Kotak Wealth Management: Top of the Pyramid India Edition 2016

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THE INDIAN ULTRA HNI
Optimism Uninterrupted

Foreword
What an exciting year 2015 has been! India
emerged one of the strongest larger economies
in the world, despite bumps such as the stress
in the banking sector and a choppy stock
market performance. For ultra HNIs, last year’s
positivity flowed through into this year (Optimism
Uninterrupted) with reforms taking root, inflation
under control, and economic growth looking up.
Our annual report, Kotak Wealth Management’s
Top of the Pyramid (2016 edition), continues to
capture the mood of the ultra HNIs in India in the
context of the country’s changing socio-economic
landscape. Top of the Pyramid remains the last
word on the lifestyles, aspirations, and opinions of
India’s most wealthy. In addition to analysing the
spending and investment patterns of the
ultra HNIs, for 2015, Top of the Pyramid also covers
their increasing interest in art and collectibles, and
their growing affinity for wearable devices.
The edition has looked at the growing tendency
among the ultra HNIs to incorporate increasing
‘goodness’ into their lives. Two such inclinations
have emerged strongly – their keen interest in
renewable energy and their increasing bent
towards investing in companies that make a
sustainable difference to many people’s lives, also
known as impact investments. In this context,
we have profiled four unique individuals whose
ventures and investments have set out towards
sustainable and positive changes.
Our annual survey delved into the details of
another interesting development – from treating
death as taboo, India’s jet set has started facing
the inevitable head-on and is actively providing
for and simplifying the lives of their loved ones,
employees, and dependents through succession
planning initiatives. Top of the Pyramid looks at
the various means that the ultra HNIs employ to
plan for progression.
As always, Top of the Pyramid takes you through
the extraordinary and remarkable lives of India’s
ultra HNIs that continue to stay firmly at the helm
of India’s development journey.
Happy reading!
Dipak Gupta
Joint Managing Director
Kotak Mahindra Bank Ltd.
Foreword
01

INSIDE THE REPORT
04 About the report
08 Executive summary
12 Optimism Uninterrupted
SPENDS
Income allocation
Areas of spends
Apparel and accessories
Art and paintings
Wearable devices
PROFILE
Mr Nagaraja Prakasam
Partner, Acumen Fund
Type of collectibles
Sources of purchase
Key drivers
S P E C I A L F O C U S
43 Succession Planning
Modes of succession planning
Activities and time allocation
Implementation
PROFILE
Ms Shaheen Mistri
Founder, Akanksha Foundation
& CEO, Teach For India
19
Collectibles37
02
TOP OF THE PYRAMID 2016 | Kotak Wealth Management

73 Impact Investment
Ultra HNI exposure to impact investment
Sectors in impact investment
Key drivers
Investment modes
Importance of renewable energy
Types of renewable energy and
investment patterns
Key drivers
55 Renewable Energy
PROFILE
Mr Vinod Keni
Co-founder & Partner,
Peachtree Management Advisor
INVESTMENTS
Sources of wealth and
asset allocation
Commodities
63
PROFILE
Ms Roopa Kudva
Partner & Managing Director,
Omidyar Network India Advisors
03

Report
About the
This year saw a
7% increase in
the number of
ultra HNHs to
about 146,600.
This continuing
positive sentiment
is captured in the
theme – “Optimism
Uninterrupted”
Making of Top of the Pyramid 2016
04
op of the Pyramid is Kotak Wealth
Management’s annual publication that
covers the spending, investment and
lifestyle patterns of ultra-high-networth
individuals (HNIs). Kotak Wealth Management,
the private banking arm of Kotak Mahindra Bank,
commissioned professional services firm Ernst &
Young LLP (EY) for the report.
EY collaborated with market research firm
Feedback Consulting for the survey to study and
analyse ultra-HNI trends. For its projections, EY
used parameters such as GDP growth, savings and
inflation rates, past and projected financial and
non-financial asset-class allocations, and returns.
With the advent of improved government
policies and reforms, both accomplished and
planned, India has emerged as a much stronger
economy. These government initiatives have
influenced the investing and spending patterns of
ultra high-networth households in India. This year
saw an increase in the number of ultra
HNHs to about 146,600 (7% growth over last
year). It is this continuing positive sentiment
that is captured in the theme of the report –
“Optimism Uninterrupted”.
While looking at their spending and investing
patterns, the report has explored ultra-HNI
behaviour in apparel and accessories, art
and paintings, and wearable devices. The
special focus of this year’s edition is collectibles,
renewable energy, succession planning and
impact investments.
During our research, we observed that
emerging cities and small towns continue to
form a significant part of the Indian ultra-HNH
population. We found that besides the top-four
metro cities, non-metro cities such as Bengaluru,
Ahmedabad, Pune, Hyderabad, Nagpur,
and Ludhiana contribute 45% to the Indian
ultra-HNI population.
The current report is a culmination of insights
from three main sources that are listed below:
1.A detailed market survey of 225 ultra HNIs
by Feedback Consulting. The survey took place
between January 2016 and March 2016 in the
form of face-to-face interviews. These interviews
were conducted over 12 cities to understand the
lifestyle of ultra HNIs in India and changes over
the previous year.
2.A series of interviews were conducted with
ultra HNIs to understand their patterns and

201320122011
Covers of the last five editions
2014 2015
05
About the Report
preferences in impact investments, renewable
energy, collectibles, and art and paintings. In
addition, their spending patterns in apparel and
accessories and preferences in wearable devices
were also studied.
3.Secondary research and additional analysis
by EY. EY extensively analysed the results of the
survey and validated its conclusions through
primary interactions with service providers.
This report would not have been possible without
the cooperation of all the survey respondents
and the interviewees. We thank them for their
invaluable support, the time they put at our
disposal, and the insights they offered.

About Kotak Wealth Management
About Kotak Mahindra Group
06
The Kotak Mahindra Group has come a long way
since its early days and caters to diverse financial
needs of individuals and the corporate sector,
nationally as well as internationally. With its
understanding, experience, infrastructure, and
most importantly, its commitment, the Group
consistently delivers pragmatic solutions.
Kotak has consistently pursued opportunities
and capitalised on them in a rapidly changing
economic and business landscape.
In the early period of Kotak’s journey, one
particular day stands out – 21, November 1985.
On that day, Mr Uday Kotak identified an
opportunity in the bill-discounting market. With
a seed capital of less than US$80,000, borrowed
from family and friends, and a small team of three
that has grown to over 40,000 as on March 31,
2016, he skillfully steered what was initially a bill-
discounting startup into a giant financial services
conglomerate with assets of US$19 billion.
In February 2003, Kotak Mahindra Finance Ltd.,
the group’s flagship company, received a banking
license from the Reserve Bank of India (RBI),
becoming the first non-banking finance company
in public to convert into a bank – Kotak Mahindra
Bank Ltd.
Kotak Group’s solutions are technology driven,
contemporary, and comprehensive, and they
span consumer, commercial, corporate and
investment banking, wealth management, retail
and institutional equities, asset management, life
and general insurance. The bank is channelising its
industry experience and capabilities to cater to its
changing customer aspirations.
Effective April 1, 2015, ING Vysya Bank Ltd.
merged with Kotak Mahindra Bank Ltd. creating a
`2 trillion institution (consolidated). As on March
31, 2016, the merged entity – Kotak Mahindra
Bank Ltd, has a significant national footprint of
1,333 branches and 2,032 ATMs spread across 674
locations, affording it the capacity and means to
serve its customers even better.
Kotak Wealth Management is Kotak Mahindra
Bank’s private banking arm. It provides financial
advice to some of the most distinguished high-
networth families in the country. It is one of the
oldest and the most respected wealth managers
in India with over 16 years of experience. Its
client base ranges from entrepreneurs to business
families and employed professionals, including
over 40% of India’s top-100 families (as per the
Forbes India Rich List, 2015).

07
We believe that no single asset class tends
to perform consistently over a long period and
that an HNI needs to have access to various
asset classes, investment styles, themes, and
tenures. With this philosophy, Kotak has built a
formidable suite of products and services for this
specific audience.
Our offerings are customised for the client’s
profile and investment objectives. With an
in-depth understanding of the client’s
requirements and of various asset classes, Kotak
offers the widest range of financial solutions
through a transaction-based investment approach
or the asset-advisory approach. Our truly bespoke
banking solutions also include one of the most
premium credit card propositions offered, by
invitation, to eminent clients.
We also offer ‘Family Office Services’ to
ultra-high-networth investors, providing
comprehensive financial solutions that go
beyond investments. Through ‘Kotak Mahindra
Trusteeship Services’ we offer estate planning
services that deal with succession planning by
creating private family trusts.
We have maintained our leadership position due
to our in-depth understanding of our clients'
requirements and the macro environment, and
our prowess over various asset classes.
Kotak Wealth Management has been adjudged
the Best Private Bank - India for the 7th year in a
row, by FinanceAsia Country Awards 2015.
About the Report

they treasure the absolute pleasure of owning a
beautiful and timeless creation, but also because
owning art has started making sound business
sense due to its manifold value appreciation.
In this light, ultra HNIs are increasingly treating art
and paintings as an integral component of their
portfolios. Even so, our survey shows that
for 68% of ultra HNIs, art and paintings are
impulse purchases; only 32% engage in research
before buying.
If e-commerce was the buzz last year, this year
wearable devices are gaining ground from a
technology perspective and have become very
popular. Ultra HNIs have followed and adopted
this trend keenly, so much so, that these devices
now form a part of their daily lifestyle. Popular
devices include smart watches, fitness bands,
smart glasses, virtual reality headsets, and sleep
headphones – to name only a few. These wearable
devices are carving out a niche for themselves
in catering to specific needs – such as fitness
bands for health-conscious individuals and smart
watches to aid convenience.
Another area of passion for the ultra HNIs
continues to be collectibles. They do not leave
any stone unturned to collect items that add to
Summary
Executive
Optimism about growth boosted both spends and investments
n FY16, India emerged as one of the
strongest economies the world over,
because of robust GDP growth and
reduction in both inflation and current-
account deficit. This translated into
improved ultra-HNI sentiment, which is reflected
in their increased spends and investments.
We estimate that the number of ultra HNHs grew
to 146,600 in FY16 from around 137,100 last year,
a moderate growth rate of 7% over one year and
16% compounded growth over five years.
Optimism about economic growth has motivated
ultra HNIs to increase their investments into
their primary businesses as well as to boost
their spends. Most of their spending categories
have seen an increase. Jewellery, apparel, and
electronics continue to be at the top, accounting
for nearly 50% of total spends. In our interactions,
we found that 64% ultra HNIs are impulsive
buyers when it comes to apparel and accessories.
Despite the allure of foreign destinations, many
of them prefer to shop within India, as most major
foreign luxury brands are now available locally.
There has also been increasing awareness about
art among the ultra HNIs, not only because
08

