The lack of penetration of financial products in India and the play on these penetration rates getting sorted over time is an overarching investment theme in the present day. We have seen this play out in the past with automobile, home and durable financing reaching significant penetration levels. There has also been strong progress made by the government in rolling out programmes on insurance, banking and the like for the lower-income population. Companies that have taken a persistent view on cracking these large opportunities have become immensely valuable, e.g., Bajaj Finance. There are opportunities to solve specific need gaps for the large population in the middle class. We believe the right way to do this is by creating the right product addressing a specific customer need combined with a distribution strategy which is economically viable. Several success stories abound, for instance, Zerodha, which became a major profitable retail broker without a dollop of venture money with a simple value proposition. Ideally, one would imagine a world where there is a great product which sells itself. Our sense though is that we are not there yet due to a lower level of awareness about financial products in India as opposed to benchmark models we see in the west.
Hence, we need to have a somewhat modified take on what will work and assume that with scale these companies will be able to alter user behaviour and lift awareness (financial products have a strong element of trust which takes time to build). The fundamental nature of these start-ups will be: product focused on a defined market segment with easy to understand value proposition, a pull or a limited push model to sell the product, and a relatively modest distribution expense. We would like to see interesting opportunities of this nature in insurance, savings and investments.