Namaste, Sat Sri Akaal, and Salaam. 🫡

Happy morning folks. Hope life is good.

Today we’re diving into -
- Tesla’s continued push into an Indian backend,
- Brookfield’s big bet on Leela,
- And BCCI’s move to milk cricket further.

Our read time today is 4 minutes and 52 seconds - faster than Ahmedabad Stadium emptied out in the last 5 overs. 🙈

Let's dive in. 👇

Market Vibe Check

Tesla continues it’s tango with Indian manufacturers. 💃🕺

TLDR -
- Tesla is gonna be importing almost $2bn of parts/pieces/components from India.
- This basically doubles their last year’s imports.
- Modi govt. is welcoming EV businesses, but EVs are saying “our customers need to be able to get their cars charged”.

This June, Elon Musk had a meeting with Modiji.

After the meeting, Elon said that Tesla was looking to “invest in India as soon as humanly possible”.

Either Elon sees the potential, or Modi is killer at sales, or both - but Tesla just planned to double it’s component sourcing from India.

Last year, Tesla bought over $1 billion of parts/electronics from Indian suppliers, and they have signed orders worth a total of $1.9 billion this year.

Currently, most of these parts are still very small and (relatively) aren’t anything that Indian firms can build a moat around - like castings, bearings, casings, and other small plastic parts. But this vote of confidence means that it’s gonna be easier for Tesla to trust Indian companies who can make things like battery tech, self-driving AI, and telematics/connectivity modules.

India simply does not have the charger infrastructure for cars, plus the government puts a 100% tax on imported cars, so a $40,000 Tesla becomes almost $100,000+ when you factor in registration costs, etc.

Elon and Piyush Goyal (India’s commerce minister) spoke about this, and the government might move to remove taxes entirely on Tesla vehicles.

Modi and co. have set some lofty targets by 2030 -
- 30% EV adoption for private cars
- 70% EV adoption for commercial vehicles
- 80% EV adoption for 2/3 wheelers

Electric… ⚡

Brookfield’s Leela starts printing cash. 💸

TLDR -
- 6 months back, Brookfield (over)paid ~$500mn for Indian hotels brand Leela.
- In classic private-equity style, they’re firing growth on all cylinders.
- Brookfield is also infusing $200mn MORE to sustainably scale without sacrificing quality & consistency across locations.

When you think about popular hoteliers, the first names that pop to your mind are Sheraton, Fairmont, or Waldorf Astoria. But there is only one brand that you can think of which comes from India - Taj.

In 1990, Leela was founded to fight in this exact market. But let’s cut to 2022. Lots of key hires had left, finances were in terrible shape, and the company was on life support.

Brookfield paid them a massive premium and bought the entire business out for $500mn.

Markets thought it was a stupid move at an even stupider profit multiple, but things are looking much crazier today. Pre-tax earnings have 2X'ed and Brookfield is set to put the Leela brand on 15 more buildings over the next 2-3 years.

They currently own 5 of the 12 resorts with the Leela brand - remaining 7 are all under management contracts.

Brookfield is making so much bank from this deal that they’re putting down $200mn more in to supercharge growth further.

Brands like Leela are difficult to build from scratch even if you have billions in the bank.

Today’s 5-star resort players can’t simply sell themselves as a “hotel” - they need to sell a certain lifestyle or attach an aspirational value to their brands to entice that brand loyalty out.

So Brookfield is essentially paying for -
- an established brand
- '000s of trained employees
- a distribution network to launch into escape velocity from

Killer.

BCCI pushes cricket rights to Apple & Amazon. 🤔

TLDR -
- India’s cricket body wants to sell domestic rights (i.e. all India team matches that are played IN India)
- The asking price seems to be $750mn for 5 years of rights.
- Response from media is pretty flat, because the real cash cow is IPL.

India’s BCCI is the world’s richest cricket board.

And where money moves, politics follows.

Giants like Apple, Amazon, and Reliance are all gonna be bidding for India’s 1.1 billion cricket eyeballs - in other words, the rights for domestic cricket streaming. EY reckons that we’ll see the final sale price for these rights fall around $750m USD.

This is odd, since the last time these domestic rights were sold, they fetched $800m USD.

But the answer is pretty simple.

Warren Buffett once said that price is what you pay, and value is what you get.

Here, the price is insanely high, but you don’t get much value.

Domestic cricket falls very short when compared to the IPL - which means less viewership, less expensive ads, and much smaller ad revenue figures.

Star India were the poor folks who bought LAST 5 years’ rights (2018-2023) and are currently sitting on a $120m loss on that purchase.

A little prudence goes a loooong way.

In other news… ☕

OpenAI investors finally get Altman back (BBG)

Twitter sues an ad company which published a negative report about them (FT)

Omegle dies a sad, slow death (TC)

Police calls Ashneer Grover in for questioning over fraud (Mint)

Swiggy turns up pressure in the race to profits (Ken)

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