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Indian Wealthtech – A $60 Bn opportunity by FY25

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Indian Wealthtech – A $60 Bn opportunity by FY25

  1. 1. © 2020 RedSeer Consulting confidential and proprietary information Bangalore. Delhi. Mumbai. Dubai. Singapore. New York Solve. New ​Indian Wealthtech – ​A $60 Bn opportunity by FY25 ​Paradigm shift in how India Invests! Dec 2020
  2. 2. 2 © RedSeer About Us About Us RedSeer is a leader in the Internet and new age advisory. Over the last 11 years of its operations we have advised 200+ clients across the breadth of Internet and investment industry in India, Middle East and South East Asia. Our advisory is differentiated through our high quality IP of market insights and research, which is unparalleled in Industry and helps both corporate and funds make right choices. With more then 200 consultants across 5 offices, we have emerged as the largest home-grown regional consulting firm in India.
  3. 3. 3 © RedSeer Disclaimer Disclaimer Copyright © RedSeer Management Consulting Private Limited (“RedSeer”). All rights reserved. While we have made every attempt to ensure that the information contained in this report has been obtained from reliable sources, all data and information provided in this report is intended solely for information purposes and general guidance on matters of interest for the personal use of the reader, who shall accept full responsibility for its use. RedSeer does and seeks to do business with companies covered in its research reports. As a result, readers should be aware that RedSeer may have a conflict of interest that could affect the objectivity of the report. All information in this report is provided “as is”, with no guarantee of completeness, accuracy, of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws and the inherent hazards of electronic communication, there may be delays, omissions or inaccuracies in the information contained in this report. Accordingly, the information in this report is provided with the understanding that the authors herein are not engaged in rendering legal, accounting, tax, or other professional advice or services. As such, it should not be used as a substitute for consultation with professional advisers. This report cannot be sold for consideration, within or outside India, without the express written permission of RedSeer. In no event shall RedSeer or its partners, employees or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this report or for any errors, omissions, or delays in the content of this report or any losses, injuries, or damages including any incidental or any consequential, special or similar loss or damages, arising out of, or in connection with the use of this report.
  4. 4. 4 © RedSeer Terms Used Definition Wealthtech • The Wealthtech is driven by Digital platforms which enable “End-To-End Digitization” of The Investment Value Chain making the entire customer journey Digital. Traditional Models • These are models where the Brokerages reach out to customers majorly via agents or wealth managers and customer onboarding takes place manually. Digital First Models • These are models where customer self onboards digitally on the brokerage platforms via an app/web and the entire customer journey is digital. Traditional Full Service Brokers • A traditional full-service broker offers a range of add-ons in addition to trading services & platform at stock exchanges. This includes research reports, advisory and a relationship manager to help investors with trading. Digital Stock Brokers • These companies offer an online trading platform (Desktop/Mobile) for individuals but provide no form of advisory services (financial reports, offline advisory and wealth managers) or add-on service like traditional full-service brokers. Mutual Fund Distributors • They facilitate buying and selling of of mutual funds on through their platforms. Robo Advisory based Wealth Management • These companies use AI/ML algorithms to recommend the best possible investment path given an individual’s financial history. In India, we see this with respect to MF distributors, who use AI/ML to recommend the best MF investments for an individual. Demat Account • A Demat account is an account to hold financial securities in electronic form. In India, Demat accounts are maintained by two depository organisations, NSDL & CDSL. MF Folio • A MF Folio is a unique number identifying your account with the asset management company. A folio number also records items such as investments, transaction history and contact details. Metro Cities • These are top 8 cities in India with population at 4.5 Mn & above. Tier 1 Cities • These comprise 30+ cities in India with population ranging from 1 Mn to 4.5 Mn. Tier 2+ Cities (Bharat) • These comprise 120+ cities in India with population ranging from 0.3 Mn to 1 Mn. Source(s): RedSeer Analysis Glossary
  5. 5. 5 © RedSeer Indian Equity & MF market The Indian Equity & MF market is expected to boom in India, driven by bullish stock market and MF investments.
  6. 6. 6 © RedSeer Source(s): (1) IMF (https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020) Due to COVID-19, the major economies of the world are expected to shrink in FY 21; Indian economy to see a V-shaped recovery by FY22 -10.3 -9.8 -8 -6 -5.8 -5.3 -4.3 -4.1 -1.5 1.9 8.8 5.9 3 4.2 2.8 2.3 3.1 2.8 6.1 8.2 India UK South Africa Germany Brazil Japan USA Russia Indonesia China FY 21 FY 22 Real GDP Growth (Annual % change) While all the major economies are currently struggling in the wake of COVID, China is the lone bright spot in FY21 as they have been successful in controlling the spread and impact of COVID in last 6 months. Note(s): (A) Based on IMF forecasts released in Oct 2020. Indian GDP India
  7. 7. 7 © RedSeer Despite the recent slowdown, the Indian economy is still expected to become the 4th largest economy globally by 2025… 2.0 3.0 4.1 FY 15 FY 20 FY 25F Nominal GDP of India1 USD Tn India’s Ascent in the ranking of the World’s largest economies1 CAN BRA ITA IND FRA UK GER JPN CHN USA CAN BRA ITA UK FRA IND GER JPN CHN USA ITA CAN BRA UK FRA GER IND JPN CHN USA GDP 20151 USD Tn GDP 20201 USD Tn GDP 20251 USD Tn CAGR ~9% CAGR ~7% xx Nominal GDP growth rate 4th largest economy Source(s): (1) International Monetary Fund Indian economy will continue to see ~7% growth in Nominal GDP despite the recent slowdown… …to become world’s 4th largest economy by 2025. Indian GDP Forecasts India Note(s): (A) 1 USD = 75 INR
