What InCred Money’s acquisition of Orowealth tells us about the wealth-tech industry

The acquisition of Orowealth by InCred Capital has come at a time when SEBI has tightened the norms governing registered investment advisors.

In late December 2022, InCred Group, a diversified financial services company, acquired Orowealth, one of India’s first robo-advisors. Orowealth will now be relaunched as InCred Money, and will focus on offering alternate and traditional investments like mutual funds (MF) to customers. It will also build a network of distributors who wish to service their own customers by using InCred Money’s online platform.

“In the next decade, the democratisation of investment opportunities covering the mass affluent and retail segments will be driven by digital platforms that unlock access to non-traditional assets for investors as well as their advisors,” said Bhupinder Singh, founder and group chief executive officer of InCred Group.

Vijay Kuppa, co-founder of Orowealth, will lead InCred Money as the CEO going forward.

Also read | Coming soon: Well regulated execution-only platforms for investing in direct mutual fund schemes

The new path
Orowealth, a digital-first wealth and investment platform, was founded in 2016 by three IIT Bombay batchmates: Nitin Agrawal, Vijay Kuppa and Yogesh Powar. It was one of the earliest robo advisors in India and offered direct plans (where the investor puts money in directly, without going through a distributor) for a nominal fee.

But Orowealth was mainly a robo-advisor that provided financial advisory services, completely online, for a fee. Robo advisory platforms offer end-to-end digital services, with no dependence on human agents or physical interaction and, a hands-off, data-driven approach to investment selection.

A year or two after its launch, Kuppa tells us that Orowealth stopped charging investors a fee for using its platform to invest in direct plans, after competitors such as Paytm, Zerodha and several others started offering direct plans of MFs for free.

InCred, a new-age banking and finance group, has two firms: InCred Capital and InCred Finance. InCred Finance is a new-age lending-focused NBFC that lends money to small and medium enterprises, retail and wholesale customers. InCred Capital is the institutional, wealth management and asset management platform of the group, which offers wealth management services for high net worth and ultra-high networth individuals under the InCred Wealth brand. With Orowealth’s acquisition, InCred Capital will enter the retail wealth space.

Tighter advisory guidelines
The acquisition of Orowealth by InCred Capital has come at a time when capital market regulator Securities and Exchange Board of India (SEBI) has tightened the norms governing registered investment advisors. Besides, increased competition from new entrants such as Paytm and Zerodha also nudged Orowealth to remove its direct plan fee. That is also why many early wealth-tech platforms, including Orowealth, started offering other revenue-generating financial products, such as fixed deposits and bonds.

In fact, the acquisition comes at a time when SEBI is planning to introduce a framework to facilitate execution-only platforms (EOP) for direct plans of mutual fund schemes.

“When the detailed EOP guidelines are announced, InCred Money will evaluate applying for a licence,” said Kuppa. Under the upcoming SEBI framework, EOPs may be granted registration under either of two categories: A Category 1 EOP, as an agent of asset management companies (AMCs), and registered with AMFI, or a Category 2 EOP, as an investor agent, and registered as a stockbroker.

“If we have to pick between one of the two EOP categories, we may choose Category 1 EOP as an agent of AMCs, because that is a more sustainable model of building a business,” he said. Kuppa adds that InCred Money would also apply for an online bond platform licence.

The Indian wealth-tech industry has exploded in the recent past and has huge potential.

As per the latest Association of Mutual Funds in India (AMFI) data, systematic investment plan (SIP) inflows were at their highest level of Rs 13,306.49 crore, with the retail folio count at 11.18 crore, in November 2022.

Further, per a report by RedSeer Consulting, the Indian wealth-tech market is expected to grow three times to about $63 billion by financial year 2025, from $20 billion in FY20, driven by increasing adoption of digital platforms and a growing base of investors.

There are about four million wealth-tech investors in India today and they are expected to rise three-fold to around 12 million by FY25, the consulting firm estimates.

Meanwhile, SEBI may also allow mutual fund platforms to charge their customers or fund houses for executing transactions.

Experts believe that the upcoming SEBI regulations will make things a bit easier for platforms as it was tough to earn revenue only by charging customers an advisory fee.

Sharad Singh, cofounder and CEO of Valuefy, believes that in the wealth-tech domain, hardly any company has been able to generate revenue.
“Recently, the funding scene has dried up a bit. So, maybe companies may look out for consolidation or mergers. But I think that’s largely a function of the maturity of any industry. SEBI regulations don’t have to do anything with that. If anything, I think the new regulations are going to make things a bit easier for platforms rather than difficult,” he said.