The rise of 'Affluent India'

The rapidly growing cohort of ‘affluent’ consumers in India: Only ~4% of India’s working age population has a per capita 
income of over US$10,000, projecting to ~60mn consumers. Corroborating data across tax filings, bank deposits, credit cards and 
broadband connections, we estimate that this consumer cohort has grown at a 2019-23 CAGR of over 12%, compared to ~1% 
CAGR of India’s population. If the current trajectory continues, we expect ‘Affluent India’ will grow to ~100mn consumers by 
2027.

Strong wealth effect kicking in: India’s market cap has increased over 80% over the past 3 years with rising retail participation. 
Gold price also rose 65% over 2020-23. As a result, the total value of Indian holdings of equities and gold has increased from US
$1.8tn to US$2.7tn. Property prices rose ~30% over FY19-23, compared to an increase of ~13% over FY15-19.

 
‘Higher for longer’ growth for top end consumption; we prefer businesses with a moat: The largest beneficiary of rising 
‘Affluent India’ are categories such as leisure, jewellery, out-of-home food and healthcare, and premium brands within all 
categories. With double digit CAGR in the consumers in the ‘Affluent India’ cohort, we expect mid-teens growth in these 
categories over the medium term. This ‘higher for longer’ growth will imply sustenance of rich valuations. While there are many 
stocks that are exposed to these segments, we prefer companies that also have a competitive moat. Our top ideas are Titan, 
Apollo, Phoenix, Makemytrip, Zomato, Devyani, Sapphire and Eicher. They derive their moat from 1) strong brand (eg Titan, 
Eicher), 2) entry barriers from high cost/gestation of creating new business (eg Apollo, Phoenix), 3) network effect (eg Zomato).

 
‘Affluent India’ outperforming broad-based consumption, seeing consensus upgrades: In the past 3 years, companies which 
address top end consumption have grown faster compared to those that address broad based consumption. In the past 12 
months, our ‘Affluent India’ list of stocks has seen 7% upgrade in FY24 consensus revenue estimates, vs 3% downgrade for the 
broad-based consumption names. Key risks include rising competitive intensity and a sharp correction in asset prices that 
impairs the wealth effect