Optimism about economic growth has
motivated ultra HNIs to increase their investments
into their primary businesses as well as to
boost their spends
the grandeur of their living rooms, office spaces,
or atriums. Passion is a major factor in pursuing
collectibles – 70% of ultra HNIs that we interacted
with confessed that their passion for owning a
collection of exotic and interesting items drove
their purchases.
Renewable energy has been an important
component of India’s energy planning process
for more than four decades and ultra HNIs have
always been enthusiastic about adopting and
promoting renewable energy.
Most of them strongly believe in an eco-friendly
lifestyle and strive to re-use resources, to plant
trees, and to use electric / alternate fuel cars.
Socially conscious and environment-friendly
ultra HNIs are increasingly adopting ‘green’
building practices to minimise the footprint of
their homes on the ecology while maximising
comfort. This sector is also seeing investments
towards solar rooftops and boilers and wind-
driven machinery, mainly because of government
incentives. This is likely to be a big focus area for
ultra HNIs.
As their wealth continues to grow, it becomes
very important for ultra HNIs to pass it on to
upcoming generations in a systematic manner,
which ensures sustainable growth. Today, most
ultra HNIs understand that succession planning is
a continuous and proactive process, and their plan
involves identifying potential leaders, grooming
them, and encouraging them to look beyond their
immediate responsibilities.
Our survey revealed that 43% of ultra HNIs
prepare for at least five years to put an efficient
succession plan in place, while another 35%
take anywhere between two to five years.
When it comes to a successor, over 90% of
ultra HNIs choose from their children and high-
Executive Summary
09

performing family members, while less than 10%
choose outsiders.
However, this trend is likely to change in
the future because of the increasing need
for professional management from a good
governance perspective. Even today, most ultra
HNIs (73%) prefer planning for succession with
their close confidants; a few look for advice from
external sources such as chartered accountants,
consultants, and wealth managers. People are also
gradually relying on professional estate planners,
trustees, and wealth advisors.
The bullish trend in equity markets saw a reversal
this year with a near-20% fall, mainly due to
global events such as a sharp plunge in the
Chinese stock markets and a drop in foreign fund
flows. This led to a realignment of the investment
mix – with real estate (mainly commercial), debt,
and alternate assets gaining ground at the cost
of equities.
As part of alternate assets, commodities attracted
ultra-HNI interest this year. Our survey revealed
that 72% of ultra HNIs invest in commodities; of
these, 40% have invested about 5-10% of their
total assets in commodities, with gold and silver
continuing to be the most preferred. This trend
is likely to continue until equity markets start
picking up.
The philanthropic interest of ultra HNIs has
seen a change over the years; the need to
build enterprises that not only create a positive
difference in society, but ones that are self-
sufficient, economically viable, and lasting,
essentially ‘sustainable social enterprises’, is
very strong. This has led to the emergence of
impact investing – a growing trend among the
elite. While the general interest for impact
investments is high, professionals seem to have
the highest inclination – 67% have an exposure to
these investments. Key sectors attracting impact
10
Increased spends are a good proxy for
rising optimism and are likely to continue
with steady economic growth

investment include financial services, clean energy,
and affordable housing.
The impact-investment space is receiving
traction from the ultra HNIs, mainly based on
the attractiveness of the sector and stability of
returns. In addition to the existing Indian funds
focusing on the segment, there is also a trend
towards impact-investment-focused global funds
setting up shop in India, which will give further
impetus to this sector.
The economic scenario has remained steady
and the mood of ultra HNIs is buoyant based
on better government and private consumption
and spending outlook. Increased spends are a
good proxy for rising optimism and are likely to
continue with steady economic growth.
Higher propensity towards spending also brings
good tidings for the luxury goods market, which
seems to be getting stronger in India and is
spreading out its reach to capture smaller towns
and cities.
Executive Summary
11
As their wealth continues to grow, it becomes
very important for ultra HNIs to pass it on
to upcoming generations in a systematic
manner, which ensures sustainable growth

The government’s flagship
policies – Start-Up India
Action Plan, Make in
India, Smart Cities, and
Swachh Bharat – are
gaining traction both in
India and abroad
Optimism
Uninterrupted!
The ultra HNI mood has been
upbeat because of strong economic growth
12
Y16 was one more step towards a
stronger India. Stability in GDP growth seen
this year (7.6% in FY16, 7.2% in FY15),
even as other BRICS nations and major
economies struggled, was a strong indicator of
sustained progress. India’s GDP growth surpassing
China’s was another milestone, one that India
should be able to sustain. The quantum and
magnitude of the government’s reforms, both
accomplished and planned, are also indicators of
a stronger economy.
Other factors that contributed to India’s progress
were a fall in crude oil prices and inflation coming
in below the target range, which allowed the
RBI to reduce its repo rate twice in FY16. This
move is likely to reduce cost of borrowing and
stimulate growth by encouraging investment in
the corporate sector.
Falling oil prices also had a positive impact on the
current account deficit, which was at 1.1% of GDP
for FY16.
The government’s flagship policies – Start-up
India Action Plan, Make in India and Smart Cities
are gaining traction both in India and abroad.
These initiatives intend to strengthen India’s
infrastructure; they have already translated into

2010-11 2011-12 2012-13 2013-14 2014-15
Growth of Ultra HNHs in India
We believe there were 146,600 HNHs in FY16 with an
62,000 81,000 100,900 137,100117,000
2015-16
accumulated net worth of `135 trillion
Number of Ultra HNHsCombined Net Worth
`45
trillion
`65
trillion
`86
trillion
`104
trillion
`128
trillion `135
trillion
146,600
Source: Top of the Pyramid 2016, Kotak Wealth Management
Introduction
13
on-ground investment and led to the
country becoming an attractive FDI destination.
While India still has a while to go before being
counted among the best economies, strong signs
are emerging.
With rising pollution levels, especially in metro
cities, there is an increasing awareness about
the environment. The government has launched
several initiatives to tackle this issue, which has
also prompted interest from the private sector.
Ultra HNIs have evinced interest in investing
into sectors focused on tackling social and
environmental issues.
On the global front, the Chinese market crash
was a result of perceived weakness in the Chinese
economy, which in turn was interpreted as a sign
of an impending global downturn. The Indian
stock markets also suffered from the effects, with
a sharp correction and general cautiousness in
sentiment through the year.
The US Presidential election due this year, and
the Brexit, are something that India is following
closely; both events have a considerable bearing
on global economies, especially India’s.

Compounded
growth of the
number of
Indian HNHs
over the last five
years was 16%
with 146,600
such households
in FY16
We expect these to touch 294,000 by FY21 with a combined net worth of `319 trillion
Growth in the Number of Ultra HNH Households
146,600
294,000
Number of Ultra HNHsCombined Net Worth
2015-16
2020-21
`135
`319
trillion
trillion
14
India’s Ultra High Networth Households
Our current edition of ’Top of the Pyramid’
follows the previous editions’ methodology. We
define an ultra HNI household (HNH) as one with a
minimum net worth of `250 million, mapped over
10 years. Growth in the number of ultra HNHs was
a bit slower this year.
We estimate that there were about 146,600
ultra HNHs in FY16 vs. around 137,100 last year,
a moderate growth rate of 7% over one year
and a 16% compounded growth over five years
(corresponding growth rates last year were
higher at 17% and 22%). These HNHs represent
an accumulated net worth of `135 trillion, which
is a 5% growth on last year’s wealth and 18%
compounded growth over the last five years.
We project that the number of ultra HNHs will
increase to 294,000 by FY21 with a combined net
worth of `319 trillion driven by new ultra HNHs
from emerging sectors and new avenues for
investments that give higher returns. Smaller cities
will also contribute to this growth in the number
of ultra HNIs and their wealth.

Small centres such
as Surat, Indore
and Jamshedpur
continue to create
new ultra HNIs,
mainly in the
inheritor and
entrepreneur
categories
Introduction
15
The business and investor-friendly approach of
the government will help nurture and sustain a
start-up ecosystem in the country, and propel the
growth of ultra HNHs.
As predicted in previous editions of ‘Top of
the Pyramid’, we believe emerging cities and
small towns will continue to form a significant
proportion of the ultra-HNH population-
The Geographical Spread of Ultra HNHs in India
While metros continued to hold 55%, emerging cities and small towns
stayed at a significant 45%
55%
17%
5%
23%
Top 4 cities: Mumbai, Delhi, Chennai, Kolkata
Next 6 cities: Bengaluru, Ahmedabad, Pune, Hyderabad, Nagpur, Ludhiana
Next 11-20 cities: Chandigarh, Surat, Jaipur, Lucknow, Kanpur, Jamshedpur, Amritsar, Raipur, Indore, Aurangabad
Rest of India

Indianisation of their
brands has been
tried earlier by
international luxury
companies to increase
their appeal
16
we estimate 45% coming from these non-
metro centres. The penetration of the digital
phenomenon is influencing and changing the way
people in India buy not just common goods, but
also luxury items. Until a few years ago, luxury
retailers thought that selling these exclusive goods
needs a personal touch at their outlets, but they
are slowly warming up to the idea of an online
marketplace.
In fact, the difficulty in establishing a connection
with the non-metro customer base is the primary
reason that luxury brands are turning towards
the fast-permeating digital phenomenon. A few
retailers are also adopting models such as ‘on-
demand home shopping’ for customers from non-
metros and small towns.
The quest to reach a wider population is also
aided by start-ups with innovative models,
which are introducing ‘experiencing’ luxury and
exclusivity – this helps address key imperatives
for luxury brands operating in India, which are to
increase the awareness of the brand and establish
brand credentials.
While Indian luxury private labels are known to
have product lines that are largely ‘Indian’, there
are a few instances where international luxury
brands have ‘Indianised’ their product lines,
commonly seen in the food industry.
This is not a new phenomenon – even earlier,
international luxury brands have tried this
approach to increase the appeal of their products
in smaller cities, but it has not gained the traction
and the attention it deserves. It would be
interesting to see if international luxury brands
are able to successfully employ Indianisation as a
way to increase their reach and capture traditional
Indian ultra HNIs.
The subsequent chapters of ‘Top of the
Pyramid’ will take you through the current
lifestyle trends and investment patterns of Indian
ultra HNIs.
The report this year covers unique themes such
as collectibles, renewable energy, succession
planning and impact investment capturing the
dynamic lifestyles of ultra HNIs.

