Orowealth acquires Wealth Trust; deal hints at further consolidation

PayTM's zero-fee offering pushes back monetisation plans of digital mutual fund platforms

The Mumbai-based digital platform Wealth Trust, which was earlier planning to shut down its shop, has now got a lease of life with Orowealth acquiring the firm. According to experts, the direct platform space can see more consolidation due to the pricing pressures posed by new entrants such as PayTM.  

Speaking to Business Standard, Vijay Kuppa, co-founder of Orowealth, said, “This is a period of consolidation. We have seen fewer number of new mutual fund (MF) apps coming in the last year.”

Kuppa added that buying Wealth Trust made sense as both the entities shared the same MF Utilities platform and were trying to differentiate themselves through advisory services. The combined entity will have a user base of three lakh and assets under advice to the tune of Rs 2,000 crore.

Both Orowealth and Wealth Trust had started offering some premium plans where investors could opt for their advisory services.

The fee-based advisory model in the mutual fund (MF) industry is yet to pick-up scale as investors traditionally don’t prefer to pay for advice.

Moreover, industry observers say entry of new players with deep pockets and with zero-fee structure is going to make it difficult for others to charge.  

“To compete with these new players, we will also have to re-look at our monetisation strategy,” Kuppa added.

Cashbacks and discounts are among the options being explored.

Meanwhile, costs pressures remain. “There are several costs involved such as cost to service, product development, technology, growth-related costs. Monetisation can kick-in after building sticky customer base,” said Harsh Jain, chief operating officer and co-founder of the Bengaluru-based digital platform Groww.

For some of the platforms, the pushback or slowdown of monetisation plan is making fresh venture capital money less forthcoming.

Experts also point out that such platforms run the risk of getting ‘commoditised’ into just transaction platforms if they fail to differentiate themselves.

Jain said that platforms would need to diversify beyond the MF products to build a sustainable business model.

“We are focusing on advisory and offering other products besides mutual funds. We are currently also giving stock advisory and offering financial planning. Going ahead, we may even look at loans and insurance,” Kuppa added.