The want to go to a movie theatre to watch a new movie is fading. There are a few movies which are better on the big screen but the frequency of going to the theatre has diminished by a huge margin. Movie goers are preferring to stay at home and watch what they are in the mood to watch via ott platforms.

OTT’s have an added advantage as they are able to catch the mood of the moment , and this is helping with the wants of the individuals. The margins in the theatre business is large, food and beverages also bring about a large portion of the cashflows, but they need a minimum number of people to attend their screenings. The act of going out of the house for some activity, this mode is changing and being expressed via an activity like trying a new restaurant, playing a mystery rooms game, playing a sport etc. Things like this where it is not possible to do it from the confines of your house.

Also theatres where live events can be held is a good business if the location is right. Also this might only workout if it is a large audience. Taylor swift’s eras tour is expected to generate around 4 Billion USD !! . Such events may pay off sustainably if done in a consistent basis with a large time gap in between.

India mandated the obd(onboard diagnostic) port back in 2011. This led to the emergence of onboard diagnostics, over time there have been products that can be inserted in the obd port to avail more data regarding the vehicle. This also formed the stepping stone for many other applications associated with the port. now there is a OBII port which has more data which can be collected.

The device which is connected to the OBDII port is called as a data logger. Data logger then relays the information to a phone or a bluetooth device. This transmitted data is then analyzed probably in a server and then represented to the driver via an app. This gives the vehicle owner insights into the working of his car. Some research on the cost of the data logger can be done. nowadays data loggers can be used wirelessly using an esim as well.

So , data logger is a device that can be one of the components of a E2X environment. Getting deeper into what other components can give us insights of the companies producing them. Which inturn will help to understand the sector’s future even better.

Close to 65% of the chinese population lives in urban cities. This number was around 30-40% inbetween 2000-2005. During this period the GDP of china was around 4 Trillion USD. China boasts of a GDP of around 20 Trillion USD today. The average income has increased by almost 3 times since 2004.

This trend tells us that as the economy expands, the real beneficiary in terms of government spending towards developing the city / town is the urban population. In India cities like bangalore government spending is higher compared to the other towns. And betting that the boundaries of a city like bangalore expanding faster is a better bet than betting on a city / town that’s not closer to bangalore. Infrastructure plays a critical role in such instances.

We have a better understanding of how civilizations progress when the average income increases. The logical way will be increase urban spaces because the consumption is higher as the population density is higher, but this is because of the infrastructure which was set up earlier. A deeper study in terms of how much area from the centre of the city develops over time, is warranted. This will give insights into the real estate investing.

Foreign companies, foreign institutions also invest in the Indian equity markets. In the listed universe 50-55% of the equity is held by the promoters, FII hold approximately 20-21% , and DII(Domestic institutional investor) Hold approximately 15-16%, remaining is held by retail investors. This makes FII’s an important component of the markets.

Although the holding of FII’s have gone down over the years as mutual fund inflows by the domestic investors have increased. The FII holding is significantly enough to take the markets in a volatile spree. We have to keep in mind that FII’s are not very long term oriented when it comes to emerging markets as they see these as riskier investments.

In the current scenario of high yield, where the cost of capital has gone upwards we will see companies posting disappointing numbers going ahead, and this will diminish returns in the short term. The higher yields on sovereign debt and the higher safety associated with it, might see the FII’s look at them for alternative options. And this usually means the starting of a bearish run in equities which is happening to some extent already.

In the last blog we thought about restaurants as a industry, keeping in mind that a majority of the services industry’s revenues are derived from restaurants and qsr as a industry. We have established that restaurants have many variables to keep track on , so the efficiency goes down drastically.

QSR on the other hand is a better place to be in, there might be lower gross margins , but the standardization will increase the net margins as there is more efficiency and hence better asset turnovers. Also since most of the processes are fixed the variables here are lower i.e you can negotiate with your supplier as the items on your menu are based on a theme or sometimes a single product.

QSRs can be excellent investments and that’s the reason it has created wealth over time, also when brand building happens and you build an ecosystem around the chains the margins are likely to sustain and because of the creation of that brand , the margins will expand as sales go higher. Also you have this unique ability to cut down on costs when the demand environment is in a bad shape. There is scope of price cuts as overall prices go down and because you have fixed systems you are not dependent on a chef. This makes it an attractive model.

