Why Do Eagles Fly In Circles?
Investors India|October 2020
Why Do Eagles Fly In Circles?
Why do Eagles fly in circles?
Rahul Singh

Of course, it helps that despite their size, eagles have a body that is both lightweight and strong at the same time.

There is no extra ounce of weight that they carry, and large wingspan helps. This also has a bearing on what we discussed in the August newsletter (Six packs - Believe to Achieve); corporates have to cut the extra flab to be able to take advantage of the thermals in a post-Covid world.

It is amazing how a natural phenomenon is used so effectively. We are seeing a parallel of this phenomenon through the changes in consumer behaviour and supply chain dynamics in a post-Covid world. Like the hot sun heats up earth unevenly, Covid has led to uneven and discontinuous changes in the business environment giving rise to what we term as “Business Thermals”. In this newsletter, we list down these “Business Thermals” which have implications for investment decisions in months and years to come. Corporates who can demonstrate the ability to tweak their business models in order to “stay inside the thermal” can generate superior returns for shareholders.

Business Thermal no. 1: Import substitution from China

India imports US 2.5bn of pharma API and US$19.0bn of electronics and components from China accounting for 40% of India’s trade deficit with China of US$49bn in FY19-20. There is already a worldwide trend to reduce the dependence on Chinese imports and recent geopolitical developments will add to it. India’s production linked incentive (PLI) scheme is the first step in that direction. Companies that can stay inside this thermal can gain significantly from this shift over the next 5-10 years.

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October 2020