Good Morning Toasters!

In today’s issue of the Morning Toast, we discuss:

• Indonesian Tech Giant GoTo’s IPO debuts strongly
• TCS Sets tone for India IT results season
• Results Preview
• News around the world
• An educational concept to keep you learning every day 🙂

Market Watch

Nifty: 17,674.95 | -109.40 (-0.62%)
FII Net Sold: INR 1,145.24 crore

Sensex: 58,964.57 | -482.61 (-0.81%)
DII Net Bought: INR 486.51 crore

Global Company News

Indonesian Tech Giant GoTo’s IPO debuts strongly

• In what turned out to represent one of the largest IPO debuts globally this year, Indonesia’s GoTo raised the equivalent of USD 1.1 Billion in an offering, which drew ~300,000 investors (retail proportion oversubscribed ~15x)
• Global IPO volumes have fallen ~74% to USD 54.1 Bn during the first 3 months of the year, when compared to the similar period last year, on the back of rising interest rates, compounded by Russia’s invasion of Ukraine
• In contrast, Indonesia’s stock exchange has performed strongly this year, with the IDX Composite Index of Jakarta listed stocks up ~10% this year, while many other country benchmarks have performed poorly
• GoTo stock soared ~23% above its IPO price in early trading, with shares closing ~13% higher by day close, giving the company a MCAP of ~USD 30 Bn, which made it amongst the Top 5 most valuable companies in Indonesia

Woah! Tell me something about the company please?

• The Jakarta-based company, whose formal name is PT GoTo Gojek Tokopedia tbk, was created last year from the merger of SouthEast Asian ride-hailing giant Gojek and e-commerce business Tokopedia
• Key service offerings across the ‘start-up’ now include ride-hailing, financial services and e-commerce; the group recently said it has ~55 Million annual transacting users across its multiple services
• Gojek is best known as the app connecting motorcycle taxi with passengers in places such as Greater Jakarta, a densely populated region of ~30 Million people (damn!!); the company later added services including payments, housecleaning, hyper-local delivery
• Tokopedia on the other hand operates a popular online e-commerce marketplace; both companies have been initially seeded by private equity / VCs, starting in 2014, with Sequoia Capital a common investor

Tell me more? Competitors, Financials et al.

• GoTo reported a net loss of ~USD 806 Mn for the first nine months of FY2021, while revenues increased 45% to USD 237 Mn during the same period
• The company competes independently with giant Grab (food-delivery, ride-hailing & financial services) and Sea (digital entertainment, e-commerce, digital payments & financial services)
• Grab & Sea are down by ~half their value during this financial year, on the back of slowing growth and hefty valuations; likewise, online mall operator, PT Bukalapak.com, which went public last year is down ~60% from its IPO value, possibly signaling tough times ahead?

Okay? Anything else?

• GoTo’s listing on the Indonesian stock exchange is surely a monumental occasion for the economy and the country at large; the listing was attended by local dignitaries and government officials, while also including a pre-recorded message from the President of the country
• The country also introduced a new regulation for this issue, allowing super voting rights for key shareholders & founders, similar to US & Hong Kong, in an attempt to create a strong financial environment
• GoTo has a large tech development workforce in India (think: Bangalore and beyond) who would’ve likely benefitted from the positive listing & development for the company

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Around the World 🌎

• Elon out before he joined – In spite of buying the largest share at 9.2%, Musk chose to not join the company as a member of its board of directors citing no reason for the same. That did not stop him from putting forth his suggestions, however – subscription service Twitter Blue should ban ads (it gets 90% of its revenue from advertisements), lower its $2.99-a-month price, and consider accepting dogecoin cryptocurrency as payment. He also said subscribers should get an authentication checkmark. He also suggested turning a part of their HQs into a shelter for charity. Shares of Twitter are down more than 25% over the past six months
• World War II repeat? The Top 24 US banks are expected to see a 6% decline in deposits this year (they have had a streak of increasing deposits as a group every year since at least World War II). A crucial reason behind this is the Fed’s hint at a hike in interest rates soon which would impact the way consumers and businesses handle their stored-up cash. Banks are not that affected however as the flood of deposits had them nearing regulatory limits anyway. Bank stocks have dropped along with changing Fed views
• Citibank back in Saudi – Citigroup has found favour in Saudi again as it helps Crown Prince Mohammed bin Salman modernize its oil-heavy economy. Things had turned sour after the bank shut down operations post 9/11 but they have been very active since then – they participated in the country’s biggest listings, obtained a license in 2018 for investment banking, hired local staff and has now applied for a banking permit. Saudi is a lucrative market for Citi, but one with immense competition as well from peers like  Standard Chartered, and Credit Suisse. JPMorgan and Morgan Stanley

Company Update

TCS Sets tone for India IT results season

What’s up?