Introduction
17
The Key Attributes of
Ultra HNIs in the Indian Context
The following table gives the key attributes across three categories of ultra HNIs –
entrepreneurs, inheritors, and professionals – in the Indian context
Entrepreneur Inheritor Professional
Sources of wealth Motives for wealth creation Attitude to perpetuation of wealth
Drivers for spending Attitude to charity Approach to investing
Entrepreneurship
Self-recognition
and achievement
Wealth is strictly for
the immediate family
Attainment of
luxurious lifestyle
Provides mainly
monetary support,
less time
More opportunistic,
informal
Inheritance,
entrepreneurship
Wealth preservation
and growth
Wealth must remain
within the family
Maintaining a
luxurious lifestyle
Compassionate,
provides money
Organised
and planned
Self
actualisation
Wealth is for family,
Attaining value
for money
Important part of the
Disciplined and
planned with
systematic goals
but they must strive
to earn it
spending, provides
time and money

18

The average age of an Indian ultra HNI is reducing, and nearly half of them
are now less than 40 years old. Increasing number of start-ups have aided this
fall in average age. Good performance of the Indian economy, as evident from
high GDP growth, is reflected in rising ultra HNI spends this year.
Increasingly younger ultra HNIs, with high disposable incomes and an ample
choice of luxury options, are usually high spenders. They are also the ones
who are largely responsible for bringing in concepts such as ‘experiential
luxury’ into the limelight.
The recent ecommerce and technology boom has created many relatively
young ultra HNIs who have sky-high aspirations and desires when it comes
to luxury in their lifestyle. Luxury retailers have recognised this opportunity,
and are already aiming to capture the mind space of these young guns by
engaging in targeted marketing. This is one of the reasons for the rapid
expansion of these retailers into smaller centres to leverage, on the increasing
ad-hoc spends of these ultra HNIs.
LUXURY
FOCUS ON
The celebration continues
SPEND
HOW THE ULTRA HNIs
UNABATED!
Spends
19

Ultra HNIs Choose Investments over Savings
investments into primary businesses. This year,
59% of the ultra HNIs we surveyed increased their
investments into primary businesses and 43% saw
a decrease in their overall savings, which they
substituted with investments.
Non-discretionary expenses continued to
dominate their income allocation, except in the
case of entrepreneurs, for whom investments into
businesses became a priority. For professionals,
the proportion of savings reduced over last year,
with a commensurate increase in their investments
for personal wealth.
In FY16, India recorded the highest GDP growth
among major world economies, thereby
incentivising various stakeholders to increase their
investments into the economy. Inflation saw a
downward trend – with June 2015 recording the
lowest monthly CPI of 3.69% since FY14’s high of
over 11%. Consequently, the RBI cut rates twice
in FY16 (cumulatively by 0.75%), even after it had
already effected two rate cuts of 0.25% each, just
before the start of the financial year.
The rate cuts led to a fall in lending rates and
ultra HNIs turned to substituting savings for
Expenses
Savings and
Investments
55%
45%
How Ultra HNIs Allocated their Income this Year
Prioritised investments into primary businesses and personal wealth over savings
Others Charity
Investment for
personal wealth
Savings
Investment into
primary business
Discretionary
expenses
Non-discretionary
expenses
15%
25%
2%
5%
16%
14%
23%
20

Family-Centred Expenses see a Spike
Jewellery and apparel continue to remain ultra
HNIs’ top-spending categories, followed by
holidays. Family-centred expenses – spending
on jewellery, holidays, apparel, automobiles,
home décor and events – continue to dominate
by contributing to 68% of overall spends, a slight
increase over 67% last year.
A higher proportion of ultra HNIs compared
to last year are now considering these
family-related expenses (except home décor) as
non-discretionary.
In the jewellery space, Indian boutique
jewellers are becoming popular. Recently, a
prominent Indian jewellery designer’s collection
of customised diamond cuts was worn by a
Hollywood celebrity at the Oscars, making it so
popular with the ultra HNI that his company is
coming out with a `1000 crore IPO.
Apparel and accessories are the second biggest
spending avenue for ultra HNIs, and one of the
primary ways that they showcase their wealth and
A renowned Hollywood actress
wore the collection of a
prominent Indian jeweller at
the Oscars — this boosted the
popularity of the jeweller among
the ultra HNI. The jeweller is
now planning a `1,000 crore IPO!
Allocation of Income by Ultra HNIs
Professionals reduced savings this year, to choose
investments for personal wealth
Discretionary
expenses
Non-discretionary
expenses
Investment into
primary business
Savings
Investment for
personal wealth
Others
Charity
24% 27% 23%
15% 15% 16%
5%
5%
4%
25% 23% 17%
14% 13% 19%
15% 15% 19%
2%
2%
2%
Spends
21

Jewellery and Apparel Retain the Largest Share within Areas of Spending
Share of apparel and accessories, holidays, and electronic gadgets increased
Jewellery Apparel
Electronics Home
Related
Events
Vintage
Spirits
Luxury
Watches
Art &
Paintings Automobile
17%
16%
13%
11%
9%
5%
4%
5% 5%
Holidays
15%
passions. In an attempt to capture the interests
of India’s ultra HNIs, subsequent chapters detail
their spending preferences on apparel and
accessories, in addition to their interest in
wearable devices, art, automobiles, and events.
We have also captured their growing interest in a
sustainable lifestyle and renewable energy as an
investment avenue.
Almost all areas of spends have seen an
increase over last year, indicating positive
sentiment among ultra HNIs, driven by improved
economic outlook.
Luxury companies looking to woo young ultra
HNIs and garner a large share of their lifestyle
spends are likely to take a cue from this pattern.
22

UPSCALE ELEGANCE
Designer-wear and expensive accessories are haute with the Indian ultra HNI
he ultra HNIs live in a world filled with
innumerable business appointments,
luncheons, formal dinners, and high-brow
events, adorned and embellished by a
landscape of beautiful clothes – elegant business
suits, sophisticated foreign labels, and exclusive
collections by stylish designers, both from India
and abroad.
This section attempts to peek into the glamorous
wardrobes of India’s richest, usually filled to
the brim with the latest outfits from premier
luxury brands. In their purchases of apparel and
accessories, brand value is what pulls at the ultra-
HNI heart and purse-strings the most. They cannot
resist the tasteful temptation of the limited-
edition release of luxury-brand items, and it
usually turns into an impulse purchase.
In our interactions with ultra HNIs, we found that
64% of them are impulsive buyers when it comes
to apparel and accessories.
When a member
of the British
royal family
wore an outfit
by a high-end
Indian designer,
the designer’s
website crashed
due to enquiries
from all across
the globe
Spends
23

Popular Buying Destinations for Apparel and Accessories
India is the favourite, followed by Dubai, Singapore and Europe
59% 28 5%
3%
19%%% 28
Singapore EuropeDubaiIndia Thailand
Other destinations
Dubai and Singapore have emerged as other
popular destinations for apparel and accessory
shopping, while Europe is the next most popular.
What they really value is variety and exclusivity.
Many Indian ultra HNIs and their family members,
particularly women, are true fashionistas at
heart. They own exquisite collections of Indian
and western wear, which are integral to the
various high-profile events that they attend
almost daily. Most ultra HNI wardrobes, especially
women’s, are sure to include luxuriously
embellished Indian-wear crafted by prominent
Indian designers and accessories from top-end
international brands.
While ‘branded luxury’ was the most important
driver in their apparel choices (32% of them said
that this was their first priority), weather-specific
choices in clothing was important for 26% of ultra
HNIs. Interestingly, men were found to be more
brand conscious compared to women!
Not too long ago, visiting a foreign location for
shopping and other purchases was de riguer for
these brand-conscious ultra HNIs because of the
limited choice that shopping in India had to offer.
However, this is not strictly necessary anymore -
we observed through our survey that as many
as 59% ultra HNIs now satisfy their apparel and
accessory purchase needs in India itself.
24

15%
30%
43%
7%
5%
16%
33%
41%
9%
1%
The Frequency of Apparel and Accessory Purchases
Once a quarter to once a month
9%
33%
29%
19%
10%
More than once a month Twice a year At least once a yearOnce a month Once a quarter
15%
31%
41%
9%
4%
Overall
In our interactions, we observed that while
professionals tend to have a lower frequency of
apparel and accessory purchases, entrepreneurs
and inheritors are more frequent buyers.
However, most ultra HNIs picked up these items
between once a month and once a quarter.
Interestingly, product catalogues of international
luxury brands have started showing an inclination
towards ‘Indianise, personalise, and customise’.
For example, a European pen manufacturer
regionalised all its marketing material letterheads,
invitation letters, and newsletters; it also altered
other aesthetics such as colours and amount of
decoration used to Indian tastes. A Lebanese
designer's spring 2016 collection was inspired by
Indian looks of the traditional saree and salwar
kameez. A French luxury footwear and fashion
designer launched a Bollywood-inspired shoe
collection which included traditional Indian
designs and embroidery.
Past offerings by top brands have set the tone
for the future in terms of trends in apparel and
accessories, one that is increasingly inclusive of
Indian-ultra HNI tastes and desires.
Spends
25

