MONTHLY NEWSLETTER

JUNE 2021

What’s Inside

EVOLVING LANDSCAPE OF
FOODTECH PLATFORMS

AUTO SECTORAL TRENDS

Q1FY22

COVID 2.0 STIMULUS PACKAGE

EVOLVING LANDSCAPE OF FOODTECH
PLATFORMS
Evolution of the FoodTech space in India
1. Do you remember going to a restaurant not knowing
what the menu is like or how the reviews are?
2. Or hunting for menus of a restaurant, placing an order,
tendering exact change and waiting impatiently, unaware
of the time till delivery?
Clearly, seems like a thing of the past. The new age FoodTech
platforms have made us accustomed to a great deal of
convenience which is here to stay.
The ongoing Zomato IPO will mark the first FoodTech platform listing in India. The Indian FoodTech
space has evolved in the last decade from restaurant listings and discovery platforms to on demand
delivery by aggregators. The newer emerging trend are the cloud kitchens (delivery only kitchens)
such as Rebel Foods (Faasos, Behrouz Biryani, Oven Story, Mandarin Oak, The Good Bowl, Sweet
Truth etc.)

M&A led consolidation in food delivery resulting in duopoly

Year of Launch Notable Food delivery Start ups

Started as Foodiebay with restaurant listings &

2008
discovery. Ventured into food delivery in 2015

2012 Acquired by Ola cabs in 2017

2014 Acquired by Zomato in 2017

2014 Launched as a food delivery platform

2015 Shut its operations

2015 Acquired by Swiggy in 2018

2017 Acquired by Zomato in 2020

Swiggy launched in 2014 amidst notable food delivery startups like Foodpanda and TinyOwl who were
struggling. Ola, too, launched their delivery service ‘Ola café’ in 2015 which shut within a year of operations.
Zomato was a little late to the party with its entry in food delivery in 2015 but managed to garner a ~50% share
of the online food delivery market. Uber Eats was launched in 2017 and acquired by Zomato in 2020. The
market is currently a duopoly between Swiggy and Zomato.
India’s total addressable food services market
opportunity of US$110bn in 2025
Food consumption, at US$607bn in 2020
Restaurant food as a % of food
consumption constituted 25% of India’s GDP.

60% This is largely driven by consumption of

49%
50% 44% home-cooked food.
40%
30%
Food services (Non-home cooked food or
20% restaurant food) currently contributes only 8-9% to
8%
10% the food market in India. This is substantially low vs
0% US and China at 47-50% % and 42-45% respectively.
India US China

Internet and online food delivery market

Of the total population with access to Internet,
only 8% order food online in India 100% 100%
94%
100%

In US and China that share is at 38% and 53% 68%

respectively. 49% 53%
38%

8%

India Food Services market (US$bn)

India US China
120 110
Total population Access to internet
100 (Indexed to 100)
Online food delivery users
80 65
60

40 Food Services market opportunity, as per RedSeer

20 was US$65bn (Rs. 4.6trn) in 2019.

0 This is expected to grow at 9% p.a to US$110bn (Rs.

2019 2025 7.7trn) in 2025.

Global Trends: Increasing orders lead to higher gross order value

even as AOV remains flat
The initial focus of food delivery platforms across the globe is acquiring customers, increasing repeat
customers and gradually working on the unit economics as they achieve scale and capture a sizable
portion of the market.
Historical global AOV trends
Hence most of the global delivery platforms are
currently making losses at operating level; while 60.0
some are at meagre operating margins, e.g. 44.2 44.8 48.2
40.0 41.9
Meituan. Gradually the increase in gross order 37.0 33.9 30.6 30.2
value (GOV/GTV/GMV) will help achieve scale and 20.0
aid in driving profitability. The average order 13.3 13.1 12.7 11.1 9.5
frequency is also rising across the globe. -
2016 2017 2018 2019 2020
The Average Order Value (AOV) has remained
broadly flat or seen a slight downward trend Delivery Hero (€) Meituan (RMB) DoorDash ($)
across players as they expand and move into
newer territories.
600 488.9 15.0 Meituan (RMB m)
392.7
400 282.9 10.1 10.0 CY18 CY19 CY20
8.8
171.1 6.4 Revenue 65,227 97,529 1,14,795
200 5.0
58.7 4.1
1.6 growth y/ y % 50% 18%
0 0.0
2016 2017 2018 2019 2020
EBITDA -8,018 5,563 1,875
GTV (RMB bn) Orders (bn)
Adj PAT -13,137 166 -3,206

15,000 12,400 1,500 Delivery Hero (Euro m)

1,300
10,000 7,400 1,000 CY18 CY19 CY20
5,100 666
5,000 2,618
3,824
500 Revenue 665 1,238 2,472
402
292
197 growth y/ y % 86% 100%
- -
2016 2017 2018 2019 2020
EBITDA -242 -648 -894
GMV (€ mn) Orders (mn)
PAT -277 -690 -1,403

30,000 24,664 1000 Doordash (USD m)

816 800
20,000 CY18 CY19 CY20
600

10,000
8,039 400 Revenue 291 885 2,886
2,812 263 200
-
83
0
growth y/ y % 204% 226%
2018 2019 2020
EBITDA -201 -584 -316
GOV ($ m) Orders (m)
PAT -204 -599 -464

Conclusion: FoodTech industry in a sweet spot

Almost a non-existing sector in the past, the Indian FoodTech sector has seen a remarkable growth in the
last decade. However, Food Services market in India remains highly under-penetrated and is likely to grow,
taking share away from home cooked food.

