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EXECUTIVE SUMMARY
Distribution of HNWI Investments The total Assets under management for wealth sector (Mutual Fund, Fixed Income, and Equity) in India is expected to grow at around 33% YoY from 7 5 USD 220 billion in 2010 to over USD 500 billion by 2013. 100% 7 7 10 Indias individual wealth is predicated that it will almost double from the 12 23 22 existing USD 1.59 trillion to USD 3.18 trillion in the next three years that 50% 26 25 will probably grow at 26% compounded annual rate, whereas the market size for individual wealth management in China was USD 350 billion and 29 27 0% is expected to reach USD 700 billion by 2014. 2009 2010 The individual HNI wealth across the globe is estimated to grow from USD Luxury Collectibles Art Collections 39 trillion in 2010 to USD 48.5 trillion by 2013 at a growth rate of 5.6%, Jewelry, Gems & Watches Other Collectibles Sports Investments Miscellaneous which indicates that the Individual wealth in India which grows at 26% compounded annual rate is expected to grow at more than four times the Source: CapGemini world rate. Due to overall macro-economic growth and strong recovery in stock The wealth management market in market, Indias high net worth individual population grew to over 130,800 India will have a target size of 42 in 2010 and is estimated that it will increase to over 174,095 by 2013. million households by 2012, as The fact that affluent wealth is growing at a rate of 17.6% compounded against 13 million in 2007. annually is attracting both foreign wealth managers to set up business and Over the next four-five years, the domestic banks to set up wealth management businesses. revenue from wealth management The individual HNI wealth across the globe is estimated to grow from USD services is expected to contribute to 39 trillion in 2010 to USD 48.5 trillion by 2013 at a growth rate of 5.6%, over one third of full-service financial which indicates that the Individual wealth in India which grows at 26% institutions. compounded annual rate is expected to grow at more than four times the world rate. HNI Wealth across the Globe (USD trillion) HNWI Wealth (USD trillion)
60 60 50 40 20 0 2008 2009 2010 Africa Middle East Latin America Source: CapGemini 2011E Asia-Pacific 2012E 2013E Europe North America 40 30 20 10 0 2010 2011E 2012E 2013E
39
42.17
45.33
48.5
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CONTENTS
EXECUTIVE SUMMARY 1
WEALTH MARKET
8 9
11 26 27
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WEALTH MARKET
Number of Billionaires around the World Number of Billionaires in Asia
403
64 49
25 22
18 11 10 10 9 7 5 4 4 4 3 2 1 1
Canada
United States
Russia
Germany
United Kingdom
Japan
Hong Kong
0 China India Hong Kong Japan Taiwan South Korea Saudi Arabia Israel Malaysia Indonesia Kazakhstan Lebanon Singapore U.A.E Thailand Philippines Kuwait Pakistan The individual wealth in India will almost double in the next three years. It is estimated to grow from present USD 1.59 trillion to USD 3.18 trillion by 20122013.
Mukesh Ambani, Lakshmi Mittal, Azim Premji, Anil Ambani, Shashi & Ravi Ruia, Savitri Jindal, Kushal Pal Singh, Kumar Birla, Sunil Mittal and Anil Agarwal these are the top ten billionaires of India.
3.18 2.52 2
2 1.5 1 0.5 0
1.59
2009-2010
2010-2011E
2011-2012E
2012-2013E
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0.3%
31.10%
Investment in direct equity of individual wealth in India amounts to over USD 494,140 million. Investment in fixed deposits & bonds of individual wealth in India amounts to over USD 481,806 million. Investment in insurance of individual wealth in India amounts to over USD 227,423 million. Investment in savings bank deposits of individual wealth in India amounts to over USD 146,768 million. Investment in small savings of individual wealth in India amounts to over USD 112,861 million. Investment in provident fund of individual wealth in India amounts to over USD 61,209 million. Investment in mutual funds of individual wealth in India amounts to over USD 60,425 million. Investment in alternative assets of individual wealth in India amounts to USD 4,038 million.
Key Asset-wise breakup of Individual wealth in India (%) We can see a shift towards the equity based asset classes which are expected to form 42.9% of individual wealth by 2012-2013 as against 33.9% in 2009-2010. The investment in debt is expected to increase by 20 % year-on-year in volume terms, its overall proportion is likely to reduce from the present 65.8% of individual wealth in India to 56.1% by 2012-2013. Individuals in India are under invested in alternative assets with just 0.3% of Indias wealth presently in alternative assets as compared to 7% to the globe.