ART AND PAINTINGS
eorge Bernard Shaw is once believed
to have said, “Without art, the
crudeness of reality would make the
world unbearable.” Indian ultra
HNIs seem to be on the same page as
Mr Shaw – most have always been passionate
about art, but a growing number are now
considering it a safe haven for investment and a
means to preserve family wealth.
Art and paintings have always been an inherent
part of Indian culture, whether it is Mithila
Madhubani paintings, Rajasthani miniatures,
Mughal, Mysore, Pahari, Tanjore, and Rajput
paintings, Raja Ravi Varma’s inimitable style, or
Odisha’s pattachitras – they all are an important
part of India’s rich history.
With increasing awareness about art, not only
for the simple pleasure of owning a beautiful
and timeless creation, but also for the sound
For the simple pleasure of owning beauty
Leading auction houses
focus on prolific Indian
artists besides other
modern figurative and
abstract artists
26

business sense it makes due to its manifold value-
appreciation, ultra HNIs’ are increasingly treating
art and paintings as an integral component of
their portfolio.
Our survey shows that for 68% of ultra HNIs, art
and paintings are impulse purchases; only 32%
engage in research before making a purchase
decision. For more than 80%, passion and status
are key drivers for acquiring art and paintings.
Other reasons include tradition and networking.
Ultra HNIs are combining their aesthetic sense
with their financial intuition to broaden and
What Drives Ultra HNI Purchases of Art?
Passion and status are key drivers
Passion
85%
Status
81%
Tradition
31%
Networking
28%
Resale value
26%
deepen the market, thereby making this segment
an alternative investment avenue.
Of the ultra HNIs we surveyed, 26% said that
they buy art and paintings for their resale value
and as an alternate asset-allocation avenue,
given that this segment acts as an effective
hedge against inflation and weak economic
periods. In addition to individual ultra HNIs,
buying of artwork has seen heightened interest
from the corporate sector and from institutions -
in fact, the corporate segment has already
amassed significant collections.
Spends
27

Types of Paintings that Indian Ultra HNIs Like
64% prefer Indian paintings and 56% prefer western ones
Indian
64%
Western
56%
Dependent on
Historical Importance
35%
Contemporary
24%
Far Eastern
33%
Indian art and artists have started receiving
global recognition; in fact, in the last few years,
Indian art has become a common feature in global
auctions. Increasing awareness and appreciation
has led to Indian art becoming the first choice
for ultra HNIs. Indian contemporary works also
sell at record-breaking prices in prestigious
auction houses.
28

Sources of Purchases
It is extremely important for ultra HNIs to obtain
independent and objective advice while making
investments in any asset class, including high-
value works such as art and paintings. The art
market has grown considerably in recent years,
which presents interesting opportunities for
providers of art-related services, as well as for
wealth-management services that would integrate
art in their services and strategies.
Based on our survey, we have found that 71%
ultra HNIs prefer to buy art and paintings from
art houses, 58% choose exhibitions, and 50% rely
on Indian auctions. Online galleries, international
auctions, and resale in secondary markets are also
preferred ways of buying art and paintings.
Where do Ultra HNIs Shop for Art?
Most prefer buying from art houses, exhibitions, and auctions
Art House
71%
Exhibitions
58%
Indian Auction
50%
Online Galleries
38%
International Auction
20%
Resale in Secondary Market
16%
Last year, while
inaugurating
an art museum
in Mumbai,
a prominent
ultra-HNI family
displayed
30 paintings
belonging to
Baroda's royal
family
Spends
29

Spending Patterns on Art
them twice a year. Only 10% spend on art at
least once in a quarter. While the interest levels
in art are high, the actual spending on art, in
comparison, is modest among the wider ultra HNI
segment; 85% spend less than `10 lakh on art and
paintings in a year while only 3% invested more
than `25 lakh per annum.
Our survey shows that average spends were
`7.5 lakh per year. This spending trend is likely
to rise with the growing demand and popularity
of Indian art across the globe and as ultra HNIs
develop a deeper understanding and appreciation
for art.
Driven by high disposable wealth, the growing
ultra HNI population has triggered a change in
investment behaviour in art and paintings. Prices
are driven by a combination of availability, quality,
and popularity.
Of the ones we talked to, 61% ultra HNIs purchase
art and paintings only once a year and 29% buy
One of the world's
largest auction houses
recently made a record for
any auction held in India -
by selling art worth `100
crore in December 2015,
highlighting the appetite
for Indian artSource: Top of the Pyramid 2016, Kotak Wealth Management
How Much do they Spend on Art?
Not much; 97% ultra HNIs spend less than `25 lakh per year
85%
12%
3%
Less than `10 Lakh
`10-25 Lakh
`25-50 Lakh
30

ACCESSIBLE CONVENIENCE
Wearable devices becoming very popular
ver the years, the term ‘wearable’ has
undergone a dramatic change. New
technology and its enthusiastic adoption
have helped to create a whole suite of
electronic products that can be worn. Ultra HNIs
have followed and adopted this trend keenly, so
much so that these devices now form part of their
daily lifestyle.
Interestingly, our survey showed that older
ultra Indian HNIs, between the ages of
36 and 50 years, were more eager to adopt
wearable devices than the younger ones;
we saw close to 61% adoption among the
36 to 50-year age group compared to 55%
adoption among ultra HNIs who are below 35
years of age.
Increasing Prevalence of Wearable Devices among Ultra HNIs
57% of them use these devices in their daily lives
57
Of ultra HNIs use
wearable devices
%
O
Spends
31

The quest for access to real-time information in an
easy and convenient manner has led to as many
as 57% of ultra HNIs becoming users of atleast
one high-end wearable device. What was once
considered fiction has now become a reality;
devices of the future are now exclusive and
more accessible.
Currently, popular wearable devices include smart
watches, fitness bands, smart glasses, virtual
reality headsets, and sleep headphones – to name
a few. Our survey uncovered that as many as 68%
of ultra HNIs have a smart watch – it seems to be
one of their most popular wearable devices.
While only 32% of them use fitness bands, we
expect this usage to grow as awareness about
their advantages increases. Other niche products
like sleep headphones – which block out noise
to aid slumber, while being comfortable for the
sleeping user – are also gaining popularity.
These wearable devices are carving out a niche for
themselves in catering to specific needs – such as
fitness bands for health-conscious individuals and
smart watches to aid convenience. These gadgets
assist users in something as simple as allowing
them to answer calls, to something as complex
as becoming their personal health assistants for
tracking sleep patterns and fitness regimes. We
have seen the children of ultra HNIs showing an
avid interest in wearable devices such as smart
watches, virtual reality headsets, and segues.
The adoption of wearable devices has led to an
increase in interest in this sector, which is giving
rise to new start-ups; this, in turn, could make way
for ultra HNIs that are both young and tech savvy.
For 81% of ultra HNIs, wearable devices serve
as additions to social status. For an equally high
proportion (73%), passion for these devices drives
their purchases.
These hands-free devices are beginning to act as
virtual assistants to ultra HNIs and provide them
with customised recommendations – such as a
fitness band that prompts an optimal workout
regime allowing the users to set targets as per
their capability and stamina. At least 70% of ultra
HNIs in our survey believe that the high degree of
customisation offered by wearables has led to a
marginal-to-positive change in their lifestyles.
Most Popular Wearable Devices
Smart watches are the rage; fitness bands are fast catching up
32%
Smart Watch Fitness Bands VR Headset Sleep
Headphones
31%
17%
68%
Smart watches
are the new
rage among the
ultra HNIs and
fitness bands are
also becoming
increasingly
popular
32

Luxury wearable devices also provide options for
personalisation such as name and date engravings.
Not surprisingly, a few luxury jewellery and watch
brands have taken the concept of a wearable
device to a different level with the introduction
of ‘smart jewellery’ for the ultra-rich– diamond
studs and 18-carat gold, combined with cutting-
edge technology. These devices enable contactless
payments, gesture recognition, and remote access
to cars and homes.
The jet-set will increase their wearable-device
usage, as these gradually cater to every aspect of
their lifestyle.
Hands-free
wearable devices
are already
acting like virtual
assistants to
ultra HNIs; their
customised
recommendations
should lead to
higher adoption
Reasons for Using Wearables
Most common reasons include social status and passion
Social Status Passion
Convenience
Health & Fitness
Personal Safety
Innovation
81% 73% 45%
36%
33%
31%
Spends
33

P R O F I L E
If the impact
is more with
low profit, it is
better to be
an NGO
PRAKASAM
Nagaraja
r Nagaraja (Naga) is an angel investor,
impact-investment specialist, and a
member of the Indian Angel Network.
He spent 16 years (1996-2012) with CDC Software,
most of it in the US, from where he left as
President, South and Southeast Asia. In 2012, CDC
was sold to a private equity firm, and Mr Naga
M
decided to take a break from a flourishing career
and do something completely different. The seeds
of this ‘something different’ were sown almost
13 years ago; in 1999, he and his team had raised
money for a group called Association for India’s
Development, which was used to support NGOs
in India.
34

more time and effort, it has good potential. This
led to the launch of IAN Impact, which is focussed
solely on impact investments. Its first venture was
GoCoop, India's first social marketplace to buy
and source handmade apparel, home furnishings,
fabrics, and crafts directly from co-op weavers
and artisans.
Initially, only 40-50 IAN members supported the
GoCoop concept, but ultimately all 350 came
on board, which eventually fuelled investments
in Uniphore (company that allows software
to understand and respond to natural human
speech in many languages), Saahas (organic
waste management, collection and recycling of
packaging waste and e-waste), and Freshworld
(a farm to home FnV using electric smartcards).
In fact, Saahas, he recalls, was an NGO. It took
a push from Naga and his portfolio consultant
company for Saahas to realise that it did not have
to remain an NGO – it could become a sustainable
social enterprise rather than depend on donations
for growth – and perhaps make a bigger
difference to people’s lives.
All his investments are in the impact space right
now in the `50 lakh to `6 crore bracket with the
average investment ‘sweet spot’ at `3 crore. He
calls this space “high risk and high return”.
Naga has invested in 18 companies and is sitting
on a 4X appreciation right now while some are
at 5X-13X return. 15 are doing well and 3 are not
doing well. He reinvests his returns, he says. He
believes that there is ‘political will involved’ in
renewable energy in India and sees a bright future
for this sector.
He served as the group’s president for a while
and spent time in India, particularly in India’s
villages when he realised that he fervently wanted
to contribute to the country’s social upliftment.
However, it was not until 2012 that he could
whole-heartedly pursue his heart’s desire.
From 2012, he has been a partner at Acumen
Fund, which invests patient capital in businesses
whose products and services enable the poor to
transform their lives. This US-based company was
started by entrepreneur and investor Jacqueline
Novogratz in 2001. Acumen has invested more
than US$88 million in 82 companies across Africa,
Latin America, and South Asia. Mr Naga joined
Acumen with the idea of bringing in the efficiency
of a corporate into the heart of an NGO.
Besides Acumen, he is a part of the Indian
Angels Network, and the founder Chairman
of Native Angels Network, a board trustee
of Nativelead Foundation, a non-profit
organisation promoting innovation-based New
Age entrepreneurship. He is also on the board of
several social-enterprise companies.
In his career as an angel investor, he has invested
in 18 startups in the impact investing space. His
investment philosophy rests on what he calls the
3Ps – profit / planet / people. “As an investor, my
main interest is profit. But as this is an impact
investment, there is a longer grace period – so this
is called patient capital,” he says.
Mr Naga was instrumental in making the Indian
Angel Network look at companies other than IT
for investments. As part of IAN, he urged fellow
investors to look at companies in the social space-
he believed that even though this space requires
The challenge
is to get wealth
into the social
ecosystem
Spends
35