  8. 8. 8 © RedSeer …driven by continued rise of consumer spending, foreign investments and infrastructural development backed by strong government stimulus Drivers of Growth of Indian GDP Growing consumer spending on goods & services  India will see 500 Mn people enter middle class within the next decade.  With a median age of 28 it will continue to add young working age population4 in the earning brackets, further driving consumption. Rise in foreign investments  Despite a slowdown in the global economy, foreign inflows are expected to as EODB is improving – In last 6 years, India jumped from 142nd rank in 2014 to 63rd rank in 2019.  India is among top 10 recipients of FDI5 globally. Investment in infrastructure  Private sector deployed about 46% of their funds in fixed assets last year compared with 18% in the year before.  Government will invest ~ USD 1.5 Tn in infrastructure projects over next 5 years to lift the COVID-hit economy. Government initiatives to boost growth A B C $1.4 $2.1 $3.1 FY15 FY 20 FY 25F Final Private Consumption India1 USD Tn $45 $71 $112 FY 15 FY 20 FY 25F FDI Flow India2 USD Bn Source(s): (1) World Bank; (2) Ministry of Commerce & Industry; (3) World Bank; (4) Ministry of Statistics & Programme Implementation; (5) UNCTAD ; (6) Finmin $699 $869 $1,080 FY 15 FY 20 FY 25F Gross Capital Formation India3 USD Bn D  Corporate tax rate rationalization – Earlier in the year Government slashed corporate taxes to boost business as the effective tax rate came down from 35% to 25.17% for existing companies.6  COVID-19 special package – Roughly 10% of Indian GDP – Government announced special economic package of ~$ 270 Bn in May 2020 to revive the Indian economy and industrial sector.6  Specifically, for MSME, Govt. will infuse ~$7 Bn in equity to boost liquidity in MSMEs. Growth Drivers India
  9. 9. 9 © RedSeer However, only 2% Indians invest in stocks resulting in stock market capitalization at 76% of GDP & as a result presents significant headroom for growth 3% 7% 55% UK 1% Indonesia 1% Brazil 2% India China USA ​Population participating in Stock markets by Country ​% of population, 2020 ​Stock Market Capitalization as % of GDP1 ​% of GDP, 2018 to 2019 period 35% 47% 59% 65% 76% 97% 148% China Russia Indonesia Brazil India UK USA 92% Global average While developed economies currently stand at more than 100% in stock market capitalization (% of GDP), India falls well behind. As only 2% Indians invest in Stock markets, there is a significant headroom for growth when compared to developed economies. Source(s): (1) World Bank Global benchmarks Equities & MFs
  10. 10. 10 © RedSeer Over the years, there has been a steady growth in Indian equity markets, MF Folios & Demat accounts As a result, both Demat account and MF Folios have grown at decent pace over last few years. Mar-19 Mar-17 Mar-16 Mar-20 Mar-18 Oct-20 Indian share market is steadily rising since last 5 years driven by high investor confidence in Indian markets. Total Demat Accounts and MF Folios in India ​Mn, FY16 - 20 48 55 71 83 90 25 28 32 36 41 FY19 FY17 FY16 FY18 FY20 Total Demat Accounts Total MF Folios ~13% ~17% CAGR (FY 16 – 20) Source(s): (1) Sector Reports; (2) NSDL; (3) CSDL; (4) AMFI 25341 29620 32968 38672 29468 38973 7738 9173 10113 11624 8597 10899 Sensex & Nifty 50 (YoY) 2,3 4 Growth Equities & MFs Sensex Nifty ~10% ~8% CAGR (FY 16 – 20)
  11. 11. 11 © RedSeer Despite the COVID impact, the Sensex & Nifty have been resilient and have bounced back after dipping by ~40% in March Pre COVID Post COVID Source(s): (1) NSDL & CDSL; (2) RedSeer Analysis Aug May Jun Jan Feb Jul Mar Apr Total Demat Accounts Total MF Folios 40,723 38,297 29,468 33,718 32,424 34,916 37,607 38,628 38,068 11,962 11,202 8,598 9,860 9,580 10,302 11,073 11,388 11,248 0 10,000 20,000 30,000 40,000 50,000 Sept Feb Apr Sensex Jan Jul May Mar Jun Aug Nifty ​Sensex & Nifty in CY 20 Sensex & Nifty made a resounding comeback after the COVID impact and have been growing strong. MF folios and Demat accounts have also experienced consistent growth throughout the year. 88 88 89 90 91 91 92 92 93 39 40 40 41 42 43 44 44 45 0 10 20 30 40 50 60 70 80 90 100 COVID Impact Equities & MFs ​Total MF Folios & Demat accounts in CY 20 ​(Mn) • COVID-19 led to volatility in the market which brought investor to buy stocks at a relatively low price (crash of blue-chip stocks). • People are looking for new sources of income because of the pandemic. • Increase in investors from Tier 2 & 3 cities (low ticket size investors). Sept
  12. 12. 12 © RedSeer Wealthtech Market A $20 Bn market poised for significant growth by 3x to reach ~$60 Bn by FY25.
  13. 13. 13 © RedSeer 2010 - 16 2017 2018 2020 (Post-COVID) 2019 2020 (Pre-COVID) • 2010: Zerodha started operations • 2011: Upstox opened for public use • 2012: Scripbox founded • 2013-16: More players primarily focused on retail investors • SEBI allowed investment up to ~$ 714 per mutual fund per financial year through digital wallets. • Zerodha launched COIN, a direct mutual fund platform. • Wealthtech becomes the 4th largest funded sub-sector within Fintech. • Upstox & 5 paisa gained more clients than Reliance & Edelwiess. • Paytm received SEBI approval & started operation as a MF aggregator. • Zerodha surpasses ICICI Securities to become the largest discount broker in India 2019. • Indwealth launched its operations with HNIs as target customers & received funding from Tiger Global. • PayU acquires fisdom to enter wealthtech market. • Zerodha applies for AMC license. • Cubewealth launches cross border SaaS service and marketplace called Cube Cloud. • Equity markets make record breaking recovery after one of the worst crashes in history. • Retail participation in Indian equities surge to a 15-year high. • Paytm money launches app for mutual funds investments. In India, Wealthtech has been generating quite a buzz in last few years with multiple players entering the sector Source(s): (1) RedSeer Analysis Timeline Wealthtech
  14. 14. 14 © RedSeer Wealthtech: welθ·​tech “The End-To-End Digitization Of The Investment Value Chain Making The Entire Consumer Journey Digital!” Wealthtech is driven by Digital platforms which enable “End-To-End Digitization” of the investors’ investment journey Definition Wealthtech Self onboarding Digitally on App/ Web Invest Digitally Redeem Digitally
  15. 15. 15 © RedSeer Wealth customers, primarily, include millennials… Millennials Middle aged working professional High Net worth Individuals Consumer Persona Gender • Male • Male • Male Age • 25-40 years • 40-55 years • 35- 55 years Time spent on Smartphone • 5 hours daily • 4 hours daily • 2 hours daily Online shopping • 90% shops online • 30% shops online • 20% shops online App used Online Payments • 90% payments online • 20% payments online • 30% payments online Insurance Products Equities Mutual Funds Equities Mutual Funds Equities Mutual Funds Gold Govt. bonds/ FDs Gold Govt. bonds/ FDs Gold Govt. bonds/ FDs Average Investment • $ 1500 • $ 7000 • $ 30,000 User Speaks “I am glad I never had to interact with any human being to start my Demat account. SIPs, trading, etc. are done within one click.” “I have to maintain a balance between my investments and EMIs. My kids are growing fast, I had to do my best to take care of them. I have multiple investments due to my busy schedule its very difficult to manage all of them” “ Monitoring my wealth is a pain for me. I want to focus on my business and expect my money to grow. I don’t have time to meet wealth managers regularly. “” Growth Drivers Wealthtech Source(s): (1) RedSeer Analysis
