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A Passage To India

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Historically, Australians investing in India have done so through broad emerging markets indexes like the MSCI Emerging Markets Index. These indexes, while dominated by China, have India as their third biggest country after Taiwan.

However as geopolitical tensions with China escalate, and as India’s share market continues to outperform, Australians starting to consider investing in India in its own right.

But what does investing in India involve exactly? And what are some of India’s largest companies? Below we look at five of India’s most influential businesses.

The below companies are included in the ETFS-NAM India Nifty 50 ETF (ASX Code: NDIA).

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HDFC Bank

(NSE: HDFCBANK)

In India, the banks have historically been run by the government and before the 1990s, bank accounts were unavailable to most Indians. HDFC has been working to change that. The company’s business model is, in essence, is bringing banking to the masses, and doing so has proved especially profitable.

Starting in the 1990s and early 2000s, as India began opening its banking sector to private companies, HDFC built partnerships with employers to give salaried staff savings accounts. Often, these were employees' first-ever bank accounts. It then installed bank branches everywhere in India, making services more available. This meant that as India became richer, as the government began paying welfare into bank accounts, and Indians grew their savings, HDFC Bank had a huge pool of customers and a deposit pool.

HDFC earns net interest margins on its customers' deposits. It also offers them home, car and credit card loans. Consumer lending is a higher margin than commercial lending. It is also stickier, as Indians like everyone else are reluctant to change banks.

HDFC is a favourite stock among Indian fund managers.

Bank Account Ownership Rate India 2011-2017

Bank_account_ownership_rate_india_2011_2017_b6e96fbbc4.pngSource: World Bank, Gates Foundation. 3 March 2022.

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Reliance Industries

(NSE: RELIANCE)

Reliance will be most familiar to Australians because of the Mumbai Indians, the IPL cricketing franchise. The Mumbai Indians, which paid big money for Aussie cricketers Riley Meredith, Daniel Sams and Tim David at the 2022 IPL Auction, is owned by the Ambanis, the family that owns Reliance.

Reliance is the top stock in the Nifty 50 Index, India’s premier share market gauge. What does Reliance do? Basically everything, and within India itself Reliance is sometimes said to be “at war with everyone”.

Reliance at heart has three main businesses: fossil fuels, retail and tech.

Fossil fuels are Reliance’s cash cow and where most of Reliance’s profit comes from. Its subsidiary Jamnagar Refinery is the largest oil refiner in the world. But Reliance is looking to move beyond fossil fuels as the world decarbonises, and has invested in solar and hydrogen.

Reliance Retail the largest supermarket chain in India, sells household items like groceries, toys and electronics.

While Jio Platforms, Reliance’s tech business, has been at the heart of much technological disruption in India. Jio, which counts Google and Facebook as its biggest outside investors, has benefitted hugely from smartphone adoption and currently has over 385 million users. Jio provides a wide range of apps from Jio Mart, which competes with Amazon, to Jio Meet, which competes with Zoom.

S-curve: Smartphone users in India 2010-2040

s_curve_smartphone_users_india_2010_2040_7ce663c929.pngSource: Statista, Data as of Sep 3, 2021