Investors are betting on Indian wealthtech startups as a growing middle class looks to diversify its investments and startups challenge traditional financial advisers to cater to high-net-worth clients.
Premji Invest is in final talks to lead a $30-40 million funding round for 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 about $170 million pre-money, more than double its previous funding round.
Lightspeed Ventures is in advanced talks to lead a $20 million-plus investment round in digital asset management platform Centricity, two sources said. PeakXV agreed to invest about $35 million in asset management startup Neo in October.
The high-net-worth and ultra-high-net-worth segments are growing rapidly in India, and some wealth management firms are aggressively expanding their relationship manager networks to capture this market. Analysts say only about 50-55 percent of the Indian wealth management market is currently under professional management.
Different segments of affluent India. Data: McKinsey, 360 ONE WAM estimates, Jefferies
Most of these services are still relationship-driven and require a bespoke approach, and investors are hoping startups can cut out the middleman and offer more personalized, data-driven offers to customers, while also serving market classes currently ignored by incumbents.
Industry analysts have cynically said that Accel-backed Scripbox has turned around its business over the past two years: The company is profitable, is “well capitalized,” and manages more than $2 billion in assets, Scripbox founder and CEO Atul Singhal told TechCrunch.
Betting on the wider India
India is also seeing a rapid financialization of its economy, with big growth in areas like insurance and mutual funds. According to Macquarie, the number of mutual fund accounts has grown 3.5-fold since 2015, with small systematic accounts growing exponentially in the past three years.
And there's still plenty of room to grow: India's mutual fund assets as a percentage of GDP are 15%, above the global average of 75%, according to Macquarie. “As penetration increases, we believe the mutual fund industry can fairly comfortably sustain 20% growth for the foreseeable future,” Macquarie said in a note. This optimism is also reflected in the long-term growth forecasts of major financial institutions: UBS forecasts compound annual growth of 22%-25% in active assets under management for major players in the asset management industry from FY24 to FY27.
Startups are also moving into India to help more people invest in mutual funds, stocks and gold. Tiger Global-backed Jar helps customers develop savings habits. Targeting India's $100 billion gold market, the startup is already seeing customers make an average of 22 investments per month, co-founder Nishchay AG told TechCrunch.
India's wealthy population is set to explode with growth: The number of people earning more than $10,000 a year is expected to more than double over the next five years, according to UBS, creating a strong tailwind for financial services platforms targeting this demographic. The industry is taking notice.
Average monthly retail inflows through systematic investment plans have reached an all-time high over the past eight years, at a CAGR of about 20%. Image: Goldman Sachs
360 One WAM, India's largest asset manager specializing in ultra-high net worth individuals, agreed last month to acquire ET Money, a popular Indian mutual fund app, for about $44 million.
CRED agreed to acquire mutual fund platform Kuvera earlier this year, and Smallcase, a startup that CRED previously pursued but turned down, is in talks to raise $40 million at a valuation of about $240 million, according to three people familiar with the matter.
Fidelity's venture arm, Eight Roads, is considering investing in Asset Plus, another mutual fund platform, according to two people familiar with the matter.
And there's more competition on the way.
India's most valuable company, Reliance, last year partnered with BlackRock, the world's largest asset manager, to set up a joint asset management venture in India. BlackRock and Reliance's financial arm are targeting an initial investment of $150 million each in the new 50/50 venture that aims to provide “affordable and innovative” technology-enabled investment solutions to millions of investors in India, the companies announced last year.
In April, the two companies announced a new joint venture aimed at offering asset management and brokerage services in India.