Azim Premji, Narayan Murthy, SD Shibulal, Kris
Gopalakrishnan, the Burmans, the Sundarams, Ajay Piramal and Patni brothers
keep some of the largest family offices in the country.
MUMBAI:
Nestled obscurely on the higher floors of plush commercial buildings across
leading metros are small office 'suites' without name boards, that serve a
growing number of super-rich in India. In fact, some of these offices --
famously called 'family offices' -- manage family wealth that can match the
assets of top companies such as Bajaj Auto, Cipla and Godrej Industries.
The
country is home to 90 mammoth single family offices (SFOs) that manage private
wealth in excess of $100 billion, according to an internal study conducted by
Association of International Wealth Management of India (AIWMI). An SFO,
loosely explained, is a firm that manages the personal wealth of one wealthy
family.
"The
numbers are growing steadily," said Aditya Gadge, chief executive of
AIWMI. "90 SFOs is not a big number for a country like India. There's a
lot of traditional business wealth here; all these would end in family
office-like structure over the next few years. New-generation entrepreneurs
would also add to the tally," said Gadge.
Azim
Premji (Premji Invest), Narayan Murthy (Catamaran Ventures), SD Shibulal, Kris
Gopalakrishnan, the Burmans, the Sundarams (TVS family), Ajay Piramal, Qimar
Rai Gupta family and Patni brothers, among others, keep some of the largest
family offices in the country. Each of these SFOs is believed to have assets in
the range of Rs 6000 crore to Rs 15,000 crore.
"Old
business families are cashing out of their businesses... The money these
families receive upon selling their businesses are channelled into their own
investment firms or family offices," explained Amit Patni, scion of the
Patni family which once owned Patni Computers.
"Dividend
payouts, partial stake-sales, public listing of shares, et al, are also
increasing promoter wealth. All this money is flowing into formal family
office-like structures," said Patni. SFOs invest across asset classes and
geographical boundaries.
Over
40% of the wealth is invested in equities -- both private and publicly listed.
Within equity, start-up investing is the latest fad among most SFOs.
Capital
pools such as Narayan Murthy's Catamaran Ventures is learnt to have (direct and
indirect) investments in over 100 start-up ventures. Azim Premji's Premji
Invest has money parked in Flipkart, Myntra and Snapdeal. Ajay Piramal's SFO is
ploughing in as much as $50 million into Montane Venture, an early-stage fund,
as its anchor investor. (See graphics) Apart from equity investments, SFOs also
allocate money to real estate projects and real estate REITs and NCDs. Infosys
co-founder SD Shibulal has invested in more than 700 apartments spread across
Seattle and Bellevue area in the United States. Mutual funds and alternative
investment vehicles (such as private equity funds, long-short funds) are also
lapped by active single family offices. A few families also make good use of
RBI's liberalised remittance scheme (LRS) route to invest in overseas assets
(mostly technology companies, real estate and commodities).
Under
LRS, a resident Indian can invest up to $250,000 in overseas assets every year.
"Capital
preservation and growth are important for family offices. To manage funds
effectively, SFOs appoint dedicated investment professionals who are given
broad directions as to how the fund should be managed. Generating returns is
then the job of the wealth manager," said Patni.
Promoters,
who cash out of businesses completely, lay a lot of stress on capital
protection. Many a time, familial discord or lack of interest to carry on
business (especially among new generation) prompts families to cash out. The
wealth accumulated by selling the business is managed diligently by
professionally-managed SFOs.
"Family
offices take care of almost everything, right from investments to tax planning,
estate and succession planning.
People
with reasonable assets would set up family offices and hire professionals to
manage them," said Deepak Natraj, managing director, Aarin Capital, the
proprietary investment vehicle of former Infosys CFO Mohandas Pai and Manipal
Group Scion Ranjan Pai.
"Family
offices also help to weed out conflict of interest. Personal wealth and
business wealth are clearly demarcated -- and managed separately," Natraj
added.
While
SFOs are the preserves of the rich, the not-so-rich can avail themselves of the
services of multi-family offices (MFOs) to manage their wealth. MFOs take
wealth management mandates from smaller families for a fee every year. There
are close to 30 MFOs in India, reports AIWMI.
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