  16. 16. 16 © RedSeer Overall Number of people who invest in equity & mutual fund online Millennials have turned up as a powerful cohort which will drive digital investments in India. Source(s): (1) RedSeer Analysis, Survey Growth Drivers Wealthtech 24% 100% 52% 20% 32-40 25-31 18-24 4% More than 40 yrs Overall N= 50 ​With 95% confidence level and ​ 15% margin of error ​` Nov-2020 …who constitute ~70% of the investors using these platforms as per our recent survey
  17. 17. 17 © RedSeer 599 366 244 ~140 4 Access to Internet Active Internet Users Online Services Users Online Shoppers Wealthtech Platform Users Total population with access to internet Uses social media, google, but doesn’t transact online Transacts for services e.g. banking/recharge, but no products Atleast one transaction on online retail platforms in a year 100% 61% 41% Trades equities or buys MFs on Wealthtech platforms at least once a year 23% 0.7% Average Premium = $100 Source(s): (1) RedSeer Analysis 971 680 506 404 12 11% 16% 10% CAGR (FY 20-25) FY25 FY20 100% 70% 52% 42% 1.2% 38% 25% 557 ~939 11% # Smartphone Users (m) There exist ~4 Mn Wealthtech investors in India today and they are expected to multiply by ~3x to reach ~12 Mn by FY25 Wealthtech Funnel – FY 20 Number of Users, Mn Note(s): (A) Users include MF and Equity buyers on Wealthtech platforms who buy at least once a year. A Opportunity Wealthtech
  18. 18. 18 © RedSeer CUSTOMERS GETTING DIGITAL – HIGH AWARENESS & HIGH USAGE OF DIGITAL PLATFORMS FOR INVESTMENT  According to our survey, there is a high awareness among investors about digital platforms across equity and mutual fund investments.  At the same time, Digital platforms also witness high usage as illustrated from our survey results. RISE IN BHARAT INVESTORS & MILLENNIALS – RISE OF POWER COHORTS WILL DRIVE WEALTHTECH MARKET  ~15% of investors in equity markets come from Bharat (Tier2+ cities).  Rise in such investors from Bharat will further drive the adoption of digital platforms  Millennials form more than 70% of investors who invest digitally come from the age group of 25-40 years. HIGHER CUSTOMER SATISFACTION FOR DIGITAL PLATFORMS – HASSLE-FREE CUSTOMER JOURNEY LEADING TO BETTER CUSTOMER EXPERIENCE  Digital platforms smoothen the consumer journey & reduce the hassles across the investment value chain, right from onboarding to purchase to redemption.  As a result, customers are highly satisfied with Digital platforms when compared to the traditional players. COVID IMPACT – POST COVID HAS SEEN AN INCREASE IN INVESTORS, INVESTMENTS & USAGE ON DIGITAL PLATFORMS  Post COVID, in last 6 months, while ~25% of respondents started digitally investing in equities, ~40% started digitally investing in MFs.  Also, Post COVID saw an increase in average investments via digital platforms as well as growth in usage across these platforms. INVESTMENTS POURING IN WEALTHTECH – INCREASING INTEREST AMONG INVESTOR COMMUNITY LEADING TO LARGE INVESTMENTS  The investments in the Indian Wealthtech has grown at a CAGR of ~40% in last 5 years with investors pouring in millions of dollars in the upcoming digital platforms. This growth will be driven by 5 key drivers as explained below A Source(s): (1) RedSeer Analysis D C E Growth Drivers Wealthtech B
  19. 19. 19 © RedSeer 78% 22% No Yes According to our survey, there is high awareness among investors about digital platforms across equity and mutual fund investments While 80-90% are aware about Discount brokerages and Digital MF distributors, 60% are aware about Robo advisors. Q. Are you aware of the following investment services available online? N= 50 92% 8% No Yes 60% 40% No Yes Discount Brokerages Digital Mutual Fund Distributors Robo Advisors Source(s): (1) RedSeer Analysis, Survey ​With 95% confidence level and ​ 15% margin of error ​` Nov-2020 Growth Drivers Wealthtech Note(s): (A) Robo advisory based wealth management recommend the best MF investments to an investor based on the financial history with the help of AI/ML. A
  20. 20. 20 © RedSeer At the same time, Digital platforms also witness high usage as illustrated from our survey results below 45% 71% 75% 75% 77% 78% 78% 80% 85% 88% 88% 89% 90% 55% 29% 25% 25% 23% 22% 22% 20% 15% 12% 12% 11% 10% Zerodha Paytm money Upstox 5 paisa Hdfc Securities… Icici Securities… Indmoney Groww Scripbox Zerodha coin Iifl Securities… Angel Broking… Sharekhan Ltd. Don't use Currenlty Use Q. Which platforms do you currently use for investments in Equity/ MF? N= 50 Nov-2020 Source(s): (1) RedSeer Analysis, Survey ​With 95% confidence level and ​ 15% margin of error ​` High usage of digital first platforms is enjoyed by Zerodha, Paytm money, Upstox and 5 paisa. Growth Drivers Wealthtech A Digital First Traditional Digital First Traditional
  21. 21. 21 © RedSeer Rise in investors from Bharat (Tier 2+ cities) will further drive the adoption of digital platforms ~15% ~85% In last 2-3 years, there has been an increasing interest among retail equity investors in Bharat (Tier 2+ cities). Some of the trends observed in Bharat are detailed below… Growth Drivers Wealthtech B 100% BHARAT (TIER 2+) METRO & TIER 1 OVERALL Rise in small ticket investors from Bharat form ~1.5 Mn active clients on stock trading platforms. By FY25, Bharat, is expected to drive ~25% of the total active clients. ~10 Mn # Active clients in Equity markets (Digital + Traditional), FY20 (Mn) – Split by city Tier • For Upstox, 80% the customer base comes from Tier 2+ cities such as Nashik, Jaipur, Guntur, Patna, Kannur, Tiruvallur and Nainital, among others. • For 5 paisa, 70% of the customer base comes from Tier 2+ cities. • Angel Broking has added more than 0.1 Mn new accounts in Mar,2020 and out of them 80% are from Tier 2+ cities. • FY19 saw an increase in retail investors in Tier 2+ cities such as Rajkot, Vadodara, Lucknow, Nagpur & others with ~68% of the new investor registrations in FY 19 coming from Tier 2+ cities. Indicative Note(s): (A) Active clients are those who are active on trading platforms in a year. Source(s): (1) RedSeer Analysis
  22. 22. 22 © RedSeer 9% 8% 47% 43% 28% 30% 16% 19% 2017 2027 50-64 36-49 18-35 15-17 34% 33% 31% 26% 14% India Brazil China USA UK Millennial Population as a % of country’s total population Globally, India has the largest millennial population… … who also form the largest working cohort in India. Moreover, digital savvy Millennials, who are the Wealthtech power users as defined earlier will continue to drive > 40% of working age population Source(s): (1) RedSeer Analysis Share in working age population in India (by age group) Growth Drivers Wealthtech B • More than 80% of Millennials have internet connection in India. • Among them, ~90% are use mobile to access internet
