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basant
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   Topic: Sectors that can gain in market cap weightage
Posted: 15/Oct/2006 at 8:20pm |
Sectors that can gain in market cap weightage
The Indian market cap to GDP ratio is near to 90%. While this means that all sectors should be represented by at least 90% of their contribution to the GDP the listed space actually throws up quite a few anomalies. While the biggest anomaly could be in agriculture since its percentage to GDP is more then 50 times its percentage to the overall market cap. On the other hand software would have a market cap of more then 50 times its contribution to the GDP so these discrepencies would remain. I have however tried listing down the sectors that have growth potential within them so that we as investors can help track down the winners in each of these spaces.
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Industry |
Industry size US$ bn |
Market cap of listed companies US$ bn |
Key companies in the space |
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Retailing |
300 |
2 |
Pantaloon Retail, Trent, Shoppers Stop, Titan
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Real estate |
45 |
7 |
Unitech, Mahindra Gesco, Anant Raj are key listed companies.
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Insurance |
21 |
0 |
No direct listed plays. ICICI Bank, Bajaj Auto, HDFC have exposure to insurance through
joint ventures
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Airlines |
4 |
1.7 |
Jet Airways, Air Deccan, and Spice jet, are the listed companies. Several other low cost carriers and full-service airlines (Indian, Kingfisher) are unlisted.
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Logistics |
30 |
5 |
Concor, Gateway Distriparks, and TCI are the listed companies. Indian Railways
and Indian Post and Telegraph are unlisted.
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Telecommunication |
20 |
25 |
BSNL, the largest PSU telecom service provider, and Hutchison India, a large private
sector company, are still unlisted.
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Consumer durables |
5 |
2 |
Unlisted subsidiaries of multinational corporations (LG, Samsung, Nokia etc) account
for the bulk of the consumer durable industry.
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Source: UBS
Conclusion: The above table is a broad guide to the kind of companies that could become big. A very interesting observation could be media. This sector takes up more then a significant percentage of the market cap of the foreign markets whereas in India the entire media sector is represented by about US $ 7 billion – US $ 8 billion. Over a period of time Media & Entertainment as an industry would become half as large as Telecom; the trick is to bet on the winning horse irrespective of whether it is dark or white.
Edited by basant - 19/Oct/2006 at 11:27pm
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investor
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Posted: 15/Oct/2006 at 9:48am |
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Very interesting.
Basant, how did you arrive at the industry size valuations?
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omshivaya
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Posted: 15/Oct/2006 at 11:23am |
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Basant ji, I think you should clarify whether the retail industry total is the organized retail or the retail as a whole. I think comparing the organized retail market cap with the total(organized) retail industry would be fair. Is 300 bill US$ the total for the organized retail industry. If that is so, then its pretty darn amazing.
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basant
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Posted: 16/Oct/2006 at 4:51pm |
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I have taken some inputs from UBS and other from the net. The organized retail is only 3% so that does not matter. This is the total size.With time later organized will grow to the extent of 70%+.
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omshivaya
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Posted: 16/Oct/2006 at 11:40pm |
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Well, that clarifies it. Thank you.
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The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it
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vip1
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Posted: 17/Oct/2006 at 4:46pm |
Basant, what about Infrastucture (Roads, Power etc), isn't that the Largest opportunity . L&T, BHEL,AREVA,NTPC,SIEMENSETC.?
Industry size >400 billion USD
Edited by vip1 - 17/Oct/2006 at 4:48pm
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basant
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Posted: 17/Oct/2006 at 4:54pm |
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Good point. Do we spend US $ 400 billion? I would think that Rs 18,00,000 crores is not what we spend on infrastructure each year. Will try and see if I could get something on that. This comes to 60% of our GDP which does not seem possible at first look?
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vip1
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Posted: 17/Oct/2006 at 7:11pm |
I am quoting from the Prime Ministers address at the Economic Times Awards held in Bombay Last week. The point is all the above Sectors can only grow once the Infrastructure is in place.
Retail - needs Roads, Power for Stores, Building
Insurance - You can only reach Rural areas if you have Roads
Airlines - We need airports FIRST
Logistics -You need Roads, Ports
Telecom - You need power to recharge your batteries.
The List goes on ------
This 400 Billion USD is a spend over a period of time
Gautam Singhania: Sir, India Inc is gearing up to be globally competitive. However, we see a couple of areas of concern. One, that of the infrastructure, and the other, warped labour laws. We would like your views on how we could expedite investment in infrastructure and reform labour laws.
PM: That infrastructure needs lot more investment is something which is beyond doubt. And in some sectors we haven’t really taken off. In Railways, in the next five or six years, massive investment, massive modernisation is going to take place.
In the same way, the telecom sector is also going forward and although it's not so visible, in ports and airports also there is lot more activity. I do agree that the power system in our country and the energy area happen to be somewhat of a laggard.
Edited by vip1 - 17/Oct/2006 at 7:28pm
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