Foxconn’s India burden

Good morning! Today’s introduction is out of r/IndianSkincareAddicts territory, and we’re all for it. Whether or not you’re into skincare, you’ve likely observed the rise of products such as lip masks, makeup wipes, and eye creams. The last stands out for its insane prices (Clarins’ Eye Lift costs ₹5,400 or $66, per 15ml). Well, just as we suspected, eye creams are hogwash… kinda. The Atlantic reports that these products not only vary little from irritant-free moisturisers, but are atrociously-priced simply because companies spend a lot on packaging, marketing, and convincing you that this thing is miraculous. But hey, if that eye cream makes you feel like a million bucks, who are we to stop ya?

Today’s edition also features pieces by Roshni P. Nair, Srijonee Bhattacharjee, and Soumya Gupta.

If you enjoy reading us, why not give us a follow at @thesignaldotco on Twitter and Instagram.

The Market Signal*

Stocks & economy: Indian markets are shut today for Holi on Tuesday but US Federal Reserve Chairman Jerome Powell’s two-day testimony to Congress beginning today will likely set Wednesday’s course.

The US economy has stayed strong and inflation high since his last speech to Congress. The conditions are expected to persist as manufacturing data from the US indicated that demand is not slowing down despite high prices.

Sentiment for equities had just begun to improve with receding recession fears but a hawkish stance from Powell could flip it quickly.

“Oversold” Indian stocks rose in the last two days as investors found value and foreign investor appetite returned. Foreign investor purchases in equities, including GQG Partners’ purchase of Adani Group companies’ shares worth $1.87 billion, lifted the rupee to a one-month high against the dollar.

Troubles mounting: Beleaguered “crypto bank” Silvergate Capital inched closer to shutting down.

MOBILITY

The IndiGo Of India’s EV Ride-Hailing Bandwagon

Back in January, we wrote about how Ola changing its business model (for its Bengaluru EV pilot anyway) is reminiscent of electric ride-hailing upstart BluSmart and Meru, whose fleets are leased/owned by the company, not driver-partners. Ola will also give partners a fixed pay a la BluSmart.

The Economic Times has some details on Uber’s and Ola’s EV push. While Ola may list ‘premium’ EV cabs as a separate category, Uber will integrate its EVs with its existing premium services, Premier and Rentals.

BluSmart—which has a 2,000-strong EV charging network it plans to expand and monetise—will only operate in the top six cities since that’s where “80%” of the ride-hailing business is concentrated.

BluSmart’s zero cancellations and no surge pricing were enough to disrupt the now-haggard ride-hailing biz. Reminds us of a circa-2006 upstart IndiGo, whose operational efficiency, competitive fares, and punctuality eventually turned it into India’s largest airline.

🎧 It's the season of re-runs on streaming platforms. Also in today's edition: all eyes are on the ongoing Women's Premier League. Listen to The Signal Daily on Spotify, Apple Podcasts, Amazon Music, Google Podcasts, or wherever you get your podcasts.

ENTERTAINMENT

Are You Entertained?

Apparently not. American viewers are ditching originals to stream reruns of shows such as Grey’s Anatomy and The Walking Dead. Netflix’s global viewership is down 8%, and its popularity fell marginally last year; it did, however, retain the top spot for the most popular streaming service.

Done and dusted?: Franchises help streaming companies retain viewers, but the dream of releasing “a Squid Game a week” may be over. Netflix had said in a shareholders’ letter in January that it was done blowing cash on big-budget originals and wanted to focus on free cash flow. In India, demand for Hindi remakes of South Indian films is drying up after recent flops Shehzada, Selfiee, and Vikram Vedha.

Meanwhile: Movie tickets are getting more expensive and complicated, with tiers for audio and video top-ups and types of seating. Higher ticket prices propped up revenues of PVR and Inox last year as well.

MANUFACTURING

The Elephant In The Room

@agebarros/Unsplash

The current dream date of every Indian state is iPhone maker Apple’s Taiwanese contract manufacturer Hon Hai Precision Industry Co., popularly known as Foxconn.

Bad date: But Karnataka’s tryst with Foxconn turned sour almost immediately after signing an MoU on Friday during company chairman Young Liu’s visit.

Chief minister Basavaraj Bommai said the company will set up a plant at a 300-acre site allotted to it near the airport. It would create 100,000 jobs, Bommai claimed. Bloomberg reported it would be a $700 million investment.

The next day, Foxconn contradicted the minister, saying there was no “binding, definitive agreement”, only to do a backflip on Monday. In a carefully worded letter to Bommai, Liu said he will ensure the “successful grounding of the ‘Project Elephant’ in Bengaluru”.

Meanwhile, Telangana seemed to claim the project for itself.

