Indian ultra HNHs numbers soar 17% to 137,100; equity, jewellery top preferences: Kotak Report

Whatever the state of the economy for the rest of the population, the rich are certainly multiplying massively in India. The number of Indian ultra HNHs (Ultra High Networth Households) has increased by as much as 17% to touch around 137,100 in FY15. This comes in at a compounded annual growth rate (CAGR) of 22% over the previous five years.

The good news is not restricted to the past and the current phases, the net worth of ultra HNHs’ is projected to surge at a CAGR of 26% from an estimated Rs 128 lakh crore in FY15 to Rs 415 lakh crore by FY20.

The findings are part of the fifth edition of the Kotak Wealth Management ‘Top of the Pyramid’ report titled ‘Gliding on Optimism’.

A special focus and recurring motif in the report is the rise of the e-commerce industry, which has led to a new category of entrepreneurs who are young and ultra-rich. This has contributed to the lowering of the average age of ultra HNIs — and nearly half of them are below 40. In fact, analysis of PE and VC investments in FY15 has shown that technology (IT and e-commerce) is the preferred sector.

C. Jayaram, Joint Managing Director, Kotak Mahindra Bank, said, “The ultra HNI landscape in India has transformed dramatically over the last few years. New emerging industries armed with disruptive technology have created space for a different economy, which has propelled the number of young ultra-rich entrepreneurs in India.”

He added, “Overall, the mood of India’s ultra-rich has been buoyant, and it augurs well for the economy and luxury retailers. Ultra HNIs are equally inclined in giving back to the society, and healthcare and education continue to be the top supported causes. There is also a steady increase in spends of luxury goods and preference towards equity over real estate.”

Top 5 Key Findings:
· Ultra High Networth Households (ultra HNHs) increase by 17% to 137,100 in FY15 from 117,000 in FY14
· Equity exposure increased to 45% in FY15 from 38% in FY14; banking, infrastructure preferred sectors
· Business, real estate key investment drivers; commercial real estate preferred
· Maximum spends seen in jewellery
· Majority of Ultra High Networth Individuals (ultra HNIs) prefer investment portals to track investments

Murali Balaraman, Partner – Advisory Services, Ernst & Young, said, “Top of the Pyramid 2015 has been prepared with survey results and analysis of over 225 ultra HNIs across twelve Indian cities. Ultra HNIs have a positive outlook towards the economic environment and there is a rising inclination towards equities over real estate. Further, improved performance of the corporate sector has led to a rise in average salaries with as many as 66% of professionals getting most of their wealth from personal income and real estate investments.”

Emerging cities and small towns continue to register a significant proportion of the ultra HNH population — 44% of the total pie. Increased spends and investment patterns of ultra HNIs in three cities — Chandigarh, Ahmedabad, and Chennai — reveal interesting insights about the rise in income and diverse lifestyles influencing preferences across different parts of the country.

Key areas of investments and spends for the ultra HNHs continue to be equity and jewellery. Cities such as Pune and Bengaluru have emerged as preferred destinations for real estate investments. There is a shift towards commercial real estate, driven by higher rental realisations compared to the residential market — 36% of the ultra HNIs that were surveyed for the report showed an interest in commercial properties. In terms of tracking their investment, the report noted that a majority of ultra HNIs (around 74%) prefer investment portals.

Ultra HNIs also lay great emphasis on their children’s education. While entrepreneurs and inheritors prefer to send their children abroad for education, 41% of professionals are inclined towards educating their children in India. USA and UK are the most favoured education destinations. Quality of education, global exposure, and safety are the key drivers in selecting the destination country for educating their children.

Luxury weddings are a distinct part of the ultra HNI lifestyle and destination weddings are hugely popular, with India being a preferred destination. Offshore destinations like Thailand, France and Spain have also emerged as popular destinations. While the UHNIs spend most time on deciding a wedding theme and the location, exquisite cuisines and location décor are the focus areas during the wedding. Fusion food is one of the hottest trends in these luxury weddings.