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Motilal Oswal 5 Year G-Sec Fund of Fund (G) - 10.1178Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive (G) - 11.5983Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive-Dir (G) - 11.693Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative (G) - 11.1433Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative-Dir(G) - 11.2387Motilal Oswal Dynamic Fund (Div-A) - 13.0657Motilal Oswal Dynamic Fund (Div-Q) - 11.3125Motilal Oswal Dynamic Fund (G) - 15.3263Motilal Oswal Dynamic Fund-Dir (Div-A) - 13.4319Motilal Oswal Dynamic Fund-Dir (Div-Q) - 11.6494Motilal Oswal Dynamic Fund-Dir (G) - 16.418Motilal Oswal Equity Hybrid Fund - Direct (G) - 16.2067Motilal Oswal Equity Hybrid Fund - Regular (G) - 15.2217Motilal Oswal Flexi Cap Fund(D) - 23.0931Motilal Oswal Flexi Cap Fund(G) - 32.964Motilal Oswal Flexi Cap Fund-Dir(D) - 23.3502Motilal Oswal Flexi Cap Fund-Dir(G) - 35.6314Motilal Oswal Focused 25 Fund - Direct (D) - 20.292Motilal Oswal Focused 25 Fund - Direct (G) - 37.1795Motilal Oswal Focused 25 Fund (D) - 18.003Motilal Oswal Focused 25 Fund (G) - 32.8989Motilal Oswal Large and Midcap Fund - Dir (D) - 15.7595Motilal Oswal Large and Midcap Fund - Dir (G) - 16.9334Motilal Oswal Large and Midcap Fund (D) - 15.0549Motilal Oswal Large and Midcap Fund (G) - 16.1552Motilal Oswal Liquid Fund - Direct (Div-D) RI - 10.0077Motilal Oswal Liquid Fund - Direct (Div-F) RI - 10.0043Motilal Oswal Liquid Fund - Direct (Div-M) - 10.0493Motilal Oswal Liquid Fund - Direct (Div-Q) - 10.0652Motilal Oswal Liquid Fund - Direct (Div-W) RI - 10.0058Motilal Oswal Liquid Fund - Direct (G) - 11.5604Motilal Oswal Liquid Fund - Regular (Div-D) RI - 10.0055Motilal Oswal Liquid Fund - Regular (Div-F) RI - 10.0042Motilal Oswal Liquid Fund - Regular (Div-M) - 10.0487Motilal Oswal Liquid Fund - Regular (Div-Q) - 10.0635Motilal Oswal Liquid Fund - Regular (Div-W) RI - 10.013Motilal Oswal Liquid Fund - Regular (G) - 11.4972Motilal Oswal Long Term Equity Fund (D) - 19.2744Motilal Oswal Long Term Equity Fund (G) - 26.3435Motilal Oswal Long Term Equity Fund -Dir (D) - 23.2551Motilal Oswal Long Term Equity Fund -Dir (G) - 29.1327Motilal Oswal Midcap 30 Fund (D) - 27.5907Motilal Oswal Midcap 30 Fund (G) - 48.4015Motilal Oswal Midcap 30 Fund-Dir (D) - 28.8756Motilal Oswal Midcap 30 Fund-Dir (G) - 53.7168Motilal Oswal MSCI EAFE Top 100 Select Index Fund (G) - 9.6619Motilal Oswal Multi Asset Fund - Direct (G) - 11.1077Motilal Oswal Multi Asset Fund (G) - 10.7928Motilal Oswal Nasdaq 100 FOF - Direct (G) - 22.74Motilal Oswal Nasdaq 100 FOF - Regular (G) - 22.4053Motilal Oswal Nifty 200 Momentum 30 Index Fund - Direct (G) - 9.3099Motilal Oswal Nifty 50 Index Fund - Direct (G) - 14.865Motilal Oswal Nifty 50 Index Fund (G) - 14.7033Motilal Oswal Nifty 500 Fund - Direct (G) - 17.2385Motilal Oswal Nifty 500 Fund (G) - 16.9119Motilal Oswal Nifty Bank Index Fund - Direct (G) - 14.2164Motilal Oswal Nifty Bank Index Fund (G) - 13.9372Motilal Oswal Nifty Midcap 150 Index Fund (G) - 20.348Motilal Oswal Nifty Midcap 150 Index Fund-Dir (G) - 20.7802Motilal Oswal Nifty Next 50 Index Fund - Dir (G) - 14.912Motilal Oswal Nifty Next 50 Index Fund (G) - 14.6526Motilal Oswal Nifty Smallcap 250 Index Fund (G) - 19.6016Motilal Oswal Nifty Smallcap 250 Index Fund-Dir(G) - 19.9979Motilal Oswal S&P 500 Index Fund - Direct (G) - 15.2425Motilal Oswal S&P 500 Index Fund (G) - 15.0232Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund (G) - 10.2366Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund-Dir (G) - 10.2395Motilal Oswal S&P BSE Low Volatility Index Fund (G) - 10.7395Motilal Oswal Ultra Short Term Fund - Dir (Div-D) - 10.2879Motilal Oswal Ultra Short Term Fund - Dir (Div-F) - 10.313Motilal Oswal Ultra Short Term Fund - Dir (Div-M) - 10.295Motilal Oswal Ultra Short Term Fund - Dir (Div-Q) - 10.4443Motilal Oswal Ultra Short Term Fund - Dir (Div-W) - 10.3001Motilal Oswal Ultra Short Term Fund - Dir (G) - 14.5775Motilal Oswal Ultra Short Term Fund (Div-D) - 10.182Motilal Oswal Ultra Short Term Fund (Div-F) - 10.1945Motilal Oswal Ultra Short Term Fund (Div-M) - 10.1838Motilal Oswal Ultra Short Term Fund (Div-Q) - 10.3305Motilal Oswal Ultra Short Term Fund (Div-W) - 10.187Motilal Oswal Ultra Short Term Fund (G) - 14.0237

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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