With over 700mn people with access to Internet in India, only 50–55mn order food online currently thereby
offering immense potential ahead. Factors such as increasing internet reach, digital adoption across small
towns and changing consumer behaviour place the FoodTech industry in a sweet spot.

Trends in mature economies in the last 5 years and growing appetite of PE players in FoodTech imply this
space will remain hot for the foreseeable future.

Increasing
Millennials Increasing penetration
Changing reducing consumer in smaller
consumer dependence spending cities
behaviour on home food
AUTO SECTORAL TRENDS Q1FY22

Q1FY21 Q4FY21 Q1FY22 YoY QoQ

2-Wheelers
TVS Motor 255428 886614 618701 142.2% -30.2%

Hero Moto 563426 1568313 1024489 81.8% -34.7%

Bajaj Auto 443103 1047632 899305 103.0% -14.2%

Royal Enfield 57269 204604 123640 115.9% -39.6%

3-Wheelers
Atul 1477 4993 1739 17.7% -65.2%

Bajaj Auto 3W 43174 122032 106709 147.2% -12.6%

TVS Motor 3W 11505 40965 39057 239.5% -4.7%

M&M 3W 52 9659 3065 5794.2% -68.3%

Passenger Vehicles

Maruti 81250 492235 353614 335.2% -28.2%

M&M PV 11942 52725 43204 261.8% -18.1%

CVs
Ashok Leyland 3814 44060 17987 371.6% -59.2%

M&M CV 15587 39706 34034 118.3% -14.3%

VECV (Eicher) 2129 18167 5806 172.7% -68.0%

SML Isuzu 202 2247 812 302.0% -63.9%

Tractors
Escorts 18150 32588 25935 42.9% -20.4%

M&M Tractors 65657 93894 99929 52.2% 6.4%

Tractor segment was most resilient in the Auto pack, despite second wave impact on rural
markets. M&M posted a positive 6% QoQ tractor sales (including exports) in Q1FY22 while Escorts
posted a 20% QoQ decline

PV segment was also less impacted (down 20-30% QoQ) as personal mobility continues to be in
focus amid second wave.

2-wheelers sales declined 30-40% QoQ, while 3-wheeler and CV volumes declined ~60% QoQ
owing to second wave lockdown.

Pertinent to note that Bajaj Auto fared better in 2-wheeler & 3-wheeler owing to exports, which
remained steady amid domestic lockdown.
COVID 2.0 STIMULUS PACKAGE
Maximum Benefit, Minimum Effort

The last stimulus – experiment successful!

Well, the Government has surely found a miraculous way of solving the financial
distress without much impact to its fiscal. The government implemented this
methodology last year when the quantum of measures implemented were 10%
of GDP but the actual outlay was only 2% of GDP. Lot of skeptics had questioned
the model and believed that the Government measures would not yield much
benefit to the economy as large part of the benefits were in the form of loans
and guarantees. However, we have seen very strong response to the package
being announced by the industry at large. Banks came forward to fund MSMEs and NBFCs (largest beneficiaries
of the stimulus package) and bank credit to MSMEs which was de-growing went back into the growth territory
purely on the strength of the stimulus package. This was the sole reason for the entire financial sector bouncing
back in the second half of FY21, asset quality performance was much better than most institutions and credit
rating agencies had anticipated, credit growth also surpassed the estimates. Just to give an example, prior to the
stimulus package, CRISIL, the leading credit rating agency in India, had pegged bank credit to show NIL growth
in FY21. But we ended with 5.6% credit growth for the banking system in FY21. The improved health of the
financial system was responsible for the bounce back in the economy in the second half of FY21.

The current stimulus – tried and tested!

Having tasted success with this approach, it was very much expected that the government will continue to
apply the same model for the next package as well. And so it is. The Finance Minister announced a fresh round
of stimulus measures to support the economy after the second wave of Covid-19. While the announced size of
the package is ~3% of GDP, the actual FY22 fiscal outgo on the back of these measures will be just 0.3% of GDP.
The reason for the lower fiscal outgo are (i) some of the measures included in the package were announced
earlier like the extension of free food grains till Nov 2021 and additional allocation for fertilizer subsidy (ii) like the
earlier stimulus packages, this package has also relied heavily on government-guaranteed loans which don’t
have any upfront fiscal cost and (iii) some of the measures are spread over five years, splitting the fiscal costs
over a longer timeframe. Let’s take a look at the details and its impact thereof.

