We could also look at some of the old sectors - these are not as exotic as media or internet - but still have a long long way to go. The one such sector that comes to my mind is oil and gas.
India's oil & gas companies are like big frogs in a well. They are big yes, but the size of oil and gas companies of the world is staggering in comparison. Examples -
Exxon Mobil (USA) - Revenues of $340 billion
British Petroleum (UK) - Revenues of $267 billion
Sinopec (China) - Revenues of $98 billion
Gazprom (Russia) - Revenues of $50 billion
While one might argue that, hey, there are big banking companies in developed markets too. Why just look at oil and gas? The reason is - oil and gas industry in India is undergoing a big structural change - they are at an inflection point.
- NELP (National Exploration and Licencing Policy) has resulted in discoveries after discoveries of oil and gas (Rajasthan, KG Basin etc) in just 7 years. Before NELP, there were zero discoveries after Bombay High discovery in 1970s. Companies to watch out for - ONGC, RIL, Videocon Industries and Cairn.
- Some scientists claim that
Central India has more oil reserves than Iraq. Unfortunately, the current technology does not allow exploration companies to drill through hard rock of the Deccan Plateau. This might change in the near future. Companies to watch out for -
ONGC, RIL and Cairn - in partnership with global oil majors.
- Exxon Mobil didn't become a $400 billion company through E&P within USA. They have their reserves in Mexico, Venezuela, Russia (Sakhalin) etc. Some of the Indian companies like ONGC and Videocon Industries are already following the footsteps by buying oil blocks in Sudan, Indonesia, Russia etc.
- India has a huge appetite for natural gas. It can be used to generate power and also used for domestic purposes like cooking etc. While discoveries in KG Basin directly affect E&P companies like
RIL, Cairn, ONGC and Gujarat State Petroleum Co., it will also have a positive impact on gas distribution companies like
GAIL.
Gail is investing Rs. 25,000 crores in laying pipelines all over India, and they hope to increase their revenues 3 times in the next 4 years.
I haven't covered companies like Petronet LNG, Indraprastha Gas or RNRL - because frankly, I am not quite sure what they do!
I see my next long-term multibagger in good old Reliance Industries. It has gone up 6 times in the last 3 years. I have no reason to believe it won't give similar returns in the future too.
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