India’s consumer-driven growth story lures foreign investors

A string of major in-bound investment announcements in last few months goes to highlight rising preference of investor towards India’s consumption-led companies. Apparently, they are betting on the fact that over 1.2 billion people in the country will spend big time on food, gadgets, luxury items and travel.

From Unilever and Diageo to GlaxoSmithKline, several multinationals are keen to have a bigger portion of India’s highly promising consumption story that has been fueled by increasing income level, small families and thus enhanced purchasing powers, state market experts.

The sector is witnessing a clear secular growth trajectory in most of the consumer-oriented businesses, whether it’s health care or consumer products – driven by consumer awareness and favorable demographics primarily. The same is getting reflected in significant M&A deals that are growing in size and volume, apart from even higher sustainable valuations.

This suggests that foreign investors are not unduly concerned about any particular regulatory, governmental or administrative overhang, which they come across at times in some other sectors,” so states Ravi Shankar, the Managing Director of UBS Investment Bank in a news report by Dev Chatterjee and Reghu Balakrishnan of the Business Standard. The investment flow in recent times suggest that foreign investors have shunned the less attractive infrastructure sector like roads and power completely since they are facing issues of land acquisition and environmental clearances.

An official of Blackstone has been quoted as saying that all of the US-based company’s investment plans in the country’s infra sector were hampered owing to serious problems plaguing the sector. But there is no other option than to stay invested in the Indian infra companies,” the official added.

In 2012, in contrast, food & beverage sales in India increased by more than 21 percent whereas  the home & personal care sales increased by almost 17 percent. Also, sales for cell phone, airline and airline companies grew.

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