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India to become trillion-dollar market by 2012

India is set to become a huge hunting ground for wealth managers, says a report by global consultancy firm Celent.

business Updated: Jan 06, 2008 12:55 IST
Malvika Bhatnagar
Malvika Bhatnagar

Indians will have one trillion dollars worth inevitable wealth by 2012, with the country's robust economic growth driving a four-fold surge from just about 250 billion dollars in 2007.

According to a report by international consultancy firm Celent, India is set to become a huge hunting ground for wealth managers with the number of their potential clients and size of manageable wealth both expected to grow four-times through 2012.

The wealth management market will have a target size of 42 million households by 2012, as against just about 13 million in 2007, noted the report -- Overview of the Wealth Management Market in India.

"The wealth management sector is poised to witness tremendous growth. India's economic growth is making larger sections of the population prospective customers of wealth management providers," Celent said.

The growth would be seen across all income-levels, but the lower-income segment would record the maximum growth in terms of volume, while high-networth households would contribute the most in terms of wealth size, it noted.

Celent has defined a household with a minimum income of 5,000 dollars (Rs two lakh) as the lowest end of the target market for wealth managers, while one with at least 30 million dollars (Rs 120 crore) of investable income has been put in the category of ultra-high net worth.

The market would see different products being launched for catering to different client segments, Celent's banking practice and author of the report Ravi Nawal said.

"There is an increasing momentum towards structure in this previously chaotic domain. We should expect some very India specific innovations in the near future," Nawal added.

Unorganised players, whose share is 1.5 times that of the organised market, currently dominate the market. However, a structural change is taking place and organised players are drawing clients away from the unorganised players.

Wealth management revenues are expected to contribute 32-37 per cent of the total revenue of full-service financial institutions by 2012, Celent said.

According to the report, mass-market (Rs 2-10 lakh of disposable income) would be a key driver, accounting for 40 per cent of the overall growth in the number of households.

A majority of wealth managers, except niche players, would target the mass market because of its youth-dominance and this market would see more service providers entering the fray with a 'own them young' policy.

The ultra-high net worth households with wealth in excess of 30 million dollars would have a total population of 10,500 households by 2012, while the super high net worth households (10-30 million dollar) are expected to grow to 42,000.

The population of high net worth households (1-10 million dollar) would grow to 3,20,000, while there would be 3,50,000 households in the super-affluent category (Rs 50-400 lakh).

Besides, 10 lakh new households would join mass-affluent category (Rs 10-50 lakh), taking their population to 18 lakh by 2012. However, a vast majority of 39 million households, out of the total 42 million-target market populations in 2012, would belong to the mass market (Rs 2-10 lakh).

Private banks, independent financial advisors and full service brokerages would serve the high networth segment, while ultra high networth private banks and family offices would serve households.