IIFL Wealth gears up for post-raise expansion

Last month, IIFL Wealth Management, India's second largest private wealth manager by AUM and a subsidiary of IIFL Holdings, has been on a tear of late, joining the ranks of those firms that have raised capital to fund business expansion and enjoyed the tailwinds of demonetisation.

Last month, IIFL confirmed it will raise some US$110 million through the sale of 4.49 million shares at Rs 1,661 apiece to investors, including Ward Ferry, Rimco (Mauritius) Ltd, and General Atlantic, which already holds a 21.6% stake in the firm and will ply in an additional US$13.8 million.

Karan Bhagat, co-founder, managing director and CEO of IIFL Wealth and Asset Management, said at the time the investment would provide the firm with additional means to expand across geographies. He also said it would enable IIFL Wealth to improve its credit platform and serve as a sponsor to its growing alternative investment fund schemes.

The raise comes on top of already impressive growth over the past few years. IIFL Wealth Management cemented its second place ranking in the Top 20 League Table, closing out 2017 with just under US$18 billion in AUM, up from US$15 billion in 2016.

While a smaller increase in percentage terms than some competitors, Bhagat told Asian Private Banker the 20% year-on-year jump in AUM "in  an absolute amount was large" and that "the assets are growing and the maturity of relationship managers is increasing every year". He said new inflows came from a combination of existing clients deepening walletshare and new clients against a positive market backdrop.

"[Beyond demonetisation], and for the past decade, we have seen three or four major transactions a fortnight which have produced liquidity for our clients, to our benefit. Professional entrepreneurship is on the rise, for example in the tech sector, and the corporate services industry has grown significantly, ensuring a large flow of AUM. And finally, real estate has lost favour to the benefit of financial assets," Bhagat explained.

But perhaps looming even larger on the horizon is IIFL Holding's planned demerger, which would see it unpack its wealth, finance, and securities units and list them publicly as three separate companies over the course of the next 12 months. Bhagat said that while the demerger won't have a significant impact on the operations of IIFL Wealth given that its platform, as it is, is robust and purposefully built for the wealth management business, it will provide the firm with added clout for expansion, hiring and offering good equity stock options.

That growth is unlikely to come via inorganic means. Bhagat said slim pickings onshore, especially in Tier One cities effectively takes acquisition off the cards. So too in the offshore space, where IIFL Wealth operates, but where its business is still "very small".

"But in Tier Two cities, such as Chennai, there are potential opportunities to acquire at some stage because, in these centres, clients typically prefer to deal with the local players," he added.

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Asian Private Banker