Good news has been hard to come by for Netflix (NFLX 2.33%) of late since the streaming giant warned of a slowdown in subscriber growth last month, but there's one market where the company continues to make impressive progress: India.

Considered by PwC to be the world's fastest-growing over-the-top (OTT) video streaming market with a projected compound annual growth rate of 28.6% through 2024, Netflix has high hopes from India. Not surprisingly, the company has made bold moves in India as it looks to corner a bigger share of what's expected to become the world's sixth-largest OTT market in the next four years, generating an annual revenue of $2.7 billion.

And its various strategies seem to be paying off.

Person streaming video on a mobile phone.

Image source: Getty Images.

Netflix nearly doubles its revenue in India

Citing regulatory filings, technology-focused Indian website Entrackr reports that Netflix's revenue from its Indian operations doubled to almost 924 crore rupees (around $124 million at the current exchange rate) in fiscal 2020, which ended in March of this year. The company had generated revenue of 470 crore rupees during the previous fiscal year.

What's more, Netflix posted a small profit of almost 9 crore rupees (roughly $1.2 million at the current exchange rate), an increase of nearly 73% over the prior year. The report also shows the company rapidly ramping up spending in the Indian market. Netflix's total expenses in India increased close to 97% over the previous year as the company spent more on employee benefits and pumped money toward developing local content.

The sharp spike in Netflix India's expenses is not surprising, as the company had announced in December 2019 that it would be spending $420 million to produce local content over a period of two years. In July of this year, it was reported that Netflix India had a local content pipeline of 17 new titles as it looked to take advantage of a strict lockdown enforced to contain the spread of COVID-19.

As such, Netflix could replicate its terrific financial performance in India once again during the current fiscal year, which ends in March 2021.

The long-term play

According to third-party research, Netflix is expected to end 2020 with 4.6 million paid subscribers in India with an average revenue per user (ARPU) of $5. The company reportedly exited 2019 with 2 million paid subscribers in that market, indicating that it is making nice progress.

That would be a small number, given that the company had 195 million subscribers at the end of the previous quarter and generated $6.44 billion in quarterly revenue. However, investors should look at the bigger picture.

India is a small part of Netflix's business right now, but the market holds great potential, as discussed earlier in this article. The company is capable of ramping up its subscriber growth in India on the back of innovative plans to bring new users into the ecosystem, as well as its partnership with telecom companies such as Jio, the country's largest operator.

On the other hand, increased spending by Indian consumers on video streaming platforms could be another tailwind for Netflix. PwC estimates that India's video streaming revenue could overtake box office revenue in 2020 and open a wide gap over the latter by 2024, which could help Netflix boost its ARPU. The streaming specialist still has a lot of room to grow its base in India as less than 5% of internet users in the country use its services, as per a third-party estimate.   

Additionally, Netflix's user base in India is expected to more than triple in the next couple of years compared to 2019 levels. So, the company could keep clocking high levels of revenue growth in that market thanks to a combination of subscriber growth and higher revenue from each user. This is what Netflix needs right now as its growth seems to be peaking.

Netflix's terrific revenue growth in India indicates that it is on track to milk the huge opportunity presented by that market. After all, rapid growth in a nascent video streaming market such as India could provide the much-needed catalyst for the company to regain its mojo, especially considering that it aims to hit 100 million subscribers over there in the long run. That should give Netflix investors (or potential investors) reason to stay interested in this still-growing stock.