China closed off its borders and created giants like Tencent, Alibaba, and Baidu. Now India is following in the same steps.
In the past four articles, we explored how a rapid adoption of the internet in India has changed the way that companies like Amazon, Facebook, and Netflix are approaching business outside of North America, but the internet renaissance in India doesn’t stop there.
Every industry in India is set for change in the same way that China has evolved in the past ten years; closing off its borders to foreign investments to form in-house global giants like Tencent, Alibaba, and Baidu.
I’ve spent the past two years researching the emerging economy in India with Macro Media Lab to uncover what the next generation of global giants will look like. Below are five industries and companies to watch over the next five years as COVID-19 subsides and new habits transform the global consumer market. Some of these industries have homegrown Indian companies at their helm, others are being led by American companies that were able to enter prior to 2019.
Those five industries are…
Industry 1: Finance (Homegrown)
Since the early 2000’s, retail investing around the world has become increasingly popular as online trading platforms have made it easier for individuals like you and me to invest in the stock market. Recently, apps like Robinhood, followed by larger institutions like TD Ameritrade and Charles Schwab have made it even more accessible with easy to use apps, quick set-ups, and Zero Commission on trading, doubling the amount of individual investors in the stock market.
But this is just one piece of the puzzle.
The real prize is in controlling each aspect of your wealth management; from daily transactions to investments and loans. This is the path that companies like the Ant Group (Alibaba’s massive finance subsidiary) followed – starting with Alipay as a leading digital wallet in China, then introducing Yu’E Bao which lets individuals invest the money from their Alipay accounts into the money markets, and MYbank offering and approving loans in under 5 minutes to small businesses.
This playbook is starting to be followed by India’s largest digital wallet – PayTM. With their quick rise to the top of India’s mobile payments sector, PayTM has recently entered the investment space with the official launch of PayTM Money. An online investment and wealth management platform that will allow 150 million Indian’s to start investing their personal savings into the domestic stock market; a dramatic shift for a market that only has 18 million active traders in its equity market and is quickly being driven upwards by millenials.
Given this, PayTM is set to take retail investing by storm and lead the charge in changing the way that Indians manage their financial well-being. This is just one aspect of a quickly changing financial industry in India that PayTM is poised to capture, enabling it to rise to the ranks of the Ant Group, Paypal, and Mastercard.
Company to Watch: PayTM may be gearing up for an IPO of its parent company or subsidiaries in 2022.
Industry 2: Telemedicine and Pharmaceuticals (Homegrown)
In the internet renaissance, telemedicine has become the next big opportunity for healthcare in India, expected to grow to a $5.5B market by 2025. Largely driven by India’s new telemedicine guidelines released in March, aligning it closer with both the US and China in terms of policy accommodations. In addition to this, COVID-19 has accelerated the push towards Telemedicine, with the government looking for more solutions to allow the millions of Indians in rural villages to access proper healthcare through the internet.
In China, the telemedicine market is much larger, valued at $29B with giants like Ping An Good Doctor (1833:HK) which is run by a large Chinese insurer, and Alibaba’s ‘Ali Health’ – demonstrating the potential for India’s telemedicine market to grow much larger.
But the real winner in this opportunity might be India’s Pharmaceutical Industry. An increase in telemedicine services across the country would allow access to larger patient pools in Tier 2 and Tier 3 rural India to become a reality. This has the potential for India’s largest pharmaceutical companies like Sun Pharmaceuticals or Cipla, which generate most of their revenue through volume, to increase their sales and grow rapidly over the next 5 years.
Companies to watch: Dr.Reddy’s Laboratories Ltd is one of the largest pharmaceutical companies in India and has an ADR that trades on the NYSE (NYSE: RDY). Sun Pharmaceuticals trades on the Indian Stock Exchange Under (NSE: SUNPHARMA) it is also included in the INDY ETF (NASDAQ: INDY).
Industry 3: Entertainment (Foreign Player)
India has one of the fastest growing VOD (Video On Demand) markets in the world. The total value of the industry is expected to hit $5B by 2023 in a study done by BCG, it has attracted the attention of the world’s largest and quickest growing companies.
For companies like Amazon and Netflix, India’s rapid internet growth has unlocked an entirely new market of consumers who have started streaming movies and TV shows from their phone for the first time.
Since 2018, both companies have launched ambitious campaigns in India and managed to capture significant market share (with Netflix at 5% and Prime Video at 10%). However, neither of them compare to Disney, with a whopping 29% of the rapidly growing market through a subsidiary that most American’s have never heard of, Hotstar. The video streaming app with 300 million users that now has exclusive access to Disney’s massive content library.
You can read the details of how Disney became a leading player in India’s VOD market in a previous article I’ve written here – How Disney took over the mobile streaming wars.
Company to watch – Disney (NYSE: DIS), or the Columbia India Consumer ETF which follows Indian consumer sector at large (NYSE: INCO)
Industry 4: India’s Online Learning Market (Foreign Player)
In the age of COVID-19 and the internet renaissance, the online learning market in India is set to grow from $530 Million in 2018 to $4.4 Billion in 2021 – an astounding rate of 43% per year. It’s current biggest player is BYJU – India’s third largest start-up (behind PayTM and Flipkart.)
However, Google is also making strong moves into this market by recently launching Youtube Learning, which provides educational content on a separate section of Youtube in local languages like Tamil, Telugu, Bengali, and Marathi. India contains one of Youtube’s largest user base with 265 Million people watching videos each month, and a strong content creator network with 1200 Indian Youtube channels over 1 Million subscribers.
With Google shifting its focus to increasing its Youtube revenue as its ad business falls under scrutiny in the US Antitrust race, there is a strong likelihood that Google will attempt to become a leader in the online learning space and leverage its current strong Indian user base to do so.
Company to watch: SuRo Capital (NASDAQ: SSSS) holds a significant share in Coursera which has made aggressive pushes in India, Google (NASDAQ: GOOG) is an obvious player.
Industry 5: E-Commerce (Homegrown & Foreign Players)
The e-commerce market in India could have an entire article on its own and I explain most of it in a previous article – The Rise of the Internet. With a rise in the number of internet consumers, the e-commerce industry in India is expected to grow from $38.5 million in 2017 to $200B in 2026, making it the fastest growing e-commerce market in the world at an estimated rate of 51% a year.
Most of the large acquisitions and investments in this space have settled with the investment of $5B into Amazon’s ventures in India, the $16B acquisition of Flipkart by Walmart, and the $5.7B investment Facebook has made into Jio along with its partnership between Jiomart and Whatsapp. These four companies are aggressively pursuing the Indian e-commerce market from different angles.
Amazon and Walmart are competing head-to-head for the direct to consumer online retail industry, while Facebook and Jio are focusing on connecting the 400 million Indian users on Whatsapp to India’s staple mom and pop shops (which make up 90% of India’s grocery market). Many of whom already use Reliance-made point-of-sale systems.
As this industry takes shape, it is likely that Reliance and Facebook, through the use of their dominant platforms and grassroots approach, might emerge as the leader. I am a strong believer in technology that fits with cultural norms and helps people do what they already want to do better and faster. I believe that Reliance, with its Indian origin, brand, staff, and deep relationships with the Indian consumers, is best suited to do this with Facebook.
Companies to Watch: Facebook (NYSE: FB) is and will continue to be a long term player in India. Tencent has an ADR that trades on the NYSE (NYSE: TCEHY) and is a major invest into most large Indian consumer tech companies.