36

COLLECTIBLES
n the past, maharajas, royal families, and landlords lived
opulent lives and loved to surround themselves with
beautiful objects – commonly called ‘collectibles’. These
collectibles were often their pride and joy and were
proudly displayed for their aesthetic and monetary value. These
collections have included vintage cars, gems and jewellery,
paintings and sculptures, and curios.
Snap to the present and the zest for collectibles is equally
visible in ultra-HNIs’ collections. Ultra HNIs have varied
tastes – from the quaintest of objects to the most stunning,
ostentatious jewels.
These collectibles not only define their quest for luxury and
power, but also their desire to be exclusive and distinct. This
section explores the drivers for collectibles, various categories
within this segment, and their purchasing trends.
Defining the quest for luxury and power
Spends
37

Our survey revealed that 65% ultra HNIs prefer
collecting electronic gadgets and about a third
have developed this interest over the last one
year. Luxury cars account for 63% of ultra HNIs’
collections, followed by investments made in art
and paintings.
In fact, collecting cars that are antique or
fashionably modern is an established purchase
trend among this community over many years.
These car collections are extremely opulent,
depending on individual eclectic leanings. All
latest luxury / sports car models launched in
India – from coupes to caravans – are generally
pre-booked, showing the passion that ultra HNIs
have for cars as collectibles.
Ultra HNIs that invest in art / paintings for their
collectibles tend to invest in the most expensive
paintings by world-renowned artists, making their
homes veritable museums – almost an intimate
haven for art aficionados.
Most Preferred Collectibles that Ultra HNIs Invest In
A Kolhapur-
based ultra HNI's
enviable car fleet
is maintained
by a team of
mechanics daily
What Kind of Collectibles do Ultra HNIs Covet?
Most-owned are art and paintings, cars, and electronic gadgets
Electronic
Gadgets
Luxury / Sports
Cars
Art / Paintings Sports / Cruise
Bikes
Antiques Currency Other
Memorabilia
Stamps
65%
63%
56%
40%
35%
30%
27%
21%
38

An ultra HNI we met is
big into scripophily –
he collects antique stocks
and bonds. His collection
totals more than
1,000 cancelled share and
bond certificates
It is not just their homes that they adorn with
these artifacts – they are very visible in their work
places too. Modern sculptures and contemporary
art is the latest flavour for the wealthy. Structures
and sculptures made out of waste and recycled
material are also becoming highly prized among
ultra HNIs.
The charm of letter writing is fading, but philately
(stamp collecting, once perceived as a hobby that
kids indulge in) has now become an investment
mechanism for ultra HNIs. Many of them look at
stamps known for their antique value and history
as an alternate investment avenue.
Collectibles are not always conventional. For
example, having a passion for carpets is fairly
Sources of Purchases
Ultra HNIs do not leave any stone unturned
in their quest for collectibles that add to the
grandeur of their living rooms, office spaces,
or atriums. These purchases are traditionally
known to require the collector visiting, examining,
and then estimating the value of the article
being purchased.
Even now, most collectibles are purchased through
physical channels (not online ones) with 63%
through special stores or institutions.
Of course, technology is augmenting traditional
physical purchases of collectibles; online
channels as a source of collectibles are evolving.
Our interactions revealed that 47% of ultra HNIs
are considering online channels for their purchase
of collectibles.
While special shops and old markets of cities are
famous among ultra HNIs for their collectibles
shopping, the increasing interest and growing
awareness of niche collections is also providing
unheard of in India. Nevertheless, an ultra
HNI from Delhi has several rare, characteristic
specimens of many varieties, some of them going
back 200 years! He collects these carpets from
around the world and exhibits them in metro
cities such as Delhi, Mumbai, and Bengaluru.
Spends
39

opportunities for specialised outlets, mobile apps,
websites, and communities that are emerging and
shaping up the collectible marketplace in India.
Special institutions and communities provide
ultra HNIs the chance to pursue, purchase, and
showcase their collectibles.
For example, because of the interest displayed
by the Indian ultra HNI community, one of the
world’s most prominent and oldest auction houses
One of the
world’s oldest
auction houses
recently opened
an office in India
with a preview
of some of its
works for the
very wealthy
opened an office in India recently and even
announced an exclusive preview of some
of its works that would subsequently go under
the hammer.
These auction houses do not just engage in vanilla
auctioning of collectibles, but work towards
kindling the interest of the ultra-rich community
through educational events that keep them well-
informed on current trends and concerns in the
global collectibles market.
From Where do Ultra HNIs Purchase their Collectibles?
While mall displays and special stores are high up in ranking, online is making rapid inroads
Collected by SelfMall Display
Special Stores / Institutions
Online Purchase Auction
Museum Passed on as Heirloom
65%
63%
47% 34%
21%
14%
8%
40

Key Drivers for Collectibles: Led by Passion
Passion is a major factor in pursuing
collectibles – 70% of the ultra HNIs that we
interacted with confessed that their passion for
owning a collection of exotic and interesting
items drove their purchases. This passion has
made them take steps towards setting up
communities to promote art and to collect exotic
items. For example, a prominent Mumbai-based
family has set up a foundation to promote art
and has opened up their entire collection to the
public. Not only this, they provide assistance in
developing art galleries in the city. It would not be
long before they pursue professional courses to
take their interests to the next level.
About 63% of the ultra HNIs we surveyed
consider it a matter of pride to own and display
collectibles. Many prominent personalities have
long collected (sometimes for generations)
artifacts that represent India’s magnificent past
and its rich cultural heritage. In fact, for 28% of
the ultra HNIs we talked to, traditional values
drive their purchases.
It is time that these collectibles – from exotic
wine collections, to expensive paintings, to classic
cars – are looked at as ‘passion investments’.
Worldwide, wealth managers and consultants
track the value of these investments for their
clients. Although these are not a prominent asset-
class in India yet, they are likely to become one,
very soon. Rising interest in collectibles among
India’s ultra-rich could open up these passion
investments as a new asset class.
A Mumbai-based family
has set up a foundation to
promote art and has opened
up their entire collection to the
public apart from providing
assistance in developing art
galleries in the city
What Drives Ultra HNIs’ Purchases of Collectibles?
Most are driven by passion and consider these status symbols
70%
Passion 63%Status
28%
Tradition
Investment
20%Networking
20%
Spends
41

42

onflicts relating to succession are almost as old as
recorded history. Most famous Indian epics have
an undertone of problems related to, and the
importance of succession. Even as literature and
reality demonstrate how important this area is, Indian business
families have not really given this issue its due. Wealth can grow
manifold and be preserved for many generations if a well-
defined and well-thought-out succession plan is in place.
Problems in succession planning take many forms – ‘The
Aurangzeb syndrome’ is a classic case of the potential heirs of
the family fighting over the succession of the family estate –
something that recurs fairly regularly in corporate India. All
too often, we also come across the ‘Dhritarashtra complex’
where the patriarch or matriarch has a clear preference for one
family member, leading to problems among potential heirs. In
the past, we have seen cases where such a preference has even
taken precedence over merit.
As the concept of succession planning has moved far beyond
just dividing the gold amongst family members, and as
meritocracy plays a vital role in the right fit, finding the right
successor is becoming very important. In this section, we
explore recent trends and changes in succession planning
among India’s ultra HNIs.
c
98%
of Ultra HNIs believe
in Succession Planning
PLANNING
Deciding the next in line
81% of them give it high importance
SUCCESSION
Spends
43

Passing the Torch
As ultra HNIs move through various stages of
their life and build growth strategies to deal with
the changing business environment, the issue
of succession becomes critical to ensure smooth
functioning of their businesses, and for the
financial security of their family members.
Today, most ultra HNIs understand that
succession planning is a continuous and proactive
process, rather than a reactive one. Their plan
involves identifying potential leaders, grooming
them, and encouraging them to look beyond their
immediate responsibilities. This translates
into vision-building, better teamwork, and
effective performance — both for the successor
and the business.
Recently, a north-based industrialist went through
a feud over the family’s wealth and business due
to lack of a proper succession plan leading to
misunderstandings between family members.
Such episodes serve as a wake-up call for ultra
HNIs and push them into planning for succession
well in advance.
Motives of Succession Planning
Well-being of the family remains a major driving force
35%
30%
Ensure well-being of
immediate family
Make family capable
and independent
Contribute to growth and
ringfencing family business
Reduce family /
internal disputes
15%
12%
8%
Ensure the well-being of
other stakeholders
44

