Kotak Wealth Management report estimates surge in UHNIs

A 16 per cent increase in the number of Indian Ultra High Networth Households to around 117,000 in FY 2013-14 and its tripling over the next few years has been estimated by the Kotak Wealth Management ‘Top of the Pyramid 2014’ report released in Mumbai on Wednesday.

Consequently, the net worth of UHNHs is projected to surge at an annual compounded rate of 34 per cent from an estimated Rs. 104 lakh crore in FY 2013-14 to Rs. 408 lakh crore by FY 2018-19. The report also points that close to 45 per cent of current UHNIs are seen residing in non-metro cities and smaller towns.

C. Jayaram, Joint Managing Director, Kotak Mahindra Bank said: “India’s super rich are moving out of their comfort zones to put more monies in the rare and the risky – exotic food, private equity and even space travel. While exclusivity is the mantra for personal and family expenditures, they are equally interested in giving back to the society. UHNIs are supporting a variety of social causes. ” 

Over 60 per cent of the UHNIs surveyed consider philanthropy while planning annual expenditure; education (86 per cent) followed by ‘food for poor’ (79 per cent) get preference.

26 per cent of UHNIs surveyed also included Private Equity (PE) investments in their portfolios with Real Estate and IT emerging as top two sectors and e-commerce being the favourite on the PE investment block for UHNIs, according to the report.

“HNIs are now warming up to equities as compared to the lull or sideways movement that we saw for last five years. The perceived risk has subsided and it is more to do with the hope that the country sees in structural reforms the new government will deliver. Today, UHNIs are in strong contact with people globally and we realize India is gaining more traction among emerging markets,” he added.

The report also offers insights into the Ultra High Networth Individuals segment’s outlook towards the economic environment and rising inclination towards equity as opposed to debt. 

As per the report, the allocation to equity has increased from 35 per cent in 2012 to 38 per cent in 2013, with a corresponding reduction in debt investments to about 24 per cent. Similarly, income statements of UHNIs reflect a growing share of returns from real estate in addition to their primary business, followed by equity, said the report.

According to Murali Balaraman, Partner – Advisory Services, Ernst & Young,  “Top of the Pyramid 2014  has been prepared with survey results and analysis of more than 150 UHNIs across ten Indian cities and interviews with luxury service providers”. 

“The optimism of changing environment is reflected in the aspirations of UHNIs as their spend get more luxurious and investment more exotic. We expect a continued momentum in the positive trend and even further acceleration, with UHNIs being an ever alluring segment,” he added.

The study categorises India’s rich in three segments – Inheritors, Entrepreneurs and Professionals. UHNIs in each of these categories exhibit different behaviour in their spending and also investments pointed the report. For instance, Inheritors and Entrepreneurs prefer re-investing about 20-25 per cent of income into their primary business whereas Professionals prefer savings and personal investments.

A significant increase in spends is seen - growing from 30 per cent of total income in 2012 to 44 per cent in 2013. Spending on Jewellery (16 per cent), Apparel and Accessories (15 per cent), followed by Luxury Travel (14 per cent), indicates family-orientation in expenditure planning, said the report.

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