Week 09

Date- 26/02 – 03/03/2024

The Weekly
Anyone who wants to be
successful should study physics
because its concepts and formulas
so beautifully demonstrates the
power of underlying theory

Charlie Munger

The Eulogy for the guardian of money

Edition 01
Next one will be better
 New this week
Page one –
Warren Buffet Letter to shareholder
Page Two
Why CPI tweaking is in favour of government?
Page Three
Growing Divergence
Page Four
Policies and News
Page Five
SonaComstar
Page Six
Interesting Reads
Page Seven
CHOTA SATTA
Page Eight
GDP on Fire
Appendix: Weekly Compilation of Corp. Filings
CHARLIE MUNGER
The Architect of Berkshire Hathaway
Though born and raised in Omaha, he spent 80% of his life domiciled
elsewhere. Consequently, it was not until 1959 when he was 35 that I
first met him.
In 1962, he decided that he should take up money management.
Three years later he told me – correctly! – that I had made a dumb
decision in buying control of Berkshire. But, he assured me, since I had
already made the move, he would tell me how to correct my mistake.
In what I next relate, bear in mind that Charlie and his family did not
have a dime invested in the small investing partnership that I was then
managing and whose money I had used for the Berkshire purchase.
Moreover, neither of us expected that Charlie would ever own a share
of Berkshire stock.
Nevertheless, Charlie, in 1965, promptly advised me: “Warren, forget
about ever buying another company like Berkshire. But now that you
control Berkshire, add to it wonderful businesses purchased at fair
prices and give up buying fair businesses at wonderful prices. In other
words, abandon everything you learned from your hero, Ben Graham. It
works but only when practiced at small scale.” With much back-sliding
I subsequently followed his instructions.
Many years later, Charlie became my partner in running Berkshire and,
repeatedly, jerked me back to sanity when my old habits surfaced. Until
his death, he continued in this role and together we, along with those
who early on invested with us, ended up far better off than Charlie and
I had ever dreamed possible.
In reality, Charlie was the “architect” of the present Berkshire, and I
acted as the “general contractor” to carry out the day-by-day
construction of his vision.
Charlie never sought to take credit for his role as creator but instead let
me
take the bows and receive the accolades. In a way his relationship with
me was part older brother, part loving father. Even when he knew he
was right, he gave me the reins, and when I blundered he never – never
–reminded me of my mistake.
In the physical world, great buildings are linked to their architect while
those who had poured the concrete or installed the windows are soon
forgotten. Berkshire has become a great company. Though I have long
been in charge of the construction crew; Charlie should forever be
credited with being the architect.
KEY TAKEAWAYS FROM WB’S LETTER
Time in the market beats timing the market
"I can’t remember a period since March 11, 1942 – the date of my first stock purchase –
that I have not had a majority of my net worth in equities, U.S.-based equities. And so
far, so good."
⁠
Buy good companies
"We want to own either all or a portion of businesses that enjoy good economics that are
fundamental and enduring. Within capitalism, some businesses will flourish for a very
long time while others will prove to be sinkholes. "
⁠Focus on companies with plenty of reinvestment opportunities
"At Berkshire, we favor the rare enterprise that can deploy additional capital at high
returns in the future. Owning only one of these companies can deliver wealth almost
beyond measure."
⁠Buy companies run by great managers
"We also hope these favored businesses are run by able and trustworthy managers,
though that is a more difficult judgment to make, however, and Berkshire has had its
share of disappointments."
⁠Let your winners run
"By both luck and pluck, a few huge winners have emerged from a great many dozens of
decisions. And we now have a small cadre of long-time managers who never muse about
going elsewhere and who regard 65 as just another birthday."
Try to be a bit above average for long periods of time
"Berkshire should do a bit better than the average American corporation and, more
importantly, should also operate with materially less risk of permanent loss of capital."
Buy when there's blood running through the streets
"Berkshire’s ability to immediately respond to market seizures with both huge sums and
certainty of performance may offer us an occasional large-scale opportunity."
⁠ ule Number 1: Never lose money
R
"One investment rule at Berkshire has not and will not change: Never risk permanent
loss of capital."
Share repurchases only make sense when the company is
undervalued
"All stock repurchases should be price-dependent. What is sensible at a discount to
business value becomes stupid if done at a premium."
⁠Never sell wonderful companies
"The lesson from Coke and AMEX? When you find a truly wonderful business, stick
with it. Patience pays, and one wonderful business can offset the many mediocre
decisions that are inevitable."
Don't try to make market forecasts
"We don't believe we can forecast market prices of major currencies. We also don’t
believe we can hire anyone with this ability."
The magic of compounding
"We have been in the business for 57 years and despite our nearly 5,000-fold increase in
volume – from $17 million to $83 billion – we have much room to grow."
 What the latest survey of household consumption spending
reveals
A person living in rural India spent ₹3,773 a month on average as consumption
expenditure in 2022-23 while her urban counterpart spent ₹6,459, the Ministry of
Statistics and Programme Implementation’s (MOSPI’s) National Sample Survey
Office (NSSO) estimated after a nationwide study of households’ spending patterns.
Of this, consumers in rural India spent about 46% on food and those in urban areas
about 39%. Other expenses include health, education, rent, clothing and conveyance.
Significantly, the share of spending on food has fallen below 50% for the first time
in rural India.
The NSSO has been conducting household consumption expenditure surveys once
every five years since 1972-73. The results of the last survey, conducted in 2017-18,
were withheld over what the government described as “data quality issues", though
many believe an uncomfortable fall in average consumption was the real reason for
that decision.
The findings of the survey conducted in 2011-12 are thus the ministry’s last
published report on consumption expenditure patterns of households. These surveys
serve a variety of purposes – they aid policymaking, are used for weighting diagrams
to construct the consumer price index (CPI), and also to estimate the country’s GDP.
The survey is keenly followed by industry, which uses it to draw up medium-to-long-
term growth strategies.
So far MOSPI has published only a factsheet of the survey’s findings. It intends to
publish a detailed report based on data – collected from 2.62 lakh households (1.55
lakh in rural areas and 1.07 lakh in urban areas) between August 2022 and July 2023
– at a later date.

