How Amazon.com is better positioned to win the battle against Walmart

Background: Walmart Inc, the world’s largest retailer, took 77% equity stake in Flipkart, an Indian eCommerce company, on Wednesday. With Amazon.com establishing its presence organically, the fight to capture the Indian market has now shrunk to these two giants. So who has the better chance of winning this war?

Walmart is the world’s largest retailer, but its online rival, Amazon.com has better war chest when it comes to winning the Indian eCommerce market. Amazon’s cash at hand is thrice that of Walmart’s, though the online giant’s sale is only 36% of Walmart’s topline. Interestingly, Amazon.com has bigger long term debt than Walmart, but its interest cost is 50% lower than the offline retailer. Much more than cash at hand, Amazon’s valuation is thrice that of Walmart’s that gives US online retailer edge to acquire firms through non-cash transactions.

This table gives a preview of where the companies stand:

 

Walmart Inc. Amazon.Com, Inc
Cash 6.7 20.5
Sales 482 177.8
Net profit 15.08 3.03
Earnings Per Share (EPS) 3207 6.32
Market capitalization 252.35 776.43
Long term debt 36.7 45.6
Interest expenses 1.9 0.848

All in $ billion, except EPS
All numbers, except market capitalization, are December 2017.
Market capitalization is as May 9, 2018
Source: Company websites, NYSE

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When Regulator Facebooks

3

What is it? The three entities—Rupeshbhai Kantilal Savla, Sujay Ajitkumar Hamlai and V Techweb India Pvt Ltd—from whom the market regulator has ordered impounding of unlawful gains worth over Rs 2.4 crore in an insider trading case.

Why is it important? The Securities and Exchange Board of India (Sebi) trawled the Facebook profiles of the suspected people to check if they were connected in the case, which violated insider trading norms. SEBI found the involved persons were ‘friends’ on Facebook and had liked each other’s posts, an instance of the regulator combing social media to track insider trading.

Tell me more: The order stated that by way of “this association and frequent communications, they are reasonably expected to have access to unpublished price-sensitive information” related to the firm in which shares were traded by the involved persons.

 

3

What is it? The number of years since the death of former judge BH Loya. He died of a cardiac arrest on December 1, 2014, in Nagpur, according to the Maharashtra police.

Why is it important? On Thursday, a three-judge Supreme Court bench, in a scathing verdict, dismissed a batch of petitions that sought an independent investigation into Loya’s death and said the pleas were an attempt to scandalise and obstruct the course of justice. It said public interest litigations were being misused for personal agendas. The BJP and Congress got into a war of words after the dismissal of these pleas.

Tell me more: The death of Loya came into focus after some media reports said that his sister had raised suspicions about the circumstances of his death. Loya was hearing the case regarding the death of a gangster Sohrabuddin Sheikh in which Amit Shah, president of BJP, was an accused.

 

Rs 6,904 crore

What is it? Tata Consultancy Services’ (TCS) net profit in the January-March quarter of 2017-18.

Why is it important? India’s largest software services exporter saw its banking and financial services vertical, its largest contributor, grow 2.3% sequentially and 8.2% year-on-year. The firm had witnessed lower client spending, particularly in this sector in North America, last year. A turnaround in the banking and financial services vertical, in addition to growth in digital services, is likely to help TCS achieve its 10% dollar-revenue growth in 2018-19.

Tell me more: Its Q4 revenue increased by 8.2% to Rs 32,075 crore on an annual basis. In 2017-18, TCS’ net profit declined 1.8% to Rs 25,826 crore.

 

102

What is it? The number of words devoted to India (out of 4,310) by Amazon founder and CEO Jeff Bezos in his 2017 letter to shareholders, released late Wednesday.

Why is it important? India received a para under the section ‘recent milestones’. India is one of the big markets identified by Amazon to open up new frontiers of growth, and it is locked in a bruising battle here with Flipkart, which might soon have a new owner in Amazon’s rival in the US, Walmart.

Tell me more: Bezos also disclosed that Amazon Prime crossed 100 million members worldwide in 2017 and that this paid membership service added more members than any previous year.

