- Equity Portfolio Manager
United States, Institutional
Change
The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
Many industries across India remain highly fragmented. However, a trend that has become more visible in India over the past several years under Prime Minister Narendra Modi’s administration is that of industry consolidation, which has streamlined the number of companies operating within each sector.
I see this as a largely positive development that presents opportunities from which some equity investors can (and should) seek to benefit.
A little background on this trend
The reasons for the increased industry consolidation are many. In the past, many sectors in India could have been typecast as “small-scale industries,” populated by mostly inefficient, uneconomical companies that did not generate the anticipated levels of employment. The Indian government has come to realize that size and scale matter in today’s world. Thus, it has forged ahead to attract large-scale manufacturing to the country using subsidies and other means. The most notable and successful example of this is that iPhones, including the iPhone 14, are currently being made (“assembled” is the correct word) in India. In fact, India has been the world’s second-largest maker of smartphones of all types for a few years now.
The change in the Indian government’s mindset is most apparent in existing businesses and sectors. The government has been a key facilitator of consolidation, either by design or by default. There seems to be a growing recognition that Indian companies need to get bigger to stay relevant and competitive globally. While the government has not explicitly articulated any such policy, I believe its actions on this front speak for themselves. Here are some examples of what I’m talking about.
Consolidation: Examples by design
- India’s competition commission has been allowing corporate mergers to go through even in cases where it could have blocked them. A month or so ago, for instance, the country’s number one and two multiplex chains were permitted to merge unconditionally. Even more recently, two big cable TV players were allowed to merge, subject to some conditions.
- India’s banking sector has been consolidating for several years now. In a few years, I suspect only two or three large state banks will be left. Meanwhile, some smaller state-owned enterprise (SOE) banks have been absorbed by bigger ones. (I would not be surprised if the large SOE banks are privatized at some point, but that is still a long ways away.)
Consolidation: Examples by default
- In India’s telecommunications sector, there are effectively two large players and two other “bit actors” remaining in the wake of industry consolidation that has created some significant shareholder value.
- In the airline industry, there have been several bankruptcies and a government sale of one airline, which could eventually be merged with one of the others, potentially resulting in just two large players left to serve one of the world’s fastest-growing air-travel markets.
- There has also been consolidation in India’s scattered, disorganized retail jewelry sector. My view is that the number of players in the sector could shrink further over time, due mainly to tax-rule changes that limit arbitrage opportunities for some players.
Bottom line
Industry consolidation has been gaining considerable traction in India. All in all, I expect to see a lot more of it happening in the coming years, which should generally be good news for investors as consolidation of legacy, mostly family-run businesses into larger enterprises boosts market share, operating leverage, and profit margins for publicly traded companies in India. I believe these conditions offer equity investors an opportunity to benefit from positive change across a variety of industries in one of the world’s fastest-developing nations.
Expert
Related insights
Showing
of
Insights Posts
The power of local perspective: the long and short of European equity investing
Continue reading
7
min
Article
2025-10-31
Impact measurement and management: addressing key challenges
Continue reading
5
min
Article
2025-10-31
Decoding impact expectations: best practices for impact investors and companies
Continue reading
6
min
Article
2025-10-31
URL References
Related Insights
Stay up to date with the latest market insights and our point of view.
Read next
Showing
of
Insights Posts
Chart in Focus: Can this equity bull market last?
Can this current equity bull market last? In this latest edition of Chart in Focus, we focus on the indicators of whether it may come to an end or keep running.
3
min
Article
2025-11-30
What do declining European earnings mean for ECB policy?
European companies have been unexpectedly resilient over the last couple of years. However, the outlook for European earnings could be more challenging than headline numbers suggest. What could this mean for investors?
6
min
Article
2025-11-30
The power of local perspective: the long and short of European equity investing
Dirk Enderlein and Boris Kergall explain why, in their view, the structural changes impacting European equity markets offer active long/short investors a rich source of potential return and diversification.
7
min
Article
2025-10-31
Impact measurement and management: addressing key challenges
Our IMM practice leader describes common impact investing challenges and suggests ways to overcome them.
5
min
Article
2025-10-31
Quality growth — a less volatile sweet spot?
Growth stocks can be volatile, especially when companies fail to meet expectations. However, high-quality growth companies can help mitigate downside risk while still offering potential for long-term outperformance. How can investors find the sweet spot?
8
min
Article
2025-11-30
Unlocking the full value potential of stewardship
Yolanda Courtines and Alex Davis examine how corporate stewardship can be a source of value and delve into what investors can do practically to maximise its full potential.LDI Team Chair Amy Trainor explains why she believes a pension risk transfer may, in many cases, not be the best choice for fully funded plans from a cost/benefit standpoint.
5
min
Article
2025-10-31
Decoding impact expectations: best practices for impact investors and companies
We share three recommendations each for impact investors and companies to help them better understand and manage each other's expectations.
6
min
Article
2025-10-31
Strong fundamentals, attractive valuations: Why the time may be right for active biotech investing
From solid fundamentals to supportive macro conditions, learn why our biotech experts believe the industry may be ready to run.
8
min
Article
2025-10-31
Navigating AI resource demands: Strategies for sustainable data center operations
AI's growing computational demands are raising critical questions about energy efficiency and water-resource management. We delve into strategies for enhancing sustainable data center operations, highlighting the importance of proactive resource stewardship.
10
min
Article
2025-10-31
What is “the economic cycle,” anyway?
See why the relationship between asset prices and the economic cycle is more complex than you might think, why a US recession is unlikely, and what a more dovish Fed could mean for the US and global markets.
5
min
Article
2025-10-31
Japan’s factory automation sector: Poised for a significant upturn?
Global Industry Analyst Takuma Kamimura explains why he believes we’re on the verge of a multiyear cyclical upturn in the factory automation sector and why he sees a compelling outlook for select Japanese companies in particular.
5
min
Article
2025-10-31
URL References
Related Insights
Chart in Focus: Can this equity bull market last?
Continue readingMultiple authors