I will take liberty to point out certain factors.
a) The movie Baaghi 2 had a bigger opening collection than Bahubali 2 which was a far grander movie. It shows that urban consumption is growing at a reasonable pace.
b) Sonali Contractor sold 100,000 tractors last year. Mahindra & Mahindra, Escorts are also showing all-time high levels of tractor sales.
Clearly, that shows that rural economy is doing well.
Maruti Baleno has a four months’ waiting period. If consumers do not have money, then how come they are waiting for four months to get the car? Tata Motors’ commercial vehicle production is at an all-time high record level. Generally commercial vehicles are pulse of the market, pulse of the economy.
If commercial vehicle sales are happening, certainly economy is rebounding.
Cement volume are showing double digit growth. The cement numbers for this quarter has come ahead of expectation. If we see a variety of other FMCG companies like Dabur, Lever and ITC, their commentary is also positive in terms of rural FMCG growth.
Put all these numbers together and you realise that the economy seems to have now rebounded, the momentum is picking up, it is reflected in last four months of IIP numbers which was above 7%.
It is reflected in GST collections which have crossed Rs 1 lakh crore for the first time.
It has taken 70 years for India to Reach 2.5 Trillion Dollar Economy, though India will take only 7-8 more years to reach 5 Trillion i.e. the Total amount of Money that was made in Last 70 years would be made again in the next 7-8 Years. The Question is how much will you make? I have absolutely no doubt that the ones who can catch a few right trends in next 7-8 years are going to be very very rich.
China took 5 years to double, US took 10 years to double from 2.4 to 5 trillion$, it is estimated that India will take 7 years to get there.
The Idea is simple, there will be 100’s of entrepreneurs out there who will increase their profit 10-15x from current levels, they will grow at 30-40% and we need to back them. The Biggest Trend is India.
Within India there will be Sector Trends that will change every 3-4 years like:
Automobiles – India Sold a whooping 2 Crore Two Wheelers India V/S 1.7 Crore Two Wheelers sold by China.
Interestingly India Sold 33 Lakh Passenger Cars in FY2018 V/S 2.4 Crore in India. Slowly but Surely in the next 10 years we are confident that India will sell 1 Crore+ Cars and the average ticket size of a car would also Increase rapidly. Out of these 33 Lakh Cars, more than 50% i.e. 18 Lakh Cars were sold by Maruti alone. Maruti has a Market cap of 2.6 Lakh Crores and did Profit of about 8000 Crores in FY2018.
Financials – This is one space where the Opportunity is Largest into all Three Spaces i.e. Lending, Protection and Wealth Management.
Lending – The Top 45 Business houses in India are 50% of Nation’s banking debt even after nationalization of banks. The Top 20% of India is well banked and Opportunities are now on the lower ticket size retail lending (80% of Population).
With Upsurge of MFI, SME Lending, consumer finance, affordable home loans, Retail Credit is a big trend which are typically small ticket size loans with higher NIM spreads. India’s Credit needs will grow at 15-16%, whereas Smart private Bankers/NBFC can grow faster at 20-30% easy for next 7-8 years. Their is an Opportunity to grow look book by 3-5x easily.
Protection – This Again is a multiyear theme, from Life to Auto insurance to Health to crop to even your cellphone. Here not only there will be Growth of 15-17% in the general Market but there will be large Market share shift from PSU Insurers to Private companies, we believe Private Insurers can grow 20%+ for a long long time.
Wealth Management & Investment- We Strongly believe that Markets are underestimating the financialization of savings as a theme, the total Profit pool of top 5 Asset management companies (57% Market Share) in India is just 1800 Crores in FY2017. The Profit Pool is so small that one mid-sized popular hedge fund Pershing Square made more Profit than the Entire Indian Asset Management Industry, We at Stallion Asset have absolutely no doubt that the Profit Pool will grow multi fold in next 5-10 years and there will be massive wealth Created in this space.
Air Conditioners – I hope the Indian summer is not killing you because you are in A/C room right now reading this blog but you will be surprised to know that only 4% of Indian Households own a Air Conditioner, (10% Indian own Air-Cooler) whereas 85% of Indian Household have fans.
In China the Penetration of Air conditioners grew from 8% in 1995 to 70% in 2004. Voltas is the Market Leader with 24% Market share in A/C in India and Sold 10 Lakh Air conditioners this year and will do a Profit of 650 Crores in FY2018 and has a 20,000 Crores Market Cap. 10 years from today, I don't know what profits Voltas will make but I am confident that India’s Penetration of Air Conditioners will go up from 4% to at-least 15%.
Large Format Retail Stores- There are 3700 Tesco Stores in UK, 4100 Walmart Stores in USA where in India, D-Mart has 155 Stores and Big Bazaar 260. Remember The population of UK is 6 Crores, the Population of USA is 32 Crores and Population of India is 125 Crores.
Conclusion – I repeat “MORE MONEY WILL BE CREATED IN THE NEXT 7-8 YEARS THAN INDIANS CREATED IN LAST 70 YEARS” There are opportunities to make it large. There will be cyclical ups and downs but smart mf investor would easily make 10x in next 10 years. *Don’t Miss this BIGGEST TREND EVER
Nilesh shah- MD - Kotak AMC on the Indian economy.
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