Niche in this perspective of a market means a place which is suitable for someone or something. Hence we find bigger banks usually operating in the metros, urban or suburban areas and somewhat less enthusiastic in working in the village or rural areas. This is where the niche players in the market come to act decisively. If we take ICICI Bank ,HDFC Bank or an AXIS Bank or YES Bank they have greater marketability in the metros and urban areas. They offer big ticket loans , have big investors investing humongous sums of money and the transaction every day are beyond the imagination of middle class people. The corporate and the well connected people usually form the creme dela creme of these banks.
However it is not just the banks. Imagine a showroom in the villages selling Air Conditioners, delivering pizzas, multi-specialty hospitals, fresh fruit shops, SUVS, apparels, shoes etc.The answer most often shall be an emphatic no! No one blames these companies. They cannot just afford to put in time or workforce to penetrate these areas.
This is the time the niche companies come into the picture. If the banks cannot allow loan to the people there , the micro finance companies come in the fore. The smaller footwear companies come into the play.The smaller house building finance companies wait with eagle eyes. The niche companies target a specific group of customers.And the trick lies in focusing area specific demographics.Agents recruited from these specific areas do a commendable job in the sense that they are persistent in their striving in order to convince their customers in the locality.
It shall be an interesting observation that in emerging countries line India, some of the African countries, Poland, Austria, Lithuania etc. the sell of motorcycles in the suburban areas far outpaces the sell of four wheeler.The sell of products of a small company whether it be milk powder, footwear,apparels, small toys ,gunny bags in the local market outweighs the products of bigger and well renowned companies. Even the loans approved by the smaller housing finance companies are of a smaller ticket size ranging from a couple of hundred or thousand in dollar terms.
Hence with time and a consistent effort , these companies create a niche consumer for themselves. And the loyalty of the customers to these brand are unbelievable.The loyalty earned is out of extreme gratitude .They are considered friends because they extended helping hands during time of need and planned the loan terms in such easy E.M.I's that they can easily pay back the loan.
The companies have the advantage of pinpointing their focus on these selected demographics. The lure of branching out into other supporting companies can be great and this is why many of the companies with great promise fade away into oblivion.
Many of the niche companies get themselves listed on the stock exchanges. Some are happy to carry on with their usual day to day activity.And it shall be quite interesting to observe that most of these companies grow at a ferocious speed for 10 to 15 years. Their sales and profit margin grow at a break neck speed .Peter Lynch would like to call them high growth companies. Of course they are not cheap and ignored by conservative investors. The fault lies not in their diagnosis of the financials of the companies but out of their lack of information about them , specifically because they operate in the rural or suburban areas and is more often than not unknown to the urban specifics.
One of the major advantages of the niche company is that they cater only to a specific group and hence is not lost in the wilderness of heterogeneity.And the advantage now for the net fed investors is that they can derive ample information about these companies , thanks to a over conscious media and of course the stock exchange regulatory authorities.
However there are also pitfalls. Many niche companies get embroiled into or marred with controversies and the majority who suffers are the over zealous investors.One of the examples of this kind of controversy was with the SKS Micro finance company in India.It got listed on the National Stock Exchange(NSE) and BSE(Bombay Stock Exchange) with a lot of hullabaloo . Got to its life time high of 1490.70 on 27th September,2010 was victim of a series of controversies and came down to a all time low of 54.40 on 7th June , 2012. Experts cried , analysts were flabbergasted and the market was stunned. However it has made a new 52 weeks high today at 654.90 but it is a far cry fro its lifetime high it made a couple of years back.
How can we predict what can be the next multibagger? how can we say a company is going to be one of the best companies in the next 20 years. That is why it is always important to be cautious while investing in the niche companies. You may make a cut but the investments are always laced with danger.
The companies names above are only for illustrative purpose and it is not my intention either to encourage your or desist you from investing in these companies .
Disclaimer: This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice.Please contact an independent financial professional or adviser for advice regarding your particular and specific situation.
However it is not just the banks. Imagine a showroom in the villages selling Air Conditioners, delivering pizzas, multi-specialty hospitals, fresh fruit shops, SUVS, apparels, shoes etc.The answer most often shall be an emphatic no! No one blames these companies. They cannot just afford to put in time or workforce to penetrate these areas.
This is the time the niche companies come into the picture. If the banks cannot allow loan to the people there , the micro finance companies come in the fore. The smaller footwear companies come into the play.The smaller house building finance companies wait with eagle eyes. The niche companies target a specific group of customers.And the trick lies in focusing area specific demographics.Agents recruited from these specific areas do a commendable job in the sense that they are persistent in their striving in order to convince their customers in the locality.
It shall be an interesting observation that in emerging countries line India, some of the African countries, Poland, Austria, Lithuania etc. the sell of motorcycles in the suburban areas far outpaces the sell of four wheeler.The sell of products of a small company whether it be milk powder, footwear,apparels, small toys ,gunny bags in the local market outweighs the products of bigger and well renowned companies. Even the loans approved by the smaller housing finance companies are of a smaller ticket size ranging from a couple of hundred or thousand in dollar terms.
Hence with time and a consistent effort , these companies create a niche consumer for themselves. And the loyalty of the customers to these brand are unbelievable.The loyalty earned is out of extreme gratitude .They are considered friends because they extended helping hands during time of need and planned the loan terms in such easy E.M.I's that they can easily pay back the loan.
The companies have the advantage of pinpointing their focus on these selected demographics. The lure of branching out into other supporting companies can be great and this is why many of the companies with great promise fade away into oblivion.
Many of the niche companies get themselves listed on the stock exchanges. Some are happy to carry on with their usual day to day activity.And it shall be quite interesting to observe that most of these companies grow at a ferocious speed for 10 to 15 years. Their sales and profit margin grow at a break neck speed .Peter Lynch would like to call them high growth companies. Of course they are not cheap and ignored by conservative investors. The fault lies not in their diagnosis of the financials of the companies but out of their lack of information about them , specifically because they operate in the rural or suburban areas and is more often than not unknown to the urban specifics.
One of the major advantages of the niche company is that they cater only to a specific group and hence is not lost in the wilderness of heterogeneity.And the advantage now for the net fed investors is that they can derive ample information about these companies , thanks to a over conscious media and of course the stock exchange regulatory authorities.
However there are also pitfalls. Many niche companies get embroiled into or marred with controversies and the majority who suffers are the over zealous investors.One of the examples of this kind of controversy was with the SKS Micro finance company in India.It got listed on the National Stock Exchange(NSE) and BSE(Bombay Stock Exchange) with a lot of hullabaloo . Got to its life time high of 1490.70 on 27th September,2010 was victim of a series of controversies and came down to a all time low of 54.40 on 7th June , 2012. Experts cried , analysts were flabbergasted and the market was stunned. However it has made a new 52 weeks high today at 654.90 but it is a far cry fro its lifetime high it made a couple of years back.
How can we predict what can be the next multibagger? how can we say a company is going to be one of the best companies in the next 20 years. That is why it is always important to be cautious while investing in the niche companies. You may make a cut but the investments are always laced with danger.
The companies names above are only for illustrative purpose and it is not my intention either to encourage your or desist you from investing in these companies .
Disclaimer: This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice.Please contact an independent financial professional or adviser for advice regarding your particular and specific situation.
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