While writing an article on NBFCs, I came across some interesting facts.

I would like to share a few of them in this thread.

Dive in...

Some key differences in NBFCs & banks:

NBFC:

~ Cannot accept demand deposits i.e. cash in savings/current a/c
~ Are not part of the payment & settlement system
~ Cannot issue any cheques
~ Are not covered under deposit insurance facility

Image source: enterslice.com/learning/different-types-of-nbfc/

Funding of NBFCs vs Banks:

Banks access low cost deposits through saving accounts.

NBFCs rely on borrowing from banks or issuing bonds to raise funds.

Some types of NBFCs:

Asset Finance Company - Financing of assets that support productivity e.g. tractors, generators, vehicles
Investment Company - Buying securities for selling & profit
Loan Company - Provide loans
Infrastructure Finance Company - Loans for infra projects

Type of NBFCs:

Infrastructure debt fund - Facilitates short & long term debt for infra projects
Micro finance institution - Provide credit to disadvantaged groups, cottage industries, MSMEs etc.
NBFC Peer to Peer Lending Platform - Online platform for lenders & borrowers

Types of NBFCs:

Housing finance companies (HFCs): Provide home loans for the people buying house.

Image source: www.legalraasta.com/blog/non-banking-financial-company/

Why People prefer NBFCs over banks?

Loan processing is easier & quicker than banks.

The compliance requirements are flexible and can be customized for the specific needs of client. Banks have a rigid framework of compliance for lending irrespective of the borrower's profile.

Some popular NBFCs:

~ Power Finance Corporation
~ Bajaj Finance Limited
~ Indian Railway Finance Corporation Limited
~ Muthoot Finance Ltd
~ Manappuram Finance Ltd.
~ SREI Infrastructure Finance Ltd.

Image source: nbfcadvisory.com

You can read the unrolled version of this thread here: https://typefully.com/Finalysis20/SKvXbWP

Interesting Facts about NBFCs: Key Differences and Funding

Tea / Coffee lovers..


Here are some metrics about market size & market share in Indian market, for these two popular drinks.

Data source: Citi Research's @CitiResearch report on Tata Consumer products

Strictly No Recommendation.

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Market size Tea vs Coffee



Tea: Rs. 344 billion
Branded tea constitutes 74% of market share



Coffee: Rs. 32 billion
Branded coffee constitutes 80-85% market share

2/4

Key players in branded tea market



Hindustan Unilever: 74% of branded market share
Tata Consumer Products: 21% share
Gujarat Tea Processors & Packers(Wagh Bakri Brand): 5%

3/4

Key players in branded coffee market

Hindustan Unilever :32% of branded market share
Nestle India: 24% share
Narasu's Coffee: 7%
Tata Consumer Products: 2%

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You can read the unrolled version of this thread here: https://typefully.com/Finalysis20/HaT9otF

Tea and Coffee Market Insights in India

Some key data points for Indian chemical sector from a report by  @Trendlyne

A short thread 🧵

Contribution to economy:

Indian Chemical industry contributes 7% of country's GDP.

Market size is $240 Billion

Import & Export

Chemical industry traditionally has been a net importer.

Imports have risen due to: Higher domestic demand & increased production of downstream products.

But, Specialty chemical segment is net exporter.


Key sub-segments that contribute 80% of exports under speciality chemical segment.

~ Agro chemicals
~ Dyes & Pigments
~ Cosmetics & Personal care
~ Food Ingredient Chemicals

Growth & margins

Chemical industry growth in last 2 years = 17.8%

But they are due to:
~ Low base effect of COVID lockdowns
~ Pent-up demnd post Covid

Expected growth rate in coming year : around 12%.

However the profit margins have reduced.

Margin Decline:

Peak margin of 22% in Q3FY22 has declined to 18% by Q4FY23

Key reasons:
~ Increased input costs of high raw material prices
~ Lack of pricing power

Key Data Points for Indian Chemical Sector from Trendlyne Report

Competitive edge or Moat has always been talked about by Warren Buffett.

