---

As stock market investors, identifying sectors with promising growth prospects and potential profitability is essential. One such sector offering an attractive opportunity is the refrigerant gases industry.The Indian refrigerant gases industry is poised for huge growth, primarily due to robust domestic demand. The  country’s rapid urbanization, coupled with an increase in disposable incomes,  has led to a rising demand for air conditioning units, especially in residential spaces. This trend has created a substantial untapped opportunity, supporting the potential for long-term growth.

Furthermore, with the country’s economy booming, this growth is expected to accelerate in the coming years. The combination of increasing urbanization, higher disposable incomes, and the desire for better living conditions has created a favourable environment for the refrigerant gases industry to thrive.

 DOMESTIC DEMAND DRIVERS

Growing Urbanization India is currently experiencing rapid urbanization, marked by a significant increase in its urban population. According to the United Nations, India is projected to add 416 million urban dwellers by 2050. This ongoing trend of urbanization has resulted in a substantial demand for air conditioning units, onsequently driving the need for refrigerant gases.

Globally, there are approximately 160 crore installed air conditioners. In contract, India has only about 9 million to 10 million installed AC units, which accounts for a mere 6% of the total worldwide. When we compare India to other advanced nations, it becomes evident that the country has very low AC penetration, hovering at around 5% to 6%. On the other hand, countries like Japan have reached a penetration rate of 91% the US at 90%, and China at 60%. Nevertheless, India’s AC market is growing at an impressive rate and is predicted to reach a 69% penetration rate by 2040.

 

According to RationalStat’s analysis, the air conditioner market in India was valued at 9 million units in 2022, implying a robust Compound Annual Growth Rate (CAGR) of 15%.

Increasing Disposable Incomes

The rise in disposable incomes among the Indian population plays a pivotal role in driving the demand for air conditioning units. Notably, India’s per capita net national income (NNI) has surged to 1,70,000 in fiscal year 2023, reflecting a robust annual growth rate of 13.7%. Furthermore, it’s important to highlight the government’s ambitious objective to transition into a developed nation by the end of the year 2047.

As part of this transformative journey, India’s per capita income is anticipated to increase substantially by 7.5-fold,  reaching 14.9 lakh, as projected by an economist closely monitoring economic trends at SBI research. This notable increase in purchasing power will enable a larger number of households to afford air conditioning units, thereby leading to a substantial surge in demand for refrigerant gases.

Changing Lifestyles & Demand For Comfort

As lifestyles continue to evolve, there is a noticeable and growing preference for comfortable living spaces equipped with air conditioning units. This shifting preference is driven by the desire for an enhanced quality of life and improved comfort levels, which has, in turn, fuelled the demand for air conditioning units.

This increasing demand for air conditioning units is well-supported by data from a report by TechSci Research, which projects massive growth in the Indian air conditioner market.

The report suggests a CAGR of approximately 13% between 2021 and 2026. This trend not only highlights the current market potential but also brings into focus the untapped opportunity that exists for further growth.

 

Climate Conditions

India experiences hot and humid weather conditions for a substantial part of the year, with greater intensity in regions like North India. This prevalent climatic factor creates a strong and consistent demand for air conditioning units.

Furthermore, the data from the India Meteorological Department reveals that the average temperature in India has been on the rise over the years. This escalating trend not only validates the need for air conditioning but also serves as a driving force behind the increasing demand for refrigerant gases.

Government Initiatives

The Indian government has undertaken several initiatives with the primary objective of promoting energy efficiency and mitigating greenhouse gas emissions. A key program in this regard is the Indian Cooling Action Plan (ICAP). This plan is designed to phase out high-GWP (Global Warming Potential) refrigerants, and in turn, encourage the adoption of low-GWP alternatives.

This initiative aligns with global efforts to combat climate change, underlining the commitment to En vironmental responsibility and sustainability.

 

Furthermore, the importance of these initiatives Is accentuated by data from the Bureau of Energy Efficiency, which highlights the potential for significant energy savings in the Indian air conditioning sector.The implementation of energy efficiency measures here can lead to remarkable energy savings of up to 30%,as aspect that demonstrates the importance of these government-led efforts.

---

---

---

Environmental Awareness

A growing environmental consciousness is taking root among consumers, with a heightened awareness of the environmental impact associated with refrigerant gases.