Methods of Succession Planning: Investing on the Future
With the changing education paradigm in
India, ultra HNIs are making way for the next
generation in their enterprises quite early on.
Successors are being inducted in businesses at
an early age; they are getting involved across
functions to understand nitty-gritties, and
to build relationships with key people in
an organisation.
We have seen this in the past – successors joining
in as management trainees in prominent business
houses in India, receiving insight into functions,
and working their way to the top. This makes
the transition smooth for key parties involved –
employees, family members, investors, and
other stakeholders.
During our interactions, we noticed that a few
ultra HNIs are even working on a blueprint to
get all stakeholders on board to understand the
succession exercise. There are many factors that
affect ultra HNIs in the process of succession
22%
1-2 years
Time for Succession Planning
Ultra HNIs take about five years to plan efficient succession
Over 5 years
%43
35%
2-5 years
planning, including the type of business, size of
company, and existing leadership structure. These
factors affect the organisation, as they influence
productivity, reputation, brand image, and
employee morale. Our survey revealed that 43%
of ultra HNIs prepare for at least five years to put
an efficient succession in place, while another 35%
take anywhere between two to five years.
Preparation for succession planning happens
majorly through a formal education – seen in 45%
of ultra HNIs. For 22%, strategic involvement in
business decisions serves as a means for grooming
The son of a leading industrialist
completed his technology
management course from
a leading university in the
United States of America while
undergoing hands-on training in
their organisation
Spends
45

the next generation. Other ways include –
demonstration, exposure to business scenarios,
and formal and informal mentoring.
Leading universities in India and abroad have
started offering entrepreneurship and family-
business-management programs and a growing
number of ultra HNIs send their children and
family members to these programs. For example,
the son of a top industrialist completed his
technology-management course from a leading
university abroad while undergoing hands-on
training within their company.
These programs help participants understand
their businesses better, prepare them to sustain
through phases of transition, and enable them
to grow their businesses in an environment of
increased competition.
Importantly, these programs benefit not just
the participating students, but also their family
businesses. This is because through these
students, other members of the family are able to
learn and understand from each other, thereby
enabling continued success and reducing conflicts
in a family-managed business.
In ‘successor
induction’
they join in as
management
trainees and
work their way
to the top
How do Ultra HNIs Groom Potential Successors?
Educating and strategic involvement in business decision are the most prevalent methods
45%
Education
22%
Strategic Involvement
24%
On-ground
Mentoring
6%
Documentation
of best practices
3%
Informal
Mentoring
46

Identifying the Right Candidate
Traditionally, succession planning among ultra
HNIs largely meant dividing assets among the next
generation, but it is not that simple any more. The
phrase is gaining a wider role and significance in
the current scenario. To find suitable successors,
ultra HNIs are making concerted efforts with
sophisticated methods and strategy. They are
devising elaborate models to sharpen their
succession and development practices.
Broadly, there are two approaches for succession
planning – one, where ultra HNIs look at
harmonising expectations with the family
members before drafting a succession-planning
blueprint; two is more about dividing the empire.
Daughters are becoming
an integral part of succession
planning. The daughter of a
leading industrialist recently
played an active role in business
expansion through acquisition
and has also led the company’s
foray into new sectors
The Pool of Potential Successors
Ultra HNIs often choose children and ‘high-potential’ family members
54%
Kids
39%
High-potential
family members
High-potential
external candidate
Non-immediate
family
Friends
4%
2% 1%
Spends
47

The first approach, while superior, is a difficult
one due to the struggle involved in bringing
all stakeholders on board; however, if successful, it
leads to finding wider acceptance, an
undivided group with higher resources, a bigger
balance sheet, and eventually, a bigger impact on
the marketplace.
For instance, an infrastructure heavyweight
recently took this approach to establish a ‘family
constitution’, and to make each member of the
family understand relationships within the group.
He hopes that these moves will eventually lead to
effective succession.
Succession planning is becoming increasingly
gender agnostic – a major shift among ultra HNIs
is that they are trying to include their daughters
in their succession discussions. Previously largely
ignored, daughters are now seen taking on
active roles in their family businesses. Ultra HNIs
Finding the right person for the job, even an outsider
with professional skills and necessary education, is
taking precedence over keeping control within the family
are training their daughters and handing them
crucial roles. For instance, the daughter of a
leading industrialist played a very active role in
business expansion through acquisitions, and also
in her company’s foray into new sectors. Another
example is one of India’s richest families involving
their daughter in the telecom business.
With changing times, business families are
becoming keener on finding the right person for
the top job. This would mean opening up to the
idea of finding this person even outside the
family – someone with professional skills and
necessary education.
Although currently, successors from non-
immediate family and professionals are less than
10%, the trend is likely to pick up. Recently, one
of India's leading consumer-goods companies with
a long family history appointed an outsider to
lead the group.
48

Implementation of Succession Planning
Assessment is a key practice in effective succession
planning. There is no widely accepted formula
for evaluating the future potential of leaders,
but there are many tools and approaches
that continue to be used today, ranging from
personality and cognitive testing to team-based
interviewing and simulations.
Mode for Succession Planning
Wills are the most common instrument
Will82
18% Private Family Trust
%
How Ultra HNIs Plan their Succession
Most prefer planning for succession themselves
Involve
External Agency
27%
Close Confidants
73%
In our survey, 73% ultra HNIs said that they prefer
planning their succession with close confidants.
Others look for advice from external sources
such as chartered accountants, consultants, and
wealth managers. People are also gradually
relying on professional estate planners, trustees,
and wealth advisors.
In a country where discussion of death was
virtually unheard of, Indians have now started
writing wills. The well-heeled, especially the new
ultra HNIs, have become savvier about preparing
for the inevitable – and their favourite instrument
of choice for bequeathing their riches has turned
out to be the simple will. Trusts are now gaining
traction with many large corporate houses going
down this road.
Spends
49

Counterintuitive as it may sound, Indian
ultra HNI families are involving younger members
of their family right at the onset of succession-
planning discussions.
The younger lot is more educated and open to
ideas and concepts. Our survey disclosed that
70% of the ultra HNIs have commenced planning
of succession at least two years ago, while 62%
of them revisit it at least once in five years with
the aim of incorporating the latest changes in
the family. As SEBI ushers in a new regime of
corporate governance, it has asked companies
to put in place succession planning for top
management and board positions – in line
with best global practices. With the regulator
taking a keen interest in succession planning,
global best practices in this segment will soon be
adopted in India.
Succession planning is not just being treated as
an insurance policy for ultra HNI families focusing
on the continuity of their business – it is slowly
turning out to be a retirement plan for them.
Today, they are not waiting to turn 60 before
they retire. In the past decade, we have seen a
Early Planning = Early Retirements
How Long Ago did they Initiate Succession Planning?
Many ultra HNIs have initiated planning for succession
24%
10 years
agoWill start
later
17%
19%
5%
10%
5-10 years ago
2-5 years ago
2 years ago
Will start now
25%
50

With a focus on corporate
governance, SEBI has
taken an interest in making
companies have succession
planning in place for
top roles
number of ultra HNIs retiring early and choosing
alternate paths for their future. Most of them
are working on succession and retirement plans
simultaneously. They are keen to ensure that their
life after retirement is not dependent on others.
They are opting for various post-retirement funds
and insurance schemes to secure the future for
themselves and their families.
Many are seen working even after retirement,
and in some cases, their risk appetite and business
sectors undergo a change. Take for instance
an ex-head of India’s top conglomerate – after
retirement, he has invested his personal savings in
ecommerce start-ups.
Some ultra HNIs prefer to enjoy the post-
retirement phase in pursuing their hobbies
and passions – for example, an ex-banker from
Kolkata turned to freelance photography and
has exhibited his works at various national and
international forums!
How Often do they Revisit their Succession Planning?
Most ultra HNIs visit their succession planning at least once in five years
38%
Never
19%
1 year
3 years
27%
5 years
16%
Spends
51

Education is a
long, hard, and
human process
and it’s really
important that
we give kids the
opportunity and
time to be able
to meet their
potential
s Mistri is a well-known social activist,
educator, founder of the Akanksha
Foundation, and CEO of Teach For India.
Her dedication to her cause is awe-inspiring and
she strongly believes that quality education is the
only way forward for a better tomorrow for India’s
underprivileged children.
Akanksha is a non-profit organisation, which
provides children from low-income communities
with a high-quality education, enabling them to
maximise their potential and transform their lives.
Currently, it reaches out to over 5,000 children
through two models: the after-school model (where
centres support each child by providing a strong
educational foundation, help them have a good
time, inculcate self-esteem and values, and assist in
planning for a steady-income livelihood) and the
‘school project’ model (opening high-quality schools
for under-privileged children in partnership with
local municipalities).
M
P R O F I L E
Shaheen
MISTRI
52

Our goal is to
reach a million
children in five
years, which
is a massive
jump, but we
do not want to
compromise the
quality of what
we give our
children in that
process
Growing up, Ms Mistri went to 10 different schools
in five countries. This kind of exposure perhaps
gave her a very early insight into exactly what she
wanted to do with her life. Even as a young child
of 12, Ms Mistri spent her summers volunteering
with disadvantaged children. As a teenager, she
was already looking for volunteering opportunities
to work with children. When she visited her
grandparents in Mumbai, she was appalled by the
sharp contrast in the living conditions of the rich
and poor in the city – and decided to do something
about it. The best way to bridge this gap was to
educate children, she decided. In her own words,
“My first organisation Akanksha started as a college
project and a belief that education is important,
kids are important, and because I just enjoyed being
with kids. Slowly, a community and classrooms with
disadvantaged children grew around me.”
In 2007, Ms Mistri met Wendy Kopp, the Founder of
Teach for America, and was inspired to start a similar
initiative in India under the ‘leadership at the core
of the solution’ model. Her Teach For India initiative,
which she began after Akanksha had already
flourished for almost 17 years, was a result of her
desire to scale Akanksha’s model.
Teach For India's mission statement is that every
child deserves to attain an excellent education. It's
aim is to prove that no child’s demographics should
determine their future. It has grown from 2,000
children in its first year to 38,000 children today. In
terms of employees, Akanksha has 200 and Teach
For India has 250 and growing. Teach For India is
present in seven cities (Mumbai, Pune, Bengaluru,
Delhi, Chennai, Ahmedabad, and Hyderabad).
Akanksha has eight centres and 16 schools in
Mumbai and Pune – the organisation celebrates 25
years of existence this year.
Besides working for children, Ms Mistri says she
is ‘obsessed’ with animals, especially stray ones.
She is also very passionate about creativity and
art – from film to music to fine arts to painting. She
loves travelling and is an author. “I have written a
book for Teach For India last year called ‘Redrawing
India’ and published a couple of children stories
about a little crocodile called Miss Muglee, which
were illustrated by Akanksha kids,” she says with an
indulgent smile.
While Akanksha is not an impact investment,
Ms Mistri has valuable words of wisdom for the
education sector. “Organizations becoming more
professional and being able to tell their story and
operate at a scale – this is a big opportunity, as it
resonates with what investors want,” she
concludes. In this sector, making an investor or
donor a partner in the larger vision and giving
them an opportunity to actually engage is a great
idea, she says and adds that 2% CSR is a really good
opportunity for the sector.
Just seeing our children grow and change, and then going out
there and wanting to change the society – that to me is really
where the power of the movement is. Our children as young as
5th, 6th, and 7th graders say that I will change my community –
this is just incredibly fulfilling.
Spends
53