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 20102011E 20112012E 20122013E 20092010
Source: KPW
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Breakdown of HNWI Financial Assets (%) As the economic conditions are improving, the profile of HNWI portfolios is likely to shift upward. HNWIs investment in equities is expected to rise from 29% in 2009 to over 35% in 2011. It is also expected that fixed-income holdings will increase slightly, as investors will move some of their increased allocations and short term deposits back into long-term, higheryielding investments. HNWIs investment in cash/deposits is expected to increase from 17% in 2009 to around 19% by 2013. HNWIs investment in real estate is expected to decline to 14% by 2013 as against 17% in 2009.
120 100 80
6 18 17
7 16 16 30 31
2010
8 14 13 31
9 14 13 32
7 15 14 35
60 40 20 0 2009
31 29
35
32
2012E
29
2013E
2011E
Source: CapGemini
Number of wealthy people having more than USD 1 million of financial assets
180000
Wealth management industry currently registers a 30 % plus growth rate. The number of people with more than USD 1 million of financial assets is estimated to double from 84,000 in 2008 to over 166,793 by 2013. By 2012, the countrys wealth management market is expected to be USD 1 trillion, with approximately 42 million households by 2012, as against USD 13 million in 2007.
160000 140000 120000 100000 80000 60000 40000 20000 0 2008 2009 2010
2011E
2012E
2013E
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The above figure shows the different segments of Indian customers for the wealth management providers. Based on their investible surplus funds, they can be divided into six segments as given below: Investible Surplus Ultra High Net worth = in excess of USD 30 million Super High Net worth = between USD 10 and USD 30 million High Net worth = between USD 1 and USD 10 million Super Affluent = between USD 1,25,000 and USD 1 million Mass Affluent = between USD 25,000 and USD 1,25,000 Mass Market = between USD 5,000 and USD 25,000 Segments of HNWIs in India by 2012
400,000 300,000 200,000 100,000 0 Ultra HNWI Super HNWI HNWI Super Affulent
320000
350000
10,500
42,000
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Objective Setting
Asset Allocation
ProductDriven
Advice-Oriented
Product-Oriented
WEALTH MANAGEMENT RANGE Student Liquidity Management (Cash Management) Start of Career Career Established Premium A/C Platinum Card Retirement Premium A/C Platium Card
Deposit based Comfort A/C comfort A/C with credit limit Credit Cards Gold Card Overnight money A/C Money Market & Fixed Income Fund Near Money Market Fund ZINS Plus Top Portfolio Flagship Portfolio Titan Portfolio
Overnight money A/C Money Market & Fixed Income Fund Near Money Market Fund ZINS Plus Top Portfolio Flagship Portfolio Titan Portfolio
Top Portfolio Flagship Portfolio Titan Portfolio Capital formation benefit funds
Absolute return Portfolio Holding & Private Equities Modular Wealth Management Individual Wealth Management Premium Portfolio Titan Portfolio
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502
500 400 300
200 100 0
2010
2011E
2012E
2013E
The total assets under wealth management in India are expected to grow at around 33 per cent YoY from USD 165 billion in 2009 to over USD 500 billion in 2013.
17% 61%
Based on the most active regions in India, the western region dominates with 61 per cent of the investment activity. Northern region a distant second with 17 per cent while the eastern region is the least active with only 6 per cent.
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REGULATION
Registration: No person shall act as portfolio manager unless he holds a certificate granted by the Board (SEBI). An application by a portfolio manager for the grant of a certificate shall be made to the Board and shall be accompanied by a non-refundable application fee. Registration Fees: Every portfolio manager shall pay a non-refundable fee of USD 2174 (INR one lakh) along with the application for grant or renewal of certificate of registration. Every portfolio manager shall pay a sum of USD 21740 (INR ten lakh) as registration fees at the time of the grant of certificate by the Board. Every portfolio manager shall pay a renewal fee of USD 1087(INR five lakh) upon grant of renewal. The following criterion has to be met for registration: The applicant is a body corporate; The applicant has the necessary infrastructure such as adequate office space, equipments and the manpower to effectively discharge the activities of a portfolio manager The principal officer of the applicant has either A professional qualification in finance, law, accountancy or business management from a university or an institution recognized by the Central Government or any State Government or a foreign university; Or An experience of at least ten years in related activities in the securities market as a portfolio manager, stock broker or as a fund manager. The applicant has in its employment minimum of two persons who, between them, have at least five years experience in related activities in portfolio management or stock broking or investment management or in the areas related to fund management; The capital adequacy requirement shall not be less than the Networth of USD 4.35million( INR two crore) Minimum portfolio size: For an investor to avail PWM services, the minimum portfolio size should be Rs.1million. An investor can also open a PWM account by transferring his existing portfolio of stocks or mutual funds.
