March 2026 / Q4 FY26

Focus of This Newsletter

The geopolitical developments of the past quarter have been extensively covered across news channels and research reports. Recounting those events adds limited value. Instead, this letter focuses on what we believe is more important and less examined: India’s response to the disruption, the level of preparedness entering this phase, and the structural investment implications that follow.

For India, the exposure is clear. The Strait of Hormuz, through which roughly 20% of global oil and LNG trade flows, has been effectively disrupted since early March. It serves as the transit route for nearly half of India’s crude oil imports[4] and close to 90% of its LPG shipments[5].

Yet the situation is more nuanced than a simple vulnerability story. India entered this phase better prepared than in previous instances and has responded with a degree of pragmatism, reducing the duration and severity of the disruption.

This newsletter examines India’s response and the steps taken — both in this phase and towards becoming more Aatmanirbhar. We also discuss the structural energy transition underway and the investment framework we are applying, and close with a scenario analysis and how our portfolio is positioned.

01India — Exposure, Response, and Structural Shift

1AUnderstanding the Exposure

India is the world’s third-largest consumer of crude oil, with import dependence at ~87% of total requirements[4]. Of this, nearly 47% is sourced from West Asia, with approximately half transiting through the Strait of Hormuz.

The composition of consumption is equally important.

Transport (diesel, petrol, and ATF) accounts for roughly 65% of petroleum usage. This makes it the single largest source of vulnerability — and also the most important lever for reducing dependence over time.

LPG: India’s Most Acute Vulnerability

Within the petroleum basket, LPG stands out as the most immediate point of stress.

India consumes ~33 million tonnes of LPG annually, with ~60% import dependence. Of these imports, ~91% come from the Gulf via Hormuz. Unlike crude, there are no strategic reserves, and usage is widespread across households and the informal economy.

1BThe Response: India’s Pragmatic Playbook

Supply disruption has not paralysed India — and that is not accidental. What has been less visible in the headlines is the degree to which India has actively managed the situation. The response has been both swift and coordinated.

The shift is evident below:

India diversified sourcing, restored availability, and stabilised flows within weeks.

This response is not new. Gulf dependency had already declined from ~72% in FY18 to ~62% in FY26[12], well before this event. During the disruption, domestic refineries increased LPG output by ~25–40%[10]. The Essential Commodities Act was invoked to control hoarding, with over 12,000 raids and 15,000 cylinder seizures. Operation Sankalp was activated, with the Indian Navy on standby to ensure continuity of critical shipments.

1CThe Second-Order Effects

The supply response has been effective at the macro level. At the ground level, the picture has been more difficult. The commercial LPG disruption cascaded into India’s informal economy. Restaurants, hotels, and small eateries — which account for 8 million direct jobs[15] — faced an existential interruption. In Bengaluru, hotel associations reported that only 10% of establishments received gas supplies in the first week of March. Black market cylinder prices surged to ₹1,800–2,500 versus a formal price of ~₹900.

Two effects stand out:

Raw Material Cost Inflation and Cash-on-Delivery Pressure

Across most sectors, raw material prices have risen approximately 20–30% in the wake of the disruption. More consequentially, trade credit has tightened sharply: suppliers are shifting to cash-on-delivery terms, effectively compressing the working capital runway for weaker businesses. Companies with strong cash balances and low debt can absorb this and continue operating. Those with stretched balance sheets are facing a double bind — higher input costs and shorter credit cycles simultaneously. In an environment like this, being cash-rich is not a financial metric; it is an operational weapon.

Labour Dislocation

The LPG shortage is not merely a cooking fuel problem — it has triggered a wave of labour migration. Migrant workers, unable to cook at urban accommodations and facing rising costs, are returning to their home states in significant numbers. This is creating acute operational stress for manufacturers and contractors who rely on semi and unskilled labour. Companies with the financial capacity to provide accommodation, meals, or retention bonuses are actively doing so — and are building a meaningful staffing advantage over competitors who cannot afford to. Our portfolio companies are in this category.

1DThe Transition: Five Years of Structural Change

The only durable answer to import vulnerability is a structural reduction in dependence. India has been moving in this direction through a combination of changing consumption patterns and building alternative capacity. The progress over the past five years has been meaningful.

In June 2025, India crossed an important milestone, with over 50% of total installed power capacity coming from non-fossil fuel sources, achieved five years ahead of its COP26 commitment[16]. On July 29, 2025, renewables met 51% of total electricity demand on a single day. India is now the third-largest solar market globally.[14]

Transport: the two-wheeler signal. India registered a record 2.27 million EVs in CY2025 — a 15× increase from ~0.15 million in FY20[17]. Electric two-wheelers accounted for ~56% of this volume[15] and are emerging as the leading indicator of broader EV adoption. In April 2026, the Delhi government released a draft EV policy proposing a complete ban on new petrol and CNG two-wheelers from April 2028[19].

