Welcome to the "Next Wave." We are living in an unprecedented point in human history when the new consumer, technology, infrastructure, and environments begin to converge and create one of the world's greatest eras of economic growth and technological innovation.
During the next 20 years, the Next Wave will create more new consumers than the previous millennium did. Investments in infrastructure will exceed the total investments in the reconstruction of post-war Europe. Technology and the Internet will be the great enabler, facilitating the development of multiple centers of innovation across a wide range of geographies. And the environment will be a critical thread within this new tapestry, as climate change and the need for resources push humankind to find new approaches to economic development and sustainable growth. Although China, Brazil, Russia, and other emerging markets will drive much of this, India stands at the forefront with its rapidly growing middle class, massive investments in infrastructure, a technology-based culture, and growing need for energy and other natural resources.
Many companies will benefit from the Next Wave, but some verticals will capture the lion's share of the growth and profits. Among the most significant of these "Next-Wave Verticals" are media and entertainment groups. They are gaining importance in India because of the country's growing middle class, improving literacy rates and increasingly organized retail sector driving demand for print, radio, and TV content. Improvements in infrastructure and advances in technology are also rapidly increasing media penetration in rural areas of the country where more than two-thirds of the population resides.
Advertising spending in India is roughly one-third of that in the U.S. and Europe, but that's rapidly changing as retailers find competition growing and consumers become more sophisticated and discerning in their buying decisions. There are now more Indian homes with television sets than homes with telephones. India's 119 million television households comprise about 60% of the total households in the country. About 50 million receive cable-television services, leading to a penetration of about 42%. The television-distribution market consists of revenues generated by companies that distribute television programming to viewers. This includes spending by consumers on subscriptions to basic and premium channels delivered by cable operators, satellite providers, or Internet protocol television (IPTV) services, as well as on video-on-demand (VOD).
The Indian DVD market now exceeds 1.5 billion units per year. This figure is expected to grow to 4.5 billion units per year by 2010. The explosive growth in DVD sales also is attributed to the predominance of single-TV households. However, this is expected to change as rising incomes and a large pool of teenagers fuel mushrooming growth of multiple-TV households, commonly known as the "Teenager Effect." These factors will continue to drive high revenue growth and profitability for such media and entertainment companies as TV18, ENIL, and D.B. Corp., which are leaders in this space.
Private education will also ride India's Next Wave as an aspiring population seeks to give its children and itself the greatest opportunity to succeed and prosper in the new economy. With the exception of the world-renowned Indian Institutes of Management & Technology, the Indian public school system has proved to be a dismal failure. As a result, Indian citizens of all socio-economic brackets have looked increasingly to the private sector for their education needs.
As with other Next Wave Verticals, technology and infrastructure have fostered the rapid expansion of private education as Internet-based learning programs create opportunities for distance-learning, and improvements in communications and roads have created new education institutions in rural areas of the country.
Private education in India is growing more than 30% per year, and the profitability of this sector exceeds that of most North American institutions. Companies like Manipal Education are at the forefront of this growth as they continue to develop innovative solutions to meet the increased demand.
Environmental services is becoming one India's the fastest-growing Next Wave Verticals, as an increasingly industrialized economy and wealthy population elevates the need for clean air and water and the recycling of scarce natural resources. The Indian government is looking to the private sector to build and manage numerous aspects of environmental services to include waste-water treatment, hazardous waste disposal and air-quality control systems. Considering that approximately 70% of India's cities do not have adequate waste-water treatment, the financial opportunities in this area alone are significant. India's carbon-credit market is currently valued at $5 billion and is expected to double to $10 billion by 2009. This will create a significant opportunity for carbon-capture equipment and for environmental consulting services that focus on reducing greenhouse gases.
Renewable energy is a global issue that could define India's long-term economic success. India has very little in the way of crude oil reserves and finding new fields will become a costly proposition. As India's economy continues to grow, so will its energy needs. Developing renewable sources of energy is a national priority. Renewable energy only accounts for about 5% of India's total energy consumption. The Indian government has set a goal of generating 50% of the country's energy needs by 2050. This will require massive investments in a wide range of renewable energy sources.
India is already developing technical and manufacturing leadership in several areas including wind, solar, and biomass. Suzlon Energy, a publicly traded Indian company, is now the world's fifth-largest wind energy provider, and its ranking is expected to climb in the near future. Moser Baer Photovoltaic, which is planning an initial public offering in 2009, is becoming a global leader in the development and manufacture of thin-film solar technology. And Bhoruka Power has become a leading player in the small hydro segment for power generation in India.
But the largest manufacturer of agricultural vehicles in India, Mahindra & Mahindra, is taking the lead in biodiesel. In February, 2007, the company introduced versions of its two most successful sport-utility vehicles, Scorpio and Bolero, which run on biodiesel. Scorpio is the first Asian vehicle in its class running on 100% biodiesel.
Mahindra also unveiled a biodiesel tractor for the first time in India. The company had set up its own biodiesel plant in 2001. It completed extensive studies and worked with IIT Kanpur, a leading Indian technology institute recognized globally, and the R&D center of Indian Oil Corp. Mahindra is also simultaneously working on its vehicles' fuel adaptability and trying to position itself for when India matures to the point of requiring better fuel sources.
That day may not be far off, as India is the world's second-largest producer of sugar cane, which is a preferred source for ethanol. Renewable energy will provide investors and joint venture partners with significant returns during the coming years. And with opportunities in solar, wind, ethanol, and biodiesel, numerous global synergies are emerging exist between homebuilders, power companies, and automotive firms. Savvy investors and corporations already recognize the significant potential of the Next Wave. They know another wave like this won't crest for another 20 years or 30 years, and they're eyeing opportunities to capitalize on this unique opportunity.
William Nobrega is president and founder of The Conrad Group, a global professional-services firm that focuses on emerging markets and technologies. It provides a complete spectrum of strategic planning and mergers-and-acquisitions facilitation services to Fortune 500 and leading regional companies worldwide. The firm is dedicated to maximizing the success of market leaders in international markets. Mr. Nobrega is the author of Riding the Indian Tiger: Understanding India the Worlds Fastest Growing Market, published by John Wiley & Sons. Mr. Nobrega is currently working on his next book, entitled The Next Wave: How Investors Can Ride an Era of Unprecedented Economic Growth and Innovation; it will be released in 2009. For more information, visit www.conradgroupinc.com.
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