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Fees to be charged: The SEBI (Portfolio Managers) Regulations, 1993, have not prescribed any scale of fee to be charged by the portfolio manager to its clients. However, the regulations provide that the portfolio manager shall charge a fee as per the agreement with the client for rendering portfolio management services. The fee so charged may be a fixed amount or a return based fee or a combination of both. The portfolio manager shall take specific prior permission from the client for charging such fees for each activity for which service is rendered by him directly or indirectly (where such service is outsourced). The Board on being satisfied that the applicant fulfils the requirements specified above shall send intimation to the applicant and on receipt of the payment of registration fees grant a certificate.
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KEY PLAYERS
Aditya Birla Money Mart Ltd
Date of Inception Assets Under Management Number of Clients Distributors Product & Services 1999 USD 100 million Over 260,000 Multiple Distribution Mutual Fund, PMS, Direct Equity, Structured Products, Alternate Asset Products, Real Estate, Loan against Securities & Mutual Funds, Gold, Life Insurance, Wealth Management Description Aditya Birla Group enjoys a leadership position in all the sectors in which it operates and its operations span 25 countries across six continents. Aditya Birla Money Mart is having presence through its 37 branches and through a network of 7,000 business associates across more than 100 centres. The company caters to the corporate and institutional segment, wealth management.
132
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180
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95
104
115
127
140
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Description
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259
250
2009
2010
2011E
2012E
2013E
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198
200 150 100 50 0 2009
210
231
254
280
2010
2011E
2012E
2013E
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190
207
227.7
250.47
275.52
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656
722
794
873
961
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Description
102
114
125.4
137.94
151.73
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675
725
797.5
877.25
964.98
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183
202
222.2
244.42
268.86
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Commodities, Wealth management, Asset management, Insurance, Fixed deposits, Loans, Investment Banking, GoId bonds and other small savings instruments.
102
112
123.2
135.52
149.07
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159.78 138.95
167.77
176.16
184.97
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Reliance Money
Date of Inception Assets Under Management Number of Clients Distributors Product & Services 2008 USD 800 million Over 16,870 Multiple Distributers Wealth Management, Equities, Commodities, Mutual Fund, IPO Investment, Equity-linked PMS, Insurance, Structured Products Description Reliance Securities is the broking arm of Reliance Capital. It provides access to equities, equity option and commodities futures, wealth management, wealth management services, mutual funds, IPO, offshore investments and investment banking. It has presence with over 6,100 outlets.
760
800
840
882
926.1
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181
198
217.8
239.58
2012E
2013E
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RECENT DEALS
Atlanta based Wealth Management Company Reliance Financial Corporation announced that its subsidiary Reliance Trust Company had acquired Harrington Wealth Management Company which is a provider of trust and investment management services to individuals and institutional clients.
Karvy Private Wealth acquired the wealth management business of iTrust Financial Advisors with operations in Delhi, Bangalore and Hyderabad. It has acquired the entire business and assets of iTrust.
Future Capital Holding is to exit from its two joint venture companies i.e. Centrum Capital- FCH Centrum Direct Ltd and FCH Centrum Wealth Managers Ltd. It wants to do solely into retail finance, broking and wealth management. Standard Chartered Bank acquired the remaining 25.1% stake in Standard Chartered-STCI capital Markets from Stock trading Corporation. STCI Capital Market currently offers retail & institutional broking, wealth management products and investment banking services. Tata Capital is planning to raise USD 1 billion for its private equity. It has also started its international fund raising process. Its wealth management business is developing and is planning to foray into the securities broking business. Qatars largest investment bank will buy 25% stake in Mumbai -based Ambit group. This will help Ambit to expand its investment banking, advisory and private wealth businesses.
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ABOUT RESEARCH
Northbridge Capitals Research team generates Sector and Company research for Indian companies. Should you wish to request a specific research report, please contact Monali Doshi at monali@northbridgeasia.com Northbridge Capitals Research team also published several periodic updates of relevance to foreign and Indian companies including M&A activity, Debt and IPO issuance etc Research reports on sectors, stocks are also available to clients online and can be accessed at www.northbridgeasia.com
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CONTACT INFORMATION
INDIA OFFICE Monali Doshi Email: monali@northbridgeasia.com Tel: +91-22-22901715 Fax: +91-22-42643612 Northbridge Capital Ltd R-501, Remi Bizcourt Shah Industrial Area Off Veera Desai Road Andheri (West), Mumbai 400 053, India Website: http://www.northbridgeasia.com HONG KONG OFFICE Sam Farrimond Email: sam.farrimond@northbridgeasia.com Tel: +852-28628053 Fax: +852-22909154 Northbridge Partners (Asia) Ltd 22/F, 3 Lockhart Road Wanchai, Hong Kong
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DISCLAIMER
- This information is for Institutional Investors and Northbridge Capital clients only. It is not meant for public circulation No transmission of this information in any form or medium is allowed without the written authorization of Northbridge Capital - This is not a solicitation to buy or sell any security in any jurisdiction. - The exchange rate of INR/$ is taken as Rs. 45/$.
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