NORTHBRIDGE CAPITALAsia Investment Banking Research

India Wealth Management ResearchFebruary 2011

Analyst Monali Doshi monali@northbridgeasia.com

EXECUTIVE SUMMARYDistribution 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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India Wealth Management Research

CONTENTSEXECUTIVE SUMMARY 1

WEALTH MARKET

3

SEGMENTATION OF INDIAN WEALTH MARKET

6

WEALTH MANAGEMENT VALUE CHAIN

7

GROWTH OF ASSET UNDER WEALTH MANAGEMENT (AUWM) IN INDIA REGULATION

8 9

KEY PLAYERS RECENT DEALS ABOUT RESEARCH

11 26 27

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India Wealth Management Research

WEALTH MARKETNumber of Billionaires around the World Number of Billionaires in Asia

450 400 350 300 250 200 150 100 50 0

403

70 60 50 40 30 64 62 53 49 29 28 Turkey 25 24 22 20 10 China India

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.

Source: Forbes Rich List

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.

Growth of Individual Wealth in India (USD trillion)3.5 3 2.5

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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Asset-wise breakup of Individual Wealth in India 4% 4% 7% 9% 14% 30.30%Direct Equity Savings Bank Deposits Mutual Funds Source: KPW Fixed Deposits & Bonds Small Savings Alternative Assets Insurance Provident Fund

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

Alternative Assets Debt Equities

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 312010

8 14 13 31

9 14 13 32

7 15 14 35

Alternative Investment Real Estate Cash/Deposits Fixed Income Equities

60 40 20 0 2009

31 29

35

322012E

292013E

2011E

Source: CapGemini

Number of wealthy people having more than USD 1 million of financial assets180000

166793 132966 84000 105840 118720 148922

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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SEGMENTATION OF INDIAN WEALTH MARKETPrivate Banking USD 1mn in free assets Private Client USD 250k in free assets Premier USD 100k in free assets RetailSource: PricewaterhouseCoopers

HNI Affluent Emerging Affluent Mass Retail

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 2012400,000 300,000 200,000 100,000 0 Ultra HNWI Super HNWI HNWI Super Affulent

320000

350000

10,500

42,000

Source: Live Mint

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