The crazy rich Indians have found a new way to get richer
A new-found love for startups
The Ultra-High Net worth Individuals (UHNIs), who are considered the richest in the world and reportedly constitute only 0.003 percent of the world's total population holding approximately 13 percent of the world's total wealth are investing in startups.
Big stake on startups
After a killing in AU Small Finance Bank and Ujjivan Small Finance Bank, these UHNIs have invested in a number companies including Bira Beverages, BigBasket, Zoom, Coverfox, Ola and Paytm. (Pic: Facebook/Bira Beverages)
Kotak Wealth Management, which identified many of these opportunities of direct investments, said UHNIs are investing in unlisted firms swayed by higher returns. In fact, Kotak Wealth created a separate team of specialists to cater to this opportunity and also hired industry experts to form a think-tank to advise its clients.
This is the first time this trend has been visible with Indian UHNI investors, where they are directly investing in Indian startups feels Srikanth Subramanian, senior executive director, Kotak Wealth Management. “Till now, Indian UHNIs have never participated in emerging companies and missed the opportunity,” he added.
Private equity vs startups
The trend of direct investment in startups is growing as returns generated by private equity funds in the past few years are much lesser than the benchmark, said wealth managers. “The returns generated by a large section of PE funds over the last decade have at times been even lower than the relevant benchmarks and their listed peers on a post-cost, post-tax basis,” said Arpita Vinay, executive director, Centrum Wealth Management. (Pic: Facebook/Ola)
A word of advice
Most wealth managers are targeting unlisted companies at a mature stage, where their IPO is in the pipeline. They advise UHNIs to invest directly in unlisted companies or startups as co-investment, where clients can invest alongside a fund in a leveraged buyout, recapitalisation or growth capital transaction. (Text By Rajesh Mascarenhas)