Agriculture: from diesel to solar. Diesel-powered irrigation pump sets are one of India’s most direct pockets of crude oil consumption. India has approximately 8–9 million diesel pump sets in active agricultural use, against a total addressable market of roughly 20 million. PM-KUSUM targeted 1.4 million standalone solar pumps as a first step. PM-KUSUM 2.0 is expected in the coming quarters — materially larger than its predecessor in both ambition and budget, and a structural demand pipeline with multiple years of runway.

Gas and power: an insulated sector. Natural gas contributes ~7% of India’s primary energy mix, with the power sector accounting for ~17% of total gas consumption.[16] Coal dominates electricity generation at ~75% of output, with renewables now contributing ~25%. As a result, India’s power sector carries negligible Hormuz exposure. Electricity supply has remained stable through this phase — a significant advantage for industrial activity.

The shift is gradual but clear — India is structurally moving towards lower external energy dependence.

02The Macro Risk and Our Investment Framework

2AScenario Analysis: What Sustained Elevated Crude Means for India

The Union Budget FY27 was built on an assumption of ~$70/barrel for the Indian crude basket. Current prices are significantly higher, at ~$105/barrel. This gap has direct implications across inflation, the current account, and the fiscal position.

The government’s fiscal balancing act: The government has chosen to absorb part of this shock rather than pass it fully to consumers. The excise duty cut of ₹10/litre on petrol and diesel implies an annual revenue impact of ~₹1.75 lakh crore. This increases the likelihood of some adjustment to the ₹12+ trillion capex programme.

Capex is unlikely to be cut uniformly. Economy-accretive spending — roads, railways, defence, and power — is more likely to be protected, while non-productive or redistribution-led expenditure is more vulnerable. Capex that improves the government’s own balance sheet is easier to sustain than spending with no direct economic return.

This distinction matters for us, as our B2G exposure is largely aligned with these segments.

The inflation dimension: CPI inflation was 2.75% in January 2026[20], near the lower end of the RBI’s 2–6% band. Even at an estimated 4.6% for FY27, it remains well within range. In our view, moderate inflation is a feature of expansion, not a concern. It supports realisations across our B2B and B2G businesses and is not alarming at these levels. As we noted in our June 2022 newsletter, inflation can be earnings-accretive for companies with pricing power. The real fiscal risk is not inflation, but a sharp cut in government capex.

2BWhere We Are Positioned

This disruption has not altered our investment thesis — in many cases, it has validated and accelerated it. Our portfolio was already oriented towards businesses benefiting from India’s energy transition, domestic production capability, and government spending on productive infrastructure. Each of these themes has become more visible and more relevant over this quarter.

Domestic Hydrocarbons: The Aatmanirbharta Imperative

India produces ~600,000 barrels of crude per day, covering only ~10% of total consumption of ~6 million bpd[16]. This 90% gap is the core vulnerability — and every incremental barrel produced domestically carries zero Hormuz risk.

The current disruption has effectively accelerated India’s upstream agenda. Our upstream E&P holding operates across four producing basins with nine discovered resource blocks at various stages of development. With domestic production still low and policy focus intensifying, the opportunity here remains both large and long-term.

EV Transition: The OEM Route

Electric two-wheelers have driven early EV adoption and continue to lead volumes.

The more meaningful shift, however, is emerging in commercial and public transport, where unit economics are already compelling and policy support is strengthening. Measures such as Delhi’s proposed ban on new ICE two-wheelers from 2028 make the direction of travel clear.

Component manufacturers and OEM suppliers aligned with this transition are well placed to benefit, and we have been steadily building exposure to this theme.

Solar Agriculture

Solar irrigation is quietly emerging as one of the more important levers in India’s energy transition. Diesel pumps still account for a meaningful share of rural fuel demand, so every shift to solar directly reduces oil dependence while giving farmers a more stable and predictable energy source.

The change is structural. Irrigation moves from a recurring, fuel-linked expense to a more stable, upfront investment, improving cash flows and reducing sensitivity to diesel prices.

The more important impact is in the second order. Lower and predictable energy costs support better farm economics and higher productivity. For businesses, this creates a clear, policy-backed demand pipeline with multi-year visibility across the ecosystem.

Defence

Emergency defence procurement of ~₹80,000 crore was confirmed in Q4 FY26[21]. At the same time, India’s indigenisation rate has increased from ~54% in FY19 to ~68% in FY25[22].

The current conflict has accelerated procurement timelines and strengthened the push for domestic manufacturing. With import restrictions expanding across categories, the opportunity for local players continues to deepen.

For us, this improves visibility on both order flows and execution. We have been building exposure in this space, and the structural case has strengthened further this quarter.

Market View: Our Read on the Street

Operating Performance

We were earlier building in ~22% PAT growth for FY27E. The ongoing conflict introduces near-term uncertainty, and we are closely monitoring both demand and supply-side developments.