 As individuals become increasingly conscious of the need to reduce their carbon footprint, there is a noticeable shift in preference towards eco-friendly refrigerant gases with low global warming potential.

This shift underscores the evolving consumer values and priorities that are shaping the refrigerant gases industry, highlighting the importance of sustainable and environmentally responsiblechoices.

---

---

---

 

Infrastructure Development

 India is witnessing a significant surge in infrastructure development, including the construction of commercial buildings, shopping malls, logistics parks, ports, manufacturing, railways, defence, transportation, aviation, and hotels.

As investments continue to pour into these sectors, they play a pivotal role in supporting higher demand. Of particular note is the impact of new facilities and projects, in contrast to the past. Unlike earlier developments, these recent projects are creating a substantial and ever increasing demand for air conditioning units.

This shift is evidenced in a report by JLL India, which projects heavy growth in the retail sector in India. The sector is expected to grow at a CAGR of 9% to 11% over the next five years, driving the demand for refrigerant gases.

 

Healthcare Sector

The rapid growth of the healthcare sector in India has led to an increased demand For air conditioning units. Hospitals, clinics, and healthcare facilities require optimal temperature and air quality control, which drives the need for refrigerant gases.

Increasing Awareness Of Health And Comfort

As people become more health-conscious and prioritize their well-being, there is a growing demand for airconditioning units to provide a comfortable and healthy indoor environment.

 

According to a survey by Nielsen, 77% of Indian consumers consider air quality as an important factor when purchasing air conditioning units.

---

Growing Middle-Class Population

The expanding middle-class population in India has had a significant impact on the demand for air conditioning units. As per a report by McKinsey, India’s middle-class population is expected to reach 570 million by 2025. This demographic shift is likely to create a substantial market for refrigerant gases.

---

 

---

Phasing Out Old Gases

In India, Hydrofluorocarbon (HFCs), particularly R-32, have emerged as the preferred choice for personal air conditioners. This is primarily due to their suitability for cooling purposes and their low global warming potential. As environmental concerns gain prominence, the demand for eco-friendly refrigerant gases like R-32 is expected to further drive the growth of the industry.

Government Policy Support To Help In Sustained Growth Also, the Indian government has taken steps to promote energy efficiency and reduce greenhouse gas emissions. Initiatives such as the implementation of the Montreal Protocol and the introduction of the Indian Cooling Action Plan (ICAP) aim to phase out high-GWP refrigerants and promote the adoption of low-GWP alternatives.

 

These measures further support the growth potential of the refrigerant gases industry in India. Lowering Import Substitute In addition to the aforementioned factors, the competitiveness of Indian manufacturers in the global market is further enhanced by two key elements.

Firstly, the imposition of anti-dumping duties on Chinese imports provides Indian manufacturers with a competitive edge. This measure helps to level the playing field and protect domestic industries from unfair trade practices, allowing Indian manufacturers to compete more effectively.

Potential For Higher Exports

India has a huge export advantage, especially to neighbouring resourcedeficient countries, making them key potential markets. The global refrigerant gases industry is evolving due to environmental concerns and regulatory changes. Phasing out HCFCs, like R-22, in various countries to reduce ozone depletion and global warming potential presents an opportunity for HFCs, such as R-32, to emerge as preferred alternative.

According to an industry report, the global refrigerant gases market size is expected to reach $30.7 billion by 2028. Additionally, India’s lower production costs compared to Developed nations, like the United States, make Indian manufacturers competitive while maintaining quality. This cost advantage attracts international customers and increases market share and profits through exports.

 

Indian companies also have strengths in research and development, backward integration, quality, logistics, and available capacities. Furthermore, the ‘Make in India’ initiative by the Indian government promotes domestic manufacturing and reduces dependence on imports. It aims to boost the manufacturing sector and establish India as a global manufacturing hub.

This has led to increased investments in refrigerant gas manufacturing facilities, enhancing the competitiveness of Indian manufacturers in the global marke

 

                                                              __________________________________________________________________________________________________________________

 

100Bagger: Eagle Post

Aimed at compounding knowledge and wealth, we bring to you best stories and resources every month handpicked by our 100 Bagger team.

• Bonus: You'll also receive a FREE COPY of our latest ebook, "MARKET CYCLES: HOW THEY WORK AND HOW TO PROFIT FROM THEM"
• E-copy of Highlighted 45 Page Detailed Naval Ravikant Interview
• Book Summary "The 4-Hour Work Week"