What does the data show on income disparity?

While the big picture shows that the spending gap between rural and urban India has narrowed, there remains a wide intra-state and inter-state disparity in spending.
There is also a huge disparity between the spending of the bottom and top fractiles. The average monthly per-capita consumption expenditure (MPCE) of the bottom 5% was ₹1,373
and ₹2,001 in rural and urban areas, respectively. In comparison, the average MPCE of the top 5% in rural and urban areas was ₹10,501 and ₹20,824, respectively.
In other words, the MPCE of the top 5% in rural areas was 665% more than that of the bottom 5%. The contrast was starker in urban areas, where the MPCE of the top 5% was
941% of that of the bottom 5%.
Also noteworthy is the wide gap in the spending of the top 5% compared to the next 5%. This difference was 58% and 68% in rural and urban areas, respectively.

The current CPI, with the base-year 2012, "A lower weightage for food would make the
accords 39.1% weight to food items, while government less inclined to impose export

WHY INDIAN CPI MIGHT NEED A

'food and beverages' constitute 45.9% of the curbs," Sharma said.
index. Former MPC member Mridul K
Saggar said that food's weightage may be India imposed a series of export curbs on
reduced to around 40% in the new CPI series.

Less volatility in consumer inflation could

LITTLE TWEAKING? wheat, sugar, onions and most rice grades in
the last two years to keep food prices under
control. New Delhi also allowed duty-free
limit the need for abrupt measures to control imports of pulses and slashed import duty on
prices, said Devinder Sharma, an edible oils.
independent food and trade policy analyst.


What does the latest survey reveal?
The factsheet estimates that monthly per-capita consumption expenditure rose
164% in rural India compared to 146% in urban India. This narrowed the gap in
per-capita spending between rural and urban India by nearly 13 percentage points
over 11 years.
The survey does not provide any answers for uneven growth in spending between
rural and urban areas. Migration of workers to urban areas, resulting in an
increase in remittances to rural areas, could be one of the reasons for faster
spending growth in villages.
The proportion of spending on food fell in both rural and urban areas, driven by
lower expenditure on cereals. This is a natural process ― as incomes rise, the
share of expenditure on food falls. Also, with higher incomes and more spending
power, households tend to reduce their consumption of cereals and increase their
intake of protein. The magnitude of that change will be known only once the
NSSO publishes the detailed report. Subsidised and free foodgrain schemes under
the National Food Security Act and Pradhan Mantri Garib Kalyan Anna Yojna
also contributed to lower household expenditure on cereals.
Milk and milk products accounted for the largest share of spending on food, at
over 8% in rural areas and over 7% in urban areas. In both rural and urban areas,
households spend nearly as much on eggs, fish and meat as they did on
vegetables.
An increase in spending on processed food, takeaway and dining outside was
seen across rural and urban India. The share of spending on toiletries and other
household consumables and durables has also increased over the past 11 years.
This is reflected in the top line growth of FMCG and durable-goods companies
over the years.
Other significant changes include an increase in the spending share on
conveyance across the country and a rise in spending on consumer services
(which includes personal grooming) in rural India.
What has been the fallout of the delay in conducting
this survey?
The survey gives policymakers an understanding of the ever-changing basket of
goods and services that a typical household consumes. An insight into its
composition is necessary to determine how changes in their prices affect a
household.
Similarly, statisticians need this data to estimate private consumption expenditure
when calculating the GDP of the country. If the basket of goods and services used
for statistical purposes differs from actual consumption, measurements of
inflation and GDP will be inaccurate. India is still using the 2011-12 basket of
goods and services for calculating various indices such as consumer price index.
Many policymakers and statisticians say that the basket must be updated once
every five years. If things had gone as originally planned, India would have been
using 2017-18 as the base year.
Base years for GDP, inflation and other indices are chosen carefully. They need
to be a “normal year", meaning the consumption behaviour and the economy
should not have been adversely affected by natural calamities or man-made
disasters. A drought year or a pandemic year are never used as the base.
Such a situation forced the NSSO to recommission a quinquennial survey over a
decade ago. The government decided against using the results of the 2009-10
survey for rebasing GDP or inflation as 2009 was a drought year and its effect
was visible in consumption patterns in rural India. The report was published and
remains in the public domain, but another survey was carried out in 2011-12
when the effect of the drought had worn off, and the results of that survey were
used in the weighting diagram for the new CPI.
 THE TWO FACES OF INDIAN COMPS. Q3 GROWTH STORY
Corporate India’s revenue and profit growth went somewhat divergent paths in the December-ended quarter,
with both good and not-so-good news coming out of it.
On the face of it, revenues expanded 8% on a year-on-year basis, the fastest in three quarters, but profit
growth slacked off to 31%, the slowest in 2023-24 so far. But on the flip side, thanks to struggling rural
demand, that revenue growth is highly subdued as compared to what it was just four quarters ago (18%); yet,
profits growth is shining in double digits on account of reduced input cost pressure.

