Source: Sunil Singhania, CIO Equities, Reliance Mutual Fund, shares his views during a panel discussion at the Morningstar Investment Conference held in Bengaluru.
Regarding sunrise sectors, what could investors expect?
India is a very large diversified economy driven by entrepreneurs. We grow despite the government rather than because of the government. Hopefully, this government will also support and we will grow much faster.
From an asset management perspective, it makes our life easier that India is behind the world by 15-20 years, though it’s catching up in the sense that trends which used to take 20 years to come to India are now taking maybe 20 months or 20 days to appear. So, it’s very easy to figure out that what would be the next sunrise sectors.
Around 15 years ago, I made my first trip abroad. The most of the time I spent in malls because we did not have any in India. Shopping was the biggest driver to go abroad. Now, when you go abroad, you don’t even visit a mall because all the brands are present here. So, what happened there is ultimately going to come here.
So if you just simply start to analyze, you will find a few themes which might not be too big right now, but from a 1-year to 15-year horizon, they can really get big.
One is very clearly financial savings. Take Capital International, one of the largest asset managers in the U.S. In its initial 8 years, it reached a size of $2 billion assets under management. The next 30 years it grew 1000 times – $2 billion became $2 trillion.
We believe that the asset management business is just scraping the tip of the iceberg. We have a long, long way to go. And the next 10-15 years it could multiply manifold. So money moving to a very systematic wealth management financial savings kind of thing is a big theme. And whichever company you feel can benefit out of it are going to be the companies to bet on.
With both spouses working, I think QSRs – quick service restaurants, ready-to-eat food, are also segments that will grow.
Let me give you an example. My son was born in 1997 at Breach Candy Hospital in Mumbai. At that time my monthly salary was around Rs 15,000. The doctor wrote a prescription for a hepatitis B injection from SKF, which was SmithKline Pharma’s earlier avatar.
The pharmacy quoted each injection at Rs 3,500 and I had to purchase three of them. I did not have the money that day, so made the purchase the next day. But I also ensured that I went and bought 100 shares of SKF. Within one month, the entire hospital bill of my son got paid by 100 shares of SKF.
So, sometimes these trends are visible in our own habits. So, if you are ordering something every day rather than cooking at home, it could be a big trend.
The other thing is brands. Tailored clothes or shirts are not common anymore. Everyone wants to sport a brand. Depending on your budget, you will buy Armani or Van Heusen or so on and so forth. Zara comes from a small country called Spain, whose population is equivalent to that of Mumbai. But Zara is a $70 billion brand globally and the biggest brand in India sells shirts worth $200 million.
Look at India – now 130 crore people, of which, let’s say 50% are men. I’m just taking an example so ladies please excuse me. But if 65 crore men, on an average, start to buy one extra shirt – that would mean 65 crore extra shirts. So, at an average price of Rs 1,000, it is Rs 65,000 crore extra spent on only shirts in a year. Again, we used to buy two shirts during Diwali and use them all through the year. Now, we shop regularly.
Brands are going to be a huge play.
Stocks are expensive but one must have a 10-15 years perspective.
Regarding sunrise industries, how does the health sector and health management industry look?
Health is a very good long-term sector in India.
Take the case of medicines. The total sales put together by all the companies is $12 billion, roughly Rs 75,000 – 80,000 crores. Pfizer’s one drug, Lipitor, which was a cholesterol drug before it went off patent, had global sales of $14 billion. So, one cholesterol drug was bigger than the total of 130 crore people’s medicine bill. So, there is a long, long way to go.
Second, affordability is improving. The propensity to take medicines is increasing. So is awareness. Lifestyle diseases are increasing.
As awareness and acceptability of life insurance and health insurance increases, the propensity to spend also does.
As a nation we are very under-served in terms of even basic medical facilities. So, it’s going to be a great sector. As more hospitals get listed, as more specialty hospitals get listed – eye chain, cardiac chain, oncology chain, there will be various different specialized sort of opportunities also available.
The problem is that this sector is never cheap. It might appear a bit expensive, but if you look at it from a 5-10-15 years perspective, decent returns would be made.
What about sunset industries?
Doing business is becoming very difficult and very dynamic. For example, my son is now studying in the U.S. When he was applying to colleges, I would tell him to read the newspapers to increase his knowledge and awareness. And he said that the newspapers give stale news since he has already read it online the night before.
So, there will be lot sectors or industries where the way of doing business will change.
Someone was asking me about the advent of payment banks. There will definitely be some disruption. E-commerce, Flipkart is talking about doing $10 billion of gross merchandise value this financial year. While the traditional Hyper Cities and Shoppers Stop over the last 20 years have been able to reach only $1.5 billion. We continue to be positive on the brick and mortar play but the way of doing business is definitely going to change.
Every sector will have threats. Only companies which evolve and transform will be able to sustain. If not, the companies, irrespective of the sectors, will become sunset companies.