Is Water the new Oil?

Is Water the new "Oil"? This is a question that has a simple answer-Yes. All over Asia, and particularly in China and India investment in water infrastructure is becoming the pillar of Government policy, as countries recognise that their economic success hinges on access to increasingly scarce clean water. Much of the focus is on piped water and wastewater management with a "land-grab" underway in China. In the current scenario investors should initially hold stocks with exposure to piped-water. Longer Term, we prefer waste-water treatment recycled water, irrigation and desalination plays. Asia's Water Crisis-An Economic Angle -Drowning or Thirsty, Asia represents a Water paradox. China and Australia face the biggest water shortages, which pose a huge constraint to growth. -The Asian Water market is forecast to enjoy a 5.8 per cent CAGR over the next ten years with China and India standing out with 10.6 per cent and 11.7 per cent CAGR. -With less than 50 listed pure-play entities in Asia, valuations are likely to become stretched as increasing demand and liquidity in this space increases. China-Highest Growth Potential -The introduction of public-private partnerships in China has sparked a land grab, with International and local companies scrambling to win concessions. -Only a small number of Chinese cities have entered into private contracts to date. We see significant growth opportunities in Water Privatisation. -Government support to flow through to renewed project growth and higher tariffs. Go Long water-recycling and desalination -Low tariffs in the short term will hold back earnings in water supply and treatment. -But long term, despite rising tariffs, the returns in recycled and desalination industries will overtake the return of piped-water businesses. -Increasing returns will be seen in sewage water treatment integrated with recycled water operations. -Despite significant energy needs, the desalination theme shall also play out across Asia, where Hyflux, Kurita Water, Doosan Heavy, IVRCL and Indian Hume Pipe will be prime beneficiaries. The Indian Scenario -The Central Government intends to spend almost $ 59 bn on creating Water Infrastructure over the next 5 years. -This Central allocation will be in excess of and in addition to State funded Water Development plans, that would include Lift Irrigation, Building up Water Transport pieplines, Conservation of water, creation of new reservoirs.. Projects like the Jalagyan in AP will cost close to $ 5 bn, the Jal Swarajya in Maharashtra will be equally big, and then there are Urban Water Supply, Sewage and Waste Management projects being put up by civil bodies in urban areas. Concluded projects by Urban bodies like the Veeranam Lift Irrigation project of the TN state, the Indira Gandhi Canal in Rajasthan and the Sardar Sarovar in Gujarat, are live case studies for new entrants to the field. -Key Concerns that will stand out to benefit: 1. Indian Hume Pipes 2.Electrosteel Castings 3.Lanco Industries 4.Jain Irrigation 5.IVRCL 6.HCC 7.Subhash Projects 8.Mount Everest Mineral Water 9. Ion Exchange