Meanwhile, India Inc. finally came out of the shadow of the vibrant fortunes of the country’s banking and
financial sector, which had been riding on healthy business performance and asset quality so far, but were no
longer the primary driver of the profit growth in the December quarter, showed a Mint analysis of the earnings
of 3,478 BSE-listed companies. Excluding banking, financial services and insurance (BFSI) firms, total
revenue growth returned to positive territory (3.4%) after two consecutive declines, and profits swelled by
nearly 43%.
Sequentially, revenues rose 3.6%, a three-quarter high, while profits shrank marginally, largely on account of
smaller companies in the sample, whose profits shrank 38%. Even on a year-on-year basis, small businesses’
profit growth lagged larger firms.

Size was not the only factor dictating the hits and misses this quarter. Across sectors, too, the performance
was not uniform, with rural demand remaining a major pressure point. The overall earnings show was
impressive, but surely not broad-based. As many as 11 of the 18 key sectors covered in the analysis showed
some slowdown in their net profit growth.

BANKING IN SPOTLIGHT
BFSI sector, which had largely done the heavy-lifting for corporate India earnings in recent quarters. The
sector’s profits rose 12.8% from a year ago, against a 31% growth in the September quarter. Sequentially,
the sector witnessed a contraction in net profits.
“With the exception of a few public sector banks, the majority of banks saw their margins remain flat or
slightly decline," said Palka Arora Chopra, director at Master Capital Services Ltd.
However, the sector remained a leader in terms of revenue growth (25.9%), followed by infrastructure
and engineering (17.6%), auto (16.2%), hospitality (14.2%) and textiles sector (12.3%). For nine of the
18 sectors, revenue growth exceeded the aggregate rate of 8.4%.

RELIEF ON THE WAY? MARGINS RISK

Not too long ago, businesses faced the terror of high expenses—both on Aggregate operating margins remained strong, rising from 24.1% a year ago to
account of raw materials and employee salaries. Much to their relief, the 28.6% in the December quarter. However, there was a 57-basis-point dip on a
pressure has tapered down. In the December quarter, total expenditure quarter-on-quarter basis. Net
was up only 2% from a year ago, with the pace stable for some time. As profit margins—or net profits
a share of revenue, aggregate expenses for the sample stood at 71.4%, as a share of revenue—moved
roughly unmoved for three quarters. in tandem, seeing a dip in the
The raw materials head has also been coming under control since a high last two quarters, even as it
of 33.6% as a share of revenues in April-June 2022. In the last four rose on a year-on-year basis.
quarters, it has come down from 30% to 28.3% (with only a marginal rise
in the December quarter). Employee costs were 8.5% of revenues, The signs of stability on
marginally down from the preceding two quarters but slightly higher margins could change in the
compared to the same quarter a year ago. coming months. “The next
“With input prices abating, profit margins have seen a sharp few quarters may remain
uptick…contributing to higher profits," the Bank of Baroda report said. volatile or a mixed bag as
freight costs are on a rise due
to the Red Sea crisis, affecting some of the input cost and margin," said Mukesh
Kochar, national head of wealth at AUM Capital.

On the positive side, companies could also expect a lift from increased consumption demand, especially in urban areas, in election season, Kochar said.
However, that’s not to say that the rural demand factor is out of the woods: analysts will closely watch the recovery on that front.

TECH WORKERS HAD A GLOOMY YEAR; WILL THINGS GET BETTER ?

Infosys and Wipro, together accounted for 46,057 or more than half of the total Hitesh Oberoi, CEO of Info Edge India Ltd, which operates Naukri.com, said IT services
reduction in workforce at the largest companies, according to an analysis by companies went on a hiring binge during the two pandemic years, but a subsequent
Mint. (Mint) slowdown forced them to trim down.

Mumbai and Bengaluru: Headcount at India’s top 10 IT firms employing a “We didn’t see any recovery in Q3. IT hiring was slow in Q3 as well. What we’ve been
combined two million people fell by 76,572 last year, as companies retrenched seeing for the last three quarters now is a serious slowdown in IT hiring," said Oberoi in
workers in the face of a slowdown. a post-earnings interaction with analysts on 13 February. “They’ve (IT services firms)
According to staffing firms and job portals, hiring is not expected to pick up not been adding new people. In many cases, they’ve been letting people go."
soon either, amid muted demand for technology services and rising fears of Oberoi’s acknowledgment of retrenchment is the first comment by a boss of a job portal,
artificial intelligence eating into existing jobs. a subject that none of the companies admit to. It is also significant because staffing firms
. and job portals including Naukri, Quess Corp and TeamLease Ltd are the first to offer
people a role with companies in good times, making their commentary and performance
a good leading indicator of the health of the sector.
 EXEMPTION FOR TEXTILES IN EU PSE’s EARNINGS NEEDS TO CATCH UP!!
The NSE PSU index has nearly
EU nations impose higher import duties, typically ranging 10-12%, on textile products,
placing India at a disadvantage compared to China, the EU's leading supplier of apparel
doubled in the past one year.
and textiles, said two people seeking anonymity. Now, to justify the valuations,
earnings performance of the
India's textile exports to the EU fell from $44.43 billion in 2021-22 to $36.68 billion in companies in this index needs to
FY23. In the first 10 months of the current fiscal year, India exported textiles worth $27.69 catch up meaningfully. An
billion globally, including products valued at $7.67 billion to the EU. This merchandise analysis by Yes Securities
included readymade garments worth $4.30 billion and handicrafts worth $330 million. showed that PSU companies’
India is emerging as a preferred destination for sourcing textiles, with better quality earnings performance has lagged
products, adhering to global standards, driving exports growth. The elimination of import
the Street’s expectations sharply
duties will further stimulate growth, the second person said.
in Q3FY24, falling to 2%, putting
However, experts hold differing views on the proposal for zero duty on textile exports. up the weakest show in the past
Mere signing of an FTA may not result in a rise in export of India’s labour-intensive goods, six quarters.
said Ajay Srivastava, founder, Global Trade Research Initiative (GTRI).

