Patanjali Disrupts FMCG Pecking Order - Chart Of The Day 4 August 2017 - Equitymaster

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Patanjali Disrupts FMCG Pecking Order
Aug 4, 2017

Deep in meditation, a yogi sits cross-legged...clad in scraps of saffron... hair matted... the picture of spiritual enlightenment...

But wait, what's that he is surrounded by?

Biscuits, body lotion, ghee, shampoo, hair oil...?

Ah, that must be dear Baba Ramdev, the patron saint of disruptive businesses.

Usually when you think of disruptive businesses, tech giants like Flipkart, Amazon, Uber, and Ola come to mind.

But Patanjali is different. It has challenged the FMCG titans using an age-old tradition - Ayurveda - as its USP. And a yoga guru as its brand ambassador.

The share of Indian households that use the Patanjali brand is estimated at 38%. That's huge for a company barely a decade and a half old. Especially if you consider Patanjali's competition.

In 2016-17, the company posted revenues of more than Rs 100 billion. It has surged past behemoths such as ITC, Nestle India, Britannia Industries, and Dabur to become the second largest pure play FMCG company...second only to HUL.

Patanjali is hardly showing ascetic restraint. Restaurants, private security (market worth Rs 400 billion), and its 'Swadeshi' line of clothes (jeans included) are its next projects. This is a company that wants to be a movement.

If Patanjali were a listed company, its investors would know economic enlightenment.

Alas, it is not listed. Does that mean the door is closed?

Absolutely not.

Basking in Patanjali's halo effect are a few small-cap packaging companies. Patanjali has become their biggest a significant boost to their low-scale business. Some of these companies are even setting their plants at Haridwar...close to Patanjali's plant.

You see, these packaging companies are to Patanjali what Blue Dart is to ecommerce.

While it's impossible for the public to invest directly in Patanjali stock, these small-cap stocks could offer a 'backdoor'.

The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends. This is great news as direct players are almost always out of reach - either because they are not listed, in cash burning mode, or too expensive to bet on.

I have identified three perfect proxy plays.

The first is a proxy on the growth of the food segment. The second is a play on the renewable energy sector. And the third is a proxy play on the hospitality sector.

Irrespective of the dynamics of the industry they cater to, they all claim strong fundamentals. To learn all about these small-cap proxy plays, download my free report - Backdoor Profits: A Little-Known Investing Approach to Ride Big Returns in Stock Markets.

Editor's Note: You may have heard of an insider leaking valuable small cap stock recommendations to his list... In fact, he is sharing stock ideas from across Equitymaster's research vault... Click here to access this insider information.

Data Source:

This Chart Of The Day was published in The 5 Minute WrapUp - Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies

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