Will Reliance Kill Decathlon?
Our goal with The Daily Brief is to simplify the biggest stories in the Indian markets and help you understand what they mean. We won’t just tell you what happened, but why and how. We do this show in both formats: video and audio. This piece curates the stories that we talk about.
Check out the audio here: Spotify and Apple Podcasts
And the video here:
Today, we look at 3 big stories:
Will Reliance kill Decathlon?
Yes bank says “Nonsense”
Will India’s largest stock exchange IPO?
Will Reliance kill Decathlon?
Following their partnership with Shein to disrupt the cheap fast fashion market, Reliance is now targeting the sportswear and athleisure sector, directly competing with Decathlon.
The Indian athleisure market was worth about $7 billion in 2023 and is expected to grow at 14% per year till 2028, reaching $8 billion in the premium and mid-price segment by 2032.
Reliance's Strategy and Market Impact
Reliance Retail plans to lease large format stores (8,000-10,000 sq. ft.) in prime locations across major cities, mimicking Decathlon’s model. This is a significant development because an unspoken rule about doing business in India is that if Reliance enters your territory, you should be really, really scared.
Market Competition
Adidas, Puma, and Nike are well-established and highly aspirational brands in India.
Brands like HRX and Wrogn are popular in the semi-premium segment.
With revenues of 4000 crore rupees in 2023, Decathlon has doubled its revenue since 2021.
Reliance's Unique Advantages
Reliance has a proven track record of creating brands that deeply resonate with Indian consumers.
A robust supply chain and distribution network enable efficient inventory management and staying ahead of fashion trends.
The influence and trust associated with the Reliance name give them a strong market entry point.
Yes bank says “Nonsense”
Yes Bank found itself at the center of a controversy when Mint published a story claiming that the Reserve Bank of India (RBI) had approved a sale of a 51% stake in the bank. This report quickly drew a response from Yes Bank, which dismissed the claims as speculative nonsense.
A Brief History of Yes Bank
Once hailed as the next HDFC Bank, Yes Bank experienced a dramatic fall from grace. By March 2020, years of mismanagement had left the bank in dire straits, prompting the RBI to intervene. The central bank removed the existing management and took control to stabilize the situation. As part of the rescue plan, bonds worth over ₹8000 crores were written off, and a consortium of 10 investors, led by the State Bank of India (SBI), injected ₹10,000 crores into the bank. This led to a steep decline in Yes Bank's share price, plummeting from ₹400 to just ₹5.
Following the reconstruction:
SBI emerged as the majority shareholder with a 30% stake.
Other major investors included ICICI and LIC, each holding single-digit stakes.
These shares were locked in for three years, ensuring stability.
The Controversy
The Mint story claimed that the RBI had given the green light for some promoters to hold a 51% stake in Yes Bank. This is a significant claim because RBI regulations typically restrict promoter holdings to a maximum of 26%. Yes Bank swiftly denied the report, clarifying that there was no truth to the speculation.
Current Ownership
As of May, SBI remains the largest shareholder with about a 24% stake, even after selling small portions post-lock-in.
Despite minor sales, SBI and other banks continue to hold substantial investments in Yes Bank.
Will India’s largest stock exchange IPO?
NSE's journey to go public has been a long and winding road, spanning almost a decade. Despite persistent efforts, India's leading stock exchange has yet to succeed in launching its initial public offering (IPO).
The Initial Steps and Setbacks
NSE took the first formal step in going public by filing its Draft Red Herring Prospectus (DRHP) back in 2016.
A whistleblower accused NSE of giving certain traders an unfair advantage by allowing them to place orders faster than others. And, this caught the attention of SEBI.
The crux of the issue was that NSE had multiple servers with varying speeds. Algorithmic traders, who rely on speed, gained a significant edge by being connected to faster servers. Some traders allegedly colluded with NSE officials to ensure they were always on the fastest servers, leading to massive, unfair profits.
SEBI's Investigation and Penalties:
NSE was ordered to pay Rs. 6.25 billion plus 10% interest.
NSE was banned from accessing primary capital markets for six months.
SEBI instructed NSE to pause its IPO plans until the matter was resolved.
In 2019, SEBI began doling out penalties. The People Activism Forum recently petitioned the Delhi High Court, arguing that SEBI’s six-month ban shouldn’t indefinitely prevent NSE from going public.
Current Scenario
Indian law does not explicitly bar companies with pending cases from going public, as long as they disclose the details of such cases. So, NSE has now requested SEBI to reconsider its IPO.
If NSE manages to launch its IPO, it could be monumental. NSE is the world’s 8th largest stock exchange and leads in trading derivatives contracts. Back in 2016, NSE aimed to raise Rs. 10,000 crore through its IPO. Given the current scenario, they might set even higher targets this time.
Listen to the full episode to be smarter than you are after reading these bullet points.