Eliminating duties in the EU or the UK may benefit Indian exports, but for a significant
increase, we need to strengthen our product profile, Srivastava, a former Indian Trade
Service officer, added. “India’s export of apparel to Japan is an example. Even after
eliminating duties on all apparels from day one of the India-Japan FTA, which came in
force in August 2011, the expected gains did not happen."

The EU is a significant export destination for India, ranking second only to the US.
Nevertheless, non-tariff barriers imposed by the EU have led to a decline in goods exports
over the past two decades. An FTA could reduce duties and also address the barriers
affecting Indian agricultural exports. Moreover, India's production-linked incentives could
boost exports of textiles, pharmaceuticals, and mechanical appliances, all of which are
significant imports for the EU.

Geographical indications (GIs) are the other key issue that both sides seek to address.
According to the EU's website, bilateral agreements aim for significant progress in
protecting geographical indications, enhancing GI safeguards within the trade partner's
territory to standards similar to the ones upheld by the EU.

THE ALLY IN CAUCASUS

Armenia is keen to keep closer ties with India, and also to work on raising bilateral ties to the level of a strategic partnership. Armenia is ideally positioned to offer India an alternative sea trade
“I think our relations are mature enough to be defined as a strategic partnership" Armenia’s labour minister Narek Mkrtchyan. route, especially with Europe, Narek Mkrtchyan, Minister of Labor
Mrkrtchyan also said that his country is keen to deepen defence ties with India. “We have cooperation in the defence and we are looking for and Social Affairs, Republic of Armenia said on February 21 at an
what to make our cooperation much deeper." event on the sidelines of Raisina Dialogue 2024.
This comes after India has stepped up arms sales and strategic support to Armenia amid its clashes with Azerbaijan. Located in the South "The Armenian government is committed to forming partnerships
Caucasus, Armenia clashed with neighbour Azerbaijan for control over the territory of Nagorno-Karabakh. in major regional and global projects like North-South Transport
Since then, the country’s defence ties with India have strengthened. Armenia purchased the Swathi weapon-locating radar system from India Corridor (INSTC), the Gulf Black sea transport, and the transit
in 2020. Following this, a bilateral agreement was reached for New Delhi to provide Armenia ammunition and multi-barrel rocket launchers corridor and the Chabahar port development, which is a
for Pinaka, as well as anti-tank munitions. collaborative effort between India and Iran," the minister said.
In November 2022, Kalyani Strategic Systems, a wholly owned subsidiary of Bharat Forge, won a $155 million contract to supply artillery
guns to Armenia, according to numerous media reports citing defence ministry sources. He added that this offer assumes significance at a time when many
nations, including India, are looking for alternative sea routes to
This has brought closer strategic cooperation between the two countries. Armenia’s national security chief met with NSA Ajit Doval in August trade with Europe and the West given the spate of attacks on
2023, which came after a meeting between defence ministers Suren Papikyan and Rajanth Singh in October 2022. commercial vessels passing through the Red Sea.
Armenia is also keen to see Indian firms bid for tenders to construct infrastructure in the country, particularly for marquee projects like the
country’s North-South Road, which runs along the length of the country. It connects Armenia’s southern border with Iran to the country’s Back in March 2023, Armenia proposed a Persian Gulf-Black Sea
northern border with Georgia. corridor to connect Indian traders with Russia and Europe.
According to persons aware of the matter, the road needs upgrades to manage the flow of heavy trucks, which could provide an opportunity This was reportedly suggested to link the Persian Gulf and the Black
for Indian infrastructure firms. Sea to facilitate trade between India, Russia, and Europe, which
“There are still unbuilt parts of the road like some tunnels and some bridges that need to be constructed. When an international tender will be would serve as an alternative trade corridor that will operate
announced, the government of Armenia will be happy to seek proposals from India as well," Mkrtchyan said about the project. alongside the INSTC to establish a trade link between Mumbai and
Bandarabas Seaport in Iran and then proceed to Armenia and further
“We are announcing international tenders and we are happy to receive proposals from international companies for construction. For example, on to Europe or Russia.
we are constructing 300 to 500 schools and kindergartens and this is also an opportunity for Indian companies to come and participate in
tenders," Mkrtchyan said.

“We are now implementing a mega project of an academic city in Armenia, which means that universities will be located there. We will be
announcing an international tender and we'll be happy to see Indian companies invest and do business in Armenia," he added.

