Who Will Ride India's Next Wave?

Media and entertainment, private education, infrastructure, and renewable energy companies are poised to prosper as India's middle class expands

by William Nobrega

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.

Tapping into the "Teenager Effect"

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.

All Eyes on Manipal Education

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.