The Week That Was: 20-24 July

Yesterday we announced that the Saturday wrap-ups will be in a separate newsletter (so that you could subscribe to either the posts, or the wrap-ups, or both). However, the new newsletter is “not ready” yet (some Substack issue with importing subscribers). Hence we’re doing this week’s wrap-up here itself.

This is what we wrote about in the last week.

Made In India, with Incentives

The Financial Express reports that Apple wants to “make India an export hub”. Given that Wistron and Foxconn were already assembling iPhone 7 and iPhone XR in India, it is possible that Apple was planning to invest in India anyways. However, the recently announced incentives (“PLI”) seem to have hastened the process.

The slew of investments in response to the PLI is not limited to the Apple ecosystem. Samsung recently started manufacturing its smartwatches in India. In January, Samsung also announced that it was going to invest $705 million in a smartphone display plant in Noida, near Delhi. It will be interesting to see if the company will make more investments in response to the PLI (here is a confusing report that refers to Samsung’s display investment after the PLI was announced).

The Taxman Cometh, for digital services

India is not the first country to have pursued a digital tax on foreign companies without a physical presence in the country. Several countries in Europe, led by France, have already implemented a Digital Service Tax. The US has already retaliated against France by imposing additional duties on French soaps and handbags sold in the US. 

India is currently in the middle of trade negotiations with the US. India is trying to get concessions for its generic pharmaceutical drugs to the American markets, trying to trade it with opening up of Indian dairy and farm markets to American companies. It remains to be seen if India’s freshly imposed digital tax might derail these negotiations.

Consumer spending in the time of covid-19

People will continue to eat, but instead of eating in restaurants they will eat at home. They will continue to watch movies, and instead of going to the cinema they will stream it to their homes. Instead of listening to podcasts while driving, they listen while washing dishes

And instead of eating fried snacks from the roadside cart (or office cafeteria), they will snack on biscuits

Packaged foods maker Britannia Industries Ltd, on Friday reported a sharp 118.25% jump in its June quarter consolidated net profit to  ₹542.68 crore. Strong demand for its cookies, cakes and biscuits helped the company draw significant sales as more Indian households turned to branded packaged foods during India's turbulent lockdown.

Deals, Net margins, Attrition: The DNA of the IT Services Industry

Yesterday we talked about how as people spend more time at home, they continue to consume the same stuff but the way they consume it changes. People spending more time at home means that people also spending more time working from home. This results in opportunities for IT services companies to enable “digital transformation” in their clients. 

The more your business is “digital” (things in databases rather than in ledgers, documents residing in the cloud rather than in paper folders, etc.) the easier it will be for your employees to work from home. And since more people have been forced to work from home nowadays, companies have been forced to undertake possibly long-pending digital transformation assignments.

Aurous Goldfingers

The Indian jewellery sector is a “price taker” when it comes to gold, rather than being a price maker. 

The rising prices of gold means that the suffering at Indian jewellers is only going to increase. The normal practice is to benchmark retail gold prices to global prices, which means the recent price rise will get passed on to jewellery buyers.

Another way to look at the recent bull run in the gold price is that while its “demand as a commodity” has gone down (due to the pandemic and lockdowns), its “demand as a currency” has gone up, since these are uncertain economic times and people are looking to diversify their portfolios away from stocks.

We’ll be back on Monday. And next Saturday, this wrap-up will move to the new newsletter.