  23. 23. 23 © RedSeer HNIs customers are approached by wealth managers. After multiple meetings, HNIs customers get onboarded by wealth management companies HNIs rely on wealth management firms or relationship managers for quality expert advice & are happy to pay for advisory fees. Wealth managers manage HNI financial portfolio and charge commissions or brokerage fees. Customer redeem and track his investment as per his requirement in real time. Customer learn about investing and visits Wealthtech website/app and explores the investment opportunities available. Onboarded digitally by going through the KYC process and opened his Demat account. Compares the ROI on different options & chooses the best option to suit his / her needs. Customer invested the required sum online and pays the brokerage charges along with the investment. Customer redeem his investment as per his requirement or maturity in real time. Digital platforms smoothen the consumer journey & reduce the hassles across the investment value chain, right from onboarding to purchase to redemption Investments via Brokers/ Wealth Managers Customer learn about investing & explores the different investment opportunities available through broker. Visits the nearest branch to open a Demat account & submit all the necessary documents for KYC to agent. Onboarded & paid the necessary commission AMC charges. Rely on agents for investment advice. On the advice of agents explore different investment opportunities. Customer invested the required sum as per advice of agents & pay the required brokerage charges along with the investment. Customer redeem his investment from banks in 5-7 days. Source(s): (1) RedSeer Analysis 1 2 1 2 3 4 1 2 4 3 4 Retail/HNI investor HNI investor 5 Investments via Digital platforms 3 Growth Drivers Wealthtech 5 6 5 C Retail investor
  24. 24. 24 © RedSeer -9% -23% 18% 55% 73% 23% Promoter (9-10) Neutral (7-8) Detractors (0-6) This leads to high customer satisfaction with Digital brokerage models when compared to the traditional models Digital First Models Traditional Models Customers are highly satisfied with Digital brokerage models as compared to Traditional full-service brokerage models driven by overall better customer experience, smoother customer journey and lower brokerage fees. 64% 0% N=30 N=31 Nov-2020 Q. On a scale of 0-10 (with 10 being most likely), how likely would you recommend the below platforms to your friends/ relatives? ​With 90% confidence level and ​ 15% margin of error ​` Source(s): (1) RedSeer Analysis Growth Drivers Wealthtech Note(s): (A) Traditional models are Full-service brokerages which are majorly driven by brokers/ wealth managers. C
  25. 25. 25 © RedSeer 12% 6% 6% 15% 12% 18% 30% greater than 2 yrs 1 year - 2 years 6months - 1 year 4- 6 months 2- 4 months 1- 2 months Less than 1 month Post COVID, in the last 6 months, there has been an increase in “New investors” who have started digitally investing in equities and MFs Q. Since how long you have been investing in equity via digital platforms? Q. Since how long you have been investing in Mutual funds via digital platforms? 8% 5% 3% 14% 24% 22% 24% greater than 2 yrs 1 year - 2 years 6months - 1 year 4- 6 months 2- 4 months 1- 2 months Less than 1 month N= 50 Source(s): (1) RedSeer Analysis, Survey Nov-2020 Nov-2020 ​With 95% confidence level and ​ 15% margin of error ​` ​With 95% confidence level and ​ 15% margin of error ​` ~25% of respondents started digitally investing in equity in last 6 months, post COVID breakout ~40% of respondents started digitally investing in mutual funds in last 6 months, post COVID breakout 25% of the respondents started digitally investing in equities In last 6 months, Post COVID. 40% of the respondents started digitally investing in MF, in last 6 months, Post COVID. D Growth Drivers Wealthtech N= 50
  26. 26. 26 © RedSeer Moreover, Post COVID saw an increase in average investments via digital platforms as well as growth in usage across these platforms 40% 20% 32% 2% 6% Strongly decreased Slightly decreased Remained the same Slightly increased Strongly Increased Q. Post COVID, have your investments in Equity & MF via digital platforms increased, decreased or remained the same? Q. Post COVID, has your usage of digital platforms for investments on a monthly basis increased, decreased or remained the same? 30% 22% 24% 12% 12% Strongly decreased Slightly decreased Remained the same Slightly increased Strongly Increased N= 50 N= 50 Source(s): (1) RedSeer Analysis, Survey ​With 95% confidence level and ​ 15% margin of error ​` ​With 95% confidence level and ​ 15% margin of error ​` Growth Drivers Wealthtech Nov-2020 Nov-2020 D ~30% of respondents said that “Additional source of income” and “low returns from Fixed deposits and bonds” are the reasons for investment in equities post COVID. More than 50% of respondents have seen an increase in investments via digital platforms, post COVID. ~60% of respondents have seen an increase in usage of digital platforms for investments, post COVID.
  27. 27. 27 © RedSeer At the same time, there is a continued interest among investors in the Indian Insurtech sector with investments rising by 5x in last 5 years 28 7 23 43 137 140 2015 2016 2017 2018 2019 2020 Investments in Wealthtech (Digital First platforms)($ Mn) Source(s): (1) RedSeer Analysis The investments in the Indian Wealthtech sector has grown at a CAGR of ~40% in last 5 years… …with investors across the globe pouring in millions in promising digital platforms in India. Top investors in Wealthtech B Funded Companies B Note(s): (A) Investments for 2020 are on an annualized basis. (B) Selected logos have been displayed as examples. 38% Growth Drivers Wealthtech E A
  28. 28. 28 © RedSeer FY 25 $20 Bn FY 20 Driven by the above drivers, the Wealthtech market in India is expected to grow by 3x, rising from ~$20 Bn (FY20) to ~$63 Bn (FY25) Source(s): (1) SEBI (2) AMFI (3) RedSeer Analysis 26% $3.4 Bn $16.7 Bn $44 Bn $19 Bn $63 Bn 41% 22% CAGR FY 20-25 While Equity investment on Wealthtech platforms are expected to grow by 2.6x, MFs are expected to grow by 5.6x over the next 5 years. Mutual Fund FY20 FY25 CAGR # Wealthtech Investors (Mn) 1.1 5.3 37% Avg investment per year ($) 3044 3529 3% Equities FY20 FY25 CAGR # Wealthtech Investors (Mn) 2.8 7 19% Avg investment per year ($) 5954 6563 2% Mutual Funds (AUM) Equities ​Wealthtech market - Total investments via Digital platforms ($ Bn) Opportunity Wealthtech Note(s): (A) 1 USD = 75 INR
  29. 29. 29 © RedSeer Decoding the Business Models Digital brokerage models to lead the transformation of the Indian Wealthtech sector!
