VIP has too much baggage

Also in today’s edition: Super threat for supertankers; China is coming for weight loss drugs

Good morning! Ever heard of killing them with kindness? Well, in Gujarat, corrupt officials have taken this motto to heart. They're so kind that they offer their victims the option to pay hefty bribes in bite-sized, digestible pieces. Picture this: a poor farmer couldn't cough up Rs 85,000 upfront, so a deputy sarpanch in Surat generously slashed the bribe to just Rs 35,000, and kindly suggested paying the balance in three easy EMIs. And guess what? This isn't a rare gem of kindness. As The Times of India reports, this year alone, the Anti-Corruption Bureau has caught wind of ten such instances of exceptional kindness in Gujarat. Who knew a kind world could be so lucrative? 

🎧 Nisaba Godrej packs her bags at VIP. Also in today’s episode: how China is disrupting the market for weight loss drugs. Tune in to SpotifyApple PodcastsAmazon MusicGoogle Podcasts, or wherever you get your podcasts.

Roshni Nair and Anup Semwal also contributed to today’s edition.

The Market Signal*

Stocks & Economy: Asian markets rose on Friday in anticipation of US nonfarm payrolls data. The outcome, combined with the labour market easing in the country, may spur the Fed to cut interest rates (or so analysts hope). The European Central Bank cut interest rates for the first time in five years. China will release trade data today.

Oil prices rose after Saudi Arabia and Russia reassured markets about supply agreements. An earlier OPEC+ meeting had indicated increased supply, triggering a bearish sentiment.

The Reserve Bank of India is expected to announce the new monetary policy at 10:00 am. It’s unlikely to change the current interest rate of 6.5%, though a Reuters poll projects a cut may happen later this year. The GIFT Nifty indicates a muted start for benchmark indices.

LOGISTICS

These Ships Will Have Nothing Left In The Tank

Earlier this year, Indian Oil Corporation (IOC) stated that it is venturing into shipping. It’s a hedge against high freight rates, the kind triggered by adverse geopolitical events.

But a paper by University College London and Kuhne Foundation researchers asserts that vessels transporting fossil fuels will be out at sea in the long haul. A successful green transition — where global warming is limited to 1.5°C above pre-industrial levels — will turn tankers carrying LNG, coal, and crude into ghost ships. If these aren’t repurposed to carry renewable energy, the industry could lose $286 billion in value. Over a third of the world’s commercial ships ferry dirty energy.

Repurposing is tough for LNG tankers, which are customised to carry fuel at low, controlled temperatures. Coal and oil vessels will have to carry bulk low-carbon loads and biofuels, respectively. IOC will eventually have to consider such options down the line.

PHARMACEUTICALS

Make Way For Chinese Ozempic

The days of pricey semaglutide seem numbered. Thank China’s generic drugmakers. 

Whatchu talkin’ about?: Novo Nordisk’s (NN’s) semaglutide patent expires in China in 2026, and Reuters reports that Chinese firms have been hard at work, developing at least 15 generic versions of NN’s diabetes drug Ozempic and weight-loss counterpart Wegovy. The frontrunner has already sought approval for selling China’s first Ozempic biosimilar . 

So?: Analysts predict generics will lower semaglutide prices in China by 25%. Even though NN and American rival Elli Lilly have ramped up production, they're still unable to meet demand. Cheaper generics will ease supply constraints and ensure wider drug availability. 

Tangent: Indian drugmakers Cipla, Lupin, and Dr Reddy's are also developing Wegovy versions. If semaglutide production increases in China, Indian firms may look to gain cost advantages and accelerate their own generic launches by tapping Chinese suppliers of bulk drugs, as they have done in the past.

CONSUMER

Godrej VIP Packs Her Bags

‘90s nostalgia is incomplete without the VIP suitcase. But business can’t sustain on nostalgia alone. VIP Industries, India’s biggest luggage maker, has lost independent director Nisaba Godrej, chair of Godrej Consumer Products Ltd. In a letter (pdf), Godrej cited differences over VIP’s succession plans and ‘leadership accountability’. 

Sagging bags: Despite growing sales by 8% in FY24, VIP Industries’ net profit shrank to nearly a third (pdf) while Ebitda margin (earnings before interest, tax, depreciation, amortisation) fell from over 15% to 9%. The promoters have been planning a stake sale since last year. 

On an investor call last month (pdf), VIP’s management said the company will focus on increasing profit, then launching new products including travel accessories. 

The Signal 

Luggage is a tough business. Demand is seasonal, repeat purchases aren’t common, and expensive inventory can pile up if the demand forecast isn’t accurate. VIP is also losing market share on both ends of the market. Safari, now run by an ex-VIP executive, is snapping up buyers of cheap luggage. VC-backed brands like Mokobara and uppercase are picking up premium and luxury customers. And premium luggage leader Samsonite has also made inroads into the mass-premium category with its Kamiliant. 

Godrej has reason to be concerned: VIP needs new ways to grow, fast. Its share price has fallen 20% in the last one year while the benchmark Nifty50 is up over 22%. All this, while the Piramals, the company’s promoters, find a suitable opportunity for a stake sale, something they have already postponed once. 

FYI

Delighting you always: The Economic Times reports that Canon is in talks with Indian and global chip companies to procure its semiconductor lithography machines for chip fabs and electronics manufacturing in India.

Another fab update: Software-as-a-service major Zoho has applied for a licence and earmarked $600 million to build a chip fab unit in Tamil Nadu.

It’s official: The National Company Law Tribunal has approved the Air India-Vistara merger, paving the way for both airlines to integrate their fleets and operations. The combined entity will operate more international flights than any other Indian airline.

Fresh scrutiny: The US Federal Trade Commission and Justice Department have opened antitrust investigations into Nvidia, Microsoft, and OpenAI for their dominance in the AI industry.

What are they smoking?: The US Food and Drug Administration has reversed its 2022 ban against vape company Juul, paving the way for potential federal clearance.

THE DAILY DIGIT

32%

The surge in share prices of two companies – Heritage Foods and Amara Raja Energy – linked to TDP leader Chandrababu Naidu in the last two days. Naidu, along with JD(U)’s Nitish Kumar, have turned kingmakers in the new NDA coalition government. (The Economic Times

FWIW

Duped: The ‘All Eyes on Rafah’ campaign is getting tons of traction on social media, and rightly so. People are donating to better the lives of displaced Palestinians in whatever they can, but their goodness isn’t always directed to the right channels. According to social media monitoring tools, there’s been a 60% increase in phishing mails and a 40% increase in spam ever since the campaign went viral. And people are being duped in India, too. Even Good Samaritan Indians are vulnerable, according to The Economic Times. A new Jamtara is the last thing we need.

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