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Too cool for school
Also in today’s edition: More TCS corporate churn; Centre vs. e-commerce; Binance gets served; China gives IMF a run for its money
Good morning! Ugly-cool Crocs are having a ✨ moment ✨. In fact, the hype is far from over, according to The New York Times. Crocs not only survived the pandemic, unlike cough Peloton cough, but also made it to the 2023 Oscars red carpet thanks to musician Questlove, who wore them to Hollywood’s glitziest event. Gen Zs in particular love the brand. The proof is in the pudding: Crocs stock has risen 167% percent since January 2020. Two decades ago, we thought bootcut jeans were cool. We hope these clogs will give their fans secondhand embarrassment in the years to come.
🎧 Crocs are here to stay. Also in today's edition: find out why crypto exchange Binance is in trouble. Listen to The Signal Daily on Spotify, Apple Podcasts, Amazon Music, Google Podcasts, or wherever you get your podcasts.
Today’s edition also features writing by Dinesh Narayanan, Srijonee Bhattacharjee, Jaideep Vaidya and Julie Koshy Sam.
The Market Signal*
Stocks & economy: Indian equities may open flat to a tad higher as globally indices did not provide any decisive cues.
Movement in banking indices in Europe and US reflected that investors continued to worry about the health of the banking system and a potential spread of the crisis. The Fed’s top banking regulator in a hearing stated that Silicon Valley Bank’s collapse was due to the bank's oversight failures. European Central Bank supervisor Andrea Enria expressed concerns over Deutsche Bank’s weakness and said market volatility for credit default swaps could trigger another selloff.
Back home, volatility is expected before futures and options expire given foreign investors' large sell positions.
Meanwhile, amid a global economic slowdown, India’s commerce minister Piyush Goyal projected exports to rise past $760 billion to their highest levels in FY23.
EDTECH
It Pays To Be A Teacher’s Pet
The pandemic-fuelled edtech boom might be over, but star teachers are still in hot demand.
Moneycontrol reports that government job test prep platform Adda247 spent ₹100 crore (~$12 million) to poach five teachers from another edtech company, PhysicsWallah. That’s as much as edtech giant Unacademy spent to poach 30 teachers from competitors last year. Adda247 and PhysicsWallah even have a common investor in WestBridge Capital.
However, Adda247 has poached on the sly to avoid backlash from students. The five teachers reportedly started a YouTube channel called Sankalp, which has no visible connection to Adda247.
Background: In October, PhysicsWallah, reportedly India’s only profitable edtech unicorn, had bought Adda247's competitor PrepOnline to enter the government job test prep segment.
Meanwhile: Remember the BYJU’s zombie loans story? The Morning Context now reports that one of the reasons the edtech did this is so that it could recognise the EMI amounts in deferred revenues.
CORPORATE
Wobble-Top TCS
The Tata Group’s cash cow, TCS, has begun the process of picking a new leader after Rajesh Gopinathan stepped down. And not just the top honcho, the entire C-deck is being rejigged, The Economic Times reports.
That Gopinathan will likely stay back in the group as an advisor shows he is valued by his bosses. However, the timing of his resignation and his comments at the press conference revealed a man sure of himself, but unsure of the company he was steering.
Tatas are known to invest time and effort in leadership development and succession planning. The Tata Administrative Services dates back to 1956. In 2016, it drew up a comprehensive plan to groom leaders by 2025. Yet, leadership issues have incessantly dogged the group.
Ratan Tata had to battle group satraps when he took over as chairman. His successor, Cyrus Mistry, had an acrimonious exit.
E-COMMERCE
Remove From Cart
India’s Consumer Affairs Ministry is mulling rules prohibiting e-commerce and food delivery platforms from selling goods and services to third-party merchants via associate companies or ‘related parties’. This comes on the heels of the Centre possibly barring inventory-led sales.
If the rules are introduced: Platforms will be unable to offer logistics services to sellers and restaurants. Private labels will be hit. Since 2019, foreign marketplaces (Amazon, Flipkart, Meesho) have been prohibited from owning stakes in seller firms. This prompted Amazon to delist Cloudtail and Appario Retail.
Other businesses in trouble: Investors in online pharmacies are fretting over the likelihood that the platforms will no longer be able to sell medicines due to regulatory crackdowns.
The Signal
This may be the government’s attempt to fully enforce its 2019 rules banning marketplaces like Amazon and Flipkart from having any stake in seller firms, a person aware of the discussions told The Signal, requesting anonymity. With no way to sell goods to a seller, these firms may divest from their own seller firms.
While Amazon and Flipkart have been accused of unfair practices for prioritising their private labels over those of small sellers, Reliance and Tata won’t be immune to the rules, considering they’ve been acquiring brands and e-tailers to sell them.