"Capitalism is all about somebody coming and trying to take your castle.  Now what you need is. You need a castle that has some durable competitive advantage - some castle that has a moat around it."
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So what are the sources of this competitive edge?

A recent Banyan Tree Advisors newsletter talks about it.

Do look for the following sources when you study any business

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1. Economies of Scale:

A big market share.

This allows company to push it's products/services to a huge number of consumers.

Less competition means company has advantage of pricing power, thereby giving the ability to maintain it's profit margins.

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2. Intangibles

Non-physical assets that keep competition at bay.

Some of the key intangibles are.

Brands: A powerful brand has recollect value & people associate the product with the brand. e.g. Kodak for analog camera, Xerox for photocopying machines

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Patents: Gives technological edge to the company.

However innovation, research & development by peers can take away the edge.
e.g. Drug patents in pharma

Licenses: These can reduce players in the market and can create a monopoly or duopoly.
e.g. Spectrum licenses for 5G

5/7

3. Switching costs.

Cost for consumer to choose a competitor.

E.g. High costs of changing dish TV provider. Involves cost of dish, setup box, remote & installation.

OTT platforms have low switching costs. One month you recharge Netflix, the next Amazon Prime then hotstar.

6/7

4. Network effects.

Value of product grows with increasing number of users.

e.g. Sites like youtube became as more & more content was being uploaded. More content bought more viewers & increasing youtube's popularity.

7/7


You can read the unrolled version of this thread here: https://typefully.com/Finalysis20/nJ54Qle

Sources of a Competitive Edge in Business

A key metric while studying business is it's revenue breakup.

Often companies disclose revenue breakup by segments or as per geography.

Furthermore, a study of revenue breakup amongst peers can help to do a comparative analysis of peers.
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Importance of geography wise revenue breakup

~ If revenues are more dependent on a particular region, business can impact the business if that region becomes unstable
~ Higher revenues from a region could mean need of localization of resources, opening of local offices etc.
2/4

Importance of segment wise revenue breakup

~ A downturn in a segment contributing more will impact business
~ For diversification strategy could focus more on the segment contributing less
~ High margin earning segments, but with less revenue will get more focus from mgmt.
3/4

Here's a table of comparative analysis of IT Sector companies and their revenue breakup amongst segments.

Highlights the fact that Banking & Finance sector are major contributors of revenue of top IT companies.
Img src: HDFC Securities IT sector thematic report
@hdfcsec
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The Significance of Revenue Breakup in Business Analysis

Time for some Weekend Learning!

There is a lot of news going around India's Semi-conductor ambitions.
See image below.

So I decided to learn about nodes & the different size of chips & their applications.

Let us learn this..
A thread 🧵
#semiconductors

Some basics.
What are semiconductors?

They are a vital component of all electronic devices that basically function to control the flow of current.

Think about chips & ICs in your laptop, mobile & TVs.


What is node?

Node is a terminology used to describe the size of the semiconductor. It is measured in nanometres (nm).

Mature nodes are those with size > 40nm.

These require older manufacturing processes & are less technology intensive compared to the smaller ones.


How small is a nanometre?

Well too small to see by our eyes.

Human eye can see a tiny hair which has size of 40-50 microns.

A nanometre is 1000 times smaller than this hair.

1nm = 0.000000001 m.

What does smaller & smaller chips mean?

~ Faster computing speed
~ Lesser power consumption
~ Lesser space

At the same it also means:

~ Critical manufacturing process
~ Require high end machines & fab technologies
~ Technology known by a select few.

The smallest & largest nodes

Smallest: 3nm
2 nm is also said to be under development

Largest: Around 3 micron.

All high tech computing, faster mobiles, laptops, 5G & future 6G connectivity require smaller nodes.

Pic source: https://www.tsmc.com/

Applications of the newer smaller nodes of size 3nm to 10 nm.

~ High end mobiles processors such as iPhone 12 & 13
~ 5G & future 6G connectivity
~ Smart TVs
~ Mobile displays
~ Autonomous & Advanced Driver Assistance Systems (ADAS) in Autonomous cars


Current leading chip manufacturers:

~ TSMC (Taiwan Semiconductor Manufacturing Company Ltd.)
~ Intel
~ Samsung
~ NXP

All major OEMs such as Apple, Xiaomi, AMD, Huawei, NVIDIA are dependent on such semiconductor manufacturers


Why India is stressing on semiconductors?

