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1. The tailwinds behind Reliance Retail’s recent fundraising
  • Reliance Retail Ventures, holding company of India’s largest retail chain, is on the verge of an influx of investment from major global investors – akin to sister affiliate Jio Platforms’ $20B+ massive fundraising sprint earlier this year. Parent company Reliance Industries has reportedly offered a stake in Reliance Retail to the 13 previous investors in Jio Platforms.
  • This week, Reliance Retail raised $1B+ from Silver Lake Partners, for a 1.75% stake at a $57B pre-money valuation. Reports are coming in of advanced negotiations with many of the other Jio Platforms investors – with the potential for another $5B collectively from KKR, Abu Dhabi-based sovereign fund Mubadala, and the Abu Dhabi Investment Authority (ADIA); $2.8B to $5.6B from Facebook for 5-10%; and investment from Saudi Arabia’s sovereign Public Investment Fund (PIF) and L Catterton. Intel Capital and Qualcomm have declined to participate, and there’s no word yet on whether the remaining 4 Jio Platforms investors – Google, TPG, Vista Equity Partners, and General Atlantic – will want in.
  • A speculative report is also afloat that Amazon has been offered a 40% stake in Reliance Retail for $20B. It’s not clear whether this is true given prior reports that Reliance was targeting sale of a 15% stake and also that Amazon had been in talks for a 9.99% stake in late Jul 2020. If the report is true, this would be the largest-ever equity investment in an Indian company or by Amazon. India’s rules around foreign direct investment allow non-Indian entities to own up to 51% of multi-brand retail ventures, with government approval and under certain conditions (e.g. investment in backend infrastructure).
  • The Reliance Retail umbrella houses supermarkets, India’s largest electronics chain, a wholesale business, fast-fashion outlets, and its fast-growing ecommerce and grocery-delivery business JioMart. Recent investment talks comes on the heels of Reliance Retail’s $3.4B acquisition of the retail, wholesale and logistics businesses of #2 retail chain Future Group in Aug 2020. Together, the combined entity has about 14,000 stores nationwide and $26B in annual revenue – 7x larger in revenue than its next-biggest rival.
  • The acquisition strengthens Reliance Retail’s leadership in one of the fastest-growing and largest ($1T+) retail markets in the world. Brick-and-mortar stores, such as neighborhood “kiranas,” are still the most common retail presence in India, with ecommerce accounting for just 3% of retail sales. At this rate, Reliance Retail promises to be the dominant brick-and-mortar retail presence in India, complementing the rise of Jio Platforms as it becomes “a next big tech firm.”
Related Briefs:
  • Jul 15 2020: Who will be the next set of “big tech” firms?
  • Jan 30 2020: India is the market battleground everyone is watching
2. GM will manufacture Nikola’s electric and fuel-cell trucks – if Nikola doesn’t implode
  • This week, General Motors (GM) and electric-truck startup Nikola announced a strategic partnership in which GM would provide its electric battery and hydrogen fuel-cell technology to Nikola and manufacture the Nikola Badger pickup truck in exchange for an 11% stake (valued at $2B) and a seat on Nikola’s board. Slated to begin production in 2022, the Badger is being offered for pre-order in 2 options: A $60K battery-electric vehicle (BEV) with a 300-mile range, and a $80K fuel-cell electric vehicle (FCEV) with a 600-mile range. GM would also provide its hydrogen fuel-cell technology for Nikola’s planned range of Class 7 and Class 8 heavy-duty commercial semi trucks, which Nikola has said it will manufacture at its own facility in Arizona.
  • Buzzy and controversial startup Nikola was founded in 2015, went public in Jun 2020 via a "blank check" SPAC (which have drawn companies in higher-risk sectors of late) – despite still being pre-revenue. For Nikola, the partnership with GM helps it paint a picture of how its ambitions could become real. It benefits from GM’s technology and manufacturing prowess, doesn’t have to build its own pickup truck plant or develop the chassis, and can share components and a supply chain with GM’s Hummer. Nikola projects it could save $5B+ on battery, powertrain, engineering and validation costs over 10 years. It also could allow Nikola to focus more on its core hydrogen-powered semi-truck and hydrogen-station programs – its primary investment thesis when it went public.
