Real estate and IT continue to be the top two sectors for Indian UHNWIs’ private equity (PE) investments, with e-commerce emerging as a new favourite, a new report from Kotak Wealth Management has revealed.
Reflecting a positive investor sentiment, 53% of Indian UHNWIs prefer exposure to the real estate sector whereas 43% prefer IT through PE investments, followed closely by the pharma sector (42%), financial services (40%) and e-commerce (38%).
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‘Top of the Pyramid: ‘Ready for Change’, the fourth annual survey of UHNWIs Indians by Kotak Mahindra Bank, revealed that nearly 26% of this wealthy segment have an allocation to PE in their total investments, with higher returns being the primary driver for the interest.
The report, with the contributions from EY and Feedback Consulting, surveyed 150 Indian UHNWIs households worth over INR250m ($4bn) in wealth.
According to the study, in 2013 real estate private equity funds raised INR5,000 to 6,000 crore ($80.78bn to $96.94bn) from investors in the Indian market.
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By GlobalDataThe survey also found that two-thirds of the total distribution of wealth for UHNWIs comes from primary business and real estate.
Specifically, among UHNWIs, professionals lay higher emphasis on premium real estate, whilst most of entrepreneurs’ and inheritors’ wealth comes from their primary business
Interestingly, the report revealed that when it comes to investment decisions, not many wealthy Indians ‘use’ financial advisers or wealth managers.
"The complexity of decision making is handled generally by the UHNWIs themselves in coordination with their advisors, ranging from family and friends to experts," states the ‘Top of the Pyramid: ‘Ready for Change’ report.
According to the survey, 28% of inheritors and 19% of entrepreneurs rely on family and friends as compared to 13% of professionals in their investment decisions.
As for their spending habits, the report found that the luxury market in India has touched INR51,000 crore in 2013 as against 36,000 crore in 2012. This is estimated to cross INR84,000 crore over the next three years.
The report said India’s ultra high net households (HNH) population has witnessed a strong growth, rising to 117,000 in 2013-14 from 100,900 in 2012-13.
The number of UHNW households grew by 24% over the last four years, with accumulated wealth growing by a significant 32% year-on-year since 2010.
The study predicts that the number of Indian UHNWIs is projected to nearly triple to 343,000 with total net worth reaching INR408trn ($6.5trn) by 2018-19.
With 22,000 employees, Kotak Mahindra Bank has a distribution network of 652 branches across India and international offices in London, New York, Dubai, Abu Dhabi, Mauritius and Singapore.
The bank has recently acquired ING Vysya Bank in an all stock amalgamation valued at $2.4bn, resulting in the creation of the fourth largest private sector bank in India.
