Value Migration – the shifting of value-creating forces

Credit: Motilal Oswal report

What is value migration?

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

Value Migration happens in three stages:

  1. Value Inflow: In this phase, a company or an industry captures value from other industries or companies due to a superior value proposition. The market share and profit margins of the company or industry expand
  2. Stability: In this phase, the competitive equilibrium is established. Growth rates moderate
  3. Value Outflow: Value starts to move away towards companies or industries meeting evolving customer needs. In this phase, market share declines, margins contract, and growth stops

Bank Financial Service and Insurance (BFSI):

Value migration from PSU to Private banks – CASA attraction by digitalization and branch spread

Data points which indicate the shift of the market from PSUs to Private banks:

  1. The shift of CASA from PSUs to Private banks

2. Market share in digital transactions

3. Loan market share shift from PSUs to Private banks

4. High asset quality of private banks

5. PAT market share shift, ROE shift, Share price CAGR

Information Technology

Three phases of Value Migration are there, starting from value inflow benefiting the regime of low-cost sourcing route to IT spending optimization to value outflow towards models built on the combination of automation, cloud and digital technologies (low-cost talent, offering services 40-60% cheaper service)

I.e. there is value migration from legacy models to digital

Oil and gas

Due to an increase in pollution, the focus on increasing penetration of gas becomes all the more important considering that in the latest study of the World Health Organization (WHO)

Gas is a better option for India to control pollution but to increase demand, India needs to have that infrastructure and pipelines

An increase in gas supply and improvement in pipeline infrastructure and policies, broadly, will lead to benefit the gas sector

I.e. Value migration from Oil to Gas

Consumer – jewelry

GST implementation & policies turn in favor of the organized player, an organized player like Titan has increased its product category, and Titan still has room to grow further as its market share is around 5% only

Though the market size is static or decreasing, Titan has increased its market share

I.e. Value migration from the unorganized sector to organized sector

Published by Aakash and Meet

I am Aakash Raotole I am currently doing Bcom from Dr. Patel and Rb Patel commerce college I am currently studying at finnacle investment academy Recently done distance internship with windrose capital, Pune - for a period of 14 weeks I am Meet Bhatt Completed HSC in commerce Now studying finbridge program at finnacle investment academy and Bcom externals I had completed CFA institute's investment foundation course and distance internship with Windrose capital, Pune - for a period of 14 weeks

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