There is a global chip war especially between US, China & Russia.

Key defense & strategy applications, space exploration, cutting edge research, newer technology all require semiconductor chips.

Self reliance is hence very important.

India's plan:

~ Attract global semiconductor manufacturers to setup fab plants.

~ Be self sufficient in domestic chip demands e.g for smartphones & TV display.

~ Become the semiconductor supplier for the world

Weekend Learning: A Beginner's Guide to Semiconductors and Nodes

Time for Weekend learning!

Wish to know some truths of Investing?

Listened to a talk by Howard Marks @HowardMarksBook CEO of Oaktree Capital Management on CFA Society India's Youtube Channel.

@CFASocietyIndia

A thread 🧵 on some of the investing truths:

#weekendlearning

In investing and in life:

Sucess is not good for most people. Success makes you overestimate your abilities.

You learn nothing from success, you learn from failure.
Hence, Howard Marks says:

"Experience is what you got when you didn't get what you wanted."

Don't buy just good things, buy them well!

Buying at a cheap price, with a bigger margin of safety is important.

Buy assets which are out of favor, as they give better bargains.

Do not predict but prepare!

It is impossible to predict:

~ Interest rates
~ The next big trend
~ Macros
~ Stock market

But, investors act as if they can see future, which is impossible!

Focus on things within your control which are:
~ Your emotions
~ Strategy
~ Behavior

Have a good sense of where you are.

Understand the current market conditions.

It's possible to enhance investing decisions based on what market is doing now.

Decide to be aggressive or defensive based on observations of current market conditions.


Most dependable way for investing success is:

"Buy assets at a low purchase price i.e. at discount"

Because it:
~ Reduces downside risk
~ Enhances return

The stock price is due to consensus of all market participants.

Hence:

~ Be contrarian
~ Think different but better!



Avoid being distracted by the short term.

Quarterly or daily returns don't matter.

Focus on things that matter in the long term.

Be right in the long term and you can be wrong in the short term.



3 stages of bull market

No optimism:
Few intelligent ones believe that things can get better

Good optimism:
Most investors know that things are actually getting better

Extreme optimism:
Everyone thinks that things can only get better forever



Market is not 100% efficient but,

In this age, everyone knows & can access the information that is provided by the market regulator.

If you think you know something more, ask yourself,

"Why do I know this than others. Does it mean I am wrong?"


Behavior of participants alters the landscape.

If there is a bargain, then people buy it to make it not a bargain.

So, a market that gave bargains in the past doesn't mean it would do in future.

Have courage & conviction to stick to your approach.

But, no approach will give returns in all conditions.

So,
~ Participate only when opportunities fit your approach.
~ Don't invest in everything, every trend.
~ Stick to what you know.


To succeed you have to survive.

Ensure you survive the worst days.

Worst thing is selling at the bottom.

Perseverance in difficult times require:

~ Consistent adherence to approach
~ Control over emotions &
~ Portfolio build to withstand declines.


Risk is inescapable part of investing.

You can't have returns with absolutely no risk.

But,
that doesn't mean higher risk equates to higher returns.

Controlling risk is as important as finding profitable opportunities. A balance between these two is important.

There are no rules in investing.

It all comes down to judgement.

There are many things that cannot be quantified.
But people think that they need more data, even if majority data is unimportant.

Look for long term performance when choosing a fund or money manager.

Randomness in short term can make bad manager look good & vice versa.

Note:
Good manager brings more money to manage but too much money beyond a point, makes it difficult to manage.

Have reasonable expectations.

Don't aim too high.

Just because you wish high returns doesn't guarantee it. There should be right environment, right approach of investor to get it.