The key pillars

The measures consist of three pillars: ‘economic relief’, ‘public health’ and ‘impetus to growth and employment’
which account for 60%, 2% and 38% respectively of the total announcements. However, in terms of fiscal outgo,
they account for 0.1%, 22% and 78% respectively. The fiscal outgo for ‘economic relief’ measures is negligible as it
comprises largely of loans and guarantees. ‘Impetus to growth and employment’ measures are largely spread
over 5 years, thus reducing the FY22 outgo. The table below gives a good perspective on the size of the stimulus
package and the expected fiscal outgo.

Pillar Package Size ( Rs bn) Expected fiscal outgo ( Rs bn)

Economic Relief from

3,762 1
Pandemic

Impetus for Growth &

2,377 533
Employment

Public Health 150 150

Total 6,289 684

 Having understood the fiscal impact, let’s
take a look at the benefits that these
measures will bring about.

Economic Relief from

Pandemic
1. Loan Guarantee Scheme for
COVID Affected Sectors
Total package announced is Rs. 1.1 trn (capped at
7.95% interest rate) of which allocation for health
sector is Rs. 500 bn and other COVID affected
sectors is Rs. 600 bn. The scheme is aimed at
scaling up medical infrastructure especially in
underserved areas. The scheme will also help
COVID affected sectors like hospitality, hotels,
restaurants etc. to get additional funds at
attractive rates of interest.

2. Emergency Credit Line Guarantee Scheme (ECLGS) – MSME package

The ECLGS scheme announced last year for the MSME
sector, providing them with additional loans at low rates
has tasted huge success, with 90% of the Rs. 3 trn
package already disbursed. Now the government has
enhanced the package to Rs. 4.5 trn giving further
support to the MSME sector.

3. Credit guarantee scheme for MFIs

Government has also announced a credit guarantee
scheme worth Rs. 75 bn for MFIs/NBFC-MFIs. These
measures are likely to benefit 2.5 mn MFI borrowers.
This guarantee scheme will help the MFI entities
address the ALM mismatch and continue to support
the affected borrowers, thus maintaining the financial
inclusion objective of the government.

4. Tourism Sector
Loans with 100 % guarantee up to an amount of Rs.
10 lakhs for Travel & Tourism stakeholders and Rs. 1
lakh for licensed tourist guides has been announced
which is likely to benefit 11,000 licensed tourist
guides, Travel & Tourism stakeholders. Also, first 5
lakh Tourists Visas will be issued free of charge. The
measures entailed will help the sector which is one of
the most severely hit.
 Impetus for Growth & Employment

1. Exports Boost
Boost for Project Exports through National Export
Insurance Account, additional corpus of Rs. 330 bn to
be provided over 5 years. Fund infusion of Rs. 880 bn
in Export Credit Guarantee Corporation (ECGC) over 5
years will boost export insurance cover. These
measures will help the exports sector.

2. Reform Based Result Linked Power Distribution Scheme

Financial assistance to power sector DISCOMS for

infrastructure creation and up-gradation. Total
allocation of Rs. 3 trn with Centre share at Rs. 976 bn.
Strong power sector reforms and financial assistance
were much needed in order to support the poor
financial health of our DISCOMs.

3. Extension of Tenure of PLI Scheme for Large Scale Electronics

Manufacturing

PLI Scheme for Large Scale Electronics Manufacturing has now

been extended till FY26. This will help the companies which are
a part of PLI to get maximum benefit from the scheme.

Public Health

Scheme for short term emergency preparedness for pediatric care

Package of Rs. 232 bn allocated to increase availability of ICU

beds, oxygen supply, equipment, medicines in order to boost
health infrastructure.

Conclusion
It was essential to come out with a timely and effective stimulus package to combat the effects of
the second wave, which the government has done well. It has focused on segments most
impacted by COVID and ensured adequate support to them while keeping the costs at a
minimum. Past experience has surely made the government more effective and targeted in its
response and we see no reason as to why these measures won’t help. It has also not lost sight of
the longer term and focused on PLI scheme, DISCOMs support and exports which are essential for
structural growth. The well rounded support means that India as a country will bounce back
strongly in the coming months.
 THANK YOU
We would love to hear from you…

Contact us at:

MUMBAI OFFICE
Contact No : 022-61013818

Marathon Futurex, A-603 6th Floor, Mafatlal Mills Compound,

N M Joshi Marg, Lower Parel East, Mumbai 400013

DELHI OFFICE
Contact No : 0120-6675900

A-40, Office No. 202, 2nd Floor, I-Thum Tower, Sector 62, Noida 201301, India

BENGALURU OFFICE
Contact No : 080-46013333

3rd, Floor, Unit No-302, PALMS SQUARE, 125, Brigade Road, Bengaluru-560025

THANE OFFICE
Contact No : 022 – 62327101

Unit No.306, 3rd Floor, CentrumPlot C-3, S.G. Barve Road,

Wagle Estate, Thane (West) – 400604