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Wealth managers target new Flipkart millionaires after Walmart deal

Wealth managers are making a beeline for individuals who made windfall gains in Thursday's blockbuster Flipkart sale, hawking their services for a batch of multi-millionaires from co-founder Sachin Bansal to employees vesting their stock options.

The top two wealth management firms in the country - IIFL Investment Managers and Kotak Wealth Management that they would be pitching for the accounts of Bansal and Flipkart's overnight millionaire employees.

Walmart Inc., which has sealed the largest e-commerce deal in history with its $16 billion buyout of Flipkart, has set aside nearly $500 million to buy back shares from existing and former employees of Flipkart. Bansal will be leaving Flipkart, selling his 5.5% stake for $1 billion (Rs6,700 crore approximately).

"Here (through the deal) the number of people who are getting benefited and making between $800 million-$1 billion is upwards of 50. Hence, there is a big business opportunity available at least for the top four wealth management firms in India," Yatin Shah, founder and executive director at IIFL Investment Managers said.

The deal could also make wealth managers focus more on Indian unicorns approaching actual cash realizations, a rare event so far.

"To some extent, a lot of wealth creation which has happened in the sector was paper money. So, while people were paying attention to this sector from a wealth creation perspective, I don't think a lot of wealth managers had deeply engaged with the industry. Most of the wealth managers will now start focusing on other unicorns or people in the sector who have not yet had liquidity," said George Mitra, chief executive officer of Avendus Wealth Management.

Considering Bansal's billion-dollar exit, wealth managers expect him and some other beneficiaries to start their own family offices, offering an opportunity to offer consultancy services in setting them up.

"Looking at the scale of financial liquidity, we can also see them formalizing their own family offices where they hire known professionals to manage wealth. The mandate would be simple that you would want to earn a risk-adjusted return as you are already taking risk while building your venture or backing a venture," said Shah, adding the young professional entrepreneurs who have seen an event of liquidity at an early stage of their careers can allocate 15-20% in a new venture they may start.

Jaideep Hansraj, CEO, wealth management and priority banking at Kotak Mahindra Bank, said that while the allocation of funds will depend on the investment profile of the individuals and their risk appetite, the equity allocation should ideally be 100 minus the person's age; lower the age, higher the equity allocation.

Shah and Mitra both agreed that professionals who have made money could also explore backing venture capital and private equity funds as limited partners.

"People will look at investing in real estate initially. A lot of new possibilities will also open up for them such as alternative investment funds, which generally have a ticket size of Rs1 crore and which earlier might have been outside of their wallet size," said Mitra. Shah also reiterated that considering that the average age of most professionals is below 40, they could consider starting their own businesses or back startups or start their own VCs, deploying the balance money make "risk-adjusted returns" to maintain their lifestyle.


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