Ultra-rich households set to treble in 5 yrs

Close to 45% of these are in non-metros, smaller towns: Kotak Wealth Management study

India’s ultra-rich club is growing fast. A study by Kotak Wealth Management titled Top of the Pyramid 2014, released on Wednesday, estimates 117,000 ultra-high net worth households (UHNHs) at the end of March 2014, an increase of 16 per cent from a year ago. It expects this number to treble over the next five years.

UHNHs are households with wealth exceeding Rs 25 crore. The net worth of UHNHs, estimated at around Rs 104 lakh crore at the end of the last financial year, is projected to grow at an annual compounded rate of 34 per cent to Rs 408 lakh crore by 2018-19 (April-March).

Close to 45 per cent of these households were seen residing in non-metro cities and smaller towns, the Kotak Wealth Management report notes.

SWELLING SUCCESS

• 117,000 ultra-high net worth households were there at the end of March 2014, an increase of 16% from a year earlier, says a study by Kotak Wealth Management
   
• The net worth of UHNHs, estimated at around Rs 104 lakh crore at the end of the last financial year, is projected to grow at an annual compounded rate of 34% to Rs 408 lakh crore by 2018-19 (April-March)
   
• 45% of these households are in non-metro cities and smaller towns
  

 

About 60% of super-rich Indians engaged in philanthropic and charitable activities
 

UHNHs are households with wealth exceeding Rs 25 crore each

The report followed a detailed market survey of 150 ultra-high net worth individuals by Feedback Consulting and Ernst & Young, conducted between February and April 2014.

Anticipating a stable political environment, improvement in business confidence and pick-up in economic activities, wealthy Indians have increased their spend on luxury travel, philanthropy and investments. Their expenses increased to 44 per cent of total income in 2013 from 30 per cent a year earlier.

Releasing the report, C Jayaram, joint managing director of Kotak Mahindra Bank, said it “aptly captures the mood and behaviour of the super-rich against the backdrop of all-round emerging optimism in the economy”. The survey was conducted before election results and Jayaram was confident that “next year will report even more dramatic positive changes”.

Jayaram said high net worth individuals were returning to equity markets, compared to the lull in the past five years. “Investors had earlier preferred fixed income investments, but equity allocation rose from 35 per cent in 2012 to 38 per cent in 2013 while debt investments reduced to 24 per cent,” he added.

Luxury travel now appears more experience-bound with growing interest in polar expeditions and space travel. Nearly 50 per cent of ultra-high net worth individuals made at least three luxury trips and close to 33 per cent spent over Rs 25 lakh in a year for leisure. While there was a decline in the average number of days per trip, the number of trips increased.

Over 60 per cent of super-rich Indians engaged in philanthropic and charitable activities. The survey revealed education was the most supported cause followed by ‘food for poor’.

Private equity investments have gained popularity among ultra-high net worth individuals. Nearly 26 per cent of ultra-high net worth individuals surveyed have allocated some part of their total investments in private equity, with higher returns being the primary driver for the interest. Information technology, pharma, and real estate emerged as preferred sectors for private equity investments.

Murali Balaraman, partner (advisory services) at E&Y, said non-discretionary spends have gone up 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,” he said.

On preference for private equity (PE), the report said nearly 26 per cent of ultra-high net worth individuals allocated some part of their total investments in PE, with higher returns being the primary driver. More than 53 per cent ultra-high net worth individuals preferred exposure to the real estate sector, followed by information technology (43 per cent) and pharmaceuticals (42 per cent).