Why India's Young Heirs Are Choosing Investing Over Building Businesses
India's young and wealthy are not only aggressively taking risks with investments, but they’re also bracing for uncertainties and safeguarding wealth.
Unlike most of his peers who get inducted into the family business, the scion of FMCG business house Marico, Rishabh Mariwala, chose to carve his own path. Long before the beauty segment took off in India, he founded a premium body and bath brand called Soap Opera N More in 2011, and followed up with luxury skin care products under the brand, Pure Sense in 2016.
Around the same time, the younger Mariwala also started investing in venture capital, and calls himself a ‘consumer investor’. His family office Sharrp Ventures, was an early investor in many listed companies like Nykaa, Mamaearth, mcaffeine, Healthkart, purplle, Bira and others. All this while being a director in Marico as well as Kaya Skin Care.
While Mariwala’s story comes as a full circle — being an entrepreneur as well as an investor, few seem to be following in his footsteps. In fact, several veteran industrialists like banker Uday Kotak and RPG chairman Harsh Goenka have recently expressed concern over how many young heirs of successful business houses in India are choosing to become ‘only investors’ instead of working in their family businesses or building their own.
Edelweiss chairman Rashesh Shah pointed out in an interview with The Core that the wealth of the wealthy is not being put to ‘right’ use. And there seems to be a lot. As per Hurun’s 2024 report, India has 1,539 individuals whose wealth exceeds Rs 1,000 crore. Their cumulative wealth increased by 46%, while the average wealth increased by 25%.
“Once they have wealth, people then invest in only growing that. I think people who have wealth should take risks in building business. Investing your wealth to earn an extra half or 1% return, arbitrage on tax may not be the best way to get the best out of the wealth you have now got. I think you should take some risks, build some businesses, and create jobs,” Shah said.
While Kotak wants to see the young wealthy Indians hungry for success, RPG chairman Harsh Goenka said family offices offer a risk-free, stress-free and tan-friendly lifestyle. But for many young super-rich, investments are serious business.
Diversification In The Era Of Disruption
Wealth managers believe that gatekeeping their vast teeming coffers of the wealthy is a good idea.
“They have made their money from the businesses they have built. They must enjoy the fruits of the labour, and there is nothing wrong in investing in financial instruments,” said Prashant Joshi, co-founder and partner and head of family office at Upwisery, a financial strategy and solutions company.
In the era of disruption, not all businesses are booming, and a few business houses might have to diversify to ensure their wealth stays put. Many of them are looking to spread their risks.
“A few business houses who do not see significant growth in their current business are looking to diversify into financial assets. A classic example of this is the diamond industry, who are taking out profits from the business towards investments. Chemical traders too are also bringing money out. Large wealthy moneylenders, too, are seeing their businesses decline and now investing actively,” said Arihant Bardia, the founder of Valtrust, a bespoke asset management solutions company.
Value At The Other End
As average Indians are ‘financialising their savings’, the trend amongst their wealthier counterparts is the ‘business of investing’. Most Indians are now looking at structured ways to preserve wealth in the form of family offices. The number of family offices swelled from a mere 45 in 2018 to over 300 now.
Family offices offer a structured way to invest, instead of investing in an ad hoc manner. “One can’t build wealth without structure. People are realising its importance now,” said Joshi.
Within these structures, young heirs who identify as ‘aggressive investors’ are actively taking risks. As a lot of new-age trends like electric vehicles, digital economy and more catch on amongst consumers, many wealthy Indians are looking to create value from the other end of a growing spectrum. They’re aggressively investing in startups along with equity, debt and other opportunities like private credit and more.
“There is rising interest in family offices becoming capital providers to India’s innovation economy. The generational shift is playing a role here — younger ultra high networth individuals (UHNIs) are viewing wealth as a tool to influence change, not just a means to personal security. Many are prioritising impact, looking to back businesses that align with their values and vision for India’s future, says Vodhi Chakravartty, head of strategy, Kotak Private Banking.
An increasing chunk of India’s rich are gaining from their investments as well. In a survey by Kotak Private as a part of its Top Of The Pyramid report, 13% of them cited investments as their main source of income, showing that it’s a flavour for UHNIs.
UHNIs are also keen on diversifying their portfolios across nations. As per the Kotak survey, as many as 29% of UHNIs invest abroad. As many as 58% expect better returns, 49% cited portfolio diversification as a key driver, potentially to mitigate risk and hedge against currency devaluation. Other drivers include –higher security of investments, tax laws and potential migration in the future.
“While most first-generation entrepreneurs are looking to invest in India-related businesses, others differ,” said Barda.
Primary Biz Not Waning In Value
At the same time, where primary businesses show growth potential and show value, there is a large chunk going into that as well. In a survey by Kotak Private as a part of its Top Of The Pyramid report, business profits continue to be the main source of wealth for 60% of its respondents.
And, as many as 85% of them believed that it’s essential for them to invest in their primary business. However, the bond with the business is highest for entrepreneurs, as 95% felt it was essential, while it came down to 89% for inheritors and 72% for professionals.
“Reinvestment into core businesses remains the largest category of discretionary spend, accounting for 18% of UHNI wealth deployment. This signals a clear preference for capital expenditure (capex) over passive financial allocation,” says Chakravartty.
Most UHNIs either invest in expanding their businesses, launch spinoffs or subsidiaries. A few of them explore overseas expansion, especially in sectors which hold potential like fintech, pharma, health-tech, and services.
As indicated by the Kotak survey, the bond with the business is highest for those who grew the business, indicating a generational play.
“The second generation (inheritors) is not keen on investing in the same business. If they identify a new business opportunity, a lot goes there. But in case they haven’t identified or the first generation isn’t keen on it, the second generation prefers financial assets as opposed to putting it back in the operating business,” Bardia adds.
Other Priorities for The Wealthy
Young, wealthy Indians are well aware of the many uncertainties that dog the world as well as the country. While they aggressively take risks with investments, they’re also bracing for uncertainties and safeguarding wealth.
The family office structures, which have become popular with the wealthy, offer a wide range of services, which also include family governance and succession planning in addition to wealth management services. These structures help ringfence assets from business liabilities and other such troubles in the future.
“They help gatekeeping wealth within the family in case of an eventuality, be it a bad marriage or a bad credit. It creates structures so that a claimant cannot take away the money that the family has built,” Joshi said.
In addition to investing and safeguarding, wealthy Indians are also enjoying their wealth, now more than ever.
“Consumption amongst India’s ultra HNIs has risen significantly in recent years, with most reporting increased spending since before the pandemic. Expenditure on health and wellness has become increasingly prominent. Spending on luxury goods and hobbies has also seen substantial growth reflecting a diversified spending pattern amongst ultra HNIs,” says the Kotak report.
Clearly, the young and the wealthy are both careful, as well as open-fisted with their wealth, dispelling time-tested theories of putting capital through ’hard work’.
