed securities world-wide) wrote "today we’re experiencing unprecedented (or at least highly exceptional) developments in four areas: the pandemic, the economic contraction, the oil price collapse and the Fed/government response"

There is "uncertainty" arising from all of the factors mentioned by Howard Marks and even many more (from an Indian perspective). 

As the uncertainty increases so does "risk" as in a way "uncertainty" is nothing but heightened risk. 

DOW JONES IS DOWN 17.07% FROM ITS PEAK

 NIFTY IS DOWN 27.6% FROM ITS PEAK

A careful look at market indices - leads us to conclude that the US markets have recovered faster than the Indian markets. 

Why is that? 

A possible explanation is that the US has a stimulus program (for the economy) which is much larger than the Indian one.True. 

But then consider also the fact that many large US companies like Google, Microsoft, Facebook, Netflix and Apple continue to do business even during the lockdown - while other companies are suffering because of lockdown. 

Apple and Microsoft together have approx 14% weightage on DOW Jones.


So amongst the "less or not impacted because of lockdown" universe of companies - if you can identify companies which are market leaders you have a suitable case for investing. Of course more needs to be researched.

Also if one can identify the companies which are likely to "rebound" faster after the lockdown/pandemic is over, then those also can be good cases for investing. 

How? - look for good leaders for its the leaders which make the quick turnaround possible especially those who have a previous experience of managing a crisis.

There is no doubt though that this is a big crisis - perhaps the biggest in our lifetimes and hence it is time to worry. 

But then as they say "worry sharpens your focus"

Thats what we continue to do..

The Virus from China, the WHO, markets and way ahead.

17th November 2019 - According to The South China Morning post the first case of the 2019 Corona Virus - also called as Covid -19 was first discovered in Wuhan.

20th December 2019 - There were at least 60 confirmed cased of the Virus and a lockdown was imposed.  (Source : The Guardian)

31st December 2019 - China informed WHO of the situation calling it a "pneumonia of unknown cause" (Source : The WHO website)

10th of January 2020 - WHO issued its first guidance - calling the virus as "Novel Coronavirus" (Source : The WHO website)

23rd January 2020 - The Chinese Govt. announced lockdown of Wuhan (Source : Wikipedia)

30th January 2020 - First case of Corona Virus is discovered in India as a student from Wuhan travels to Kerala, India and tests positive. (Source : Wikipedia)

11th March 2020 - WHO declares Novel CoronaVirus also called as Covid -19 a "pandemic" (Source : The WHO website)

24th March 2020 - The Govt. of India announces a 21 day nationwide lockdown.  (Source : Wikipedia)


A careful observation of these dates raises many questions

a) Why is it that the virus spread so fast to the rest of the world and not within China?

 The lockdown in Wuhan was imposed 20 days after China informed The WHO.
( Google search : There are 55 pairs of trains daily between Wuhan and Shanghai and 30 pair of trains daily between Wuhan and Bejing)

b) Why did the WHO take so much time to declare Covid -19 a pandemic?

Luckily India started testing and quarantine of travellers from abroad (starting with those from Wuhan) from as early as January 24th 2020.  This resulted in slow spread of infection in India.


Markets 

Markets do not like uncertainty and uncertainty is exactly what we got out of this event.  How many fatalities, job losses, industry closures, bankruptcies, timelines of lockdown - how long etc. etc.

Longer the uncertainty - bigger the problem.

The Way Ahead 

This is for the first time that an economic sudden stop at the level of global economy has been witnessed. 

No economic model or corporate valuation model can easily incorporate the range of uncertainties associated with an event of this magnitude. 

Various Governments have announced policy measures to ease the difficulties - announcing interest rate cutes, deferring tax payments, loan repayments etc etc. 

However the extent of effectiveness of such measures will only be clear over a period of time. 

Coming to India - as the lockdown is in progress, one can observe that consumption of essentials food, packaged foods, medicines etc. continues as the supply chain has been generally intact. 

Similarly data consumption (internet viewing and video conferencing) is on the rise and this may be a secular trend as more and more capabilities are built to facilitate remote working. 

Primary health care and insurance are some other sectors which are functional (online buying of insurance and diagnostic tests) and are likely to do well in future as well. 

As long as companies which are providing such services do not have debt  - they do make a compelling case to invest into. 

Even if that is the case - one has to be very cautious of the situation - as this time it is the virus, and not the economics that decides the time line. 

DISCLAIMER :  THIS BLOG IS FOR INFORMATION AND NOT TO SOLICIT ANY BUSINESS. PAST PERFORMANCE IS NOT AN INDICATION OF THE PERFORMANCE OF STOCK IN FUTURE. EQUITY STOCK INVESTING IS A WITH RISK INVESTING INCLUDING RISK ON CAPITAL INVESTED. PLEASE TAKE AN INFORMED DECISION BEFORE INVESTING IN A EQUITY STOCK

Corona Virus, Oil Wars and investing..

Corona Virus has significantly slowed the economic activities in economic engines of the world. 

China - has still not come back to normal although the trajectory is upwards 

Europe - is slowing down as the virus spreads and Italy faces a complete lockdown. 

US - It's still time before one sees the peak of the damage done by the virus. 

WHO report as on 9th March 2020

India has as of now 50 reported cases of Corona Virus out of which 16 are Italians.  The spread of the disease so far remains controlled but the risks remain. 

Meanwhile Oil is the other news which had a dampening impact on the markets. 

On the 9th of March 2000, Oil prices have suffered their biggest fall since the day in 1991 when American forces launched air strikes on Iraqi troops following their invasion of Kuwait.

Saudi Arabia, the world's top exporter, launched a price war over the weekend. The move followed the implosion of an alliance between the OPEC cartel, led by Saudi Arabia, and Russia.

The kingdom and Russia came together to form the so-called OPEC+ alliance in 2016 after oil prices plunged to $30 a barrel. Since then, the two leading exporters have orchestrated supply cuts of 2.1 million barrels per day. Saudi Arabia wanted to increase that number to 3.6 million barrels through 2020 to take account of weaker consumption. 

But Russian President Vladimir Putin, worried about ceding too much ground to American oil producers, refused to go along with the plan and his energy minister, Alexander Novak on Friday signaled a fierce battle to come for market share when he said countries could produce as much as they please from April 1.

Investing 

"One of the greatest things about investing is that the only real penalty is for making losing investments. There is no penalty for omitting loosing investments, of course just rewards.  And even for missing a few winners the penalty is bearable." The Most Important Thing : Uncommon Sense for The Thoughtful Investor by Howard Marks. 

So on a risk return basis we wait patiently.

The one thing which is required to buy stocks at a good price is money - which we have ample - as profits have been booked and there is ample cash on books. 

Right now in times of this much fear... even the greed needs to be in control. 

DISCLAIMER :  THIS BLOG IS FOR INFORMATION AND NOT TO SOLICIT ANY BUSINESS. PAST PERFORMANCE IS NOT AN INDICATION OF THE PERFORMANCE OF STOCK IN FUTURE. EQUITY STOCK INVESTING IS A WITH RISK INVESTING INCLUDING RISK ON CAPITAL INVESTED. PLEASE TAKE AN INFORMED DECISION BEFORE INVESTING IN A EQUITY STOCK