You can read the unrolled version of this thread here: https://typefully.com/Finalysis20/HBPZPzb

Investing Truths with Howard Marks

Some interesting data points on the Mutual Fund (MF) Industry:


A thread 🧵

Increase of AUM (Assets under Management) for the overall MF Industry:



Between March 2012 to March 2023 = 6x
Growth of Nifty between same period = 3x


Current AUM = Rs. 39 Lakh Crores

Increase in number of unique investors:



Between March 2017 to March 2023 = 2.94 x

Increase in number of unique folios in the same period = 2.63 times.


Thus, Market rise & new investors both have led the increase in the AUM.

Contribution to MF industry AUM by different investor sets:


Individual investors have led to a dramatic rise in AUM followed by Corporate!



Individual Investors prefer Equity!


Individual investors have allocated around 57% to equity followed by approx. 18% to Hybrid Schemes.


while

Corporates have allocated around 52% to debt followed by approx. 29% to ETFs



Above data is taken from:

Sebi India's consultation paper for reviewing the Total Expense Ratio of AMCs (Asset Mgmt. Companies).


This paper:
~ Highlights current TER structure
~ Proposes changes to
~ Bring more transparency & accountability for retail investors w.r.t TER.


Point to note:


SEBI through this paper, has invited views & opinions from retail investors regarding the proposals in this paper.


As said by @1PageFinance in the below tweet, AMCs & distributors would not want the retail investor to read this paper
👇

https://twitter.com/1PageFinance/status/1660179111493652480?s=20

Mutual Fund Industry Data Points

Richard Feynman said:
“Imagine how much harder physics would be if electrons had feelings.”



Rules of physics are reliable precisely because electrons never:
~ Rebel
~ Innovate
~ Go on strike
~ Forget to perform
~ Behave in a contrary manner


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But this is not true for the market participants, who are prone to emotions & biases.

Every macro news, economic indicator, business happening etc. affect investors.



Hence the market fluctuates!



Adapted from Howard Marks memo:
"The Illusion of Knowledge"
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#investing


You can read the unrolled version of this thread here: https://typefully.com/Finalysis20/gwBkair

Top 10 emerging technologies in the chemical industry.


A thread 🧵



Source: Motilal Oswal @MotilalOswalLtd report on Specialty Chemicals sector.

#sectoral_view

1. Sodium Ion Batteries:


~ More sustainable
~ Environment friendly
~ Cheaper
than Li-Ion batteries.


No constraints of raw material availability.



2. Nanozymes:


Man-made nanomaterials that provide the properties of natural enzymes.

Enzymes: extracted from living cells of plants, animals & micro-organisms, help in digestion, fermentation etc.


Nanoenzymes applications:
~ Water treatment
~ Pollution removal




3. Aerogels:

Lightest (low density) solid material ever known.

Provide outstanding thermal insulation compared to conventional insulator materials.


Usage:
~ Catalysts
~ Space technology
~ Drug delivery systems
~ Energy generation, storage & harvesting


4. Film based fluorescent sensors:


Exhibit high sensitivity & selectivity.


Usage:
~ 2D/3D films that react to external stimuli
~ Detection of explosives, illicit drugs


5. Nanoparticle mega libraries:


Can be used to generate 65000+ new & complex nanomaterials.



Nanomaterials are used in semiconductors, electrical magnetic & optical applications.


6. Fibre Batteries:


Batteries that can be woven into clothes.



A potential game-changer in wearable electronics.



Can lead to the dawn of a new era of Smart Textiles.


7. Liquid solar fuel cells

Uses artificial photosynthesis (a process plants use to make their food using sunlight) to produce solar fuel cells

Application:
~ As a renewable fuel
~ Photocatalysis - Using light to speed up a chemical reaction



8. Textile displays

Fibres that are capable of emitting light.

Another game changer in smart textiles & wearables.



9. Rational Vaccines with SNA

3D nanostructures for better cell penetration.

Applications:
~ Cancer therapy
~ Deliver chemicals to activate immunity against tumours



10. VR enabled interactive modelling

VR - Virtual Reality

Application in healthcare domain wherein the healthcare modelling can be quickly done.

Healthcare modelling is form of uses data analysis to predict patient health issues & suggest preventive treatments.

You can read the unrolled version of this thread here: https://typefully.com/Finalysis20/vZmEGrF