Namaste, Sat Sri Akaal, and Salaam. 🫡

Today we’re diving into -
- Why Accel is investing in rural Indian startups,
- Nykaa’s surprisingly resilient Q1 numbers,
- and Adani’s push to keep at the Dharavi project.

Our read time today is 4 minutes and 53 seconds - faster than Tammy and Charlie got the safe open in HNY… 🙈

Let's dive in. 👇

Market Vibe Check

Accel drops a $250mn fund for rural India. 🤔

TLDR -
- Accel is venturing into smaller towns and villages for their future unicorns, moving beyond Tier 1/2 India.
- Rural areas have crazy spending power, with top 20-30% exceeding $250bn consumption per year.
- It’s a very bold, very ambitious, and very ballsy strategy.

While most investors are glued to the hustle and bustle of India’s metropolises, Accel is setting its sights on the quieter, often overlooked corners of the country.

They just announced a pretty definitive shift on their India strategy - they will be hunting for their next 1000X startup from rural areas instead of cities.

This approach is just as unconventional as it is ambitious, because they’re challenging a very popular stereotype that “rural equals impoverished.”

In fact, the top 25% of rural India spends close to $250 billion a year, and to put that into perspective, that number equals roughly 50% of urban spending in India.

Smartphones and affordable internet have democratized access to digital services across India. Mobile payments via UPI are booming, and logistics networks have evolved to ensure swift deliveries even in remote areas.

The craziest part - even rural India is starting to live that aspirational lifestyle.

People are happy to spend a little bit extra on a marginal upgrade - think 125cc bikes instead of 100cc, double-door fridges over single-door models, and yes, even used iPhones are finding a market. This willingness to spend on quality products is the lifeblood for new businesses aiming to capture these markets.

But here’s the kicker - there are a lot of smart people who have already tried and failed while trying to make waves in rural India.

Social commerce platform Udaan has raised over $1bn yet hasn’t really delivered the bang-and-boom that a unicorn warrants.

The pitfall often lies in applying urban businesses strategies to rural settings. Family-run businesses with deep-rooted relationships dominate these markets, and technology alone can’t disrupt these bonds.

Rural-focused startups will need to rethink everything from business models to customer acquisition and distribution strategies. There are hundreds of billions of dollars to be made by integrating into these existing networks rather than attempting to overhaul them.

Crazy stuff…

Nykaa rocks on with revenue growth despite a fashion lull. 🚀

TLDR -
- Nykaa is forecasting close to 25% growth for Q1 - a very admirable number given how fast fashion has slowed down.
- Their business is still dominated by beauty, accounting for ~85% of revenue.
- Competition is heating up by the day, with Reliance’s AJIO, Flipkart’s Myntra, and tons of other new businesses stepping into the ring.

Beauty and personal care marketplace Nykaa is enjoying the wave of young India’s rapidly growing consumption, and are on track to bump revenues by 22-25% for the first quarter.

This is particularly impressive given the slowdown in offline sales due to recent elections and the heatwaves hitting north India.

Even though physical retail accounts for less than 10% of Nykaa’s revenue, the company has internally shifted strategy to put a lot of their chips on retail outlets in malls and shopping centers, because there still is a lot of money to be made in modern and general trade.

The beauty division remains Nykaa’s bread and butter, accounting for a staggering 83% of its total revenue. When Nykaa went public, there was significant buzz around its potential in fashion. However, this segment has struggled to keep pace, especially against giants like Reliance and Flipkart-owned Myntra.

Reliance themselves have recently made a very hard push into the fast fashion market with their flagship AJIO and soon-to-come SHEIN marketplaces.

While Nykaa’s beauty segment continues to perform admirably, maintaining its edge will be no easy task. Competitors like Reliance’s Tira, Myntra, and Purplle—which recently secured Rs 1,000 crore in funding—are all vying for a larger slice of India’s burgeoning beauty market.

Adapt and evolve… that’s the name of the game.

Adani keeps cracking on with the Dharavi masterplan. 🏗️

Inside Bombay’s beating heart lies the world’s most famous slum - Dharavi.

Last year, India’s richest man Gautam Adani won a bid to give the area a makeover.

He paid over $630mn to the government, and he’ll also be spending $3 billion of his own money to transform the slum area into something new and jazzy.

This “bid process” is a BIG reason behind why Bombay’s urban land is a mélange of the rich and poor.

Say the government owns 100 acres of slum land, which sell to the highest bidder. The developers are gonna build permanent housing for the slum-dwellers on 30 acres of it (as they are legally bound to), and then they’ll use the remaining 70 acres to build ultra-luxury shopping malls, buildings, and offices.

Adani’s plans with Dharavi’s development are still very vague. No public information has been released on what he wants to do, but any sane developer would turn this into a hi-fi utopia.

Dharavi lies right next to BKC and is spread over 620 acres of super-prime real estate. Locals know the value of this land, but are also concerned that Adani might shunt them into tiny apartments to save costs, while spending large on the luxury developments which he’s planning to construct.

Crazy stuff, and time will tell where Motabhai takes this.

In other news… ☕

Russia’s forex trading in Chinese Yuan hits 99.6% (BBG)

X growth slows down (FT)

Archegos fraud trial nears the end (NYT)

Aramco looks to raise $3bn from a bond sale after 3 years of silence (BBG)

Investors start betting on rate cuts to come soon (NYT)

And that’s the tea the chai for today.

Thanks for reading, and we hope you enjoyed it.

Lots of ❤️,

Team CC