The Signal

As a senior government official told The Signal in a private conversation, India is the only country in the world outside China where Apple can find scale. That may be true, but India does not fulfil many other conditions required for such high-tech manufacturing. Besides being a political minefield, as Liu found out, India lacks enough small and medium companies and skilled workers with the know-how to make high-quality components.

China has over 70,000 such specialist companies. Apple’s suppliers in India have already faced setbacks such as labour trouble and debilitating accidents.

REGULATION

Lumbering Hall Monitors (Try To) Turn New Leaves

The Reserve Bank of India (RBI)—perhaps spooked by the Hindenburg Research report on the Adani Group—is keeping a watchful eye on the 20 companies with the largest bank borrowings. It has reportedly developed a monitoring system aside from its routine processes and the Central Repository of Information on Large Credits (CRILC). The RBI had first switched to proactive, risk-based supervision after the Punjab National Bank scam became public in 2018.

The RBI will also keenly follow the March 28 Supreme Court ruling on the Yes Bank AT1 bonds case, since the outcome could set a precedent for dealing with bankrupt entities and troubled banks.

Aside: Market regulator Sebi recently cracked down on YouTube finfluencers.

Over in the US, there’s no consensus among lawmakers on AI regulation despite years of proposing bills, enforcement orders, and blueprints. As a result, the EU has taken the lead in AI regulation.

CONSUMPTION

Profiting From Crises

Even as India gears up to deal with heatwaves over the next three months, some companies are lapping up the rise in temperatures.

Beverage and dairy brands are witnessing a surge in demand and expect sales to grow in strong double-digits this summer, reports The Economic Times. They’re ramping up production and launching new flavours, while also ensuring their cold-chain infrastructure and supply chain are ready to cater to the increased demand. They’ve also increased marketing budgets, with cola giant Pepsi perhaps taking it a bit too far by saying it’s “excited” about an early onset of summer. That said, 55% of the annual soft drink sales in India are recorded between March and May.

Meanwhile: The prices of apples from Jammu & Kashmir and Himachal Pradesh have shot up by 25% due to a rise in demand. That’s because exports from Turkey and Iran have been hit because of the earthquake and anti-government protests, respectively.

FYI

Trouble: Swiss bank Credit Suisse lost one of its largest shareholders, after US investment firm Harris Associates sold its entire stake in the past few months.

Taken to task: The Indian government has released endorsement guidelines for celebrities and social media influencers. The directive states that the individual should have used the product or service before endorsing it.

Pink slips: Edtech startup UpGrad has fired 30% of employees from its video-learning solutions subsidiary, upGrad Campus (formerly Impartus). The Ronnie Screwvala-backed unicorn acquired upGrad Campus for ₹150 crore ($18.3 million) in March 2021.

Fined: Twitter CEO Elon Musk will have to pay up 0.1% of Twitter's 2022 gross income to Turkey, since its antitrust regulator ruled that it got zero say in the $44 billion takeover. Twitter can appeal the decision in 60 days. In related news, Twitter faced a second outage for the second time in a week.

Bleeding red: Tesla's consistent price cuts in China have triggered a price war. The biggest casualty is Warren Buffett-backed Chinese EV maker BYD that’s witnessed an $18 billion drop in its value in February.

Direct aim: In what could intensify the economic and commercial war with the US, Chinese President Xi Jinping exhorted his country’s private companies to innovate and become tech independent to overcome the US-led western onslaught.

THE DAILY DIGIT

132

The number of years it will take for the world to close the gender pay gap. Narrowing this gap could boost the world economy by $7 trillion. (CNBC)

FWIW

Clash of the titans: Shein is getting a taste of its own medicine. Copycat Temu, also a Chinese-owned app, is out to beat Shein at its own game. It's already the most downloaded app on Apple in the US, made its Super Bowl debut, and is out to poach Shein employees. The app, which sells everything from clothes to kitchen staples, has grand ambitions to take on tech giants Amazon and eBay. Somewhere, Zara is having the last laugh.

New crib?: Colombia has a hippo problem, started by none other than drug lord Pablo Escobar. Back in the 1970s, he smuggled four hippos from Africa. Escobar is no more, but his hippos and their progeny are thriving; their current number stands at 130. The “cocaine hippos” are now wreaking havoc on Colombia's ecosystem, so much so that the country’s government is looking to ship the feral descendants to India and Mexico. Will Escobar’s hippos behave in India? Watch this space for more.

Scoring a century: Did you know that the instantly-recognisable Hollywood sign in Los Angeles started life as a billboard for a real estate ad? Fast forward 100 years, the landmark is synonymous with the American film industry. Of course, it has seen its share of bad times. It took the Hollywood Chamber of Commerce, the folks behind the Walk of Fame, and Playboy founder Hugh Hefner to give it a facelift. A trek to the barren hill that houses the sign is just as taxing as making it big in the film industry. Maybe it’s the unintended metaphor that makes the landmark so poetic.