TikTok’s tough time going on in India. And, a cursory view of Interglobe Aviation’s stock.
There’s an old saying that ‘Time is Money’. So, of course wastage of time can never be appreciated. With India being the largest market for TikTok, an impression was being created that Indians have a lot of spare time. Surely, the people consuming the content from the app were not gaining anything out of it besides petty entertainment. And, since people were watching it large numbers, some brands and businesses were also involved in marketing themselves there.
But now, the tables have started to turn. A trending rivalry between YouTube and TikTok has resulted in drastic downgrade of TikTok’s rating on Play Store along with millions of critical comments. The gravity of the situation can be understood from the fact that #banTikTokinIndia has been trending on Twitter for quite some time now. The number of downloads for the app has also decreased substantially for the months of April and May.
What Does This Mean?
The pandemic has somehow resulted in a strong anti-China sentiment which has fueled the fire in this case. Also, the type of content served by TikTok was constantly being questioned as the explicit content had no control whatsoever. But, will this hate against the Chinese app sustain or will it be short-lived? This depends upon all of us.
We would be witnessing the festive season few months down the line. If, celebrities get involved and produce content, then the condition for TikTok might get back to normal. However, if there are strict guidelines issued for the app (and the content creators) then we might see a possible improvement in the content being served. But, will that save people’s time? Absolutely not! So, all of us should consider time as money and stay away from petty entertainment.
Interglobe Aviation Limited (INDIGO)
The airline of the middle-class demography of the country, IndiGo, started as a low-cost carrier airline with a sale-and-leaseback model. In this, they purchase aircraft in bulk at discounts (approx. 40% according to a report by PWC) while paying down payments of only 4-7.5% based on credit ratings, sale them in small chunks usually at a higher price and lease them back generating a cash profit even before flying. This helps in improving financial position or balance sheet by reducing debt to aircraft manufacturers and utilizing this profit to pay other debts or make other investments. Indigo charges less fare for routes with higher traffic keeping fast turnarounds, minimal ground times, and focus on maximizing frequencies. The charges for other routes are slightly higher generating more profits.
Using similar aircraft helps it in reducing costs in terms of training mechanics and required spare parts inventory further improving operational efficiency. IndiGo is one of the few airlines that tracks and ensures it capitalizes on the warranty and guaranty clauses. It has a good capacity to convert its resources into sales with 2.53 as inventory days and 3.77 as receivable days which are quite better than the industry average of 105.06 and 60.73 days respectively. In the airline industry, the name IndiGo becomes synonymous with a low-cost airline and being on time.
For fiscal 2018-19, the passenger ticket revenue stood at ₹ 25,157.69 Crores (YoY, 26.1%) whereas revenue from ancillary products and services including cargo, special services, and the in-flight sale at ₹ 3,030.96 Crores (YOY, 17.6%) and other income at ₹1,324.94 Crores (YoY, 39.9%). However total expenses rose to ₹29,970.76 Crores (YoY, 43.8%). The returns on Assets (ROA) 7.67% (3Yr-CAGR), Equity (ROE) 31.99% (3Yr-CAGR), and Capital Employed (ROCE) stood at 30.07% (3Yr-CAGR) which are far better than industry averages of 1.06%, 3.83%, and 21.52% respectively. It had a total cash reserve of ₹15,308.1 Crores. The decision of the company to maintain such reserves proved to be of great help in such unfavorable market conditions as a result of coronavirus pandemic