54

RENEWABLE
or more than four decades, renewable energy has
been an important component of India’s energy
planning process. Social and economic growth are
top-priority for the government, and it is increasingly seen
using renewable energy to drive this agenda.
Ultra HNIs have always been enthusiastic about adopting and
promoting renewable energy. Their various initiatives have made
them frontrunners in adopting renewable-energy technology;
many have effectively integrated renewable energy into their
lifestyle and businesses. Popular programmes include water and
energy conservation, recycling and reusing plastic bags, and
waste segregation.
Committed to a greener lifestyle
Energy efficiency has been included
as one of the eight missions in
the Prime Minister’s
National Action Plan on climate
ENERGY
Spends
55

Ultra HNIs have a positive view on moving towards
the usage of renewable energy, both inside and
outside their businesses. Most of them strongly
believe in an eco-friendly lifestyle and strive to
reuse resources, to plant trees, and to use
electric / alternate fuel cars. They also often assist
in preserving non-renewable energy sources for
emergencies / better uses.
Socially conscious and environment-friendly ultra
HNIs are increasingly adopting ‘green’ building
practices to minimise the footprint of their homes
on the ecology, while maximising comfort. Beyond
the latest luxury bathroom fittings, marble floor
tiles, and technology time-savers, the wealthy are
also investing in insulated roofs, automated sensor
The Importance of Renewable Energy
lights, water-conserving fixtures and fittings,
rainwater-harvesting technology, and external
solar lighting.
Ultra HNIs have long realised the importance and
relevance of renewable energy as a sustainable
option to cater to rising energy demands. They
majorly focus on initiatives such as preserving
and maintaining non-renewable energy sources,
reducing and controlling pollution, and improving
the environment.
They are also increasingly tying up with
commercial and residential high-rises to install
solar panels on rooftops, thus encouraging the
usage of alternate sources of energy. This has not
only turned into a viable business model for ultra
HNIs, but has also made the ‘go green’ lifestyle a
coveted and fashionable one.
A few examples – a Pune-based ultra HNI family
is marketing a line of highly energy-efficient
pumps, while a leading developer in Gurgaon is
focused on making energy-efficient buildings by
using wood instead of aluminium for doors and
windows that reduce CO2 emissions.
Energy efficiency is being recognised as a
‘low-hanging fruit’ in the country’s pursuit of
energy security, inclusive development, and
transition to a low-carbon economy. To fulfil
this, ultra HNIs are investing in employee-
focused activities, such as campaigns to increase
90% agree that this is important for sustainable development
How Many Ultra HNIs Believe in Renewable Energy?
35%
Neutral
Somewhat
Agree
Agree
Strongly
Agree
55%
%2
8%
Two renowned
ultra HNIs
adopted a
tribal village in
Odisha; they
installed solar
units with two
home-lighting
systems in
each of the 61
households
there
56

awareness, motivation, and involvement in
energy-management activities – with an
ultimate aim of reducing the company’s
energy costs.
Major states in the country have recognised the
need for renewable energy and have set-up
large solar parks. Punjab, for instance, has setup
the world’s largest single-roof-top solar plant
at a cost of `140 crores. Ultra HNIs find such
projects good avenues to increase their exposure
to renewable energy and usually form groups to
invest in such initiatives.
They are also implementing operational and
maintenance practices that take into account the
Types of Renewable Energy Investments by Ultra HNIs
60% would like to be or are already engaged in initiatives such as solar power, bio-energy, and wind
Wind Power
53%
Solar Energy
Bio Energy
Heat Pump
17%
30%
51%
26%
23%
60%
25%
15%
70%
18%
12%
Direct Investment Impact Investment Evaluating
energy-efficiency impact. Many of them have
moved towards making office buildings energy
efficient and retrofitting business processes. State
governments and mobile-app companies are
coming up with car-pooling features, which are
backed by ultra HNIs implementing similar systems
in their offices.
An ultra HNI, who recently completed the
construction of his independent bungalow along
the East Coast Road in Chennai has installed
features such as insulated roofs and walls to
reduce heat ingress, automated sensor lights,
water-conserving fixtures and fittings,
rainwater harvesting technology, and external
solar lighting.
Spends
57

Investment in Renewable Energy: Trailing Growth
On an average, ultra HNIs invest `15 lakh on solar
energy per year; their bio-energy investments are
a close second at `12 lakh. These investments are
primarily towards solar rooftops and boilers and
wind-driven machineries.
Ultra HNIs are also giving up their rooftops to
install solar power systems. This model is being
used by many solar power companies to increase
their rooftop installation capacities. Industrial
establishments, commercial buildings, malls,
and large gated communities are key targets for
such installations.
The government provides several benefits for
investments in renewable energy – it permits
100% Foreign Direct Investment in the sector and
allows a tax holiday for 10 years for generation
and / or distribution of power from renewable
energy plants – this has attracted many ultra-HNI
investors to the sector.
Specialised financing agencies are also promoting
renewable energy projects, while the government
provides operating subsidies, accelerated
A leading FMCG company
has tied up with a
Jabalpur-based cement
tycoon for burning its
solid waste in the kilns
of his cement plant to
generate energy
Drivers for Investments in Renewable Energy
Main reasons include upcoming sector, energy preservation,
stability of returns, and sector growth
Upcoming Sector Energy Preservation
Level/Stability of Returns
Philanthropy
Impact on Local Communities
34%
14%
15%
Rank 1 Rank 2 Rank 3
28%
27%
18%
15%
31%
29%
20%
15%
15%
3%
13%
23%
58

High Earnings: Renewable Energy is the Next Big Thing
As India’s renewable energy sector marches from
the fringes to the mainstream, ultra HNIs are spoilt
for choice by the numerous opportunities that it
presents, all of which will multiply their wealth
and benefit the environment.
Besides renewable energy as an investment
and business opportunity, ultra HNIs are
avid followers of cost-effective technological
innovations and often actively collaborate with
academic institutes that specialise in these types
of advancements.
Exciting business models are sprouting in this field
as the market potential grows with enough room
for established inheritors and fresh entrepreneurs.
For example, a Delhi-based organisation started by
two young ultra HNIs is providing solar-powered
water-pumping solutions to meet agricultural
irrigation, aeration, fisheries, and drinking-water
needs in off-grid areas.
In five years, they have expanded to 14 states, have
2,200 projects on the ground, and are generating
revenue in millions each year already.
One of
India’s largest
automobile
companies
has installed
‘energy saver’
units along
with ‘feeder
pillars’ to reduce
its energy
consumption
depreciation, and generation-based incentives
(GBI). These incentives have been one of the most
critical factors in driving investments, especially
into sectors such as solar and wind power.
States, such as Punjab, have inked MoUs worth
`13,500 crore for investment in solar projects and
signed pacts for setting up bio-ethanol plants
worth `6,000 crore. This trend is spreading to
other states such as Gujarat, thus providing
multiple opportunities for ultra HNIs to contribute
to this ‘green cause’ while also making it a viable
business model.
In January 2016, Indian Renewable Energy
Development Agency Limited (IREDA) came out
with tax-free secured redeemable non-convertible
bonds. Ultra-HNI buyers displayed massive interest
and the issue was over-subscribed to almost
double the allocated value.
Spends
59

P R O F I L E
r Vinod Keni is the co-founder and
partner at Peachtree Management
Advisors. He is also on the board of
Indian Angel Network. He is a man who wears
many hats (impact investor, angel investor, and
management consultant). Surprisingly, he says
his journey into impact investing wasn't planned.
He was working for a large donor institution
As there are
more success
stories in impact
investing, its
familiarity
among the
investment
community will
grow
when he was introduced to this space and soon
joined a firm that was looking at a new fund in
this segment, which eventually ended up raising
US$ 100 million. After this, Mr Keni started
looking at impact investing mostly from an angel-
investing perspective because he realised it was
not just about raising capital, but more about
the expertise provided to the entrepreneur and
M
KENI
Vinod
60

he puts it “You need to pick it up carefully – is
it solving a larger problem or need? Something
that people really want? Then the next question
is if this is practical and commercially viable? Is it
sustainable?” He admits to shelving many ventures
because they qualified mainly as philanthropic. He
is not overtly optimistic about renewable energy in
India – “It will take some time, it still has significant
challenges in terms of scaling up.”
He believes that impact investing funds should
have returns of high 20s to mid-30s in four years
(minimum holding period), but there are instances
where he has landed up with high teens or even
single digits. As he puts it succinctly, “This is like
any other venture fund – one can have a few
ducks, a few singles, and a few home-runs.”
Mr Keni believes that these segments –
employability and skilling, financial inclusion,
healthcare, sanitation, water, low-cost medical
devices, energy – that are leveraging technologies
for people at the bottom of the pyramid, are likely
to attract maximum impact investment. In fact,
his preferred sectors for investing are fintech and
financial inclusion.
Mr Keni’s other interests include collecting
antique toy trains, travelling, and reading. He
likes travelling to offbeat locations and plans to
go to Ushuaia, Argentina, for his next big holiday.
A large chunk of his investments are in equity
currently, but he plans to shift more towards debt
as the years go by. His real estate investments are
likely to remain steady.
the management team to build a sustainable
enterprise.
Impact investing is challenging. “You look
for enterprises that you think are going to be
sustainable, the attraction for mainstream
professionals to join in is limited because of the
longer gestation period, and it takes a much
longer time to scale these companies up,” he lists.
The capital that comes into impact investing is a
more ‘patient capital’. “You cannot come into it
and exit in two years.” This is where experience
and expertise comes in, he believes.
“Earlier, we saw many people who had passion
and who wanted to make a difference, but now
we are seeing people with passion plus experience
to back that up.” Experience and expertise makes
all the difference according to Mr Keni. “Today,
you are seeing a class of entrepreneurs who are
more sophisticated and experienced – it is a big
boon. You now see experienced professionals who
are stepping in and saying that there is a large
enough need and I know it’s a business that I can
make sustainable.” Budding entrepreneurs and
experienced ones are now actually able to
choose between creating another e-commerce
company, or an on-demand delivery company, or
a social enterprise.
Social investing is still a fiercely debated concept,
he reveals. He says he has had mainstream
investors tell him that all investing is eventually
impact investing. What he is very clear about is
the difference between impact investing and
philanthropy; in the former commercial returns
are very important, in fact, they are a priority
– only then does he consider if the venture will
make an impact. It seems to be a fine balance – as
The number of
companies that
would fail will
be high and even
the money lost
in this sector will
be considerable,
but these are just
cycles before the
sector matures,
and consolidates;
eventually, the
number of failures
will decrease
Spends
61