GLOSSARY
Bring Your Own Encryption: Also called hold your own key, bring your own encryption (BYOE) is a security model where a user, as a cloud customer, is
responsible for encrypting own data before uploading to cloud providers’ platform. Users get a greater control over the management of their encryption, reducing
risk.

Network Slicing: A telecommunication configuration, network slicing allows creation of multiple virtualised and independent networks on top of a common
physical infrastructure. Each slice acts as a dedicated network to needs of an app or service. Operators opt for this to manage a network while meeting (and
exceeding) emerging requirements from users.

SCADA: Short for supervisory control and data acquisition, SCADA is a category of computer applications used for managing industrial processes. It gathers data
from sensors and others for measuring parameters like temperature, pressure. This data is analysed to diagnose potential problems, adjust operation of devices, and
optimise performance.

Dimensionality Reduction: In machine learning (ML), dimensionality reduction is a method to reduce variables in a training dataset used for developing models. It
aims at reducing the number of features while retaining important information required to build an efficient ML model. The goal of is to lower complexity while
working with massive data sets, as well as reduce storage and computation time.
 TRIGGER TO 700
Sona Comstar, one of India’s leading electric vehicle (EV) parts suppliers to international automakers, have received eligibility certifications for their hub-wheel drive motors for e-two-wheelers. This makes them the
first components makers to qualify to receive benefits under the PLI scheme for advanced automotive technologies.
While three original equipment manufacturers (OEMs)—Tata Motors, Mahindra & Mahindra and Ola Electric—have already cleared the eligibility criteria for the incentives for multiple products, the certifications for
auto parts makers were significantly delayed given a complex process involving auditor certifications for
domestic value addition (DVA) at the component makers’ tier-II and tier-III vendors.
With the advanced auto parts makers receiving certification confirming they meet the stringent 50% DVA
criteria laid down under the scheme, the decks have now been cleared for the government’s move to finally
start disbursements under the scheme, which it has said will begin in fiscal year 2025.
Auto parts makers still have a long way to go before they can receive the actual incentives—which,
according to the scheme, range from 13-18% of the incremental sales revenue of each EV part (and 8-13%
for non-EV parts). Claims for sales in a certain fiscal year, according to the scheme, will be disbursed the
following fiscal.
A Nomura analysis states that even with a conservative estimate of EV adoption in India, PLI claims by
OEMs and components makers are likely to far exceed the government’s budgetary allocation for the
scheme. The government has allocated ₹604 crore under the scheme for disbursement in FY25 (for claims
made for FY24) and ₹3,150 crore in FY26 (for claims made for FY25), out of the total five-year outlay of
nearly ₹26,000 crore.
“Our analysis indicates that even on a conservative estimate of EV penetration touching ~6% and 9% for
passenger vehicles and two-wheelers by 2W by FY28, the PLI budget may cover about 60% of the PLI claims. Falling battery prices and no changes in taxation/incentives could lead to higher penetration as well. The
actual benefit is likely to be lower than 60% as we have not considered claims on exports by OEMs and suppliers. Given that the benefit is likely to get paid out on pro-rata basis, it may be prudent to not assume more
than 50% of eligible incentives. Thus, business plans need to stay focused on fundamentals such as strong product offering and cost leadership rather than pricing,” the Nomura report said.
For Sona Comstar, which was the first auto component maker to receive DVA certification by the Global Automotive Research Centre (GARC) on 19 February, half a dozen more products are in the DVA approval
process, while applications for four more are yet to be made, according to a top official at the company.

SONACOMSTAR
MY CHOICE TO RIDE EV STORY
BUSINESS OVERVIEW
Conventional Products 4 R&D Centres
9 Manufacturing 53 EV Programs across Differential Bevel Gears, Differential 386 R&D Manpower
Facilities 30 customers Assemblies, Portal Axle Gears, Starter Motors
23% of total on-roll workforce in R&D
3 Business Verticals
4 Countries 28% Revenue Share Driveline Business EPIC Focused Products
Differential Assemblies, Reduction Gears, EDL, Traction Motors,
India, USA, China, Mexico from BEV2 Motor Business Motor Controllers, Integrated Motor Controller Module
Sensors & Software Business
 ‘STEEL EXPORTS AT 18-MONTH HIGH IN JAN’
India’s monthly steel exports hit a 18-month high to 1.1 million tonne (mt) in January 2024
on increased demand from the European Union and supportive global prices, SteelMint said.
Besides, competitive domestic prices of steel contributed to rise in export, the research firm
said in its latest report. The outbound shipment of steel in January 2023 was 0.67 mt, as per
SteelMint data.
On reasons behind the surge in exports, SteelMint said, “good restocking demand from the
European Union (EU) contributed 67% of the 1.11 mt (export) in January. It was highest in
last 18 months.
“While the price of hot rolled coil (HRC) in India’s trade segment was at ₹54,300 per tonne,
the global rate was $710 per tonne (about ₹58,000). Overall, Indian steel exports may remain
largely range-bound or fall slightly in the near term because of the “global trade lull induced
by the Chinese lunar holidays and Tet festival in Vietnam,” SteelMint said.
PV BIZ TO MODERATE TO LESS THAN 5% IN ’25
The growth of the domestic passenger vehicle (PV) industry is likely to moderate to less than 5%
in the next fiscal, according to Tata Motors Passenger Vehicles MD Shailesh Chandra. The
company, however, expects electric vehicle sales to keep growing despite the slow pace of
charging infrastructure development in the country.
“We had seen a very strong growth in FY23 of 25%, which is likely to moderate in FY24 to
about 8%. Therefore, we are seeing with this high base effect, and FY25 will be slightly
challenging with less than 5% growth rate,” Chandra said in an analyst call.
He further said, “As far as EVs are concerned, I think the biggest challenge here is the pace at
which the charging infrastructure is growing. It is lagging behind the pace at which the EV
adoption is happening.” Citing other challenges, Chandra noted that while commodity prices
have been stable in the past quarter or so, there is a risk that prices of certain items may go up
going forward. He noted that Tata Motors has adopted an open collaboration strategy to expand
charging infrastructure for EVs.

