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Super-rich population in India rises 17% in FY15

Business Standard:  August 12, 2015

Mumbai: Growing opportunities in e-commerce, a rising stock market and an optimistic economic outlook have helped the number of ultra-high networth households (UHNHs) in India grow 17 per cent in FY15.

In the current financial year, the number of families with net assets (excluding residence) of more than Rs 25 crore was around 137,100 , against 117,000 a year back, according to Kotak Wealth Management’s annual wealth report, Top of the Pyramid 2015.

“New emerging industries armed with disruptive technology have created space for a different economy, which has propelled the number of young ultra-rich entrepreneurs,” said C Jayaram, Joint Managing Director, Kotak Mahindra Bank Limited. The population of UHNHs has seen a compound annual growth rate (CAGR) of 22 per cent in the past five years. And over the next five years, it was expected to grow at a CAGR of 26 per cent to 348,000 families ( in the next five years, the report estimated there would be 348,000 such families ). The combined networth of these households was expected to grow from Rs 128 lakh crore to Rs 415 lakh crore by  2019-20. The growth was seen not just in major metros; emerging cities and small towns continued to register a significant proportion of the ultra HNWH population — 44 per cent of the total pie.

Kotak Wealth Management’s Top of the Pyramid is the only report that exclusively focuses on UHNH with net assets of over Rs 25 crore; most other surveys look at households with net worth of over $1 million (more than Rs 6.3 crore). The report was prepared by surveying 225 people across 12 cities. The bank had commissioned Ernst & Young for it. Opportunities in e-commerce space have contributed to the rising population of the young and super-rich, and have brought down the average age of ultra-high networth individuals (UHNIs) — nearly half of them were below 40 years.

Murali Balaraman, partner–advisory services, Ernst & Young, said there was a rising inclination towards equity investments, from real estate, among the wealthy. “Further, improved performance of the corporate sector has led to a rise in average salaries with as many as 66 per cent of professionals getting most of their wealth from personal income and real estate investments.”

As far as investments go,   non-discretionary expenses of UHNIs were around 25 per cent of their overall income, said the report. They ploughed back 22 per cent of the income back into the primary business concerned. The savings, investment for personal wealth and discretionary expenses were at 15 per cent each. While they allocated six per cent of the income to charity, most of this was not done in an organised manner.

Ultra-HNIs increased their equity allocation to 45 per cent from 38 per cent last year. There was a  growing interest in banks and infrastructure, with 55 per cent preferring these sectors. The appeal of energy companies decreased with a fall in global oil prices.

Interest in real estate reduced — only 25 per cent of the allocation was towards real estate  in FY15. Last year it was 29 per cent. The overall allocation to physical assets such as gold and property declined. Those still looking at realty focussed on cities such as Pune and Bengaluru.

There was an increasing direct exposure to the e-commerce space, too. Those who became part of the ecosystem via venture capital, private equity or direct investment routes in the early stages have seen good returns, said the report.

The country’s super-rich also put great emphasis on children’s education. While entrepreneurs and inheritors preferred to send their children abroad for education, 41 per cent of professionals were inclined to giving their children an education on India.

Spending had increased due to   lower inflation and interest rates. Until a few years back, shopping was one of the main reasons for the wealthy to fly abroad. With e-commerce growing and the proliferation of luxury brands in non-metros, this is changing. Family-centric expenses – jewellery, holidays, automobiles, home decor and events – constitutes 67 per cent of their overall spends.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.