Namaste, Sat Sri Akaal, and Salaam. 🫡

Hope aal izz well. 🙏

Today we’re diving into -
- the $1bn hole in BYJU’s balance sheet,
- Flipkart’s similar-sized fintech war chest,
- and Elon’s losing battle against China.

Our read time is 4 minutes and 57 seconds - faster than Prasidh Krishna got a second chance, and a third, and a fourth…

Let's dive in. 👇

Market Vibe Check

BYJU’s lets it’s dirty, dark secret out… 🤦

TLDR -
- BYJU’s investors ripped management a new one at their shareholder meeting this week.
- They spoke about their financial recklessness, lack of runway, and operational goof-ups.
- The company also made it’s $1 BILLION loss public.

Earlier this week, BYJU’s shareholders were invited to one of the most heated shareholders’ meetings in history.

Management revealed some pretty lackluster results, and was met with a LOT of criticism from investors.

Here are the 3 biggest concerns 👇

1 - Financial recklessness. Lots of it.

BYJU’s faced a consolidated loss of over $1 billion last year. This is a crazy number, and it stings even more when you consider that their largest investors have pegged the company’s valuation at $3 billion.

Of this $1 billion loss, around $520 million is a direct cash loss due to horrible operation, and the rest $480 million is a write-off of their most controversial acquisition, scandal-struck WhiteHat Jr.

The only silver lining (if you can even call it that) was the fact that their revenue 2X’ed from the previous year, going from $275mn to $500mn. But this too missed their own internal targets by 50%. 🙈

2 - A lack of trust in the guys running the show.

From reports of what went down at the meeting, it looked like most investors didn’t care about what was going on, and were treating BYJU’s like a write-off. They abstained from voting on key decisions, instead of their regular thumbs up/thumbs down.

Many of their biggest shareholders sent management a barrage of questions regarding -
- cash management and account reconciliation
- internal controls
- resource allocation and ‘suspicious’ fund movement
- and so much more

3 - Funding and runway (or a serious need for both)

Right now, cash is above all else.

BYJU’s needs a $120-130mn check to keep itself alive for the next 3 months, and none of their current investors are too keen to get bitten twice.

One talking point was genuinely whether Byju himself (the founder) should sell a few of his Dubai homes or his personal stake in Aakash Coaching to pay for the company’s expenses.

PS - they still haven’t found the funds which went to a hedge fund in Miami, used to buy a Mansory-specced Lambo, a Rolls, and a Ferrari… 🙈

Crazy stuff.

Elon Musk gets a drubbing from someone he severely underestimated. 🤔

TLDR -
- Chinese automaker BYD is on track to cross Tesla’s delivery numbers this quarter.
- Warren Buffett’s $230mn investment in them is now worth over $18bn.
- It’s crazy value creation, with even crazier numbers at stake.

10 years back, Elon scuffed at the thought that a little Chinese company from Shenzhen could ever touch it’s status in the EV market.

This quarter, said company is about to cross Tesla in sales.

The billionaire(s) on the other side are Warren Buffett, who invested early, and the founder, Wang Chuanfu.

Buffett handed Chuanfu a bold $232 million check in the depths of 2008, and he’s been repaid handsomely since - that stake is now worth close to $18 billion.

This is a game of catch-up with BILLIONS at stake - last year, Tesla stock dropped by 68-70% while BYD’s market cap almost doubled.

One reason that points to such a stark contrast in performance is the fact that BYD has a very strong vertical supply chain - almost everything is done in-house. They have their own
- battery production division
- energy storage division
- computer chip unit
- B2B battery business

Tesla instead relies on other manufacturers - such as Nvidia for their silicon chips - and in a market as hot as this, it inevitably takes a few percentage points out of your margins.

BYD is also focused on mass-market instead of attacking premium.

Their cheapest car can be bought for $10,000 with their most-selling model retailing for $21,000 - which is barely anything compared to Tesla’s cheapest price-point of $35,000 and most-selling price of $39,000.

Plus, the Chinese government is also steadfast behind them - tax breaks for consumers, production incentives and subsidies, chip-ins for research and development, and cheap loans.

Amazing stuff.

Flipkart stashes a $1 billion fintech war chest. 💸

TLDR -
- Flipkart just raised $600m from Walmart to invest in fintech and lending.
- They’re building up a pool of ~$1bn to attack as the market cools down.
- Pretty bold and aggressive strategy at a time when people are choosing to abstain.

Flipkart just picked up a fat $600mn check from their American best-friends Walmart, and they’re using it to ready up a stash of ~$1 billion.

This money is gonna be invested over 2 main verticals, fintech and lending.

Earlier this year, they piloted a lending product, which let you borrow 5 Lakh INR with approval in under 30 seconds.

Lending can be incredibly powerful for an ecom business like Flipkart, because it makes use of a treasure trove of otherwise (relatively) irrelevant data.

Flipkart understands the psyche of everyone who buys, including their -
- brand preferences
- order frequencies
- average order values
- returns and exchange history
- HUNDREDS of more KPIs that would take me a few thousand words to go through 😅

The logical next step is payments, which they haven’t really shed much light on, but they’re most-likely going to come out with a UPI-based product that makes it easier to transact. Like the hundreds before them. 🙈

Flipkart has also been tossing Walmart’s cash at a ChatGPT-like shopping bot, and some short-form-video based commerce.

When in doubt… throw mud and see what sticks 🤷

In other news… ☕

Dubai’s property market gets ready to hit the brakes (BBG)

America cracks down on Iranian terrorism-linked cash flow (FT)

Xiaomi’s latest EV is like a ‘phone on wheels’ (TC)

US child labour protection agencies keep failing (NYT)

Indian consumer brands get some love (Arc)

And that’s the tea the chai for today.

Thanks for reading, and we hope you enjoyed it.

Lots of ❤️,

Team CC