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Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive (G) - 11.3846Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive-Dir (G) - 11.4181Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative (G) - 10.9654Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative-Dir(G) - 11.0015Motilal Oswal Dynamic Fund (Div-A) - 14.1399Motilal Oswal Dynamic Fund (Div-Q) - 12.664Motilal Oswal Dynamic Fund (G) - 15.6026Motilal Oswal Dynamic Fund-Dir (Div-A) - 14.3632Motilal Oswal Dynamic Fund-Dir (Div-Q) - 12.8792Motilal Oswal Dynamic Fund-Dir (G) - 16.5268Motilal Oswal Equity Hybrid Fund - Direct (G) - 16.4362Motilal Oswal Equity Hybrid Fund - Regular (G) - 15.6555Motilal Oswal Flexi Cap Fund(D) - 27.2528Motilal Oswal Flexi Cap Fund(G) - 36.2551Motilal Oswal Flexi Cap Fund-Dir(D) - 27.3405Motilal Oswal Flexi Cap Fund-Dir(G) - 38.8868Motilal Oswal Focused 25 Fund - Direct (D) - 22.5111Motilal Oswal Focused 25 Fund - Direct (G) - 38.4537Motilal Oswal Focused 25 Fund (D) - 20.1781Motilal Oswal Focused 25 Fund (G) - 34.3801Motilal Oswal Large and Midcap Fund - Dir (D) - 17.3261Motilal Oswal Large and Midcap Fund - Dir (G) - 17.3408Motilal Oswal Large and Midcap Fund (D) - 16.7609Motilal Oswal Large and Midcap Fund (G) - 16.761Motilal Oswal Liquid Fund - Direct (Div-D) RI - 10.0077Motilal Oswal Liquid Fund - Direct (Div-F) RI - 10.0043Motilal Oswal Liquid Fund - Direct (Div-M) - 10.03Motilal Oswal Liquid Fund - Direct (Div-Q) - 10.0034Motilal Oswal Liquid Fund - Direct (Div-W) RI - 10.0058Motilal Oswal Liquid Fund - Direct (G) - 11.2006Motilal Oswal Liquid Fund - Regular (Div-D) RI - 10.0055Motilal Oswal Liquid Fund - Regular (Div-F) RI - 10.0042Motilal Oswal Liquid Fund - Regular (Div-M) - 10.03Motilal Oswal Liquid Fund - Regular (Div-Q) - 10.0034Motilal Oswal Liquid Fund - Regular (Div-W) RI - 10.013Motilal Oswal Liquid Fund - Regular (G) - 11.1541Motilal Oswal Long Term Equity Fund (D) - 21.5046Motilal Oswal Long Term Equity Fund (G) - 27.3747Motilal Oswal Long Term Equity Fund -Dir (D) - 25.6699Motilal Oswal Long Term Equity Fund -Dir (G) - 29.9503Motilal Oswal Midcap 30 Fund (D) - 25.6227Motilal Oswal Midcap 30 Fund (G) - 41.9429Motilal Oswal Midcap 30 Fund-Dir (D) - 26.5417Motilal Oswal Midcap 30 Fund-Dir (G) - 46.083Motilal Oswal Multi Asset Fund - Direct (G) - 10.944Motilal Oswal Multi Asset Fund (G) - 10.7567Motilal Oswal Nasdaq 100 FOF - Direct (G) - 23.6638Motilal Oswal Nasdaq 100 FOF - Regular (G) - 23.398Motilal Oswal Nifty 50 Index Fund - Direct (G) - 14.8351Motilal Oswal Nifty 50 Index Fund (G) - 14.726Motilal Oswal Nifty 500 Fund - Direct (G) - 17.1524Motilal Oswal Nifty 500 Fund (G) - 16.925Motilal Oswal Nifty Bank Index Fund - Direct (G) - 13.701Motilal Oswal Nifty Bank Index Fund (G) - 13.5202Motilal Oswal Nifty Midcap 150 Index Fund (G) - 19.7725Motilal Oswal Nifty Midcap 150 Index Fund-Dir (G) - 20.0505Motilal Oswal Nifty Next 50 Index Fund - Dir (G) - 15.0847Motilal Oswal Nifty Next 50 Index Fund (G) - 14.9091Motilal Oswal Nifty Smallcap 250 Index Fund (G) - 20.4288Motilal Oswal Nifty Smallcap 250 Index Fund-Dir(G) - 20.7098Motilal Oswal S&P 500 Index Fund - Direct (G) - 14.865Motilal Oswal S&P 500 Index Fund (G) - 14.7245Motilal Oswal Ultra Short Term Fund - Dir (Div-D) - 10.0029Motilal Oswal Ultra Short Term Fund - Dir (Div-F) - 10.0263Motilal Oswal Ultra Short Term Fund - Dir (Div-M) - 10.0099Motilal Oswal Ultra Short Term Fund - Dir (Div-Q) - 10.1541Motilal Oswal Ultra Short Term Fund - Dir (Div-W) - 10.014Motilal Oswal Ultra Short Term Fund - Dir (G) - 14.173Motilal Oswal Ultra Short Term Fund (Div-D) - 9.9475Motilal Oswal Ultra Short Term Fund (Div-F) - 9.9582Motilal Oswal Ultra Short Term Fund (Div-M) - 9.948Motilal Oswal Ultra Short Term Fund (Div-Q) - 10.0925Motilal Oswal Ultra Short Term Fund (Div-W) - 9.951Motilal Oswal Ultra Short Term Fund (G) - 13.7006

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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