How big is 'E' theme for stock investing; is it too early a bet?
Many established business houses have set up online transaction channels.
The 'E' theme has a major role to play in Indian economy. Both electric vehicles and e-commerce industry have huge potential. The electric vehicles (EV) market in India is just beginning to come up with the ongoing developments in the automotive sector. However, first-level acceptance by the customer and competence is yet to be tested. The government has created the momentum through its faster adoption and manufacturing of (hybrid &) electric vehicles schemes that encourage, and in some segments, mandate the adoption of electric vehicles (EVs) with the goal of reaching 30 per cent EV penetration by 2030.
Favourable government policies and support in terms of subsidies and grants, tax rebates and other non-financial benefits in the form of car pool lane access and new car registrations may help drive growth of electric vehicles in India.
However, until and unless the first level acceptance in sales of electric vehicle technology brings in 5-10% of revenues, valuation won’t build up. Companies are designing and testing products suitable for the Indian market with a key focus on two-wheelers and three-wheelers.
Going forward, we may see the entry of many new players of foreign origin as well as home-grown startups in the two- and three-wheeler segments.
Meanwhile, established Indian automobile firms such as Hero MotoCorp, Bajaj Auto and TVS Motor Company remain unequivocally aligned with the government’s vision. However, they are proposing a more cautious, clear and realistic roadmap towards adoption of EVs and have chosen to adopt a calibrated and wait-and-watch approach.
In e-commerce, the rapid emergence of this sector is radically transforming the business landscape. India shows optimistic projections for the e-commerce industry, which is expected to become a $200 billion market by 2026 from $38.5 billion as of 2017, propelled by rising penetration of smartphones, launch of 4G networks and increasing consumer wealth. With increasing awareness about the benefits of online trading, there has been a significant rise in investment in the e-commerce business. Ecommerce companies are specializing in exclusive items and have consciously moved away from the ‘one for all’ concept.
Many established business houses have set up online transaction channels. However, this sector is still at a nascent stage. Some companies have come up with novel ideas.
Flipkart and Walmart have joined hands. Walmart has spent $16 billion to go big in India. After the deal, Flipkart has issued co-branded credit cards and witnessed the growth of its PhonePe digital payments platform. Sensing the potential of the sector, marquee investor companies, such as Accel Partners, IDG Ventures and others have pumped in crores of rupee into this sector. The e-commerce companies have been enjoying high valuations in grey market, but it remains to be seen how many of them can actually make profits and sustain the momentum in the long run.
(DK Aggarwal is Chairman & Managing Director of SMC Investments & Advisors)