  30. 30. 30 © RedSeer Note(s): (A) Selected company logos displayed. (B) Discount broker does not provide investment advice whereas full-service broker provides research and advisory as well as brokerage service.(C) Robo advisory based wealth management use AI/ML to recommend the best MF investments for an individual. (D) HNIs are investors with more than 2Cr investible capital. Source(s): (1) RedSeer Analysis Driven by the immense opportunity, multiple business models have come up targeting various customer cohorts B2C Retail HNID Discount stockbroker & Mutual fund distributor Robo advisory based wealth management (Mutual fund) Business Models Wealthtech Indian Wealthtech Business Models (Selected example logos have been displayed to substantiate the framework below, basis their service lines.) These companies target both the clients- HNI & B2C Retail Traditional Full-service models Digital First models Full-service stockbroker & Mutual fund distributors
  31. 31. 31 © RedSeer Indian Wealthtech Business Models (Selected example logos have been displayed to substantiate the framework below, basis their service lines.) Note(s) Discount broker does not provide investment advice whereas full-service broker provides advice as well as brokerage service. These models monetize through various routes such as Commission-based fees, upfront fees while onboarding & Advisory based fees Source(s): (1) RedSeer Analysis Upfront fees + Commission- based fees Advisory based fees Discount stockbroker & Mutual fund distributor Full-service stockbroker & Mutual fund distributor Robo advisory based wealth management (Mutual fund) Monetization via Investors Business Models Wealthtech Traditional Full-service models Digital First models Advisory based fees + Upfront fees + Commission-based fees
  32. 32. 32 © RedSeer Note(s): (A) Selected company logos displayed. Source(s): (1) RedSeer Analysis Business Models Wealthtech Digital brokerage models seem to be on a growth path and have gained significant market share… Growth (FY19-20 CAGR) 60% 350% 650% Market Share by # Active Clients 0% 15% Digital brokerage models not only have a high growth, they also seem to enjoy high consumer base. Whereas, Traditional Full service stock brokers are facing challenges as they are consistently losing market share & their growth has been slowing down as well. Digital brokerage models are experiencing higher growths and are expected to grab higher market share in the next couple of years 5% 10% 30% Most of the Traditional Full-service stock brokerage models are finding it challenging as they have been consistently losing market share over last 3 years
  33. 33. 33 © RedSeer …displacing some of the leading brokerages, driving ~25% of the overall market and more than ~90% of the Digital only market The top 9 players drive ~60% market share in India with Zerodha leading the market with ~14% share. Source(s): (1) Expert Interview (2) RedSeer Analysis 50% 40% 4% 3.5% 1% 4.4% 6% 4.9% 5% 5.2% 5% 5.6% 1% 6.0% 7% 6.5% 10% 9.7% 11% 14.3% ~ 9 Mn Others ~10 Mn CAGR FY 19-20 18% 361% 9% 31% 52% 628% 12% 23% 63% 60% of the market FY 19 FY 20 Market share (Digital & Traditional brokerages) by # of active clients (Mn) Business Models Wealthtech Market share (Digital i.e., online only platforms) by #of active clients (Mn) 12% 16% 21% 51% ~2.8 Mn Others ~90% of the market FY 20 Among Digital only market, the top 3 players drive ~90% of the market Note(s): (A) Active clients are those who are active on trading platforms in a year.
  34. 34. 34 © RedSeer 0.54 0.98 1.6 2.3 0.8 0.88 1.08 1.16 0.6 0.65 0.73 0.78 0.04 0.1 0.68 1.01 0.36 0.41 0.63 0.93 FY 18 FY 19 FY 20 FY 21 Zerodha ICICI Securities HDFC Securities Upstox Angel broking A Growth of Active clients of Top Five brokerages (Mn) While Digital brokerage players like Zerodha have grown at a CAGR of ~60 % in last 3 years, Traditional Full service models like ICICI securities have seen a CAGR of ~13% during the same period. Specifically, Digital brokerage players like Zerodha and Upstox have witnessed a phenomenal growth in last 3 years Note(s): (A) FY 21 includes number up to 1st Sept, 2020 Source(s): (1) Expert Interview (2) RedSeer Analysis CAGR FY 18-21 62% 13% 193% 37% 13% Business Models Wealthtech
  35. 35. 35 © RedSeer This growth is driven by high customer stickiness due to higher customer satisfaction (as explained earlier) and less brokerage fees Digital Brokerage Models (Discount stockbroker) Traditional Full-service Brokerage Models Demat Account AMC ₹ 250-300 ($ 3.5-4.3) ₹700 ($10) Equity Delivery Brokerage (Free) 0.55% Equity Intraday Brokerage ₹20 ($ 0.3) per executed order or .03%-.05% whichever is lower 0.275% Equity Futures Brokerage ₹20 ($ 0.3) per executed order or .03%-.05% whichever is lower 0.05% to 0.03% Equity Options Brokerage ₹20 ($0.3) per executed order ₹95 ($1.3)to ₹35 ($0.5) per lot Currency Futures Trading Brokerage ₹20 ($ 0.3) per executed order or .03%- 0.05% whichever is lower 0.05% to 0.03% Currency Options Trading Brokerage ₹20 ($ 0.3) per executed order or .03% whichever is lower 0.25% to ₹65 ($0.9) per lot Digital brokerage models charge less brokerage fees compared to traditional full-service brokerage models. As a result, it attracts more customers on its platform. Source(s): (1) RedSeer Analysis Relative strength Worst Best Business Models Wealthtech Note(s): (A) 1 USD = 75 INR
  36. 36. 36 © RedSeer This has led to significantly better LTV : CAC ratio (94x) for Digital brokerage models leading to higher profitability per customer LTV vs. CAC (FY20) Digital Brokerage Models (Discount broker) Traditional Full-service Brokerage Models Remarks Average fees & commission Year 1 (INR) ~5,000 ($67) 10,000 ($133) • Discount brokers work on low commission models as compared to full-service brokers. Retention Rate Year 2 95% 80% • Customer stickiness is better in discount brokers because of low fees and better customer experience. Retention rate Year 3 90% 60% Lifetime Value for 3 years (INR) 14,025 ($187) 22,800 ($304) • LTV for full-service is more due to high avg. fees & commission. CAC (as a % Lifetime value for 3 years) 1% 9% • CAC for full-service brokers majorly includes the commission paid to agents & other marketing expenses. • While CAC for discount brokers include performance marketing & call center expenses. • Since commissions to agents is a high component for full- service brokers, discount brokers is placed favorably on CAC%. CAC/ customer (INR) 150 ($2) 2000 ($27) • When compared to full-service brokers, discount brokers have lower CAC because of the D2C route. LTV:CAC ratio 93.5 11.4 • Hence for Discount brokerage models, the value of customer is 94 times more than the cost of acquiring it. Relative strength Worst Best Source(s): (1) RedSeer Analysis Business Models Wealthtech Note(s): (A) 1 USD = 75 INR