I recently went through a video which included industry stalwarts in the fine dining space. Was very informative, i always wondered why restaurants have a higher failure rate than most other businesses. There is a fixed cost element when it comes to restaurants which includes wages, rent , electricity etc , regardless whether you get patrons visiting your restaurant these cost always remain. And since the raw materials are a wide range, its difficult to negotiate and reign over prices. These are mainly to do with places which have a wide menu and not the one product type restaurants/qsr.

The variables involved are just too many, ranging from checking of pilferage to minute things like wastage, shelf life of inventory, the design of the menu, handling the staff and checking their behaviour with the customers, handling the bad customer, tallying the inventory at the day’s end. Because of these variables the margins come down drastically. Apart from these costs there are also costs related to compliance. This goes higher if you serve alcohol as well.

Even though are restaurant is a low barrier to entry business, the variables involved are just too many. Standardization will increase scale and margins , but for a standalone restaurant which intends to have a lot on their menu. It is difficult to scale.

I guess a better way to look at valuations in this industry can be the number of variables the chain has to handle. The smaller the variables more the optimization better the margins as asset turnover will increase.

Cars and commercial vehicles are getting more durable time and new regulations. Automobile companies used to get major part of their revenues through sale of spare parts. This has seen a decline with vehicles that are more durable. Automobiles want to find a new source of revenue.

With technologies like e2v and e2x there are chances that the automobile companies see associated services as a new source of revenue going ahead. The new vehicles of tomorrow have major part of their costs towards software spends. Almost 20-30% of the vehicle costs are towards connected technologies.

Network providers stand to benefit with this trend, EMS focused towards automobile companies. Also network associated proxies, power, technological companies stand to benefit. It’s getting clearer that power related companies are going to do well in the coming years.

Historically the PE of india’s market index has hovered between 17 to 27. Previously pe values of the index were not based on consolidated results. American markets are the benchmarks for the world’s markets and reflect where the markets are heading towards. Warren buffet’s indicator i.r gdp to market cap ratio of the current US market is around 156% . According to the indicator it should be closer to 100%. Anything above that is considered a heated market.

For now the valuations of the Indian Stock Market is slightly expensive , but we have to consider the effects of higher interest rates where flight for safety usually happens as the government bonds will have attractive yields. US govt bonds are almost yielding close to 5.2% and that’s a relatively high number.

Going forward there should be some correction as the interest rates will harden and this will lead to people moving towards bonds as a safe haven. But this will only give us an opportunity to enter at lower valuations and should be one of those lifetime opportunities.

I mentioned about my experience about thinking of buying a car in the previous posts. This one is a reiteration to the previous posts. Connected cars as a concept where e2x and e2v technologies , connection between other cars and the environment is going to have even more prominence in the coming years. I see a trend shift in the short term itself.

It will start with the commercial vehicle industry , where optimizing the costs will help in increasing margins and better performance for the vehicles. Few major CV players are already in the fray developing their own products and many of them are already live. This trend is here to stay.

Eventually automobiles will want to retain their future income and data analysis of the vehicle maybe the way ahead for them. Companies in the automobile space think in terms of revenue generation first which ultimately leads to profit generation eventually with optimization. This trend is seen in older companies which have more tangible products, where optimizing for scale brings in margins. Looking for companies in this space looks interesting.

Wealth can be compounded when passed from one generation to the next, also this process can create massive wealth when the same process of preserving and growing the wealth is implemented with time. But how many generations can wealth keep compounding ?

Very few businesses survive for more than a century , usually when the founder or the scion passes away almost 90-95% of the businesses see their fortunes dwindle with time. The primary reason being, that the founder would have built things from zero to one, whereas when the next generation inherits it, only the wealth is transferred whereby the knowledge or the experience isn’t. Keep in mind that wealth only compounds if knowledge compounds along with it.

The compounding of knowledge has to be given the same importance as much as creating wealth and this process can be passed on, by creating a value system which includes passing on the experience, the hardships that the primary owner of the business went through. There have been a few companies which have survived more than 2-3 centuries primarily because of this value system transfer.