Investor Issues
Kotak, Crisil expect five-fold increase in wealth of HNIs in five years; see boost for financial, luxury services

The number of ultra high net worth households is growing quickly, but services are evidently not keeping pace

Kotak Wealth Management and Crisil Research expect that the total wealth of high net worth individuals (HNIs) in India will grow five-fold in five years and that this would be a big boost for financial services and luxury businesses that serve the ultra rich class.

According to a report published by Kotak and Crisil this week, the net worth of Indian ultra HNIs is expected to reach Rs235 trillion in 2015-16 from an estimated Rs45 trillion in 2010-11. Currently, there are around 62,000 ultra high net worth households in India with a minimum net worth of Rs250 million. This constitutes 0.03% of the total households in India, but this class is poised to more than triple to 219,000 households by 2015-16.

However, finance schemes and luxury services targeted at the uber-rich in the past have fared badly or led to mis-selling. Over-optimistic guesses and over-ambitious targets have rarely paid off and Kotak itself has tasted failure in this regard.

The report refers to the rising number of Indian names in the Forbes rich list, according to which, India is next only to the US and China in terms of the number of billionaires. The 55 Indians on the rich list are worth Rs11,090 billion together.

Kotak and Crisil say ultra HNIs prefer investing in real estate and equity and they like to spend on luxury products like holiday packages, jewellery, watches and household electronics.

 "The five-fold increase in net worth and increasing propensity to spend could together have an explosive impact on the luxury goods market," says Roopa Kudva, managing director and chief executive officer, CRISIL. "The 'Top of the Pyramid' report will serve as a useful guide for investment managers and luxury brand marketers to develop more innovative marketing strategies."

But there is little to rejoice, looking at the manner in which the luxury market has grown in India. When the economy was in its 'feel good' state, the luxury segment was much hyped. Many international lifestyle brands entered India, in the hope of cashing in on the affluence.

However, following the 2008 depression, things looked bleak. Many labels exited the country. But the hype revived in 2010, signalling a boom in the luxury items and retail sector. But the hopes have yet to materialise and there is little evidence to show that the luxury segment is growing.

Of course, many financial products targeting the uber-rich have fared disastrously. The stark examples are glamorous portfolio management schemes (PMS), all of which have done very badly. Kotak Securities discretionary PMS has been one of the worst performers. As The Economic Times reported a week ago, PMS assets of Kotak plunged 79% and poor returns have led to many investors quitting the scheme.

HSBC was recently hauled up for arbitrarily changing its schemes. The complainant was a wealthy investor. (Read, Regulation: KM Abraham's investor-unfriendly order)

Other popular investment opportunities for the rich have also not performed well. Art funds, which emerged before the 2008 slowdown, saw many affluent people rush in as investors. Today, most of these investors have either pulled out in frustration or they are waiting for repayment of capital. The Rs120 crore Osian's is one example. The luxury real estate segment has also fared badly, and in the midst of the present crisis, doesn't look like recovering anytime soon.

So, while the report from Kotak and CRISIL may boost the confidence of businesses aiming to foray into the high-end segment, for investors and consumers it could be quite a different story.




5 years ago

Some really interesting stats and data on the UHNI segment in India. Also came across the official top of the Pyramid Report.
The report is a must read for wealth managers and luxury brand managers.

Unity Infraprojects wins order worth Rs99.74 crore in Madhya Pradesh

The project is to be completed by the executive engineer of Harsi High Level Canal division dabra dist of Gwalior in 18 months

Unity Infraprojects, one of India's major civil contracting firms, has won an order in the irrigation space for the construction of Harsi High Level Main Canal, in Gwalior, Madhya Pradesh.

The order is for construction of Harsi High Level Main Canal, earthwork, cement concrete lining by paver machine for main Canal cast in Situ for distribution network all in concrete Structure WBM Service Road for main Canal and Muroom topped Road for distribution network (except agreement work of main Canal) from Km 30 to Km 65 and its entire distribution network system of distributaries minors and sub-minors up to 40 ha chak and Sindh phase II.

The project is to be completed by the executive engineer of Harsi High Level Canal division dabra dist of Gwalior in 18 months.

On Wednesday, Unity Infra ended 1.92% up at Rs69.05 on the Bombay Stock Exchange, while the benchmark Sensex declined 0.55% to 18,394.29.


Infosys and Gen-i announce strategic partnership

Infosys has also acquired Gen-i’s Software Solutions practice and offered positions to its more than 110 employees, who will continue to be in Auckland, Wellington and Christchurch

Infosys and Gen-i has announced a strategic partnership that will create a new choice for Australasian enterprises seeking local expertise and commitment, as well as global best practices and capabilities in IT services including IT consulting, business transformation and cloud-based offerings.

The partnership creates a new market proposition for local businesses by helping them to transform for competitive advantage, with new ways to innovate, reduce costs and increase the effectiveness of their people, processes and technology.

As near-shore delivery from New Zealand for Australian clients and global delivery headed by local management are among the joint growth strategies planned, the partnership also has significant potential to further grow New Zealand-based technology jobs.  Infosys has also acquired Gen-i's Software Solutions practice and offered positions to its more than 110 employees and contractors, who will continue to be based in Auckland, Wellington and Christchurch. The employees invited to join Infosys-primarily senior developers, technical architects and consultants-will expand Infosys' New Zealand team to over 150 people, with immediate plans to hire an additional 15-30 people.  

The partnership will be undertaken by Infosys Australia & New Zealand, the Australasian arm of global technology services and consulting company, Infosys Technologies, and Gen-i, the corporate ICT arm of Telecom New Zealand.

On Wednesday, Infosys ended 0.71% down at Rs2,872.20 on the Bombay Stock Exchange, while the benchmark Sensex declined 0.55% to 18,394.29.


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