• India’s Numero UNO IT company, and the Tata Group cash cow dropped their results, reporting revenues of USD 6.7 Bn for the quarter, up ~12% quarter on quarter
• The company recorded its highest-ever Total Contract Value (sum of all contracts signed during the quarter), at USD 11.3 Bn, taking the FY22 # to USD 34.6 Bn (Woah!!)
• According to the press release, growth was broad-based, with all services (including Retail, Consumer, Communication & Media and others) all recording mid to high teens growth, auguring well for the company (with limited dependency)
• The company made steady progress in client mining (as per objectives defined), adding 10 new clients in the USD 100+ Mn category in FY22

And? Tell me more?

• Attrition continued to impact the company (and can be extrapolated to other IT cos as well), coming in at 17.4% vs 15.9% for Dec’21 and 11.9% for Sep’21 quarter
• To manage the growing attrition % and scenario, the company increased headcount by 35,209 employees, the single highest addition in a quarter, taking the cumulative employee count to a whopping 592,195, taking the net addition for the year to 103,546 employees (another all time high)
• The company delivered an adjusted profit of INR 99.3 Bn vs Bloomberg consensus (all analysis post their expectations, which Bloomberg compiles) of INR 99.9 Bn, with high attrition a possible factor of miss

Finally?

• TCS results act as a marker of sorts for gauging demand scenario, within the Indian IT sector companies, with Accenture results initially setting the tone and TCS subsequently taking over
• With broad based demand, in mid to high teens, multi-year IT transformation journeys are intact and going strong, with Total Contract Values hinting on continued demand in the future
• Attrition remains a key challenge and is to be watched, in an environment where margins may become challenging, with limited ability to pass on price hikes to clients

What else caught our eye? 👀

Indians just want their gold

• India’s gold imports rose by 33.34% to $46.14 billion during the 2021-22 fiscal on account of higher demand affecting the country’s Current Account Deficit majorly
• Trade deficit widened to USD 192.41 billion (vs $102.62 billion in 2020-21) and the current account deficit widened to $23 billion 2.7% of GDP
• India is the world’s second-biggest gold consumer (after China) with the jewelry industry driving imports. (The gems and jewelry exports during FY22 grew by 50%)

Airlines are sore losers

• All but Indigo have been complaining of an aviation market riddled with “irresponsible competition” that’s kept fares low despite high taxes and fuel prices
• Indigo meanwhile has vowed to remain “very, very competitive” as they manage to make money by keeping a tight lid on costs, and owing to their huge size (they own 50% of the market now)
• Given the state of oil and the INR, Indian carriers could lose about $8 billion in the two years through Mar’22 unless they exploit opportunities to raise fares and thus revenue

Good news for Veranda

• Shares of Veranda Learnings Solutions Ltd debuted at ₹157 apiece on the BSE, (a 14%premium from the IPO issue price of ₹137/share)
• The total offer was for Rs. 200 Cr, with the Retail Individual Investors (RIIs) category receiving a 10.76x subscription, the Non-institutional investor’s portion got subscribed 3.87 times and Qualified Institutional Buyers (QIBs) 2.02 times
• Veranda offers diversified and integrated learning solutions in online and blended formats to a target audience of students, aspirants and graduates, professionals and corporate employees

Results Preview (Nifty 200)

Wednesday, 13th April: Infosys

Educational Topic of the day

Coin

A representative store of digital value that lives on a given blockchain or cryptocurrency network. Some blockchains have the same name for both the network and the coin, like Bitcoin. Others can have different names for each, like the Stellar blockchain, which has a native coin called Lumen.

Edited by Raunak Karwa 

Let’s connect, I always love hearing from you. Hit me up at Raunak_Karwa on Twitter or Raunak.karwa@finlearnacademy.com