Namaste, Sat Sri Akaal, and Salaam. 🫡

Today we’re diving into -
- Harley Davidson’s ‘too much demand’ problem,
- Allen’s decision to go hard on on-line teaching,
- and PhonePe’s launch of options .

Our read time today is 4 minutes and 56 seconds - faster than Sherpal and Deopal finished 80 rotis…

Let's dive in. 👇

Market Vibe Check

Harley Davidson deals with a demand problem in India. 🙈

TLDR -
- Harley is facing a “too much demand problem” in India.
- 26,000 customers have fully pre-paid them in cash for a bike model that hasn’t even started production.
- 65% of these 26k customers opted for the ~$3300-priced highest end variant.

2 years back, Harley Davidson ran a press release regarding their exit from Indian markets, citing “sluggish and snaillike growth.”

But after launching their new bike, they’ve been forced to stop taking orders from new customers because of how much demand they’re seeing.

There’s a little caveat too - this bike won’t be produced by Harley, but instead by Hero Motocorp, another Indian manufacturer. But because of the Harley brand, pricing is still gonna stay premium.

India has an exciting and young biker population, and 26,000 of these customers have pre-paid, FULLY in cash for a bike that hasn’t even got onto the production line yet.

Harley (along with quite a few other foreign brands) is slowly realising that India is not a poor country.

India is a wealthy country, with a lot of poverty.

Selling premium and ‘aspirational’ products does not automatically ‘blacklist’ you from most consumers’ minds, because India is turning into a country driven by the same American consumerism forces - more spending on debt, more attention given to brands and status, and more people identifying themselves by the things they own.

Interesting double-edged sword… because these trends are brilliant for consumer businesses, brilliant for the economy in the short-run, but horrifying for people’s personal bank accounts. 🫢

Allen pushes their traditional coaching biz online. 🧑‍🏫

TLDR -
- Allen bought a solution-bank startup called DoubtNut to push heavy into the online space.
- DoubtNut was once offered a buyout from BYJU’s for $150mn, this deal closed at $10mn
- Allen’s motivation behind this is to (very) cheaply acquire a massive distribution network which feeds directly to their target market.

In a time where most ed-tech companies are deciding to travel backwards and turn into “tech-less” businesses, Allen is doing the opposite.

A few months back, they acquired a question solving service called Doubtnut.

There are 2 interesting things about this deal -

1 - It was done at a fraction of DN’s previous price

When DN last raised money, they did so during 2019, during peak ed-tech season. This round was led by Sequoia India and Tencent from China - and it pegged their valuation at $137mn.

Later in 2020, BYJU’s even offered them a buyout at a $150mn price tag.

DN refused, and they sold out to Allen for just over $10mn.

Crazy erosion of value for investors, and even bigger dikkat for the founders.

2 - It doesn’t seem like a smart move…

To understand why, let’s travel to the USA for a second.

There’s this company called Chegg, which does exactly what DN does. Chegg was worth over $14 billion last year.

But when ChatGPT launched for free to the world, Chegg shares slid 65% OVERNIGHT, virtually killing the company’s stock price.

Both Chegg’s and DN’s USP of being a “one stop shop” for confused students is pretty useless know as AI proliferates and becomes much more commonplace.

AI is obviously very error-prone and far from useful when it comes to solving proper questions - but this is the worst it will ever be.

So the reason that Allen’s spent $10mn to buy DN out is simple - their user base.

They claim to have over 32 million users and 50 million app downloads. This gives Allen a very healthy distribution network if they wanna push a product, since they can get in front of 32mn people’s screens at the touch of a few buttons.

Interesting times…

PhonePe guns for the Indian stockbroking scene.

TLDR -
- PhonePe is launching a stock market app.
- They spent $75mn on wealth-tech acquisitions last year - this is the outcome.
- Current USP seems to be cost - so just like many other startups in Inda, they’re wooing customers with subsidized and market-leading trading fees for options.

6 months back, India’s payments king PhonePe announced a deep foray into markets - with the aim of giving users access to equities.

And they launched a stock market/mutual fund app called share.market.

Nothing too special here - its a classic investing app with ETFs, shares, options, etc.

The bet is on India’s financialization.

Currently, less than 3% of Indian household income goes toward stock markets.

In other places like the US/UK, over 30-35% of income is put into markets.

As that percentage of income going towards markets increases, folks are gonna be hunting for easy + seamless ways to securely invest their savings.

This space has recently started heating up -
- Jio Financial’s $300mn asset management venture with Blackrock
- Groww & Upstox’s multi-billion dollar cash piles
- Paytm’s new Paytm Money arm

As they say, follow the money…

In other news… ☕

Biden comes under pressure to quit the presidential race (FT)

SpaceX gets ready to launch 120+ times from NASA’s Kennedy Space Center (TC)

SoftBank smashes a new record high (BBG)

Temasek mulls a $120 million purchase of Tynor equity (Mint)

US student loans come to $1.6 trillion, and almost half aren’t paid on time (NYT)

And that’s the tea the chai for today.

Thanks for reading, and we hope you enjoyed it.

Lots of ❤️,

Team CC