Normal people make new year resolution on 1st Janurary. Investors make new year resolutions on 1st April. Wishing all a happy and successful new financial year! With that let’s look at this week’s Multipie newsletter. It covers the optionalities with Bharti Airtel and how will Zomato’s ambitious 10 minutes food delivery work; apart from some key market updates and good reads.
Outline
1. Market snapshot for the week
Telecom was the best performer last week, led by Bharti Airtel. Airtel conducted its first analyst meet in 2 years last Friday where they laid the roadmap for 5G and corporate strategy, followed by filing of a detailed 191 slide presentation – had updated here.
While the merits of investment in Bharti Airtel are debated due to the large debt, I concur with the view of Manish Gupta of Solidarity and I quote:
Bharti has built a toll road: the Govt, users of the toll road, and establishments riding on the traffic on the toll road (e.g. Amazon, Zomato) have all benefitted, except for the company who took on the risk of construction. This is now poised to change. The Telecom sector has been a value destroyer for over a decade and conditions are ripe for this to reverse with a very favourable industry structure, no regulatory ambiguity, Govt support and high probability of tariff increases. Over time, we believe Bharti will not be a “boring Telco” but new revenue streams will emerge as the company monetizes its 300M+ customers for new sources of revenue which are not visible today.
While core thesis hinges on increasing ARPU (average revenue per user) as users shift to postpaid from prepaid, the big optionality of its less discussed business lines such as Broadband, Payments Bank, Data Centre and Airtel Black is what I find exciting.
2. Will Zomato’s “10-minute delivery” concept work?
Zomato recently announced they will deliver food in 10 minutes and this drew a lot of attention last week.
And no surprise it got the memers in action..some good ones here😆
There is another segment that is angry about rider safety and the food quality assuming the food would be re-used or re-heated.
The question I had in mind is “Is promising 10-minute food delivery a practical thought or not?”
Before diving into the answer, here is a trivia: Multiple Dominos stores in Japan and Australia delivered fresh hot pizza for weeks under 5 minutes – from order to delivery. Yes, let’s see details.
10-min delivery: Proof of concept by Domino’s
Domino’s started trying the “Within 10-minute delivery” concept in 2016 in Australia under an initiative called “3TEN” (3/10) where the goal was to keep the pizza ready for pickup in 3 minutes and deliver within the balance 7 minutes. Later on, this model was expanded in New Zealand, France, the Netherlands, Japan, and Germany.
What’s the secret?
Data.
There are two legs to the problem – quick preparation and quick delivery. For quick preparation, Domino used data based Predictive Ordering. By understanding & analysing customer ordering behaviour over multiple locations via the stored data of deliveries and orders for years on Amazon web services (AWS), companies could predict and start preparing the orders BEFORE the customer actually ordered! ☝️ More details on the 3Ten model here.
So Zomato is trying to replicate the model?
Yes, but it wouldn’t be as easy.
Quick preparation: Even Zomato data architecture runs on AWS and they mentioned about predictive orders in a recent release.
Quick delivery: Remember they announced acquisition of 10 minutes grocery delivery startup Blinkit (Grofers) sometime back, so this is part of the strategy. They plan to use the dark store infrastructure of Blinkit to improve delivery partner logistics towards its 10 minutes food delivery targets.
Can Zomato replicate Dominos international success in India?
Possible for limited menu items, but I dont think it will move the needle in a big way. The business models of Zomato & Domino’s companies are very different.
Domino’s could do it because it had higher predictability due to limited SKUs/ order items.
Dominos controls their complete value chain. Zomato acts as an aggregator for over 15 lakh partner restaurant dependencies and we Indians are quite unpredictable as we all know 😂
Even Dominos realises that and is targeting 20 minutes, down from their earlier 30 minutes….nahi to pizza aayo free.. Both the stocks saw recent correction. So, which one would you bite into (if at all?)
3. What else is trendin’?🤙🏻
✔️ India’s Exports have breached $400Bn for the first time ever. $300Bn was achieved a decade back and India took a decade to get additional $100Bn. To know by which sectors it was driven by, click here.
✔️ India and Australia signed a historic Trade Agreement today (details).This is India’s first trade agreement with a developed economy after more than a decade and is expected to double our exports in goods and services in 5 years!
✔️ WTI Crude futures are back below $100 after the US announced the largest ever draw of strategic reserves. This triggered the rally on Friday.
✔️ Unity Small Bank, the latest Banking entrant, paid back the deposits to 8.5 lakh eligible borrowers (upto Rs 5 lakhs), totalling to a payout of ~Rs 3800 crores. While the source of capital is DICGC, timely payout by Unity SFB brought smiles to many. It was formed via Centrum Capital and BharatPe. Strangely, most business media skipped covering this event.
4. Good reads 📚
4.1 Neel Chhabra, part of Team SOIC wrote a deep dive on Google’s (Alphabet) business which I found brilliant!
4.2 An article on With valuations no longer cheap, volatility could recur by Sunil Shankar (CIO of ASK Investment managers)
4.3 ICICI Securities released a good note on CreditAccess Grameen, the leading MFI in India. Had shared my optimism on the MFI space two weeks back.
That’s all from the jungles of Corbett – see you next week. Until then, happy investing!
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