With more than 6,000 listed companies, India has one of the deepest equity markets in the world and by far the deepest one among emerging markets. Almost every imaginable sector and part of the economy is represented via multiple exchange listed companies.
With a population of 1.2 billion people and demographics (47% of population under the age of 25) that are the envy of the world, there are opportunities for growth and investment in almost every sector of the economy. There are a variety of investment opportunities in
India in numerous verticals.
Consumer Goods & Services
With a large, young and rapidly urbanizing population whose increase in discretionary purchasing power has reached a tipping point, India is emerging as one of the most powerful consumption engines in the world. The demand for goods and services in India is robust and resilient.
For a population of its size, India is woefully underinvested in physical infrastructure. With a new government in place, India is embarking on a national building mission similar to that of China 15 years ago, including plans to increase its existing stock of:
- Power generation
- Power distribution
Geologically Eastern India is identical to Western Australia and is one of the richest regions of the world for natural resources including:
- Natural gas
- Iron ore
However, Eastern India, unlike Western Australia, is one of the most underdeveloped, unexplored and poor areas of the world. Despite such vast natural resources, India continues to remain a net importer. The Indian government is making a strong push toward unlocking India's natural resources potential and developing the eastern part of the country, making it one of the more appealing investment opportunities in India.
Due to its inadequate infrastructure and rapid accession to international free trade agreements, India exported away its market for goods to manufacturers in Asia, especially China. As India's infrastructure improves, China becomes more expensive and the government corrects some of its overzealous concession giveaways, India is becoming a hotbed for manufacturing to cater to its large domestic market. Large manufacturers also realize that once critical mass is achieved, India is one of the most cost efficient manufacturers in the world. They can then use their Indian manufacturing bases to supply to their markets in the region as well as around the world.
India imports more than 80% of its oil requirements and is also a large importer of natural gas and coal. The Indian government is trying to address this in two ways:
- By increasing exploration and production of hydrocarbons within the country; and,
- By encouraging the development of a renewable energy ecosystem including solar, wind and hydropower.
India is one of the lowest cost producers of pharmaceuticals globally and has some of the best chemistry skills in the world. India has the highest number of US FDA approved pharmaceutical plants outside the USA and is a world leader in the generic drugs space. The big opportunity for Indian pharmaceuticals is not just in developed market generics, but also in low cost generics in emerging and less developed markets around the world along with branded formulations in the Indian market. As biological drugs move into generics over the coming decades, they will provide another large addressable opportunity for Indian pharmaceutical companies and another viable investment opportunity in India.
India's Information Technology industry emerged from code fixing related to the Y2K bug in mainframe software in the 1990s. It evolved into system integration, maintenance, remote infrastructure management and the offshoring of software development in the 2000s. Since then, the opportunity set for Indian IT companies has expanded materially. India itself has become a large consumer of IT products and services with the government at the forefront with its e-governance initiatives. Indian companies have also made a meaningful impact, in certain niches, in the global IT products space. The rapid growth of domestic internet and smart-phone usage has created a very large external opportunity in the India internet space. In 2015, India currently has 243 million internet users of which 57% access the internet through their mobile device. In 2014, internet penetration was only 13%. This equates to the 3rd largest internet user base in the world behind China and the USA which represents only 20% of the total Indian population. Smartphone penetration in India is 16% compared to 78% and 82% for China and the USA respectively. In 2020, Ericsson projects Indian smartphone penetration to grow to about 54%, making information a huge investment opportunity.
India has a large and well developed financial system. The banking system is sound and well regulated by the Reserve Bank of India. India's capital markets are the envy of the emerging world. However, 50% of India's population does not have any access to formal banking. The government's thrust on financial inclusion and the transfer of welfare payments via mobile linked bank accounts is likely to expand the market for financial services in India dramatically. As India grows and its population becomes wealthier, Indian capital markets are likely to expand and financial services like insurance, asset management, pensions, brokerage etc. are likely to grow exponentially.
Media & Entertainment
India's soft power in entertainment, with the global export of India's Bollywood productions, is globally recognized. With a free press and a vibrant multilingual domestic population as well as global diaspora, India's media and entertainment industry continues its rapid growth. As India's broadband connectivity improves, a large emerging opportunity presents itself in the mobile based consumption of media and entertainment.
Leisure & Travel/Tourism
With improvements in disposable income, Indians are choosing to travel both within and outside the country. As India's infrastructure improves, India is also attracting more inbound foreign tourism. India's leisure and tourism sector has been historically underinvested in and has performed below its potential. Leisure, Travel and Tourism is likely to be one of the fastest growing areas of India's economy.
M&A and Special Situations
The years following the Global Financial Crisis of 2008/2009 have been challenging for India and Indian companies. A number of companies and their lenders/investors find themselves broken/impaired following several years of distress and disappointment. Many of these companies have valuable assets and operating businesses that are likely to do very well in India's next cycle of growth. For a capital starved and impaired financial system, external capital lead restructurings are emerging as a valuable area of investment opportunity. A clean-up of India's financial system and corporate sector coupled with the need for fresh capitalization for future growth is creating numerous opportunities in mergers and acquisitions and corporate restructurings.