Why Nilesh Shah Thinks Urban Slowdown Is Not That Bad

The urban slowdown isn't as bleak as it's being portrayed, according to Nilesh Shah, managing director and chief executive officer of Envision Capital. 

Despite concerns about a sluggish economy, he believes India remains poised for growth, with several key shifts in consumption patterns helping drive positive momentum.

"Urban consumption isn't as bad as it's made out to be," Shah said, highlighting that the narrative often focuses on large and established players like Hindustan Unilever Ltd. or Nestlé India Ltd.

When it comes to consumption, one needs to look beyond just the big names like HUL and Nestle, according to Envision Capital's Nilesh Shah. (Photo source: Envision Capital website)

A key change in consumption pattern is being overlooked, he said, adding that newer or direct-to-consumer brands are gaining ground. 

"There are several new brands and products getting funded by private equity and venture capital, and they're driving growth," he noted. 

In addition to the rise of D2C brands, Shah pointed to the growing trend of premiumisation. Consumers are increasingly shifting from basic products to premium offerings, creating new growth opportunities. 

“The shift in terms of trade from products to platforms is evident,” he explained, referring to how quick commerce platforms are disrupting traditional distribution models. 

Quick commerce players are growing at a rapid pace, with some seeing growth rates of 30-50%, compared to more modest growth from traditional retailers like DMart and V2 Retail, which are seeing high-teens growth.

Shah is also of the view that the automobile sector is making a strong comeback, further debunking claims of a widespread slowdown. “Auto is back with a bang,” he said, noting that this resurgence is another indicator of economic vitality.

While India's economy grew by 6% in 2024, corporate earnings were mostly in the single digits. However, Shah remains optimistic, pointing out that earnings outside the top 100 companies showed growth in the high teens, and even above 20%. "We still have a lot of engines to fire," he said, adding that measures like the likely cut in interest rates in 2025 will further boost growth.

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