Foreign private banks are bulking up in India once again after downsizing in the past few years, anticipating new opportunities to advise Indian millionaires eager to cash in on an Internet start-up boom and on signs of an economic revival.
Bankers and consultants surveyed by Reuters said foreign private banks will hire wealth managers this year and increase their headcount by a fifth, compared to a 10-15 per cent fall in each of the past two years.
Barclays , which runs one of India’s top private banks, said its headcount could rise by 15-20 per cent in 2015.
Wealthy Indians are looking to put money in new-age technology companies after they watched savvy foreign investors such as Singapore’s Temasek Holdings and Japan’s SoftBank Corp scramble over the past few years to get a piece of Indian e-commerce companies, including Flipkart , valued by industry at around $11 billion, and Snapdeal.
The start-ups offer a new investment route for the millionaires, who are using wealth managers to guide them on these investments.
So far, the rich in India channelled funds into traditional products such as equities, bank deposits and government bonds. And an annual cap of $250,000 on overseas remittances by onshore Indians effectively rules out significant investments overseas.
To tap into this demand, venture funds are being launched that seek to raise money from high networth individuals (HNIs) for investments in start-ups. At least two venture funds are currently raising a combined $160 million from Indian investors including wealthy individuals, to invest in start-ups, people involved in the matter said.
“In the first round, it was mostly foreign investors who were chasing the start-ups. Now the Indian HNIs are waking up to this opportunity,” said Atul Singh, India head for wealth management at Bank of America Merrill Lynch.
India’s e-commerce firms last year attracted more than $5 billion in investment, the bulk of it from overseas investors, compared to less than $2 billion in 2013.
“The return from these investments could be double that of the public equity markets,” said a wealth manager at an European bank, declining to be named. “Of course, the risk is also higher and that’s why the clients need advice.”
Another reason for the enthusiasm among affluent Indian investors is the economy, which is expected to grow 7.4 per cent in the year ending March and at a faster pace than China’s in the years ahead as a new government kickstarts economic reforms.