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Multipie Weekly: June 6, 2021

Hey there!
A very good morning from Team Multipie!

We are starting our weekly newsletter digest called Multipie Weekly and going forward, it will start hitting your inbox every Sunday morning with handpicked recommendations to watch, read and summarize the week gone by.

Grab a cup of tea or coffee and let’s get started!

🗓 The Week (and month) Gone by…

Markets have been in green territory over the last week and month. We prepared a snapshot of industry wise returns over recent time periods.

PLI scheme paving the way for EV Infra 🔋🔋

Recently, a PLI scheme of ₹18,100 crores was notified to incentivize infra for EV batteries. Given the higher share of battery in cost of a car under EV ecosystem compared to fuel cars, there have been deliberations on in-house production versus outsourcing by OEMs. Powerhouses such as RIL, Tata, Adani have shown interest in setting up Lithium Ion plants.

We read a note from Morgan Stanley on their outlook for battery players under PLI. Here are our key takeaways:

  • The approved PLI scheme for EV batteries aims to achieve manufacturing capacity of 55GWh with an outlay of ₹181 Bn.
  • For an EV penetration of 5% in PVs and 10% in two-wheelers, India requires ~13GWh of battery storage capacity (outlay planned is 55GWh). 
  • Localization of battery production will lead to sharp decline in prices of Electric Vehicles and will increase affordability, thus boosting adoption
  • If OEMs such as Maruti, Tata and Toyota look towards developing battery capacities on their own, the majority of demand will be taken up by them. 
  • Globally, MS is less optimistic on battery companies due to high competition 
  • Indian companies such as RIL, Maruti and Tata Chemicals have shown interest in the Lithium-Ion battery market in India. While RIL has decarbonization at the forefront of its energy strategy, Maruti is investing in India’s first cell-level lithium battery manufacturing unit, and Tata Chemicals – who has the capability of building a circular economy around such batteries –  has partnered with global players for R&D and has invested in a plant site, indicating strong intent. 

While end outcomes are yet to be seen, Indian automotive segment is clearly heading into exciting times.. 

Have the rules of investing changed? 📈

Does the classic investment philosophy of buy right, sit tight still work? Have the rules of investing changed forever? Many have questioned this recently, given the rise of meme based investing. We found this article on the topic by @ReformedBroker quite relevant and interesting.

Multipie view: Digital era doesn’t alter the laws of supply & demand. It just shortens the cycle, squeezing into higher peaks & troughs. In short, we believe the classic rules of investing are timeless.

Can you play the long game in investing? 

Moving from one extreme of meme based investing, @VJ_Rabindranath wrote this fascinating story about his father’s investing journey called “The next Warren Buffett”. It talks about the other extreme, of playing the long game of investing. This is a must read.

Takeaways from RBI’s Annual Report

We read through RBI’s Annual Report that was released last week and here are some summary takeaways:

This is clearly not a replacement to reading the original Annual report document, which has great insights.

The Adani Group demerger and wealth creation story 

Gautam Adani is now the second richest Asian | GQ India

Adani Group is THE most successful demerger story in India Inc. From a market cap of ~68,000 cr for Adani Enterprises pre demerger, the group market cap now stands at over 9.5 lakh cr, ~14x in 6 years. Here is the break-up across group companies:

We found this post on Gautam Adani’s life story and some trivia interesting.

Modern Retail: Large opportunity size + consolidation 

Morgan Stanley is bullish on the outlook for modern retail format and especially Avenue Supermart (DMart). It expects its EPS to rise from 18.1 in FY21 to 42.2 by FY23E. Here are key takeaways for you:

  1. Grocery forms ~60% of India’s retail market
  2. Expects growth in grocery @ 7% and modern format grocery @17% CAGR
  3. Expects consolidation & duopoly with Reliance Retail
  4. Here is how their industry growth outlook adds up:

That’s all for this week. Please share with your peers if you found this helpful and subscribe at multipie.co to start receiving these as a weekly digest every Sunday!

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