Ashmayu Quarterly Newsletter- Story of the Year

Dear Investor,

Over the last 5 years we have relished the tradition of reflecting, and picking a story of the year gone by. Every time, we note that most of the “news” is not structural, not indicative of a seismic shift but merely following a cycle.

On March 31st, 2019, I wrote:

“Narratives and stories drive investment outcomes in the short run. For the most part, they provide us with shock therapies with complete elasticity. The effect of the story is felt temporarily and over a period of time we are back to business as usual. Yet there are few stories that alter the course of business and cause a structural shift. As an investor with the intent of long term wealth creation, we need to ignore the stories with elasticity as noise and focus only on those few that create a change bringing about a new or an enlarged addressable opportunity. “

From the indigenisation of pharma and chemical supply chains in 2019 to energy sovereignty in 2023, our exercise has ended up informing our portfolio decisions either in sparking new ideas or highlighting terminal value issues in existing companies. Lessons are however always the best when learnt in a period of adversity. Markets did not give us a learning opportunity this past year. This made our annual ritual even more important.

What happened in FY 24?

Headlines in FY24 were possibly the most diverse in terms of fields of study and in geography. Tragedy and inspiration were available in equal parts.

Year of Tragedy

It would be amiss for us to recollect the year gone by without mentioning the thorns in the same. The Balasore train accident, our deadliest in the 21st century, was one such weekend news. There was a silver lining though- the stand up manner in which The parliament passed the women’s reservation bill which reserves a third of the Lok Sabha as well as State Assembly seats for women. Currently only 14% of the Lok Sabha is women legislators. This shift in demographics of our elected assembly would certainly make this a contender for the structural shift in the year. But I am glad it isn’t. The law comes into effect post the next census (post 2024 elections) and will stay in effect for 15 years from the start date. While it helps inclusiveness today, it comes with an expiration date by which this head start would have propelled women in politics higher. Systems are strongest when they reward basis sheer meritocracy. the railway minister, Mr. Ashwini Vaishnav, addressed the entire situation. A leader that took accountability himself from day 0, one that did not engage in blame games and simply worked at remedying the situation. May your tribe grow sir!

The ethnic violence in Manipur reminded us that we have to constantly work together to live and thrive as one nation. We have come a long way, and have a long way to go still.

Our year of tragedy was topped off with the breaking of a 1.4bn hearts as India lost the cricket world cup finals. The run up to the finals was exemplary, as picture perfect as can be. While nerves got the better of us on the final day, the sheer conviction we all built through the course of the tournament that we can win showed how good we are.

While these incidents were all unfortunate, none of them changed the course of history. They simply push us to be sharper and better on our existing path forward.

Women’s Reservation Bill

The parliament passed the women’s reservation bill which reserves a third of the Lok Sabha as well as State Assembly seats for women. Currently only 14% of the Lok Sabha is women legislators. This shift in demographics of our elected assembly would certainly make this a contender for the structural shift in the year. But I am glad it isn’t.

The law comes into effect post the next census (post 2024 elections) and will stay in effect for 15 years from the start date. While it helps inclusiveness today, it comes with an expiration date by which this head start would have propelled women in politics higher. Systems are strongest when they reward basis sheer meritocracy.

Year of Tightening leading to a Year of Failure

Moving on from politics, straight into the hot throes of finance- the year of tightening called out in our last year’s letter resulted in failures in the US Banking system. As rates climbed, so did expenses for the consumer. For the remainder, there was a price war for depositors' money. To attract more depositors, First Republic Bank like others kept increasing rates. However, given the mismatch between locked-in rates of mortgages and pricing deposits higher, along with a surge in loan to deposit ratio to 111% resulted in a capital deficiency at the bank. JP Morgan bailed out the bank in May 2023. This was the second largest bank failure in American History (surprisingly went off without much systemic damage).
This is however the oldest story in financial history. And this will certainly not be the last iteration of it.

Israel-Palestine War

History always repeats itself. Last year we took note of UAE- Israel overtures, hoping against all odds that it would imply a structural shift. Alas, all of it came crashing down. In response to Israeli occupation, Hamas launched simultaneous rockets penetrating Israel’s Iron Dome, and indiscriminately killed Israeli civilians in October 2023. This resulted in an immediate declaration of war which has since taken over 30,000 lives. Back to where we started with, unfortunately, no end in sight. .

Barbenheimer

A reversal of a supposed structural shift was noted in the entertainment industry as well. Barbie and Oppenheimer were two of the largest blockbusters from Hollywood and both released on the same day. With a total box office collection of over $2.3bn by the two movies, it took out two myths in a go- two big releases on the same day cannibalize and OTT has killed theater going habits. Barring an OTT self production, or perhaps a SRK movie- all movies must first showcase at the theaters to attract a purchase offer from an OTT platform. The theater is alive, get the popcorn ready!

Story of Year FY24

This was a year of busting structural shift narratives. More than any of the previous iterations of this exercise, we realized how most things in the world/ life are merely cyclical patterns emerging, dropping off, remerging.

There was however a standout story that indicates the direction in which India is propelling itself- Chandrayan 3 landing successfully on the surface of the moon.

India was the fourth country to manage such a landing behind the USA, former Soviet Union and China. ISRO’s Chandrayan landing close to the moon’s south pole came mere days after Russia’s Luna 25 spacecraft spun out of control and crashed into the moon.

After landing in August 2023, the Pragyan Rover completed all mission assignments after which it was put to sleep on 3rd September 2023. It was to ‘wake-up’ on 22nd September however it missed its wake up call. The propulsion module however made it back to the earth’s orbit.

While the project was unable to find the presence of ice (from water) on the surface of the moon, it did find the presence of sulfur.

“Noah Petro, a project scientist at NASA, while speaking to the BBC, stated that while sulfur has been known to be in the lunar regolith from Apollo program samples, he described Pragyan's findings as a "tremendous accomplishment"

There are significant implications of this achievement by ISRO:

There is no better story that espouses the real structural shift that is Make in India. We are not just copycat manufacturers either. We are for the most part going to emerge as process innovators if not product innovators. It is true in bio-sciences and in space missions.

The so-called jugaad is to become our greatest strength. This investment theme will form a part of our portfolios for some time to come.

If you think I am overstating the importance of the Chandrayaan 3 landing, here are two interesting global facts I leave you with.

First- Chandrayan 3 landing on ISRO’s YouTube channel saw concurrent 8 million viewers logging in to witness the historic event. This is the highest in YouTube’s history for a live video.

Second- well, i will let a snapshot that wows, do the talking:

As always, we thank you for putting your faith in us. Wish you a very happy and prosperous FY25!

Best,
Harini Dedhia
Head of Research