Namaste, Sat Sri Akaal, and Salaam. 🫡

Happy Friday, folks!

Today we’re diving into -
- Google’s push to make Pixels in India,
- Adani’s latest khilwaad with electricity prices,
- And, Microsoft’s surging India revenues.

Our read time today is 4 minutes and 54 seconds - faster than Imran, Kabir and Arjun made it to Spain. 🐂

Let's dive in. 👇

Market Vibe Check

Google jumps on the “Make in India” bandwagon. 📱

TLDR -
- Google will be producing Pixel phones in India.
- Lots of big tech firms are opting to use India for it’s cheap subsidies, soaring local demand, and viability as an export base.
- India breaks even on their investments if companies drive over $350bn+ in revenue and hire 4.1 million locals.

Habibi, come to Tilak Nagar…

From 2024 onwards, Google will be producing it’s Pixel phones in India - another big boost to the manufacturing sector and a vote of confidence in India as an export base.

There are 3 big reasons why -

1 - A need to move away from China

This is pretty self-explanatory - not many Western firms are happy with their Chinese production backbones of late.

They’re subject to the whims and fancies of a (rather volatile) government while also getting full scrutiny from their own regulators.

The mental cost + trust lost + shipping is worth way more than the cheap production.

2 - Hefty subsidies in India

Once again, pretty self-explanatory.

The Indian government has been pushing very, very hard on local manufacturing.

They’re handing out subsidies which get as crazy as 300-350% of cost.

So if you’re a producer of “large scale electronics” and invest $10 million into a factory, you get $35 million back in cash.

3 - A large + quickly growing domestic market

Indian mass incomes are still 3rd world by any means, but they are growing very fast.

There is a very large chunk of “aspirational” middle class who is happy to spend decent amounts on big ticket purchases.

Plus, mean incomes are growing at the fastest rate out of all developing economies.

There’s also a growing local ecosystem - nine years back, there was no smartphone production. Today, almost $44 billion of mobiles are produced every year with $11 billion of that going to export markets.

Cheap production + killer domestic demand + tons of subsidies = a proposition that few sensible industrialists could ignore.

Allegations come out over Adani’s overpriced electricity. ⚡

TLDR -
- Congress just called for an investigation into Adani’s apparent artificial inflation of electricity prices.
- The FT found that Adani employed a web of foreign shell companies to sell coal to India at a price that was 2X the market rate.
- There are slight political undertones to this, and both sides have gaping flaws.

Another corporate quagmire for Adani - the FT has alleged that Motabhai has been importing coal and selling it to the people of India for more than double market price.

They’ve apparently done this by weaving their coal shipments through a crazy maze of shell companies and taking it from Point A to Point B with a hefty markup.

The FT examined 30 coal shipments bought by Adani Group companies.

Each shipment was routed through a bunch of foreign middlemen, and the total value of these shipments increased by a cumulative $70 million upon reaching India.

There is a host of evidence in this link (which is a crazy expose, btw!)

Critics are basically saying that every time someone flicks a tubelight on, or uses their kettle, Adani gets a tiny fraction richer.

Someone also brought up the fact that when Modi won the 2019 elections, he was flown from New Delhi to Gujarat in Gautam Adani’s private jet. 💀

Microsoft India mints millions. 💸

Microsoft recorded a revenue of $2.3 billion in India last year, a surge of 40% from the year before.

Their net profit margin remained low at 3.5% compared to 33% for Microsoft US.

This is probably because of the large revenue royalty that Microsoft India pays back to Microsoft US.

Microsoft India’s royalty cost also rose by 52% to $1.58 billion in FY23.

Another interesting number - the share of services as a %age of revenue increased from 51% to 74% while the share of products (Office, Excel, etc) slid from 49% to 26%.

In other news… ☕

OpenAI handshakes with Abu Dhabi’s G42 (BBG)

US 10-year Treasuries cross 5% for the first time since 2007 (FT)

Poshmark shuts down it’s India, Australia, and UK businesses (TC)

ITC net profits jump 10% to $600mn (Mint)

BharatAgri bags $4.3mn to bolster it’s last-mile delivery (Inc42)

And that’s the tea the chai for today.

Thanks for reading, and we hope you enjoyed it. Have a mauj-masti filled day.

Lots of ❤️,

Team Cutting Chai