core sector communique

And now, Ultra HNI's 

There are 62,000 ultra high-net worth households, says a Crisil report, defining this category as having a minimum net worth of Rs 25 crore.

Among the ultra high-net worth individuals who consist of inheritors, first-generation entrepreneurs and professionals, it is the professionals who are the heavy spenders, at 28.8 per cent of their total income. For inheritors and self-made ultra HNIs, the figures were 21.5 per cent and 20 per cent respectively.

Professionals comprise executives from corporate India, doctors, lawyers and accountants.

With regards to expenditure, the focus was more on the family with high spending on travel, household electronics, jewellery and watches. Of these, travel was the biggest expenditure for the ultra HNIs.

“The ultra HNIs not only spend heavily, but also look at innovative and value spending. Also, impulse spending was a small proportion of their entire spending pattern,” said Ms Roopa Kudva, Managing Director and Chief Executive Director, CRISIL.

Vacationing is the topmost priority for the professional category, who after “slogging it out in the workplace to reach the heights they have, ranked it as their topmost priority,” noted the report. About 67 per cent confessed that their biggest weakness was luxury holiday packages, compared to 65 per cent for the inheritors and 54 per cent for the self-made.

The professionals preferred travelling business class, while the other two chose economy class more often.

Travel habits

The motive for travelling varied. For professionals it was either business-related or on vacations (for leisure, sports or entertainment), while for the other two categories family functions, business and leisure (in that order) were motives for travel.

Inheritors are those who come into money by way of legacy. Self-made or first generation entrepreneurs and professionals are those who got wealthy by work benefits (ESOPs, bonus, and so on) Eighty per cent of the ultra HNIs were from Mumbai, Delhi and Bangalore.

The study conducted by CRISIL Research and Kotak Wealth Management surveyed close more than 150 ultra high net-worth households (UHNHs). The study was conducted between December 2010 and February 2011.

Their collective net worth is expected to increase five-fold to Rs 235 lakh crore by 2015-16 from Rs 45 lakh crore in the current fiscal, said the CRISIL report. The number of ultra high net-worth households is also expected to triple — to 2,19,000 — over the same period.

With respect to investment, the report says that the ultra HNIs invest around one-fifth of their income for growing their wealth. There is huge untapped potential for professional advice as there is growing popularity among the ultra HNIs for riskier investment instruments like hedge funds, private equity, structured products and derivatives.

Realty investment

However, for now real estate still holds the largest share of the investable surplus available at 37.2 per cent (estimated) for FY '11 which is expected to go up to 40.5 per cent by next fiscal.

Equity investments were the second highest investment instruments with 33.1 per cent for the current fiscal but are expected to reduce to 30.1 per cent in the next fiscal. Debt also is expected to decline from 20.4 per cent to 18.2 per cent over the same period.

However, investments in alternative assets are expected to go up from 9.3 per cent to 11.2 per cent.