In this week's wrapup, we talk about risky lending, induction stoves, the NVIDIA-ARM deal, Nikola, and why the RBI isn't able to meet its inflation target.
Adani Green and the bet on India's solar future
~1 Lakh Crores — That’s what Adani Green Energy Limited is worth right now. In fact, it’s the most valuable company in the Adani Group stable. What’s even more fascinating is that the company’s prospects blossomed only recently after its share price rallied by an eye-popping 500% in just 6 months. So in this week’s Finshots Market edition, we try and figure out what’s fuelling this frenzy.
How to think about risky lending?
On Monday, we talked about US banks and their latest approach to lending. Banking is a risky business. You loan money to individuals only to find out some of them won’t pay you back. So it’s imperative to set aside some extra money so that you can absorb losses if and when your customers default on their repayment obligation.
But how do you know how much you’ll need to set aside for these unforeseen events?
That's what we discuss here.
Can Induction Stoves solve India's biggest problems?
On Tuesday, we spoke about India's electricity consumption and oil imports problem. Ever since the first lockdown was enforced, India's electricity consumption has fallen off a cliff. And this is crippling the entire electricity value chain- it affects power generating companies, distribution companies, and the banks lending money to these institutions. The government desperately wants a solution.
On a seemingly unrelated note, India's oil import bill is also a cause for concern- we ship most of it in from middle eastern countries. And reducing this dependence is of vital importance.
You'd think these two problems are completely different and require separate tailor-made solutions. But the government seems to think they have a nifty workaround that could address both problem at once. Find out what it is here.
The $40 Billion Semiconductor deal
On Wednesday, we spoke about NVIDIA's decision to buy Arm Holdings — the British Microprocessor giant, for $40 Billion.
Now, Arm has a peculiar business model. It doesn’t manufacture anything. Instead, it licenses its technology to other companies who use Arm’s Intellectual Property (IPs) to customize their own offering of chips and microprocessors.
If you were being critical, you’d argue Arm is conceding ground here. After all, if you have the know-how needed to design and fabricate chips, why wouldn't you build a manufacturing plant and extract more value from your consumers? Find out why here.
Finshots Special — Fake it till you Make it
On Thursday, we discussed how EV upstart Nikola became a multi-billion dollar auto company without ever putting a single truck on the road. Nikola’s promise was simple — To build a fully functional truck that could run on hydrogen-powered fuel cells and compete with industry-standard diesel-powered alternatives on all fronts — price, tech, design, you name it.
But on September 10th, a forensic financial research company in the US — Hindenburg Research released a 15000 word report calling into question some of the lofty claims made by the billion-dollar company. And we've simplified the whole thing for you here.
Why RBI isn't able to meet its target?
On Friday, we talked about the problems with inflation targeting. Inflation is bad. Nobody likes to see prices rise each day as they visit the neighbourhood Kirana store. So it’s imperative that the primary gatekeepers do their job. To this extent, the RBI adopts a very interesting approach to tame inflation.
The premise is simple. The central bank makes a projection to control the general rise in price levels and arrives at a figure that it deems acceptable. This is the “target” inflation rate and they attempt to steer the actual inflation towards this target. However, with the lockdown in place, this hasn't been easy. Find out more here.
And that's a wrap! Have a great weekend :)