The Centre doesn’t yet have a clear view on how a ban on logistics services may help sellers, the person quoted above said. “Without basic logistics and delivery services, small sellers will lose business overnight,” they added.
CHINA
Ace In The Dole
There was a time when the IMF, the US, and the Paris Club—an informal group of mostly-western creditor nations—were lenders of the last resort. That’s no longer set in stone. Per a recent study, China has provided $240 billion to 20 debt-distressed countries since 2000, of which $40.5 billion was disbursed in 2021. Only the IMF lent more ($68.6 billion) that year.
Catches: While China is morphing into a bailout-in-chief, it’s paring down infrastructure loans to Belt and Road Initiative countries in order to minimise risks for its banks. Chinese loans also have a higher interest rate (5%) compared to IMF loans (2%).
China’s lending playbook resembles that of the US from the 1980s to the early aughts. The US’ status as emergency lender helped the dollar become the de-facto reserve currency. By doling out over 90% in renminbi (in 2021), Beijing is aiming to change that.
CRYPTOCURRENCIES
The Walls Are Closing In On CZ
If the US Commodity Futures Trading Commission (CFTC) has its way, crypto’s most powerful bloke won’t remain so anymore. It has sued Changpeng Zhao, his cryptocurrency exchange Binance, and Binance’s former compliance chief Samuel Lim on seven counts of regulatory violations.
Gist: Companies engaged in derivatives trading in the US must register with the CFTC. Binance, which lets Americans trade crypto derivatives, hasn’t.
The CFTC suit (pdf) cites damning internal correspondence to underline that the world’s largest crypto exchange—already accused of money laundering, abetting sanctions evasion, and an opaque company structure—encouraged “VIP customers” to use VPNs so they could obscure their US IP addresses. Binance also has 300 in-house accounts trading on the platform despite an insider trading policy.
Aside: FTX co-founder Sam Bankman-Fried has been charged with bribing Chinese government officials.
FYI
Bloodbath: Microsoft-owned developer platform GitHub laid off its entire engineering team in India. Disney, which is culling about 7,000 jobs, is eliminating its 50-member metaverse team, while consulting giant McKinsey will slash its workforce by 1,400 starting this week.
Class system?: Starting April 15, Twitter, which maintains a secret list of 35 “VIPs”, will only show accounts belonging to Twitter Blue subscribers on its For You algorithmic feed.
Red flags: India’s opposition party MPs have raised concerns about the country’s draft Digital Personal Data Protection bill, while suggesting over 40 changes.
End trip: David Risher will be Lyft’s new CEO after its founders Logan Green and John Zimmer stepped down from their respective roles.
The $220 billion breakup: In an overhaul, Chinese e-commerce company Alibaba will split its businesses into six independent units, with each looking to raise funds individually and exploring future IPOs.
Ka-ching: Tech giant Apple rolled out its buy-now-pay-later service, Apple Pay Later, for users in the US.
Held up: Germany's antitrust regulator, the Federal Cartel Office, has launched a probe into Microsoft's dominance in the country.
THE DAILY DIGIT
300 million
The number of full-time jobs that may become automated due to generative AI, according to research by Goldman Sachs. Lawyers and administrative staff could be affected the most. (Financial Times)
FWIW
Wake up and smell the coffee: Not water cooler conversations or Friday happy hours, corporate America is pinning its hope on caffeine to drive workers to their cubicles. According to research firm Ipsos, only 12% of workers in NYC step out to get a drink during work hours, thanks to free coffee at work. A host of companies are also upgrading their coffee brewing machine to lure employees to offices. Wake us up when this pro-office propaganda is over.
Not grabbing this bite: Fancy extinct mammoth meatballs? Coz Australian company Vow Foods is cooking 'em up. Its lab-grown Japanese quail meat will also make its way to restaurants in Singapore by this year. The startup previously looked into cultivating meat from 50 species including alpaca, crocodile, and peacocks in an attempt to reduce climate emissions. Prof Ernst Wolvetang, who closely worked with Vow Foods, went on record to say that they are yet to figure out how our immune systems will react to the meat when consumed. That does not inspire confidence.
Chip shot: Your bag of chips may get a much-needed makeover. Frito-Lay introduced packaging made of cornstarch for its veggie chips last year. Now it has big plans of coming up with "100% recyclable, compostable, biodegradable or re-usable" bags by 2025. Kettle Foods will also debut “Made from Stone” packs that consist of <70% calcium carbonate. Other companies better buck up. European Union regulators may soon mandate that firms use packaging that can be reused, recycled, or composted. About damn time.