Health And Wellness Segment To Emerge Key Investible Themes For PE investors

CRISIL Research expects the health and wellness segment to emerge as the key investible themes for private equity (p/e) investors.

Says Anjali Nathwani, Associate Director, CRISIL Research, "Consumer foods, QSRs, e-commerce and technology-based consumer services firms, which have been the favourites of PEs, are also the new favourites of consumers given their changing priorities. Within these segments, health- and wellness-focused businesses such as online consultation and e-pharmacy will emerge as the key investible themes."

Crisil believes that cloud kitchens is one segment that will attract PE interest as they will revive faster than traditional dine-in restaurants and have lower rental expenses. Branded QSRs with a strong value chain will regain consumer trust faster on the health and safety marketing plank. And e-commerce will witness accelerated interest as demand for contactless deliveries at the doorstep rises.

Consumer interest in online consultation, e-leaning and online recreation to strengthen

The lockdown is also expected to strengthen consumer interest in online consultation, e-leaning and online recreation, Crisil Research has stated.

However, it does not see any such favour for the consumer essentials sector.

"Disruption in demand, production and supply chain caused by the extended nationwide lockdown to contain the Covid-19 pandemic will knock back revenue growth by 2-4% for the consumer essentials sector, and 16-30% across discretionary manufacturing and consumer services this fiscal," CRISIL Research has stated.

And this is only in the base-case scenario of the lockdown ending in the first quarter of this fiscal. In case of extended vulnerability due to fresh extension of lockdown into the second quarter, the fall could be a steeper 30-40%.

"Discretionary segments such as household appliances, readymade garments and quick service restaurants (QSRs) will bear the brunt of the pandemic blow and see the steepest revenue declines under both scenarios as stretched working capital cycles will put a squeeze on liquidity and hurt profitability. These segments will also take the longest to recover post-lockdown, with discretionary spending taking up to a year to revive.

However, e-retail and essential items will fare much better, with lower decline in revenue. These will also bounce back faster - within a month - as consumers turn brand agnostic and switch to available local brands, and as e-retail platforms meet the need for contactless shopping and doorstep delivery," the research from Crisil shows.

Says Rahul Prithiani, Director, CRISIL Research, "Consumer behaviour will change in the near term as availability, convenience, affordability, hygiene and safety become priorities. The shift in brand loyalty due to unavailability will boost sales of local/ SME manufacturers with a flexible logistics network. Retailers and fast-moving consumer goods companies have started tying up with food delivery service providers to suit consumers' quest for convenience. The lingering fear of Covid-19 will also provide a boost to e-retail and cloud kitchens."