INSUBCONTINENT EXCLUSIVE:
NEW DELHI: India is fast emerging as a market for premium products with rising per capita income and improving infrastructure.
Today, a
customer does not mind waiting a couple of months for a premium motorcycle or paying a few extra bucks for better services.
And reading
between the lines, analysts say companies that focus on premiumisation would be the biggest winners as the economy slips into the next stage
Value growth will gather steam over volume growth in a couple of sectors, they say.
Premiumisation requires rarity, and demands focus on
design ingredients, craft, customer service, status, performance and reliability
Value investor Safir Anand believes rising income levels should be a good catalyst for businesses in multiplexes, consumer durables, auto,
travel, hotels, tyres, wealth management, improved healthcare and even ready-to-wear clothes
Even select footwear companies with premium products and high-end motorcycles may also gain market share in the coming years.
Edelweiss
Securities says within the two-wheeler space, demand for scooters and motorcycles of over 250cc capacity will continue to grow at a faster
clip given their low penetration, shift in consumer preference, rising female literacy and higher purchasing power.
The brokerage expects
that 250cc-plus motorcycles to continue to gain share within 2W and scooters segment.
The brokerage expects Eicher Motors and Honda Motors
and Scooters India (unlisted) to benefit from this shift in preference
Other analysts say Hero MotoCorp is well positioned to benefit from the much-anticipated recovery in rural demand and strong brand equity
Rural sales constitute 50 per cent total sales for the auto firm.
However, sustainable market share gain in scooters and premium motorcycles
segment will be key to any re-rating
The company has low presence in these segments
(around 800 basis points) due to weak presence in the expanding premium motorcycle segment, the brokerage said
In the passenger vehicles segment, Edelweiss expects utility vehicles (UV) to continue to outpace industry with burgeoning demand for
crossovers (replacing sedans)
Traditional rugged UVs have been losing market share fast.
Tier-II and below cities are likely to be key demand drivers in this space
Bata is focusing more on volumes and recalibrate its balance between premium and mass segment products to fuel its next phase of growth,
Therefore, we have a portfolio where we feel the emphasis will be on both premiumisation and volumes
footfalls driven by advertising will lead to a higher pick-up in same store sales growth (SSSG) and the revenue mix would shift towards
This will, in turn, help fund higher brand spend while still driving margin expansion
sustainable basis.
Jitendra Gohil, Head of India Equity Research at Credit Suisse Wealth, says when per capita income goes up, consumption
You will see fitness centres come up
People have the tendency to go out and eat, and so restaurant businesses are booming in India
The movie exhibition industry is growing by leaps and bounds and we are seeing good capex in that area
terms of per capita income
Last calendar, India became the world's sixth largest economy overtaking France, according to World Bank data on gross domestic product
(GDP) of countries for 2017
But our per capita income is still 20 times lower than that of France