  37. 37. 37 © RedSeer This also leads to stronger unit economics for Digital brokerage models vs. Traditional Full-service brokerage models Unit Economics FY20 Digital Brokerage Models (Discount broker) Revenue (Revenue per customer is constant as Zerodha charges flat fees & not a % of GTV) 100% Direct Cost (as a % of Revenue) (Direct Cost includes Tele-sales team, commission to Tele-sales team, Documentation is outsourced to third party) (30%) Software/Server (as a % of Revenue) (9%) Contribution Margin (as a % of Revenue) ~61% Source(s): (1) Expert Interview (2) Redseer Analysis Digital brokerage models in a very short period have been able to achieve better unit economics when compared to Traditional Full- service brokerage models which have been around for more than couple of decades. Business Models Wealthtech Unit Economics FY20 Traditional Full- service Brokerage Models Revenue (Revenue consists of revenue from operations) 100% Direct cost (as a % of Revenue) (Custodian, depository, call center charges, employees/managers & other expenses ) (38.7%) Fees & commission expense (as a % of Revenue) (14.9%) Contribution Margin (as a % of Revenue) ~46%
  38. 38. 38 © RedSeer Source(s): (1) RedSeer Analysis Indian Digital brokerage Models (Discount brokers) Indian Digital brokerage Models (Discount brokers) Global Digital brokerage Models (Discount brokers) Valuation FY20 ~$1 Bn A ~$80 Mn A $11.2 Bn A Valuation/ Revenue Multiple FY20 7.4x ~10x B ~60x Users Growth CAGR (FY 18-20) ~70% ~300% 47% #Users (Mn) 2.3 ~1 13 CAC ($) ~$2 $2-3 ~$25 PAT ($ Mn) 47 1.73 B N/A Digital brokerage model – Indian vs. Global Business Models Wealthtech Note(s): (A) Valuations are basis media reports. (B) Upstox financials are basis FY19. Globally, above merits have led to higher valuations for Digital brokerage models and Indian players are expected to follow on similar lines
  39. 39. 39 © RedSeer Our report authors can be reached out for any queries… Abhishek Chauhan Associate Partner Internet & Private Equity abhishek@redseerconsulting.com Anand Vardhan Verma Senior Consultant Fintech & Retail anandvardhan@redseerconsulting.com Prakhar Sahu Associate Consultant Fintech prakhar@redseerconsulting.com
  40. 40. 40 © RedSeer APPENDIX • Player profiles • Unit Economics of players • Other Survey Slides
  41. 41. 41 © RedSeer Zerodha Profile Founded • 2010 HQ • Bangalore Total Funding • No Funding Offerings • Kite • Console • Coin • Kite Connect API • Varsity Mobile • Pulse User Base (till date) • 2.2 Mn customers • 15% of overall trading volumes in India Key Business Metrics (FY 20) • Net Profit: $ 80 Mn • Revenue: $ 200 Mn Business Model • Zerodha is an Indian financial services company that offers offers retail and institutional broking, distribution, and trading services. The company also develops tools for market data research and analysis • Zerodha works on 'Low margin and high-volume model.' • Zerodha works on the concept of discount broking i.e., it charges reduced commission or low brokerage on transactions that attract the investors especially the beginners to use this platform Route to monetization • The firm makes money from fees on futures, options and intraday equity transactions. Customer acquisition strategies • Zerodha spends $ 0 on customer acquisition. They rely on word of mouth. ​Zerodha – Profile & Business Model Details Growth Story 2010 2015 2018 2019 onward Zerodha was founded by Nithin Kamath Zerodha launches direct mutual fund platform 'Coin’ in 2017 and adds clients at 349% rate during FY 18-19 RBI gives Zerodha a licence to lend Zerodha applies for Mutual Fund licence Zerodha replaces biggies as largest broker in India • Sentinel • Smallcase • Streak • Sensibull • Golden Pi etc. Zerodha scarps fee for cash trades, going zero brokerage and goes vernacular with launching Kite in various regional languages Source(s): (1) RedSeer Analysis
  42. 42. 42 © RedSeer IndMoney Profile Founded • 2018 HQ • Gurugram Total Funding • $56.9 Mn • Funded by Tiger Global Management, Steadview Capital, etc. Offerings • Wealth Management User Base (till date) • `2000 HNI clients Key Business Metrics (FY 20) • Total Revenue- $ 0.5 Mn Business Model • The company, in the stealth mode at present, operates a financial advisory platform that uses AI and machine learning to allow users to manage their investments, liabilities, future cash flows and taxation • INDWealth monetization technique is via advisory fees. Since they recommend commission free product, the advisory fees keep their business afloat Route to monetization • Advisory fees charged to it’s HNI Clients. Customer Acquisition strategies • INDwealth acquires customer through their relationship managers and wealth managers. ​INDMoney – Profile & Business Model Details Growth Story 2018 2019 2020 onward 2020 $12 M 2019 $15M 2018 $30M Largest funding round raised by a homegrown startup that is yet to be launched for public Launched its Android/IOS apps Raised Series C from Steadview, Tiger Global etc. to focus on customer acquisition and marketing campaigns Source(s): (1) RedSeer Analysis
  43. 43. 43 © RedSeer IIFL Profile Founded • 1995 HQ • Mumbai Total Funding • Market Cap- $ 185 Mn (IPO) Offerings • Retail broking • Institutional broking • Investment Banking • Financial product distribution User Base (till date) • 0.225 Mn active customers Key Business Metrics (FY 20) • Net Profit: $ 31 Mn • Revenue: $ 105 Mn Business Model • IIFL is one of the key capital market players in the Indian financial services space, IIFL securities is a one stop shop for investors. The company offers retail and institutional broking, financial products distribution, investment banking and advisory services. • IIFL works on the concept of full-service broking i.e., its a full-service broker offers a range of add-ons in addition to trading at stock exchanges. This includes research reports, advisory and a relationship manager apart from helping you buy and sell shares Route to monetization • IIFL makes money from brokerages on equity delivery, F&O and intraday equity transactions and AMC, paid research reports, advisory, etc. Customer acquisition strategies • IIFL works for both retail & institutional customers. They acquire customers through multiple channels. ​IIFL – Profile & Business Model Details Growth Story 1995 2011-12 2017 2019 onward IIFL was founded as Probity research and services Pvt. Ltd IIFL acquired Samasta Microfinance Ltd Demerger and subsequent listing of 5paisa Capital Ltd IIFL Securities Limited & IIFL Wealth Management Limited were demerged & independently listed. IIFL Holdings Limited was renamed as IIFL Finance Limited. IIFL incorporated the IIFL Asset Management Company Announced the real estate fund Source(s): (1) RedSeer Analysis