 

$5 million

What is it? The amount paid by cyclist Lance Armstrong to the US government to settle a whistleblower lawsuit.

Why is it important? The lawsuit, filed in 2013, could have sought damages of up to $100 million from Armstrong—whose team was sponsored by the US Postal Services—for using performance-enhancing drugs en route to winning the Tour de France race seven times, victories that have since been scratched from the record book. This lawsuit would have possibly been the biggest claim against Armstrong, who has reportedly paid about $20 million in damages and settlements.

Tell me more: The original lawsuit against Armstrong was filed by Floyd Landis, a former teammate and also banned cyclist. Landis is eligible for up to 25% of the settlement amount.

 

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Who Will Win The EV Race?

 

-2.5%

What is it? The drop in the 30-share Dow Jones, the benchmark share index in the US, on Friday—the largest single-day drop for this index in the Donald Trump presidency, which has just entered its second year.

Why is it important? After a period of sustained, euphoric rise, the Dow exhibited a fragility, which some partly attributed to the result of rising too far, too fast. In a CBS interview recorded on Friday but broadcast on Sunday, Janet Yellen, the outgoing chairman of the US central bank, said this about stocks and real estate: “Well, I don’t want to say too high. But I do want to say high.”

Tell me more: The weakness seen in the Dow was also seen in many markets across the world. Closer home, a day after a Budget that reintroduced long-term capital gains tax, the benchmark BSE Sensex fell 2.3%.

 

Rs 800 crore

What is it? The quantum of investment in electric vehicles for which Mahindra & Mahindra has sought approval from its board of directors, according to managing director Pawan Goenka. This comes on top of the Rs 600 crore that Mahindra has invested in electric vehicles.

Why is it important? Carmakers are putting the pieces for an imminent shift to electric vehicles, with this Central government aiming for all new vehicles being sold in 2030 to be running on electric technology. In India, Mahindra has been the first mover, buying Reva in May 2010 and also being one of the two companies to bag the first sizeable order from the government.

Tell me more: In the same interview, Goenka said the electric milestone will lead to a churn in the Indian industry at the very top, and that leaders won’t remain leaders. In the 10-month period to January, Mahindra sold 200,561 passenger vehicles, of which 94% were utility vehicles. By comparison, in the 9-month period to December, market leader Maruti Suzuki sold 1.06 million passenger vehicles.

 

$3 billion

What is it? The total net profit reported by Amazon for 2017. This is an increase of 25% over 2016, and comes on the back of revenues surging 31% to $178 billion.

Why is it important? It illustrates just how much financial strength Amazon has in order to absorb losses to win new markets, as it is currently trying to do outside the US, including in India. In 2017, 30% of its revenues came from international markets, where it also lost $3 billion. But with the American market and Amazon Web Services growing fast and making money, it can keep channeling more capital for new market share.

Tell me more: In India, Amazon has been involved in a bruising battle with Flipkart. On Friday, it was reported that Flipkart posted a net loss of Rs 8,771 crore in 2016-17, a year-on-year increase of 68%.

 

2

What is it? The number of indices launched on Saturday to track sentiment among micro and small enterprises (MSEs). The indices, the first of their kind for the MSE sector in India, have been jointly developed by Crisil and Sidbi.

Why is it important? The state of MSEs has been a cause of concern, and the new indices will add a data dimension to this set. According to the 2013-14 Economic Census, there were 45 million non-agricultural establishments in India, of which 43 million establishments had one to five employees.

Tell me more: CriSidEx, a composite index, is based on a diffusion index of 8 parameters and will measure MSE business sentiment on a scale of 0 (extremely negative) to 200 (extremely positive). It will have two sub-indices, one for the ‘survey quarter’ and, in time, another for the ‘next quarter’.

 

3.66

What is it? The economy rate registered by Indian bowlers in the U-19 cricket world cup one-day tournament, which India won for the fourth time on Saturday.

 Why is it important? India put in an exceptional bowling performance, which saw them not only choke batsmen from scoring, but they also took all 10 opposition wickets in all their six matches, at an average of 39 overs per game. This is only the second instance of a team picking up 60 wickets in the tournament’s history.