  • Rumors – around for years regarding whether Nikola’s technology is “vaporware” – have ramped up over the past few months with reports of non-functioning technology and delayed timelines. A bombshell research report came out this week from short-seller Hindenburg, calling Nikola an “intricate fraud” and describing “extensive evidence” such as recorded calls, text messages, emails and photos. The report details a series of alleged false claims, such as Nikola having proprietary battery technology, already producing hydrogen, and manufacturing certain parts in-house. It also asserts that a third of Nikola’s touted backlog of 14,600+ fuel-cell electric-vehicle orders ($10B in sales value) came from one company with only $1.3M in cash on hand, while the remaining orders were either battery-electric or non-committal/cancelable.
  • If true – and given the extensive and detailed nature of the claims, it’s unlikely that they are all false – it puts GM and Nikola’s other partners in an embarrassing situation. GM has so far been cautious, putting out the statement, “We stand by the statements we made in announcing the relationship.” For GM, the partnership was an effort to stave off investor pressure to capitalize on EV momentum, and tie itself to a hot EV startup. According to the aptly named Hindenburg report, GM got an 11% stake for non-cash contributions, 80% of the EV credits, and an expected $700M in expense reimbursements. Even more, it was an opportunity for GM to commercialize its electric-battery platform as well as the hydrogen fuel-cell technology it has been investing in for decades.
  • Automakers have lately been engaging in partnerships to free up capital and share the massive R&D costs (and risk) of “future” technologies. For instance, GM announced a partnership with Honda this week for joint development, shared research, purchasing, and connected-car services in North America. (Honda also has a $2.8B stake in GM-owned self-driving startup Cruise, as of 2018.) Similarly, Ford has invested $500M+ in electric-truck maker Rivian and partnered with Volkswagen to develop electric and self-driving vehicles. Given how expensive future technologies can be, these collaborations are an inevitable path for industry players seeking to retain control over their destinies.
Related Briefs:
  • Jun 5 2020 (3 Shifts): Investments may spur a rebound in China’s electric-vehicle industry
  • Oct 18 2019: How driverless trucks may reshape long-haul trucking
3. Tech on the horizon: See-thru package imaging, AirTags, verified calling, robotic mapping
  • In this piece, we highlight intriguing new products and technologies that have surfaced over the past week or two. If the response is positive, we may make this a regular feature, depending on the week’s market events.
  • “See-thru” package imaging: Last week, University of Washington spin-out ThruWave raised $6.4M to scale its “compressive sensing” technology, which generates 3D images of items contained within packages. It uses a combination of millimeter waves and computer vision to create and analyze the images, which can be used by retailers in their supply chain to verify contents, count items, detect damage, identify wasteful packaging, and measure capacity utilization.
  • Apple AirTags: Apple has reportedly begun production of its AirTag accessory. While details are limited, industry watchers expect the flat circular AirTags to attach to everyday objects for location-tracking through Apple’s Find My app. The AirTag may use ultra-wideband radio technology, allowing items to be found without an internet connection. The use cases for AirTags could go beyond the tracking of keys and purses, to resource-sharing in commercial spaces, integration of offline-online app experiences, mixed-reality environments, and games.
  • Verified calling: Google introduced this week a new “Verified Calls” feature that will allow Android users to screen calls more effectively, by displaying the business name, the reason why they are calling (i.e. “your dinner reservation”), and confirmation that the business is verified. Businesses sign up with one of Google’s communications partners and provide the necessary information to get verified and log their reasons for calling. If widely adopted, it could spur Apple and other makers of calling devices to roll out similar services, making robocalls unproductive and eventually a thing of the past.
  • Robotic mapping: Ford revealed this week that it is piloting the use of Boston Dynamics’ robotic dog – nicknamed Spot – to map the layout of a 2M sq. ft. manufacturing plant in Michigan. The leased robot dog is equipped with 360-degree vision, capable of climbing up stairs, and can access areas at least 2 feet wide. Normally, the tedious mapping of the plant for a layout redesign would take 3-4 weeks and $300,000 using human engineers. Spot can map the plant in half the time and and a fraction of the cost. 250+ Boston Dynamics Spot robots have been sold or leased so far, many for safety-related use cases such as inspection of nuclear power facilities or monitoring patients with COVID-19.
Related Briefs:
  • Aug 7 2020 (3 Shifts): Google invests $450M in ADT to integrate Nest into security offerings
  • May 22 2020 (3 Shifts): Rising demand for robots across the supply chain
Disclosure: Amazon and Google are vendors of 6Pages.
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