  44. 44. 44 © RedSeer Groww Profile Founded • 2016 HQ • Bangalore Total Funding • $ 60 Mn Offerings • Mutual Funds • Stocks User Base (till date) • 0.2 Mn customers Key Business Metrics (FY 19) • Net Profit: ($ 0.31 Mn) • Revenue: $ 0.008 Mn Business Model • Groww is an India-based online investment platform that targets first-time investors and millennials • It offers investment in mutual funds and it is a discount broker. i.e., it charges reduced commission or low brokerage on transactions that attract the investors especially the beginners to use this platform Route to monetization • Groww makes money from commission from the funds they sell & from fees on futures, options and intraday equity transactions. Customer acquisition strategies • Groww spends very less on customer acquisition. They acquire customer via digital channel only. ​Groww – Profile & Business Model Details Growth Story 2016 2018 2019 onward Groww was launched as an investing platform where users can find the best mutual funds to invest in and can invest their money without any hassles. Groww raises $ 1.6 Mn in and it launched direct plan mutual funds for its customers. It also raised $ 6.2 Mn funding from Sequoia Capital. Groww launched discount brokerage service and start offering trading & demat accounts to customers. Source(s): (1) RedSeer Analysis
  45. 45. 45 © RedSeer Upstox Profile Founded • 2009 HQ • Bangalore Total Funding • $ 29 Mn Offerings • Trading & Demat account User Base (till date) • 1 Mn customers Key Business Metrics (FY 19) • Net Profit: $ 1.7 Mn • Revenue: $ 7.5 Mn Business Model • Upstox is an Indian financial services company that offers retail and institutional broking, distribution, and trading services. Upstox works on 'Low margin and high- volume model.’ • Upstox works on the concept of discount broking i.e., it charges reduced commission or low brokerage on transactions that attract the investors especially the beginners to use this platform. Route to monetization • Upstox makes money from fees on futures, options and intraday equity transactions. Customer acquisition strategies • Upstox relies on digital channel for customer acquisition. They rely on word of mouth. ​Upstox – Profile & Business Model Details Growth Story 2010 2012 2016 2019 onward Upstox was founded as RKSV Securities India Pvt. Ltd., in 2010—a proprietary trading firm focused on a niche clientele. Upstox raised $ 4 Mn in series A funding by Kalaari Capital and GVK Darvix technologies. Upstox becomes India’s second largest broker, after Zerodha, Upstox achieved 1.2 Mn customers by October 2020. The company was re- branded as Upstox in 2012 and opened to the general public. Source(s): (1) RedSeer Analysis
  46. 46. 46 © RedSeer Kuvera Profile Founded • 2016 HQ • Bangalore Total Funding • $ 5 Mn Offerings • Direct Mutual fund • Loan on Investment User Base (till date) • 0.5 Mn customers Key Business Metrics (FY 19) • Net Profit: ($ 0.3 Mn) • Revenue: $ 0.04 Mn Business Model • Kuvera is an India-web based investment platform that targets individuals & families. • It offers investment in mutual funds and loans against investments. It offers free financial planning to individuals and families. Route to monetization • Generate revenues through B2B services and market data analytics. Customer acquisition strategies • Kuvera acquires customers through Digital channel. ​Kuvera – Profile & Business Model Details Growth Story 2016 2018 2019 onward Kuvera was started by Gaurav Rastogi & Neelabh Sanyal as a web-based investment platform that targets individuals & families Kuvera has “gamified” the mutual funds investments for Indians by offering value- added services like tax harvesting, family account planning through loyalty coins. Kuvera raised $ 4.5 Mn funding in series-A round by Eight road ventures and completely re- designed industry-leading fund detail page with investor-friendly features. Source(s): (1) RedSeer Analysis
  47. 47. 47 © RedSeer Paytm Money Profile Founded • 2017 HQ • Noida Total Funding • $ 11 Mn Offerings • Trading & Demat account • Direct mutual fund User Base (till date) • 6.6 Mn customers Key Business Metrics (FY 19) • Net Profit: ($ 5 Mn) • Revenue: $ 0.1 Mn Business Model • Paytm Money is an Indian financial services company that offers offers retail broking, distribution, and trading services. The company also offers direct mutual fund services • Paytm money works on the concept of discount broking i.e., it charges reduced commission or low brokerage on transactions that attract the investors especially the beginners to use this platform Route to monetization • Paytm makes money from commission from the funds they sell & from fees on futures, options and intraday equity transactions. Customer acquisition strategies • Paytm Money acquires customers be leveraging user base of its parent entity. i.e. Paytm ​Paytm Money – Profile & Business Model Details Growth Story 2017 2018 2019 onward Paytm Money was launched as an independent entity with focus on building investments & wealth management products & services for customers. In 2020, Paytm Money entered equity market and provides stock broking services as a discount brokerage to its customers. Paytm Money received SEBI’s approval to act as an Investment Adviser (IA) and launched dedicated app (Android & iOS) for Mutual fund investments for customers Source(s): (1) RedSeer Analysis
  48. 48. 48 © RedSeer Profile Founded • 2014 HQ • Toronto Total Funding • $166.9 M (2018) • Funded by Power FInancial Corporation, venture capitalists etc. Offerings • Wealth Management • Robo-advisory and Live Advisors • Micro-Investing Service and Savings Account • Brokerage Accounts User Base (till date) • 75,000 Users Key Business Metrics (FY 20) • Over $3 Billion AUM Business Model • Enabling clients to invest their savings: tailored and diversified portfolios comprised of exchange traded funds. • Aimed at making investing easier for millennials: No minimum investment amount, fees lower than the industry average. • Provides access to human advisors: contact via phone, email, text message, or video chat, unlike other roboadvisors Route to monetization • Management fee on assets that are not managed for free (0.5% for clients investing <100,000, 0.4 for clients investing >100,000) • Leveraging technology to reduce costs Customer Acquisition strategies • Lower management fees than traditional advisors • Introduction of Savings account • Unconventional marketing strategies Growth Story ​Wealthsimple – Profile & Business Model Details Wealthsimple 2014 2016 2018 2020 onward Wealthsimple is founded by Michael Katchen in Toronto. introduced Roundup which automatically invested the spare change from debit and credit card purchases. Becomes the first regulated crypto trading platform in Canada Wealthsimple’s Savings Account introduced Source(s): (1) RedSeer Analysis
  49. 49. 49 © RedSeer Robinhood Profile Founded • 2013 by William H. Harris, Rob Foregger, Paul Bergholm and Louie Gasparini HQ • Menlo Park, California, United States Funding • Total Funding: USD 1.5 billion • Received a USD 280 million Series F funding on July 13, 2020 Offerings • ETFs and options is offered through Robinhood Financial LLC • Cryptocurrency trading is offered through Robinhood Crypto, LLC. • Cash Management User Base • 10 million users Business Model • Robinhood Financial is a stock brokerage application that democratizes access to the financial markets • The platform enables its customers to buy and sell U.S. stocks, ETFs, and options with zero commission. • The trading platform also aims to make people comfortable storing money and trading stocks using its application. Route to monetization • It generates revenue from a broad range of sources, including Gold membership fees, stock loans, and rebates from market makers and trading venues Changes in approach during COVID • Since coronavirus struck, Robinhood has latched on to a boom in retail investing in the US that has attracted hundreds of thousands of investors to financial markets for the first time, hoping to ride a 45 per cent rally in stocks since the lows in March. But this formula has proven tough to replicate overseas. It abandoned plans to expand into the UK ​Robinhood – Profile & Business Model Details Source(s): (1) RedSeer Analysis