Tell me more: India’s Anukul Roy ended up as the joint highest wicket-taker in the tournament. He was one of the three bowlers to pick up 14 wickets, but at a far superior average, economy rate and strike rate than the other two.

 

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More Cities Come Under Metro Rail Network

 

Amazon and Flipkart are outdoing each other, but last quarter was a downer for both the e-commerce giants. On GST, governemnt collected the lowest tax last month ever since the new tax regime was launched in July. A report said, more people are dying prematurely due to air pollution in India and this can get worse in coming decades. Delhi metro has done a ton of good in encouraging other cities to come under the metro rail network. And in cricket, Ashwin reached a milestone on Monday, as India routed Sri Lanka in the second test at Nagpur.

 

92

What is it? The respective scores of Flipkart and Amazon India in the July-September period, according to the latest RedSeer E-tailing Leadership Index.

Why is it important? Scores of both companies have declined from 95 in the previous quarter. Identical scores of India’s top two e-commerce firms in two consecutive quarters indicates intense competition with no clear winner. While RedSeer did not give any reason for the decline in their scores, the previous quarter saw the flagship festive sales of both Flipkart and Amazon, and the higher volume of orders could have affected customer satisfaction levels.

Tell me more: Flipkart has emerged as the most trusted brand in e-commerce in India, while Amazon tops in customer experience.

 

Rs 83,346 crore

What is it? Collections under GST (goods and services tax) for October up to Monday (November 27).

Why is it important? This is the lowest since July, the first month when GST was implemented in the country. The government attributed the lower tax collections to, among other reasons, lower tax incidence on most goods. In a report on Monday, India Ratings said the government’s disinvestment drive and encouraging GST collections would help “reduce pressure on fiscal arithmetic”. The government has used up 96.1% of its full-year fiscal deficit target in the first five months of 2017-18. It has set a fiscal deficit target of 3.2% of gross domestic product for the current fiscal.

Tell me more: The GST collections in July, August and September were Rs 92,283 crore, Rs 90,669 crore and Rs 92,150 crore respectively.

 

30%

What is it? The percentage of premature deaths in India caused by air pollution alone, according to a report by the Centre for Science and Environment (CSE).

Why is it important? It highlights the urgent need for a multi-pronged approach to lower air pollution levels across the country. The report says every third child in Delhi, which is among the world’s most polluted cities, has impaired lungs. Not only are Indian cities witnessing higher pollution levels but 41 tier-II cities exceed the ambient air quality standard. The Organisation for Economic Cooperation and Development has said air pollution could cause 6-9 million deaths by 2060, with the biggest increases in mortality rates in India and China, among others.

Tell me more: The CSE report also said 61% of all premature deaths in the country can be attributed to lifestyle or non-communicable diseases.

 

9

What is it?  The number of Indian cities that will have a metro rail service following the inauguration of the Hyderabad Metro on Tuesday. The other eight cities are Bengaluru, Chennai, Delhi, Gurugram, Jaipur, Kochi, Kolkata and Mumbai.

Why is it important? India has been late to embracing metro rail as a means of public transport, and it’s only in the last decade, following the success of the Delhi Metro, that cities have taken to it. Another two dozen projects are at various stages of completion or lined up with the ministry of urban development.

Tell me more: China has been extremely aggressive in making the metro rail a mainstay of its public transport system. In the global list of top 10 cities with the longest metro rail network, four are from China; Delhi is at number 11.

 

54

What is it?  The number of test matches that Indian off spinner Ravichandran Ashwin took to reach 300 test wickets. Ashwin reached this milestone on Monday, as India routed Sri Lanka in the second test at Nagpur.

Why is it important? Among the 30 bowlers who have scalped 300 test wickets, Ashwin is the quickest to this milestone in number of tests. He bettered the record of Australian fast bowler Dennis Lillee, of 56 matches.

Tell me more: Ashwin is the fifth Indian to reach 300 test wickets. Also, he is only the third blower to return at least 50 test wickets in three consecutive calendar years, the others being Shane Warne (1995-97) and Muttiah Muralitharan (2000-02).

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