India is steadily getting more wealthy consumers whose incomes are going up, their lifestyles are getting better, and their buying power is growing. This is a great chance for businesses that serve this group to make a lot of money.
The number of wealthy people in India, who make more than Rs. 800,000 rupees a year, is expected to grow at a rate of 12% per year between 2019 and 2023, according to Goldman Sachs. This means that by 2027, there could be more than 10 crores of wealthy buyers.
As the number of wealthy people grows, demand rises for things like eating out, traveling, designer clothes, jewelry, cars, and other services and goods that people can choose not to use. In a new report called “The Rise of Affluent India,” Goldman Sachs named 7 stocks that are most likely to gain from the rise in spending on non-essentials.
1. Titan: The Leading Jewelry and Watch Retailer Stands to Gain
Rising wealth is great for Tata Group’s Titan Company, which is India’s biggest gold and watch store. Titan is positioned as an elite brand, and its average selling prices are 8% higher than those of its competitors.
It has a strong portfolio of jewelry, watches, and eyewear, and its name has become well-known over the past 30 years, helping it get 50% of the jewelry market and 60% of the watch market.
G.M. Sachs thinks that Titan’s gold business will have a 15% compound annual growth rate in sales from FY19 to FY23. This will be helped by 12% store openings and 9% same-store sales growth. It is also expected that the watch and eyewear sections will grow quickly.
Titan’s overall sales and profits could grow at rates of 13% and 20%, respectively, until FY23, thanks to rising wealth.
2. MakeMyTrip: Online Travel Leader to Ride India’s Tourism Boom
From FY24 to FY27, India’s travel and tourism market is expected to grow quickly at 13% CAGR. However, online travel is expected to grow faster at 15% CAGR.
With a 50% market share, MakeMyTrip is the market leader in Indian online travel. Being the first to market gives it an edge to take advantage of growth possibilities.
Goldman Sachs thinks that MakeMyTrip can grow its yearly sales by 20% and its earnings by 35% CAGR from FY24 to FY27.
This is because as people’s incomes rise, they have more money to spend on travel. Focusing on hotels and deals and going beyond selling plane tickets will help the business grow.
3. Apollo Hospitals: Increasing Lifestyle Diseases Boost Prospects
In India, conditions like heart disease, diabetes, obesity, and others are on the rise quickly because people are changing how they live and what they eat. This makes more people want good healthcare, which is good for big hospital groups like Apollo Hospitals.
Apollo has a strong brand image that has been built up over 30 years and is present in 70 places. It has more than 13,000 doctors and the best RevPOB (Revenue per Occupied Bed) rate in the business.
To keep growth going, it is also adding hospitals, pharmacies, and telemedicine. More people have health insurance, which lets them spend money on well-known hospitals like Apollo.
4. Phoenix Mills: Retail Real Estate Developer to Gain from Rising Consumption
Over 6 million square feet of retail space are run by Phoenix Mills across 9 properties in big cities. Phoenix Mills is in a great situation to benefit as more people flock to its high-end malls because income and spending are going up.
Brokerage company Goldman Sachs thinks that Phoenix Mills will be able to increase its operating profit by 25% from its mall portfolio between FY23 and FY27. This will be possible thanks to rental increases of 12 to 15 percent.
Some older shops, like High Street Phoenix in Mumbai, already have a 25% Return on Capital Employed, which means they can make more investments.
5. Zomato: Online Food Delivery Leader Set for Growth
As people’s incomes rise and their lifestyles change, the number of people buying and getting delivered food online is growing quickly.
Goldman Sachs thinks there is a lot of room for growth, since there are already more than 130 crores of people who use the platform every month but only 3 crores make transactions.
With a 50% market share, Zomato is by far the market leader in India for online food delivery.
The fact that Zomato was one of the first companies to offer this service, along with its investments in the online grocery market through Blinkit, gives the firm a 35% Gross Order Value CAGR for the next few years.
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6. Eicher Motors: Royal Enfield Set to Ride Premiumization Wave
Eicher Motors’ Royal Enfield bikes have become cult classics, especially among young people who like to travel and have fun.
Royal Enfield has over 90% of the premium bike (above 250cc) market in India. It is known for its high-end products and large repair network.
Royal Enfield is likely to do very well as people’s incomes rise and their tastes shift toward more expensive products.
In addition, it stays ahead of the competition in the 350cc to 750cc class. This makes it possible for market share wins and growth driven by higher prices to happen in the future.
7. Devyani International and Sapphire Foods: KFC Franchisees to Gain from Changing Lifestyles
Yum! Brands that KFC is becoming more popular in India because more people are young, people have more money to spend, and people’s habits are changing.
Goldman Sachs thinks that the Indian quick-service restaurant business will grow at a rate of 15-20%, which is faster than the global market. They see KFC as one of the companies that will benefit the most from this.
In different parts of India, Devyani International and Sapphire Foods own the franchising rights for KFC. Both businesses are well-positioned to ride the QSR wave in India because they have exclusive rights to the KFC franchise and are focusing on growth and market penetration.
The brokerage business thinks that both companies will have strong earnings growth in the future because KFC is still very popular.