Value Migration

Wednesday, April 26th, 2017

Disruption is the buzzword in the new economy. Major shifts in the economic landscape and the advent of new technologies are enabling start-ups to challenge established models of doing business. These new emerging businesses make disproportionate returns and capture a significant part of the new value they create. Value migration is a term aimed to capture this effect.

 

Value Migration is the flow of economic and shareholder value away from obsolete business models to new, more effective designs that are better able to satisfy customers’ most important priorities. Motilal Oswal has come out with a great thematic report on value migration which outlines a few case studies in the Indian investment landscape that have benefited from this trend. We have outlined some of their findings below.

As mentioned in the report, value migration can happen in several ways as outlined in the chart below:

Value Migration

 

Value migration can be driven by advantages led by  technology,  cost,  convenience, innovation, access to funding, or lower switching costs. Here is a snapshot of some of the case studies that the report outlines and the drivers behind the shift:

 

Value Migration Drivers

 

This can even happen with unlisted players:

 

Value Migration Unlisted

 

Finally the report uses value migration as a tool to identify solid and compounding franchises that would benefit from these trends and would have the potential to generate outsized returns for their investors over the long term.

 

Value Migration Listed

 

Motilal Oswal’s research goes into great detail for each and every one of the themes outlined above. We do encourage you to read the entire report as it gives a great insight into the massive shifts happening in our economy. If nothing else, it will give you a framework on how to think about investing in disruptive businesses’.

Kindly note that this is not an endorsement by us on stocks or themes mentioned in the report. All the information is for educational and informational purposes only. Please consult a qualified financial advisor prior to making any investment decisions.


About the author

Rishad is the founder of Kairos Capital. He started his career with Standard Chartered Wealth Management and has extensive experience in markets, particularly in terms of mutual funds and stocks.

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