SEMAGLUTIDE AND THE WILD DEMOCRATIZATION OF THINNESS

Across the world, a wonder drug is helping the rich lose weight
without the inconvenience of putting in an effort. As a result,
Semaglutide, a string of amino acids created by a Danish pharma
giant to reduce blood sugar, is democratizing thinness. What was
once possible only for people with resolve, lovers of fitness, austere
eaters, the genetically lucky, the vain, and masochists, is now
attainable by unremarkable people. In time, as patents expire across
the world, the prices of the drug will crash and most people will be
able to lose weight in the easiest way the world has yet invented.
And we will move closer to a kind of equality that is not talked
about often—better health for people who cannot work hard to
achieve it, or people who are simply not lucky enough to be born
with normal metabolism. Is this sort of equality a good thing? What
can ever be bad about equality?
For centuries, democracy had a great reputation, until our times
when the democratization of opinions began to accurately reflect
human nature. Not everyone enjoys this revelation. But what can be
wrong in a levelling of the health field? What happens when bad
genes, gluttony and decadence can go unpunished? What is the
consequence of simplification? Of something that used to be very
difficult becoming easy?
Semaglutide was developed by the pharma major Novo Nordisk as
a way to manage diabetes. The drug increases the production of
insulin, which in turn reduces blood sugar. A collateral benefit is
fat loss. Semaglutide, which is sold under various brand names, is
a prescription drug. It is prescribed for obesity too, but widely used
unofficially, without prescription, by those who may not be diabetic
or obese, but want to look fit, or at least thinner.
There have been weight-loss drugs before, but Semaglutide actually
works, according to general medical and user opinion. There are side
effects, but so far nothing out of the ordinary when compared to other
medicines. It is very expensive, as new superstar drugs tend to be. It is
usually injected every week, or had orally everyday.
In India, its injections can cost ₹80,000 per month and the pill
can cost ₹10,000 per month. The drug is even more expensive
in the West. Yet, there is such strong demand for it that Nova
Nordisk is unable to meet it. An odd quality of our times is that
the rich are our guinea pigs, and it is they who inform us of new
cures and that they are ‘safe.’
But there is ancient wisdom in us that warns us of easy things.
Among the people who are very suspicious of Semaglutide are,
not surprisingly, those who would not be needing it. They are
fit and usually misunderstood as ‘disciplined.’
It is one of our most bogus concepts—that some people can
endure a degree of suffering to do the right thing, or, in other
words, that some people are ‘disciplined.’ The fit are usually
people who are simply lucky enough to enjoy physical exercise
and who find it easy to stay away from fast carbs, or who have
a strong useful vice, like vanity, that helps them make little
sacrifices. Discipline is a name given to private procedures that
come easy to some people and is plain suffering for most others.
Even most ascetics in history who did painful things were
probably aided more by their mental ailments than any resolve.
The fit ask others to be fit because it is in our nature to ask
people to be like us, to do what comes easy to us. But the path
to fitness makes most people miserable. I know people who
start believing in mysterious injuries inside them just to save
themselves from exercise, and who manufacture mental trauma
just to eat some chocolate.
Modern food is a very powerful drug. So maybe it is only fair
that the modern world has given us another drug in
compensation.
I am trying hard to be compassionate, but lest you mistake
me for a wonderful person, I should say I am among the
people who believe that there can be no alternative to
austere eating and exercise; not just exercise, but vigorous
daily exercise.
That is the way to be, I want to say, because that is way that
comes easy to me. But I am unable to find a clinching
argument against decadence. If people love eating, why
shouldn’t they simply have a wonder drug? After all, half
the world is alive today only because of medicines. I do
believe though that what is called longevity today is merely
a prolonging of death.
The fit do point out that Semaglutide has to be had forever,
so its consumers will have to deal with the side effects
forever. But then, people who eat frugally, too, have to do
it forever. People who work-out, too, have to do it forever.
Exercise has its own adverse side-effects, like injuries. I am
just saying that the case against the drug is obvious but not
terrifying, at least not terrifying to most people.
There is one argument against it, though. Just 20 years ago,
only people who read a lot had access to knowledge. Not
all of them were intuitive, so they could not make analytical
leaps with it, but still they possessed some information.
Today, knowledge can be Googled, even sought from a
chatbot. Yet, there is a difference between a person who has
the foundation of accumulating information the hard way
and someone who is able to arrive at the same conclusion
using technology. The muscle memory of labour lends
depth to people. This muscle memory is, in fact, our true
self. Our true health is not what we appear to be, but what
the body knows it has gone through, what the body knows
it can endure

