Namaste, Sat Sri Akaal, and Salaam. 🫡

Hope you guys had a smashing weekend. Bless up, and get ready for the festive season. Santa Claus rally is upon us.

Also hope you didn’t miss me much - I had my head buried between thousands of words of US college essays last week. 🙈

Today we’re diving into -
- some of the stress in Zee & Sony’s upcoming shaadi,
- Ather’s cash injection from Hero,
- and ZestMoney’s full flop + 11th hour savior.

Our read time is 5 minutes and 3 seconds - faster than Avesh and Arshdeep rid the new ball’s lacquer yesterday. 🔥

Let's dive in. 👇

Market Vibe Check

Zee & Sony’s marriage goes through some jhagda. 🤔

TLDR -
- Zee has asked Sony to push the deadline on their deal a little further.
- There have been some issues with strategic vision and management - incumbent Zee CEO Punit Goenka has been in some legal trouble, which Sony doesn’t like.
- There’s also some teething trouble with new management and business strategy.

2 years back, Zee and Sony put pen to paper on what was to be a $10 billion mega-merger of India’s entertainment giants. Embedded within those legal documents was a clause that set a 2-year deadline for the deal to be closed.

The clock ticks zero on December the 21st - 5 days from now. And surprise surprise, Sony hasn’t merged with Zee yet. There are 3 big things tying this deal up -

1 - Turbulence with senior management

Where there is man. there is power. And where there is power, there is kalesh. Here, Zee wants their CEO Punit Goenka to lead the merged company. Sony is wary and knows that he’s being looked into by India’s Securities Board for fraud, and he’s also a nepo baby.

2 - Director dhamaal

Two of Zee’s directors were unable to get themselves re-appointed to the board, which means less power for them at the negotiation table. Because of this internal battle, shares slid as much as 9% before bouncing back.

3 - Financial + strategic concerns

There’s definitely a shared goal here - to make an entertainment giant that hogs up a good chunk of the Indian market. Zee currently holds 17% share of the viewing market while Sony has 10-12%. But Zee also wants to play the future more safely, and slowly expand while Sony wants to blitz the market.

There are definitely some teething issues here… but nothing that time can’t fix. Amazing stuff.

Hero puts some more chips into the Ather game. 🃏

TLDR -
- Hero Motocorp just bought 3% more of Ather at a $560mn price tag.
- They have a very interesting and complex relationship - both supply parts to each other and beef each others’ profit margins up.
- Some folks have said that the former might even scoop the latter up as a subsidiary.

Hero LOVES Ather…

And on that note, they just dropped a $17mn check into Ather’s bank account. This is a very interesting symbiotic relationship that you don’t see often in the market.

Every time Ather has had financial troubles, or is just hunting for more money, they have ALWAYS gotten a check from Hero.

In addition, Ather also sources a LOT of their components from Hero, often at a cheaper price compared to the broader market. This strategic support has helped them sell their scooters cheap in the crazy-competitive Indian market.

The crazy part - Hero’s OWN EV arm is doing pretty badly. It’s called Vida, and I’ll bet that you didn’t know about it until you read this. Their total stake in Ather is now at around 40%, or worth $225mn.

Great to see such collaboration over competition.

ZestMoney’s big BNPL dreams fall through the floor. 💀

TLDR -
- ZestMoney just royally blew up - receiving an 11th hour offer for pennies on the dollar.
- They positioned and marketed themselves as a BNPL business when they were just a really bad lending business.
- Goes to show that at the end of the day, fundamentals really do matter.

Some more BNPL badmaashi…

2 years back, ZestMoney was worth $450mn. Yesterday, they got a distressed acquisition call to sell their business for pennies on the dollar.

Here is how they overcomplicated a simple financial concept to the point of no return.

This is how a normal lending business works -
- You find people who want to borrow money (say I want to buy a $1,000 phone)
- You do a check-up on me and make sure I'm a trustworthy borrower
- You ask me for X% interest rate
- You ask me to repay by Y date
- You give me your money, and I pay you back

I have a new phone, you have your X% interest rate profit, and life is good :)But ZestMoney is a BNPL business.

BNPL stands for Buy now, Pay later.

This is how a BNPL business works -
- You find people who want to buy things (say I want to buy a $1,000 phone from Apple)
- You break that $1,000 payment into 4 payments of $250
- You pay Apple on my behalf
- I pay you $250 every month for the next 4 months
- Apple gives you a 5-10% commission in exchange for bringing them a customer

ZestMoney sold BNPL to investors as this "magical" dream product that would revolutionize the personal credit scene.

Their default rate was actually over 13% with an average customer acquisition cost of 1000 Rs+.

Along with this, ZestMoney needed each customer to take out at least 4 BNPL loans a year for them to personally make money.

But the average customer only ~2 loans per year.

So you're spending an arm and a leg to acquire a customer, but the customer is barely using your product, and if he is, he's defaulting on 2/7 of the time? 🫣🫣🫣

Sounds bound for failure. Lesson learnt: keep it simple across the board.

In other news… ☕

Rich Indians flock to Dubai as a safe haven (BBG)

America raises concerns over Chinese EV factories moving to Mexico (FT)

Apple agrees to shell out $25mn to settle a family sharing lawsuit (TC)

H&M revenue drops in a tough fast fashion market (Mint)

Citigroup puts a good chunk of employees on “edge” (CNBC)

And that’s the tea the chai for today.

Thanks for reading, and we hope you enjoyed it.

Lots of ❤️,

Team CC