62

ADVANTAGE
Less inclined towards equity
ver the last few years, the government has liberalised
foreign investment policies and created a very
favourable investment environment across all segments
of India’s economy. Both manufacturing and services
have received a boost under the initiatives 'Make in India', 'Start
Up India', and 'Digital India'.
In the past year, sentiment towards the government’s
performance and policies has continued to be positive.
Actions such as RBI reducing interest rates, listing of smart cities,
and clearing several road projects have strengthened ultra-HNI
investments in the domestic market.
The investment mood has remained positive. While ultra HNIs
have been less inclined towards equity this year due to the
lacklustre market performance, they have increased allocation to
other segments such as real-estate, especially commercial, and
debt. They expect the investment climate to remain bullish on
strong economic growth.
O
INVEST
HOW THE ULTRA HNIs
REAL ESTATE
Investments
63

Primary Business Remains Main Source of Wealth
Our survey revealed that this year the main source
of wealth for almost half of India’s ultra HNIs is
the success of the primary business; last year, this
figure was 41%.
There was also a corresponding decrease
in the number of ultra HNIs whose primary
source of wealth is through sale of business. In
conjunction, these trends indicate that they are
more interested in building long and sustainable
businesses.
A quarter of the ultra HNIs we polled have
created wealth from the real-estate sector, while
for others the primary wealth source is personal
income and equity investments.
Entrepreneurs and professionals predominantly
have a single source of wealth. However,
inheritors tend to diversify from their established
businesses, which has led to wealth augmentation
from real estate for them.
A new category of entrepreneurs are also
successfully investing in social entrepreneurship
businesses that focus on sustenance. Due to their
passion and vigour, the ‘impact investing’ segment
is rapidly gaining ground in India.
10%
5%
14%
42%
29%
Professional
Equity, ESOP
Sale of Business
Real Estate
Success inBusiness
PersonalIncome
3%
57%
9%
17%
14%
Entrepreneur
3%
48%
8%
25%
%
Overall
16
41%
10%
39%
9%
Inheritor 1%
Wealth Sources of Ultra HNIs Across Categories
Except for professionals, the primary business is the main source
64

Real Estate and Debt Investments see an Increase
Indian ultra HNIs broadly invest across equity, real
estate, fixed income, and alternative investment
assets. This year, the trend of increasing equity
portions in ultra HNIs’ investment portfolio saw a
reversal mainly due to the near 20% fall in Indian
equities. Small-cap stocks, which were among
the top picks and performers in the previous two
years, took a hit this year.
The stock markets dipped due to a variety of
reasons including global events such as a sharp
fall in the Chinese stock markets in just three
months, and a drop in foreign inflows into Indian
stocks. While increasing participation of domestic
institutions countered the fall to an extent, the
stock markets still saw a negative trend.
Realignment in the equity portfolio of ultra HNIs
led to a corresponding rise in the other three
asset classes – real estate, debt, and alternate
assets – lending stability to returns. In the debt
market, tax-free bond issuances by public-sector
undertakings elicited a positive response from
ultra-HNI investors.
Real estate investments, which fell last year,
saw an increase this time. The Real Estate
(Regulation and Development) Bill of 2015,
which came into force this year, is widely
expected to ease concerns around project
development and delivery and bring about
transparency and accountability.
Commercial properties are the biggest and most-
stable attraction in the real-estate market for ultra
HNIs, as they are proving to be more profitable
than residential ones. Cities such as Mumbai,
Bengaluru, Hyderabad, and Delhi NCR are
Certain series of tax-free bonds issued in
FY16 such as from HUDCO, NHAI, and NABARD
offered a yield of 7.00-7.04%, which translates into a
pre-tax yield of 10.5%
Investments
65

the hubs for commercial properties, with major
domestic corporate offices and multinational
companies opening their branches there. The
residential segment is also expected to pick up but
with a lag as the demand in small centres picks up
on increased interest from ultra HNIs.
Commodity investments are also gaining the
confidence of the ultra-HNI community. Impact
investments (as part of alternate investments)
have also captured their imagination. With
strong economic growth expected in India
over the next few years, the investment mood
continues to be bullish.
FY 2015
Equity Real EstateDebt Alternate
Investments
FY 2011FY 2012FY 2013
FY 2014
35% 32%
29%4%
38% 24%
29%9%
34% 20%
37%9%
34% 29%
30%7%
45%
Ultra HNI Investments Across Asset Classes
Equity allocation decreased, alternate investments rising
26%9%
20%
FY 2016
39%
28%11%
22%
66

COMMODITIES
ommodities are among the world’s
largest financial markets. Initially
conceived as a hedging platform for
producers and consumers in local
markets, these markets now provide sophisticated
investment and risk-management opportunities
for ultra HNIs. Globally too, commodities such
as oil and gold have become favourites amongst
institutional investors.
Most ultra HNIs invest in commodities, gold is a favourite
Government of India
started Gold Monetisation
Scheme under which
resident Indians can deposit gold
and receive gold bonds. This
scheme has piqued the interest
of ultra HNIs
Investments
67

Exposure to Commodities
Of the five BRICS economies, four slowed or
even contracted in 2015. China’s economy
continued to slow down and its move away from
commodity-intensive activities weighed on global
trade and commodity prices.
Brazil and Russia, two large commodity exporters,
are in deep contraction that is also accompanied
by currency depreciation, above-target inflation,
and deteriorating public finances. In order to
counter this volatility in raw material input
prices, Indian ultra HNIs are using the
commodity markets to limit their exposure, and
also to make gains.
Our survey revealed that 72% ultra HNIs invest
in commodities; of these, 40% have invested
about 5-10% of their assets while 39% have
11-20% exposure. The commodity markets in
India are growing, which means their potential is
huge, particularly because commodities are very
relevant to India’s economic growth.
How Much do Ultra HNIs Invest in Commodities?
49% of ultra HNIs invest more than 10% of their assets
5% 10%
40% 15%11%
20%
20%
16%
20%
10%
11%
5%
-
- -
19%
Less than
More than
68

Allocation of Investment in Commodities
According to our survey, 78% ultra HNIs
prefer gold and silver for their commodity
investments; out of these, 59% consider gold a
good investment opportunity, also because it is
traditionally regarded as auspicious.
Investment in gold varies – from jewellery, coins,
bars, to ETFs. Gold certificates and bonds are the
Investment Allocation by Commodity
Gold and silver command large chunks at 59% and 19%
Gold
59%
Silver
19%
Energy
6%
Agri Based Others
4% 3%
9%
Metals
latest additions to this list. Apart from gold, 19%
ultra HNIs allocate funds to silver and 6% invest in
energy commodities, which is the next emerging
sector globally. In line with this global trend,
commodity exchanges in India are also offering
energy products as a trading opportunity to
which the ultra HNIs are warming up and taking
restricted exposure.
Investments
69

Sources of Commodity Purchases
To attain better returns from commodity
markets when multiple avenues are available
for purchasing them, ultra HNIs are taking more
informed decisions about performance and
investments. The introduction and evolution of
a strong regulatory oversight and framework in
commodities has provided a fillip to the sector and
boosted ultra HNI confidence levels.
Physical buying is the preferred purchasing
method for 80% ultra HNIs investing in gold and
for 74% of those investing in silver. However,
when it comes to energy-based commodities,
more than half invest directly through exchanges,
online portals, and brokers.
For agri-based commodities, 48% ultra HNIs
prefer instruments that have an underlying
commodity as the driver while 39% prefer direct
investments through exchanges; the latter ratio
is lower than the former because of the relatively
lower trading volume of exchange-traded agri
commodities and trading restrictions often
imposed to curb price inflation.
Gold
80% 13% 7%
Silver
74% 11% 15%
23% 53% 24%
Energy
Metals
24% 38% 38%
Agri Based
13% 39% 48%
Physical Buying Direct Investment through Exchange / Portal / Brokers Commodity Stocks
Where do Ultra HNIs Purchase their Commodities?
More physical buying in gold and silver; energy investments are mainly through exchanges
70

Future Investments: Commodities
With the merger of FMC (Forward Markets
Commission) with SEBI (Securities and Exchange
Board of India), the future of Indian commodity
markets is likely to be bright in terms of both
investments and returns.
SEBI has initiated a number of measures to
streamline the regulatory structure and processes
in these markets, all of which are towards
increasing market integrity and liquidity,
thus helping the growth of the commodity
derivatives market.
As the number of commodities traded is
increasing, ultra HNIs are diversifying their
investment risk by participating in different
segments. This is an evergreen market, as it
involves trading of products that are as varying as
precious metals and agri products.
In our survey, 34% ultra HNIs believed gold is a
good investment opportunity for the future too,
while 25% picked silver.
Energy-based commodities (such as crude oil)
and agri-based commodities (such as soya,
cotton) were preferred by 12% ultra HNIs each.
Introducing index derivatives and commodity
options would be a great step towards
broadening the market. Potential participation
from foreign investors, once permitted, will also
boost market liquidity. With India set to become
one of the fastest-growing economies, ultra HNIs
will continue to view commodities as a good
investment opportunity.
Preferred Commodities for Future Investments
Precious metals, for both current and future investments
Gold 34%
Silver
Energy (Crude Oil)
Agri Based
25%
12%
(Soya, Cotton, Jute, etc)
Metals
Others
9%
12%
8%
Commodities
(Nickle, Lead,
Copper, etc)
Investments
71

72

Kotak Wealth Management: Top of the Pyramid India Edition 2016

Kotak Wealth Management: Top of the Pyramid India Edition 2016

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