INDIA RAISES FORECAST ON PEAK POWER DEMAND
India has raised its forecast on peak electricity demand as energy consumption continues to
outpace expectations, pushing the nation to expand its giant coal fleet.
Government officials now expect electricity demand to surge to a high of 384 gigawatts in the 12
months through March 2032, a 5% increase on an estimate issued in May, according to people
familiar with the details.
A review of forecasts was carried out after a sharp rise in demand last year, when searing
temperatures prompted higher use of air conditioners and pumps for irrigation, the people also
said, on condition of anonymity.
Electricity demand in India rose 7% in 2023 and is likely to average growth of 6% a year through
2026 on higher economic activity, according to the International Energy Agency (IEA).
“Over the next three years, India will add electricity demand roughly equivalent to the current
consumption of the UK,” the IEA said in a report last month.
Peak demand last year reached 243 gigawatts, surging past the power ministry’s projections of
229 gigawatts.
THE RETURN OF PEOPLE’S YULU
Bajaj Auto-backed electric ride-sharing platform Yulu, which started off as an e-bike rental company but
pivoted to goods transport in the aftermath of the pandemic, is looking to get back to moving people around.
The Bengaluru-based startup is looking to raise $70-$80 million next quarter in a Series-C round, after having
just received $19 million from existing investors Bajaj Auto and Magna.
While Yulu’s pivot to facilitating last-mile deliveries paid off, with the segment now accounting for 80% of
its revenues, it is now looking to double down on its original founding principle - e-bike rentals for people by
the minute.
The company has a fleet of 30,000 vehicles comprising the Yulu Miracle (for people mobility), and Yulu Dex
(for deliveries) in Bengaluru, Delhi-NCR and Mumbai. It also has a network of over 120 battery swap stations
operated by its battery-as-a-service arm Yuma.
“Today, people mobility is only 20% of the business, but we do see, in a steady state, that number will be at least 40%, if not more, of our
revenues. The moment we stabilize and set our profitability milestones, which should happen next quarter, we will actually scale the people
mobility business once again. We do not need a new product, as our people mobility piece is suitably addressed using the Yulu Miracle”,
Gupta told Mint.
“Miracle is the perfect product which we have kind of defined over the last 4-5 years and we are very happy
with it. We generate positive unit economics from that business already, and we see no reason for us to tweak
that. I think there will be minor improvement, but there is no fundamental change in terms of the product look
and feel.

While Yulu currently operates on a shared-mobility model, it is also venturing into retail segment, where it
wants to sell scooters directly to end-customers. However, India doesn’t have a robust market for low-speed
electric scooters at present, as the central government and most state governments have pulled subsidy support
from the vehicles in favour of high-speed electric two-wheelers which typically substitute internal combustion
engine scooters. However, according to Yulu, the category in India is ripe, and can become sizeable as the
government pulls the plug on subsidies down the line across segments.

“We are talking about one more business line called personal mobility. We want to actually sell the scooter to
the end-consumer and will basically double down on that once we raise our Series C...fast-forward that, let’s
say two or three years down the line, our people mobility business will also pace up to the right level”, Gupta
said.

Yulu sees deepening “synergies” with two-wheeler maker Bajaj Auto, which exports its products to more than
70 global markets. “We see with the help of Bajaj, we can launch a Yulu-like business in other markets as
well. So capital-infusion is one thing, but I think more than capital-infusion, Bajaj’s deep understanding of the
India landscape and their value engineering - getting products ready at a very competitive price, which ticks
all of the boxes on safety and TCO (total cost of ownership), and of course expansion outside of India, that’s
the value they will bring”, he said.
 ‘GAMIFICATION’
‘CHOTA SATTA’ IN INDIAN EQUITIES POSES MACRO AND MARKET THREATS

