Tough gets tougher (#046)
What can we learn from a highly competitive paints space in India and the recent cancellation of a credit rating agency's license.
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Tough gets tougher
Last week I came across an interesting index.
The HHI Index.
The Herfindahl-Hirschman Index (HHI) is one such econometric tool, which is widely accepted by various competition regulators as a measure of market concentration, with India being one of them. HHI is used to gauge market concentration in an industry.
That is what Google throws up when you search The HHI Index.
Well, to put things into context, in a few industries in India, the HHI score has become extensively high in the last 10 years especially amongst Paints, Telecom and Aviation.
While entry of new firms always makes the industry competitive but one also needs to acknowledge the fact that a high HHI score need not necessarily mean that there will be more profits.
On the other hand, there was something interesting that also caught the eye.
This was to do with the cancellation of a credit rating agency’s license and ban of conducting of audit of a company that recently went aggressively under the scanner of RBI that the board had to be superseded by the Central Bank.
This does make the role of the regulators pivotal in certain scenarios when one sees swift action and also a strong message is sent to the bad actors of a scenario where public goodwill and money is involved.
So does the tough gets tougher?
I guess it applies to both ends of the spectrum. On one end if one is really trying to break into a competitive space filled with competition and on the other end if one tries to manoeuvre regulators on thin ice.
[Premium] Will Covid-19 separate the wheat from the chaff in the Indian pharma industry? (Part 1 of 2)
This is the first part of the 2 part series breakdown of the Pharma space.
Monologue
Naval Ravikant once said -
The only difference between a healthy person and a sick person is, the healthy person may want a million things but the sick person wants only one.
Having said that, let’s look at the other part of the equation here.
The consumer which ends up buying any drug is always in pain, no matter which part of the income strata it belongs to.
So what happens in a situation where one party is in pain and the other has pleasure?
There is a transaction.
And what happens when you change some variables on both the side. Think of a sick person on the left and medicine on the right.
Irrational Exuberance.
Only here that happens with Pricing Power.
Allow me to take you through The Good, The Bad and The Ugly of the Pharmaceutical Industry in reverse order.
Click here to read more.
Alpha Swing
In this week’s 3 swing trades, we are back with the interesting guessing game.
If you can guess the stock right, you get a complimentary 1-month premium access to Alpha Swing.
HINT -
The Company operates in two key segments - Consumerware and Scientificware.
While the former has a 7-8% EBIT margin, the latter operates in the EBIT margin range of 20-24%.
The company is Debt Free and has grown it’s PAT at a CAGR of 154% over the last 3 years.
Guess the stock.
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StockRoom Sunday
This week we took a short break! We shall be back next week.
Podcast of the Week
Song of the Week
Book of the Week
HDFC Bank came out with their quarterly results.
It just felt like something that is a classic quarterly template for the bank.
Double digit NII growth, double digit advances growth and a decrease in NPAs.
What makes the bank so great?
Let’s see what the author Tamal has to say about this in this brilliant book.
Click here to check it out.
If you liked reading this, why not make someone else smarter too?
Will see you again next week.
Ciao.