India arguably stands at the cusp of one of the most compelling wealth creation waves globally. India, with its favourable demographics, is one of the fastest growing large economies in the world and will likely be so for some time. Along with this growth in national income is a fall in fertility rates, leading to a greater increase in per capita income. Alongside this, we are seeing greater financialization of savings, evidenced among other things by the growth in our Mutual Fund industry’s Assets Under Management from Rs 10 lakh crores at the end of FY15 to a whopping Rs 65 lakh crores at the end of FY25, in the 5x growth in demat accounts in the last 5 years, in the rapid increase in SIP flows and the growing number of companies listing ( 10x Fy25 compared to FY15 on the main board plus a huge growth in the new SME Exchange). Income inequality, that accelerated globally post Covid, will persist in India and we will see a big increase in millionaires and billionaires in India over the next decade, even as the general population itself gets better off as the growth percolates through. In some ways, this is the position China was in at the start of this millennium.
This structural shift underway in our economy is undoubtedly going to create many opportunities. Asset managers, wealth managers, capital market players like exchanges, depositories and transfer agents, securities brokers and investment bankers will all benefit from the growth in wealth and the growth of financial assets. While margin profiles vary across these players, the price earnings multiples probably vary by more. The top listed AMC is trading at over 40x. A listed stock exchange quotes at close to 80x. A depository quotes at close to 60x. India’s leading listed wealth manager is trading at just under 40x. There is no pure alternate fund manager listed in India. All of these stocks are rich on trading multiples but then we are in a bull market and the market as a whole isn’t inexpensive. The interesting exercise though is to look at inter se valuations. According to a Valuequest research report, wealth managers and alternative fund managers in the US have profit pools which are 2.5-3x that of MFs and Exchanges combined. In India, according to the same report, the multiple is 4-5 x but in the opposite direction!
That, and other data, suggests that wealth management seems ready for strong growth going forward. The wealth management Industry Aum is forecast to grow from Rs 95 lakh crore currently to Rs 200 lakh crore by FY29 given the trends mentioned above and the fact that only 15% of wealth is under professional advice in our country. The creation of a new class of wealthy who invest differently, the inter-generational wealth transfer into a generation more attuned to financial assets and expansion into lower tier cities will drive strong growth and drive this mega trend. So, while the capital market tide is – and will continue – lifting many boats, some may rise higher!