Indian equity market capitalization has more than doubled to $4.7

trillion in the past five years (as on 26 February 2024). Market depth
has increased, with cash-market volumes now averaging $14.9 billion
daily. Domestic investors have participated in this, with 80 million
investors now directly accessing this market, some 40 million of them
through equity mutual funds. Indian retail investors have participated in
this wealth creation journey of half a decade, having gained an
estimated ₹16 trillion in their investments in mutual funds and ₹20
trillion from direct equity investments. The combined value of their
investments in mutual funds and equity is now placed at over ₹67
trillion.
Another equally remarkable transformation has been the emergence and
now dominance of derivatives trading. The equity derivatives market in
India is about 400 times bigger than the underlying cash-market in
terms of traded volumes, by far the largest multiple globally. In most
markets, derivative volumes accounts for 5-15 times their cash-market
volumes. Derivatives in India account for a staggering 99.8% of market
volumes, trading a notional turnoverof over $5.9 trillion per day.
This ‘gamification’ of the derivatives market has led to a 20-times jump
in trading volumes from pre-covid levels, led by a proliferation of short
tenure options, and increased ease of onboarding as well as an easy-to-
use interface offered by trading apps. The number of active derivatives
traders has increased 8 times to about 4 million from less than half a
million in 2019. In comparison, in the cash market, the number has
grown 3 times—from about 3 million in 2019 to 11 million.
The availability of shorter-duration options (expiry day options are now
64% of total volumes) has led to ‘sachetization’ of the derivatives
market, with the average ticket size of contracts now down to ₹1,500,
compared to ₹3,600 in 2020. This trend is visible in the US as well, with
zero-day-to-expiry options (contracts that expire on the same day as
they are traded) constituting 55% of S&P 500 volumes in August 2023.
High embedded leverage in shorter tenor deals (up to 500 times) and
the lure of lottery-like returns are attracting a growing number of traders
to these. Retail traders have an average holding period of less than 30
minutes. The demographic profile of these traders is also getting
younger and nearly 90% of additions are now from India’s Tier 2 cities
and beyond. We have seen this in global cases with credit default swaps (CDS) and
derivative contracts. Black-swan events and resultant spikes in volatility can
While retail investors in the cash market and mutual funds have gained drive exaggerated moves in stock prices and thereby lead to market
significantly in the past five years, a report by the Securities and dislocation.
Exchange Board of India (Sebi) highlights that nine out of 10 traders
lose money in the derivatives market. The aggregate loss, as per the At an individual level as well, buying options can lead to a significant loss
study, was ₹372 billion in 2021-22. Approximately ₹448 billion was of capital. If one is dealing with futures or selling/writing options, the loss
lost in total by 90% of this market’s participants, while 10% made can be several times greater than the initial capital.
money, earning a collective ₹76 billion. Derivatives are sophisticated products that carry an asymmetric risk-return
Regulators have instituted several measures to curb the build-up of risk profile, given the large-embedded leverage. Access to portfolio
at a systemic level, such as imposing higher margin requirements. In management services (PMS) and alternative Investment funds (AIFs) is
addition, the large risk in options trading is being highlighted to limited only to investors whose net worth is above a certain threshold. This
investors by Sebi, which has mandated the display of its study’s results leaves large numbers who practise retail trading on their own. In general, to
every time an investor logs in to a trading account. The government also curb risk, the sachetization of derivatives can be tempered by setting up
increased the securities transaction tax (STT) on derivatives by 25% in minimum floors for contract premia, going beyond just limits on lot size
2023. based on notional value. Similarly, the government could consider levying
the STT on notional value instead of the premium of an option, which will
Does this deter investors? Only a few, as seen from the continued strong act as a disincentive for shorter-duration contracts.
growth in derivative volumes. Derivatives do have a useful economic
function, as they let risks be transferred from participants who do not Retail investors should remember that just as Rome was not built in a day,
want to bear them to those who are ready to (for probable returns). They they should not expect overnight success stories. They must invest in
also provide liquidity to supplement what is available in the cash markets for the right reasons, with appropriate expectations based on their
market.An outsized derivatives market, though, can itself be a source of risk profile and goals, instead of chasing daily returns in a risky market.
macroeconomic and market risks.
 India’s GDP growth surprised with a six-quarter high of 8.4% in the
quarter ended December, beating street estimates by a huge margin. While
the headline number may prove to be a shot in the arm for the Narendra
Modi government, which will seek a third term in the upcoming General
Elections, the details have perplexed economists.
Not only is the growth in the December quarter high, but the figures for
the two preceding quarters have also been revised upwards—mainly due
to a downward revision in the previous year's figures, which lowered the
base.
“The October-December data on India's growth threw up a divergent trend,
with the GVA growth moderating broadly on expected lines and the GDP
expanding higher than anticipated," said Aditi Nayar, chief economist, ICRA.
“This wide gap followed from a surge in the growth of net taxes to a six-
quarter high 32% in this quarter, which is unlikely to be sustainable," Nayar
added.

The GDP growth rates for April-June and July-September have been
revised upwards to 8.2% and 8.1% respectively, up from the earlier figures
of 7.8% and 7.6%. The revisions in numbers are a general practice but their
impact varies from year to year.

While GDP has shown an impressive rise, the sharp slowdown in gross
value added (GVA) looks worrisome. GVA growth was just 6.5% in
October-December, down from 7.7% the previous quarter. Gross value
added is GDP minus net taxes on products.

GDP ESTIMATES ARE REVISED

BETTER FOR ONCE
Sector-wise, while manufacturing and
construction recorded strong growth
in the December quarter, the rise was
In terms of share in overall GDP,
smaller than the previous quarter.
agriculture remained one of the top
Trade and hotels was the only
three contributors. Financial services
segment that saw an improved growth
once again remained the top
rate compared to the previous quarter.
contributor, followed by trade and
And, as economists had warned,
hotels.
agriculture slipped into the
contraction zone.

PRIVATE, GOVT CONSUMPTION DISAPPOINT

On the expenditure side, investments were the most rapidly growing
component of GDP, contrasting the low single-digit growth in private final
consumption expenditure and a contraction in government final consumption
expenditure.
“Going forward, the most critical aspect to watch out for will be a broad-
based improvement in consumption growth. The other critical aspect would
be a meaningful improvement in private investment," said Rajani Sinha, chief
economist, CareEdge.
Overall, the downward revisions in the GDP data for 2022-23 and the boost from
net taxes in the December quarter have lifted growth in the first nine months of
the year. As such, the statistics ministry now sees GDP growth for the full year
2023-24 at 7.6%, higher than 7.3% that it had estimated in January and 7.0%
growth estimated by the Reserve Bank of India (RBI).
“Today's print suggests growth is moving faster than expected by the RBI, which
means the central bank will see little urgency to cut rates while the MPC awaits
for comfort on headline inflation," said Barclays in a report on Thursday.

The GST collection in February grew 12.5 per cent to over ₹1.68 lakh crore, buoyed by domestic transactions, the finance ministry said on Friday.

The total gross GST collection for the current fiscal (April 2023-February 2024) stands at ₹18.40 lakh crore, 11.7 per cent higher than the mopup for the same period
last fiscal.
The average monthly gross collection for the current fiscal stood at ₹1.67 lakh crore, exceeding ₹1.5 lakh crore in the last fiscal.