  50. 50. 50 © RedSeer Personal Capital Profile Founded • September 2009 by Bill Harris, Louie Gasparini, Rob Foregger HQ • San Francisco, California, U.S. Funding • Total Funding - $265.3 Mn • Lead Investors- Institutional Venture Partners, Venrock, Crosslink Capital, Corsair Capital, IGM Financial Offerings • Personal Capital Cash • Personal Strategy • Tax Optimisation User Base / AUM • 24,000+ Investment Clients in All 50 States • Over $12.3B assets under Management as on May 2020 Business Model • Client-first, hybrid business model. • Users link their banks, brokerages, 401(k)s, mortgages, credit cards, and loans. • Analytics and planning advice is then automated through a 401(k)-fee analyzer, retirement planner, mutual fund analyzer, an investment checkup, and cash flow tool. A free Personal Capital app has also been available to all users with the same monitoring, analytic, and planning functionalities as the web version. Route to monetization • Managed accounts have been an available option for clients with a minimum of $100,000 in assets and include a team of financial advisors assigned to each account in exchange for a fee. Changes in approach during COVID • In the wake of market volatility due to COVID-19, Personal capital has launched the „Recession Simulator’ that provides insights into the effects of past market recessions. • Despite unprecedented market volatility, the company has experienced its best sales quarterly growth ever, driving a 23% annualized growth in net new assets in the first quarter of 2020. ​Personal Capital – Profile & Business Model Details Source(s): (1) RedSeer Analysis
  51. 51. 51 © RedSeer APPENDIX • Player profiles • Unit Economics of players • Other Survey Slides
  52. 52. 52 © RedSeer Unit Economics FY20 INDmoney Revenue (Revenue per customer is constant as INDmoney charges a flat advisory fees & not a % of GTV) 100% Onboarding costs (as a % of Revenue) (Multiple client meetings, documentation) (187%) Execution cost (as a % of Revenue) (Order Management system, Depository, KYC etc.) (63%) Engagement Cost (as a % of Revenue) (Clients Meetings, push mail notification, calling etc.) (125%) Contribution Margin (as a % of Revenue) (275%) Unit economics of INDmoney and Paytm Money Source(s): (1) Expert Interview (2) RedSeer Analysis Unit Economics FY19 Paytm Money Revenue (Charges commission from Mutual Fund houses per mutual fund sold) 100% Direct Cost (as a % of Revenue) (Direct Cost includes Tele-sales team, Order Management system, Depository, KYC push mail notification) (1915%) Other Cost (as a % of Revenue) (Include advertisement expense, professional charges, marketing charges, software charges,etc) (1619%) Contribution Margin (as a % of Revenue) (3474%) Business Models Wealthtech
  53. 53. 53 © RedSeer Unit economics of Upstox and ICICI Securities Unit Economics FY19 Upstox Revenue (Revenue per customer is constant as Upstox charges flat fees & not a % of GTV) 100% Direct Cost (as a % of Revenue) (Direct Cost includes Tele-sales team, commission to Tele sales team, Documentation is outsourced to third party, Custodian & depository charges) (56%) Software/Server (as a % of Revenue) (10%) Contribution Margin (as a % of Revenue) ~34% Source(s): (1) Expert Interview (2) RedSeer Analysis Unit Economics FY20 ICICI Securities Revenue (Revenue consists of revenue from operations ) 100% Direct cost (as a % of Revenue) (Custodian, depository, call center charges, employees/managers & other expenses ) (38.3%) Fees & commission expense (as a % of Revenue) (3.7%) Contribution Margin (as a % of Revenue) ~58% Business Models Wealthtech
  54. 54. 54 © RedSeer Unit Economics FY20 Kuvera Revenue (Charges commission from Mutual Fund houses per mutual fund sold and market data analytics) 100% Direct cost (as a % of Revenue) (Direct Cost includes Tele-sales team, Order Management system, Depository, KYC push mail notification etc.) (120%) Other Cost (as a % of Revenue) (Include advertisement expense, professional charges, marketing charges, software charges,etc) (296%) Contribution Margin (as a % of Revenue) (316%) Unit economics of Groww and Kuvera Unit Economics FY19 Groww Revenue (Charges commission from Mutual Fund houses per mutual fund sold) 100% Direct Cost (as a % of Revenue) (Direct Cost includes Tele-sales team, Order Management system, Depository, KYC push mail notification etc.) (44%) Other Cost (as a % of Revenue) (Include advertisement expense, professional charges, marketing charges, software charges, etc.) (64%) Contribution Margin (as a % of Revenue) (8%) Source(s): (1) Expert Interview (2) RedSeer Analysis Business Models Wealthtech
  55. 55. 55 © RedSeer APPENDIX • Player profiles • Unit Economics of players • Other Survey Slides
  56. 56. 56 © RedSeer “Additional source of income” and “low returns from Fixed deposits and bonds” are the top 2 reasons for post-COVID investment in equities 27% 27% 14% 14% 5% 5% 5% 3% 0% Looking for additional sources of income to supplement my main income While returns from FD & Bonds is low, equity investments is expected to give me better returns As I was WFH, I thought of exploring in equity investments Friends/ family motivated me to start investment in equities Market crashed in March due to Covid, I wanted to buy stocks at lower price Post Covid, other expenses have gone down, I was able to save more & started investing As market has been going up Post Covid, I want to make some money Returns from equity is my main source of income Due to loss of job during Covid, I took up investment in equities N= 50 Q. What is the motivation behind investing in equities post-COVID? Nov-2020 Source(s): (1) RedSeer Analysis, Survey ​With 95% confidence level and ​ 15% margin of error ​` Post COVID, 54% respondent's motivation behind investment are “additional source of income” and “better returns as compared to FD & bonds”
  57. 57. RedSeer.com Solve. New Disclaimer and confidentiality notice: This document contains information that may be confidential and proprietary. Unless you are the intended recipient (or authorized to receive this document for the intended recipient), you may not use, copy, disseminate or disclose to anyone the message or any information contained in the document. © 2020 RedSeer Consulting confidential and proprietary information Bangalore. Delhi. Mumbai. Dubai. Singapore. New York Thank You query@RedSeer.com facebook.com/RedSeerconsulting twitter.com/RedSeer linkedin.com/company/RedSeer-consulting

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