As the affluent class in India grows, investors are flocking to wealthtech startups

Date:

Investors are betting on Indian wealthtech startups as the growing middle class turns to diversifying investments and startups challenge traditional financial advisors for high-net-worth clients.

Premji Invest is in advanced stages of talks to lead a $30 million to $40 million funding round in Deserve, an app that offers investment solutions to India’s wealthy, three sources familiar with the matter told TechCrunch. The current talks value Deserve at around $170 million pre-money, more than doubling its valuation since its last funding round.

Lightspeed Ventures is in talks to lead an investment round of more than $20 million in digital wealth management platform Centricity, two sources said. In October, Peak XV agreed to invest about $35 million in wealth and asset management startup Neo.

The high-net-worth and ultra-high-net-worth segments in India are growing rapidly, leading some wealth management firms to aggressively expand their relationship manager networks to capture this market. According to analysts, only 50-55% of India’s wealth management market is currently under professional management.

Various regions of prosperous India. Data: McKinsey, 360 One WAM estimates, Jefferies

A significant portion of these services are relationship-based and require a specialized approach. Investors are betting that startups can bypass middlemen, offer customers more personalized and data-driven recommendations, and also serve a segment of the market currently neglected by incumbents.

Accel-backed Scripbox has significantly transformed its business over the past two years, one industry analyst joked. Scripbox founder and chief executive Atul Singhal told TechCrunch that it has become profitable, is “well capitalized” and manages more than $2 billion in assets.

Wide India Stakes

India is also experiencing a surge in the financialisation of its economy, with sectors such as insurance and mutual funds seeing significant growth. According to Macquarie, the number of mutual fund accounts has grown 3.5 times since 2015, with systematic accounts with lower ticket sizes growing more rapidly in the past three years.

And there’s still plenty of room for growth: India’s mutual fund AUM-to-GDP ratio is 15%, while the global average is 75%, according to Macquarie. “As penetration improves, we believe the mutual fund industry can continue to grow comfortably at 20% in the near future,” they wrote in a note. This optimism is echoed in the long-term growth projections of major financial institutions. UBS forecasts a 22-25% CAGR in active AUM during FY24-27E for leading players in the wealth management space.

Several startups are also helping more Indians invest in mutual funds, stocks and gold. Jar, backed by Tiger Global, helps customers build a saving habit. Nischay AG, co-founder of this startup targeting the $100 billion Indian gold market, told TechCrunch that its average customer is making 22 investments every month.

India’s affluent population is set to grow rapidly. According to UBS, the number of individuals with an annual income of over $10,000 is expected to more than double in the next 5 years, providing a strong tailwind for financial services platforms targeting this demographic. The industry has taken note.

Average monthly retail flows through systematic investment plans have reached record highs with a CAGR of ~20% over the last eight years. Image: Goldman Sachs

360 One WAM, India’s largest wealth manager focused on ultra-high-net-worth individuals, last month agreed to acquire popular Indian mutual fund investing app ET Money for about $44 million.

Earlier this year, CRED agreed to acquire mutual fund investment platform Kuvera. Smallcase, a startup that CRED had previously evaluated for acquisition but rejected, is in talks to raise $40 million at a valuation of about $240 million, according to three people familiar with the matter.

Fidelity-affiliated venture firm Eight Roads is evaluating an investment in Asset Plus, another mutual fund platform, according to two people familiar with the matter.

There’s more competition coming.

Reliance, India’s most valuable company, last year formed a joint asset management venture in India with BlackRock, the world’s largest asset manager. BlackRock and Reliance’s finance unit are aiming to make an initial investment of $150 million in the new 50/50 venture, which aims to provide tech-enabled access to “affordable, innovative” investment solutions for millions of investors in India, the two said last year.

In April, they announced another joint venture that would offer wealth management and broking business in India.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Share post:

Subscribe

spot_imgspot_img

Popular

More like this
Related

Here are all the devices compatible with iOS 18

Apple's WWDC 2024 was full of announcements about iOS...

Will Smith broke Twitch’s biggest streaming record, the real reason why

Every summer, Spanish Twitch streamer Ibai Llanos hosts a...