Indigenous Investors Weekly Insights!
Top 3 well curated stories from the stable of Indigenous Investors incase you missed them. These can range from finance to sports, depends on what made the headlines. Stay tuned.
This week, we cover the following:
Payments, Payments Everywhere, Not a Dime to Earn
India’s Green Hydrogen Transition Will Be A Bumpy Ride
India’s AC market is poised for exponential growth
Bonus: The Tripolar World: US, China and India will run our World of Tomorrow
Story #1: Payments, Payments Everywhere, Not a Dime to Earn (click here)
Let’s think of this through an example.
You want to have lunch and are eagerly scrolling Zomato or Swiggy for some food options. And you finally select the restaurant and cuisine of your choice. App prompts you for payment option. If you’re like us, then you will simply click the payment via UPI option where your Google Pay or Paytm is linked. Put in the passcode and your food is ordered.
Now, let me tell you an open secret.
Google Pay or Paytm didn’t make money out of this. You would say, ‘Duh!! I know that!! You don’t give extra Rs 2 or Rs 5 for using this service.’
When a service provider doesn’t make money out of the services they provide, it becomes a cause for concern for the entire ecosystem.
The article goes on to discuss about Merchant Discount Rate (MDR) structure which is at zero currently that allows us to enjoy the UPI service free of cost.
Is this sustainable?
Read the article to find out.
Story #2: India’s Green Hydrogen Transition Will Be A Bumpy Ride (click here)
At Indigenous Investors, we are extremely curious about the current evolution in the energy sector.
Currently, we don’t recommend any stocks from the listed space because of inherent corruption, high amount of government regulation and the sword of PSUs hanging around making the whole system completely inefficient in the process.
However, while investing in startups - we are keen to look at entrepreneurs who are looking to solve these complex equations, whether it be solar, batteries, green hydrogen, etc.. we look at it with a fine tooth comb.
We are witnessing the rise in energy consumption whether it be in our manufacturing activities, more commercial buildings coming up, data centres or simply our increasing use of air conditioners (AC) in our homes (next article is on that).
Green Hydrogen is in a testing phase at the moment because it’s a very light molecule to store and transport. It’s not a problem that our smartest engineers cannot solve, only if they stay back in India rather than moving to US or Canada.
But yes, every new technology requires tremendous amount of money being invested upfront and some reliefs from the Government in order to bring it to market requiring at least 10 years to take off.
India’s National Green Hydrogen Mission aims to produce 5 million metric tonnes (MMT) of green hydrogen annually by 2030, reducing fossil fuel dependence and emissions.
With a budget of ₹19,700 crore, the Mission targets a ₹1 lakh crore reduction in fossil fuel imports and 50 MMT CO₂ emission cuts while creating 600,000 jobs and attracting $100 billion in investment. However, electrolyser manufacturing is limited, and domestic demand is uncertain unless costs drop, subsidies are introduced, or mandates ensure consumption.
While green hydrogen could replace grey hydrogen in sectors like fertilisers and petroleum refining, transitioning steel, transport, and mobility industries will take time. Initially, 70% of the production is planned for export, positioning India as a potential leader in the global hydrogen market.
Story #3: India’s AC market is poised for exponential growth (click here)
Climate change is real.
Back in 1990s and early 2000s, we would play a lot of cricket, football and other outdoor sports throughout the day. For lunch we would be served mangoes in the form of juice or its small pieces as accompaniments.
And how quickly those times are forgotten because you cannot do that anymore. We see a limited outdoor activity during summers and if you’re like us - staying in Mumbai then even your winters are as good as summers.
That’s exactly why India's air conditioner market is poised for massive expansion, with the industry expected to double in the next four years, reaching around ₹55,000 crore. This growth is driven by factors such as low penetration of room ACs, a burgeoning middle-class population with high disposable incomes, and the increasing need for cooling solutions due to rising temperatures.
Key Drivers of Growth:
Low Penetration Rate: With only around 10% of Indian households owning an AC, there's vast room for growth
Growing Middle Class: India's middle-class population is expected to more than double to a billion by 2050, driving demand for ACs and other consumer durables
Rising Temperatures: Climate change is leading to hotter summers, making ACs a necessity rather than a luxury
Bonus: The Tripolar World: US, China and India will run our World of Tomorrow (click here)
We enjoy thinking through Geopolitics, Macro Economics and Wars as a part of our winding down method from a hard day at work that involves meetings, discussions around our research and extended reading on the equity markets.
This ability to think broadly allows us to make sense of this constantly changing world and create our short term investment thesis. One example is when Red Sea Crisis happened, we immediately started buying ship building companies. In a matter of few months, the stocks shot up giving the portfolio a handsome set of returns.
In our deep dive into the sector, we also witnessed how Indian Governments (all of them) have not really put any thought into our maritime trade. I wouldn’t like to go into the details but yes, we have very few ports despite being surrounded by sea on three sides and our port’s automation / modernisation and handling capacity is worst.
We have miles to go!
Coming back to the article.
Paul Kennedy, a renowned British historian, discusses the shifting geopolitical landscape and the emergence of a “tripolar world” by 2050, where the United States, China, and India will dominate global economic and strategic affairs.
By 2050, the U.S., China, and India will be the three largest economies, far surpassing other global powers in terms of GDP and military spending. These three nations will have economies six to eight times larger than middle-ranking powers such as Japan, the U.K., Russia, and France. He suggests that this will not radically change the state-centric world order but will shift the balance of power from the West to Asia.
This will give rise to:
Naval Power and Global Trade Shifts
The Role of Culture and Strategic Mindsets
The Dollar’s Continued Dominance