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Sectors in Focus

Major Corporate Developments This Week

1. Jupiter Wagons: Arm secures land in Haldiapada, Khordha, Odisha, for its upcoming railwheel & axle forging plant
2. Samhi Hotels: CARE Ratings Limited has upgraded ratings on the facilities of the Company.
3. Sai Life: Company sets up Peptide Research Center in India.
4. Surya Roshni: Company Receives Rs 1.16 billion Order from Gail
5. Nestle India: Company announced the ground breaking of its10th factory in Khordha, Odisha, its first in Eastern India.
6. Astral Ltd: Company announced receiving a certificate from the Bureau of Indian Standards for its OPVC pipes used for water supply, conforming to IS 16647:2017.
7. Gallant Ispatt: Board Meeting Intimation for Consideration and Approval of Expansion in the Capacities of Various Manufacturing Units of the Company.
8. Paras Defence: Company and Space Technologies has signed an MoU with Israel’s MicroCon Vision Ltd., part of CONTROP and the Rafael Group, to become India’s exclusive supplier of advanced drone cameras.
9. Zaggle Prepaid: Company has entered into an agreement with Thomas Cook (India) Ltd.
10. Hitachi Energy/BHEL: Consortium secures contract from Rajasthan Part I Power Transmission.
11. SBEC Systems: Company announced the commissioning of a 325 KWp solar power project at Modipuram, Meerut, Uttar Pradesh.
12. Alivus Life: USFDA issued an Establishment Inspection Report with a Voluntary Action Indicated status for the said manufacturing facility.
13. Netweb: Company has received an incentive of ₹ 5,93,97,758 under the Production Linked Incentive (PLI) Scheme 2.0 for IT Hardware
14. Interarch: Company secures a ₹300 Cr contract for design, engineering, manufacturing, supply & erection of Pre-Engineered Steel Building Systems
15. Kirloskar Oil Engines: Company bags order worth Rs 270 crore from Defence Ministry.
16. GE Power India: Company received a purchase order from NTPC Limited for Rs 382 million.
17. Deccan Gold Mines: Company announced the execution ofa 30 sq. km Composite Licence for the Bhalukona-Jamnidih block in Chhattisgarh Hariom Pipes: March quarter sales volume up 36 percent QoQ.
18. Maruti Suzuki: Company plans to increase car prices from Apr 8, 2025, due to rising input costs, operational expenses, regulatory changes, and feature additions.
19. BEL: Company receives orders worth Rs.593.22 Crores.
20. Ganesh Benzoplast: Company has been awarded an order from JSW Jaigarh Port Ltd. The order is valued at Rs 169.24 crore.

TechnoFunda Investing Quote from Legends -

This quote by Howard Marks captures a fundamental truth about investing and life: the future is inherently uncertain, and trying to predict market movements, economic events, or external shocks with precision is often futile. However, while we can't control or foresee what will happen, we can control how we respond. Preparation means building resilience into your strategy—diversifying investments, maintaining liquidity, managing risks, and staying disciplined. It’s about being ready for a range of outcomes rather than betting on a specific one. In essence, success lies not in perfect foresight, but in thoughtful planning.

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TechnoFunda 101 - Power Capsules

Learn technical as well as fundamental concept in a simple way

What Are Network Effects?

Network effects occur when a product or service becomes more valuable as more people use it. In other words, the utility of the network grows with its size. Companies with strong network effects often experience:

1. Exponential Growth: More users attract even more users.
2. High Customer Retention: The increasing value of the network makes it harder for users to leave.
3. Powerful Competitive Moats: New entrants find it challenging to compete against an established network.

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Types of Network Effects

1. Direct Network Effects
   Value increases as more people use the same platform.
   • Example: WhatsApp – The more friends and family join, the more useful the app becomes.
2. Indirect Network Effects
   Value grows through complementary products or services.
   • Example: App Store – More apps attract more users, which in turn attracts more developers.
3. Two-Sided Network Effects
   Platforms that connect two groups (e.g., buyers and sellers) become more valuable as participation on both sides increases.
   • Example: Amazon – More buyers attract more sellers, which enhances the shopping experience and vice versa.

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Case Study: The Rise of Facebook

Facebook exemplifies the power of network effects. Initially, it attracted college students, creating a close-knit community. As the network grew, it became increasingly valuable to users:

1. Direct Network Effect: Users joined because their friends were already there.
2. Two-Sided Network Effect: Businesses and advertisers flocked to the platform as the user base grew, creating a virtuous cycle of engagement and monetization.
3. High Switching Costs: Users stayed because leaving meant losing their social connections and content.

This self-reinforcing loop helped Facebook dominate the social media landscape, creating a massive competitive moat.

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Why Network Effects Matter to Investors

1. Compounding Growth
   ​Businesses with network effects tend to grow faster and more sustainably because each additional user adds value for existing users.
2. Scalability
   ​Once established, these businesses can scale with minimal incremental costs, leading to higher margins.
3. Resilience to Competition
   Strong network effects make it difficult for competitors to disrupt the ecosystem.
4. High Valuation Potential
   Investors often reward companies with network effects with premium valuations due to their growth potential and defensibility.

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How to Identify Network Effects in a Business

1. User Growth Trends: Consistent growth in active users signals a robust network effect.
2. Customer Stickiness: Low churn rates and high user retention indicate that users find the network valuable.
3. Complementary Ecosystems: A thriving ecosystem of third-party services or products enhances the network’s value.
4. Revenue Models: Platforms that effectively monetize their networks (e.g., subscription fees, ads) are better positioned to sustain growth.

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Risks of Network Effects

While network effects are powerful, they can also have downsides:

1. Negative Network Effects: Overcrowding or reduced service quality as the network grows (e.g., slow speeds on overused platforms).
2. Dependence on Growth: Companies reliant on network effects may falter if growth stalls.
3. Regulatory Scrutiny: Dominant platforms often attract antitrust concerns, as seen with Big Tech.

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Conclusion: Investing in the Age of Networks

Network effects are the backbone of many modern businesses, driving their rapid growth and creating enduring competitive advantages. For investors, identifying companies that leverage network effects effectively can be the key to uncovering long-term wealth creation opportunities.

🚀 My Content For This Week 🎬 YouTube: Technical Analysis for Beginner Investors​ ​ ​ 📋 Twitter: Vivek Mashrani, CFA @MashraniVivek 💡🎯 A stock up 10x sounds great, but what if it came at the cost of poor capital efficiency? Without strong ROIC, high growth can be an illusion...wondering why? Return on Invested Capital (ROIC) is the Ultimate Efficiency Metric along with ROCE Let’s understand this...🧵 4:3 PM • Mar 29, 2025 2 Retweets 10 Likes Read 1 replies ​ 📷 Instagram: Warren Buffett’s timeless principles - Here are 15 high-conviction lessons that align with our framework ​ 🔗 Linkedin: Here's how the world’s top investors made wealth!​ ​

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Keep Compounding...

Vivek Mashrani, CFA Founder, TechnoFunda Investing

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