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Motilal Oswal 5 Year G-Sec Fund of Fund (G) - 10.0277Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive (G) - 11.5825Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive-Dir (G) - 11.6214Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative (G) - 11.0987Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative-Dir(G) - 11.1404Motilal Oswal Dynamic Fund (Div-A) - 14.2282Motilal Oswal Dynamic Fund (Div-Q) - 12.345Motilal Oswal Dynamic Fund (G) - 15.7Motilal Oswal Dynamic Fund-Dir (Div-A) - 14.4666Motilal Oswal Dynamic Fund-Dir (Div-Q) - 12.5737Motilal Oswal Dynamic Fund-Dir (G) - 16.6457Motilal Oswal Equity Hybrid Fund - Direct (G) - 16.4498Motilal Oswal Equity Hybrid Fund - Regular (G) - 15.6495Motilal Oswal Flexi Cap Fund(D) - 27.1399Motilal Oswal Flexi Cap Fund(G) - 36.1049Motilal Oswal Flexi Cap Fund-Dir(D) - 27.2458Motilal Oswal Flexi Cap Fund-Dir(G) - 38.7521Motilal Oswal Focused 25 Fund - Direct (D) - 22.5303Motilal Oswal Focused 25 Fund - Direct (G) - 38.4866Motilal Oswal Focused 25 Fund (D) - 20.1758Motilal Oswal Focused 25 Fund (G) - 34.3763Motilal Oswal Large and Midcap Fund - Dir (D) - 17.1791Motilal Oswal Large and Midcap Fund - Dir (G) - 17.1936Motilal Oswal Large and Midcap Fund (D) - 16.5971Motilal Oswal Large and Midcap Fund (G) - 16.5971Motilal Oswal Liquid Fund - Direct (Div-D) RI - 10.0077Motilal Oswal Liquid Fund - Direct (Div-F) RI - 10.0043Motilal Oswal Liquid Fund - Direct (Div-M) - 10.0528Motilal Oswal Liquid Fund - Direct (Div-Q) - 10.026Motilal Oswal Liquid Fund - Direct (Div-W) RI - 10.0058Motilal Oswal Liquid Fund - Direct (G) - 11.2259Motilal Oswal Liquid Fund - Regular (Div-D) RI - 10.0055Motilal Oswal Liquid Fund - Regular (Div-F) RI - 10.0042Motilal Oswal Liquid Fund - Regular (Div-M) - 10.0515Motilal Oswal Liquid Fund - Regular (Div-Q) - 10.025Motilal Oswal Liquid Fund - Regular (Div-W) RI - 10.013Motilal Oswal Liquid Fund - Regular (G) - 11.178Motilal Oswal Long Term Equity Fund (D) - 21.2113Motilal Oswal Long Term Equity Fund (G) - 27.0014Motilal Oswal Long Term Equity Fund -Dir (D) - 25.3449Motilal Oswal Long Term Equity Fund -Dir (G) - 29.5712Motilal Oswal Midcap 30 Fund (D) - 26.462Motilal Oswal Midcap 30 Fund (G) - 43.3168Motilal Oswal Midcap 30 Fund-Dir (D) - 27.4366Motilal Oswal Midcap 30 Fund-Dir (G) - 47.6367Motilal Oswal Multi Asset Fund - Direct (G) - 11.0357Motilal Oswal Multi Asset Fund (G) - 10.8345Motilal Oswal Nasdaq 100 FOF - Direct (G) - 24.2465Motilal Oswal Nasdaq 100 FOF - Regular (G) - 23.9667Motilal Oswal Nifty 50 Index Fund - Direct (G) - 15.0498Motilal Oswal Nifty 50 Index Fund (G) - 14.9346Motilal Oswal Nifty 500 Fund - Direct (G) - 17.3864Motilal Oswal Nifty 500 Fund (G) - 17.1473Motilal Oswal Nifty Bank Index Fund - Direct (G) - 14.6152Motilal Oswal Nifty Bank Index Fund (G) - 14.4152Motilal Oswal Nifty Midcap 150 Index Fund (G) - 20.2464Motilal Oswal Nifty Midcap 150 Index Fund-Dir (G) - 20.5437Motilal Oswal Nifty Next 50 Index Fund - Dir (G) - 14.8476Motilal Oswal Nifty Next 50 Index Fund (G) - 14.6674Motilal Oswal Nifty Smallcap 250 Index Fund (G) - 20.7092Motilal Oswal Nifty Smallcap 250 Index Fund-Dir(G) - 21.0056Motilal Oswal S&P 500 Index Fund - Direct (G) - 15.4219Motilal Oswal S&P 500 Index Fund (G) - 15.2694Motilal Oswal Ultra Short Term Fund - Dir (Div-D) - 10.0245Motilal Oswal Ultra Short Term Fund - Dir (Div-F) - 10.0484Motilal Oswal Ultra Short Term Fund - Dir (Div-M) - 10.0316Motilal Oswal Ultra Short Term Fund - Dir (Div-Q) - 10.176Motilal Oswal Ultra Short Term Fund - Dir (Div-W) - 10.0357Motilal Oswal Ultra Short Term Fund - Dir (G) - 14.2037Motilal Oswal Ultra Short Term Fund (Div-D) - 9.9629Motilal Oswal Ultra Short Term Fund (Div-F) - 9.9737Motilal Oswal Ultra Short Term Fund (Div-M) - 9.9634Motilal Oswal Ultra Short Term Fund (Div-Q) - 10.1082Motilal Oswal Ultra Short Term Fund (Div-W) - 9.9665Motilal Oswal Ultra Short Term Fund (G) - 13.7219

