Namaste, Sat Sri Akaal, and Salaam. 🫡

Happy morning!

Today we’re diving into -
- Oyo’s sudden pit stop for private cash,
- Mukesh Ambani’s credit card play,
- and Tata’s push on the digital front.

Our read time is 4 minutes and 57 seconds - faster than the 20L hits Orry’s account after he clicks a selfie.

Let's dive in. 👇

Market Vibe Check

OYO gets back to markets for more capital. 🤔

TLDR -
- OYO's raising $250m from private investors to extend their lifespan until IPO.
- Valuation is gonna be anywhere from $4-6bn, which is a pretty hefty markdown.
- Most of this money is gonna go to interest payments, which total $80m+ a year!

In September 2021, OYO filed to go public on the markets. 2 years later, nothing has happened since.

OYO has been holding off IPO plans because of how harsh public investors have been on loss-making, hyper-growth businesses - but you need someone to subsidize all the cash burn.

The OYO rocketship needs some fuel quick, so they’ve picked up $250mn of investment with three things in mind.

1/ Most of this money will be used to pay debt.

In 2021, when interest rates were close to 0, lots of companies took out very cheap loans.OYO was one of them.

They borrowed over $660 million and then some more.

But rates have been drifting upward since then, which means that OYO’s interest payments are now higher. They owe ~$80m/year as interest alone!

Bottom line - this expensive will basically WIPE OUT any profits/free cash flow that OYO generates.

2/ OYO has had a bit of a “rebound” season.

As far as comeback stories go, OYO’s is currently working on it’s.

In 2020, they earned over 13,100 Cr ($1.6bn+) of revenue.

That same number last year was a relatively puny 5,400 Cr ($650m).

But over the same time period, they’ve brought losses down from 13,400 Cr → to just under 1,300 Cr. This is encouraging, and they’re slowly running a tighter ship, which always makes investors happy.

3/ Valuation seems to be “baad ki baat!” 😮‍💨

OYO is NOT begging for higher valuations.

They’re hunting for growth capital at a (relatively) decent valuation of $5.5 billion. This is much lower than the $10bn they once warranted.

Either Aggarwal saab can’t find any takers at a higher price, or he’s super intent on getting this deal done quickly.

Solid…

Tata fires on with it’s super-app super fundraise. 💸

TLDR -
- Tata is raising $1bn for it’s super-app Neu, right after a $2bn raise earlier this year.
- They did $25m of revenue against $165m of losses last year - spending almost $7 to earn $1.
- They’re making a classic flush-with-cash play: lure users in with incentives, keep them there with convenience.

Papa did the heavy lifting, beta will now enjoy…

Tata Group is raising $1 billion for their super-app Tata Neu.

Super-app businesses (read: Gojek, Uber, Careem) are notoriously cash-hungry, which means that they’re do or die.

Last year, to generate each dollar of revenue from the super-app, Tata had to burn $6.6. This is expensive, but here is some great stuff that comes out of it -

- Tata builds a very sticky customer base. Their repeat order rates are over 60%, which is unheard of in the business.
- A push into financial services. Tata’s created Fintech, Payments, and Stockbroking subsidiaries. They can ship a product to millions “overnight”, and can also tailor products based on customers’ transaction history.
- Commission income. Tata gets a nice slice of all the income they generate for the businesses on their app (BigBasket, 1mg, Croma, etc). Makes for a very good revenue stream that keeps coming back because of how good their ecosystem is.

Last year, while their losses went up 23%, their revenue went up 13X - growth like this is exactly what they’re spending big bucks for.

They’re enjoying a lot of growth on the parent company’s bankroll…

Reliance puts the final touches on it’s credit card launch.

TLDR -
- Reliance & SBI are entering the co-branded card market.
- They want to use these cards as a stepping-stone to tap a growing Indian middle class, and it’s a pretty smart strategy.
- There’s no major USP to a Reliance card as of now, but time (and Ambani’s billions) will eventually tell us what explosive market domination is in store.

Reliance and SBI are teaming up to launch 2 of their own co-branded credit cards on India’s RuPay network.

There is currently no USP other than the fact that there are some “discounts” on Reliance Retail businesses - AJIO, JioMart, Reliance Trends, etc.

This new interest in credit cards is not unique to Reliance. Tata Group also partnered with HDFC to roll out its own cards, riding on the coattails of the Tata Neu credit cards' success over the past year.

These co-branded cards serve as a conduit for these firms to diversify revenue, leverage customer data, and get a grasp on the pockets of India’s growing middle class. As incomes rise and consumerism becomes “hip”, these offerings will thrive.

But the reason this credit card news is interesting - Ambani has been going for a big financial services push of late.

Jio Financial is a $20bn behemoth with a hand in all sorts of cookie jars (asset/wealth management, advisory services, banking, lending, and now, credit cards).

Time will tell how Reliance’s plans pan out - but news like this is a pretty decent win-win for both customers & companies.

In other news… ☕

Warner Brothers hunts for a marriage with Paramount (BBG)

Elon hunts for political advertisers to offset revenue falls (FT)

Bird goes bankrupt (TC)

McLaren shareholders vote for Bahraini shakeup (BBG)

FirstCry gets ready for its’ IPO (Arc)

And that’s the tea the chai for today.

Thanks for reading, and we hope you enjoyed it.

Lots of ❤️,

Team CC