At this stage, we are not seeing meaningful demand disruption. Most portfolio companies operate in B2B segments with demonstrated pricing power, typically passing on input cost increases within one to three months. There may be a one-quarter margin impact. Order books, however, remain intact and business momentum is largely unchanged.

Balance sheets continue to be an understated strength. The portfolio median debt-to-equity stands at 0.27x — providing both resilience and strategic flexibility precisely when it matters most.

Cash Is King

This is the third major macro shock our portfolio has navigated in under seven years. COVID-19. Russia-Ukraine. Now this. Each episode has reinforced the same lesson with greater conviction: cash is king.

When the ground shifts, liquidity is not just a financial buffer. It is a strategic weapon. Companies that entered this disruption with clean balance sheets have protected their workforce, maintained operational continuity, and held competitive position while peers scrambled to stay afloat.

Labour retention remains an underappreciated differentiator. Businesses that keep their teams intact through disruption recover faster, execute better, and capture share when conditions normalise.

The trigger changes. The lesson doesn’t. This pattern repeats.

Valuations

Valuations today offer a genuine margin of safety. The portfolio is trading at a FY27E median P/E of ~14× versus a 10-year average of 16.4× — a ~15% discount to its own history despite no structural dilution in business quality or demand potential. At a PEG of 0.64×, the earnings growth ahead remains underpriced, leaving room for both earnings delivery and gradual re-rating to drive returns.

Why This Is the Time to Build Portfolios

Prolonged time corrections and steep price corrections rarely occur together. When they do, history shows the recovery from these setups tends to be strong, and the window to accumulate quality at attractive valuations does not stay open for long. Markets adjust quickly once uncertainty begins to clear, and by the time visibility improves, prices usually have already moved.

The data backs this up for our own portfolio. Every time our holdings have traded at a 20% or greater discount to their long-term average valuations, the following 12 months have delivered returns in the range of 60% to 70%. We are at that point today.

The first signs are already visible in the April recovery referenced earlier. Most holdings have recovered 20–40% within a few weeks.

This is why we have been actively encouraging investors to use this period to build positions. The response has been affirming: ₹200 crore raised and deployed through the January to March quarter, followed by ₹60 crore in top-ups and new account openings in the weeks since our April 2nd webinar. Investors who have been around long enough recognise this setup.

Our Positioning

Our portfolio is built for environments like this one: businesses with strong balance sheets, B2G revenue concentrated in economy-accretive segments, and earnings compounding at multiples of the index, bought at below-average valuations.

That said, the US political backdrop and the broader macro environment are likely to keep the investor community on edge. We are therefore deploying capital in a staggered manner and holding ~30% in cash for new capital, retaining the flexibility to add at more attractive levels if volatility persists, without being early or forced.

The philosophy remains unchanged: own well-managed, cash-generative businesses, treat volatility as an opportunity rather than a risk, and allow compounding to do the heavy lifting over time.

Sources

01

International Energy Agency (IEA), Director Fatih Birol statement, March 23, 2026.

02

CNN Business, April 7, 2026; Axios, April 7, 2026. Brent crude at ~$73 on Feb 27, 2026.

03

Business Standard, March 24, 2026; Bloomberg, March 27, 2026. INR/USD hit 93.94.

04

Ministry of Petroleum & Natural Gas, DEA Monthly Economic Review, March 2026.

05

MUFG Research, March 12, 2026; The National, March 23, 2026. ~91% LPG imports from the Gulf.

06

PPAC, Ministry of Petroleum & Natural Gas. FY26 consumption data; PPAC/Nielsen Study.

07

PPAC LPG Profile Report FY 2025–26 (Apr–Sept), December 2025.

08

ICRA; CareEdge; SBI Research. Crude price sensitivity analysis.

09

Petroleum Minister Hardeep Singh Puri, Lok Sabha statement, March 2026.

10

PTI, April 12, 2026; Indian Oil Corporation statement.

11

CNBC, April 6, 2026; Rystad Energy; Kpler shipping data.

12

Parliamentary Standing Committee on Petroleum, Dec 2024; The Diplomat, March 2026.

13

Press Information Bureau (PIB), MNRE, December 2025.

14

International Renewable Energy Agency (IRENA), RE Statistics 2025.

15

India Brand Equity Foundation (IBEF), 2025–26 industry reports.

16

IEA India Oil Market Report, 2024.

17

Ministry of Road Transport & Highways, Vahan dashboard; SMEV. EV registrations CY2025.

18

Chief Economic Adviser testimony, Parliamentary Standing Committee, March 2, 2026.

19

Delhi Transport Department, Draft EV Policy 2026–2030, April 11, 2026.

20

Reserve Bank of India; DEA Monthly Economic Review. CPI at 2.75% Jan 2026.

21

Government of India defence procurement announcement, Q4 FY26.

22

Ministry of Defence Annual Report; SIPRI.