Thinking Laterally

Blog Blog Details
  • January 15, 2018
  • Atul Mehra|
  • Associate Fund Manager, PMS

Why Air Conditioners (ACs) as a category can absolutely take-off in terms of demand in India

**The units of ACs sold in India are ~4m units. If we compare this to categories like Passenger Vehicles sales in India, it is ~1x! It’s strange that a consumer category with a ticket size of mere INR30k sells equal number of units as another category which sells an INR6 lakh ticket product! Further, the aspiration levels / consumer strata for both products are quite similar.

**A comparison with personal mobility is even more compelling! If we look at the below table, ACs sold as a proportion of personal mobility (cars or two wheelers) in China is 1.7x (65m ACs sold vs 38m Cars + 2W). In comparison, ACs sold as a proportion of cars or two wheelers in India is 0.2x (4m ACs sold vs 19m Cars + 2W). Thus, the penetration of ACs as a proportion of personal mobility is 9.2x in China vs India!

Units (m)

Cars

2W

Cars + 2W

China

20

18

38

India

3

16

19

Multiple (x)

             7.1

             1.1

                   2.0

Units (m)

AC/Car

AC/2W

AC/2W or Car

China

3.3

3.6

1.7

India

1.3

0.2

0.2

Multiple (x)

             2.6

          16.6

                   9.2

**Easy availability of consumer financing / penetration of e-commerce (Consumer Credit, Credit Cards, Bank EMI on online purchases) are enablers which will accelerate the growth and penetration of Air Conditioners in India. Further, with e-commerce, distribution for ACs improves further (In China, ~20% of AC sales for Midea comes from online).

 **Better electricity availability: With the Indian power situation going from a deficit to surplus, (reflected in merchant rates have crashed over the years to INR2-2.5 vs past rates of INR6-7), the peak demand is better addressed which increases the propensity for consumers to purchase high power consuming durables like ACs.

**India tropically being high temperature geography creates a natural demand for air conditioners.

**More power efficient products (Invertor ACs) reduce the running costs by 30-35% even as the upfront cost increases by 20-25%, thus resulting in payback of incremental invertor cost in 1-2 year or so for consumers who have round the year usage.

**Higher incomes and declining interest rates are broad macro enablers which can accelerate demand.

A comparison with China

**The Chinese AC market is ~USD30b in terms of size which is ~19x the Indian market size currently. The size delta (China v India) is highest for Air Conditioners (ACs) as product category vs Refrigerators (RF) / Washing Machines (WM).

USD b

AC

RF

WM

China

28.0

21.3

8.1

India

1.5

2.5

1.3

Multiple (x)

          18.7

             8.5

             6.2

Units (m)

AC

RF

WM

China

65

75

38

India

4

9

6

Multiple (x)

16.3

             8.5

             6.2

China consumer durable penetration chart – Insight on how ACs as a category has surpassed other durable categories in China

**Our thesis is that Indian AC market, being least penetrated (most discretionary), and being multi-use (3-4/household) vs other durable products like Refrigerators or Washing Machines (which at a maximum are single use (1/household) has the longest growth runway ahead of it.

**A parallel to our thesis actually visible in this chart for China (as shown above), where highest growth for ACs is actually playing out. See the intersection of AC penetration (green line) over other categories (blue line / red line).

**In India, AC penetration stands at 4% vs 100% in China and vs 10-20% penetration in other consumer durable categories in India, implying highest growth potential!


Cumulatively, our sense is over the next few years (~10 years), the growth for ACs as a category can be the highest amongst consumer durables, perhaps posting a CAGR of 15-20% over the next decade.

Data as on 1/10/2018
Source MOAMC Research

Disclaimer:

This article is prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fact. The Sectors mentioned herein is for explaining the concept and shall not be construed as an investment, legal or taxation advice to any party. It should not be used for development or implementation of an investment strategy. This article does not constitute an offer, invitation or inducement to invest in securities or other investments and Motilal Oswal AMC and its affiliates/associates (hereinafter called Motilal Oswal Group) is not soliciting any action based upon it. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. This article does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this presentation, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this article and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Readers shall be fully responsible / liable for any decision taken on the basis of this article. Investments in Securities are subject to market and other risks and there is no assurance or guarantee that the objectives of any of the scheme/strategies will be achieved. The sectors presented here may or may not be part of our portfolio/strategy/schemes.



“Reproduced from original article written for cnbctv18.com; published on June 14, 2019”


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