Dozens of paintings by prominent Indian artists, stacked vertically against the wall, greet visitors to the glass-and-chrome Mumbai office of Dawnay Day AV Financial Services, the London-based financial services company that is into stock broking, mutual funds and real-estate advisory. The canvases belong to over 250 art works that the company picked up in the last six to seven months, and are part of its proprietary investment. But Arpit Agarwal, chief executive and managing director, Dawnay Day, hopes it reflects the firm’s commitment and involvement in art investment.
Frenetic activity in Indian art circles has attracted financial intermediaries such as Dawnay Day and has given them an opportunity to mediate investment in art for their wealthy clients. The artists in Dawnay Day’s personal collection include M.F. Husain, Tayeb Mehta, Ram Kumar, F.M. Souza, Jogen Choudhary, Shyamal Dutta, Manish Pushkale, Shibu Nateshan, Subodh Gupta and K.K. Hebbar—many of whose works sold at above Rs1 crore in recent auctions. “It is one thing to just give advice and another how much you believe in the advice you give, and put money where our mouth is,” says Agarwal.
The activity in the Indian art business has also attracted attention of the income tax department that recently raided galleries in New Delhi and Mumbai in an effort to uncover unaccounted, or black money.
The entry of brokerages into the art advisory business started with Mumbai-based Edelweiss Securities partnering with Sakshi Art Gallery to launch India’s first art fund Yatra1 in September 2005; this was followed by Yatra II in November 2006. Other brokerages operating in India including Merrill Lynch help their clients invest in art by putting them in touch with experts and galleries as part of their wealth advisory service.
At Edelweiss Securities, a three-member committee takes decisions on buying art and the brokerage is represented in the trust that is responsible for the art fund. Edelweiss was the sole distributor for the fund. “We took art as an investment idea to our customers and got money for that fund,” says Anurag Mehrotra, head of wealth management, Edelweiss Securities.
Yatra Art Funds are close-ended with a lock-in period of five years. The investment committee takes decisions to buy or sell a certain work of art. Some pieces of art are held to maturity while some others are sold early if they fetch the right price, says Mehrotra.
In an art fund, much like a mutual fund, the investor does not get to pick the individual investment vehicles.
The fund manager picks the works of art. But unlike collectors who like to display their art, investors in art funds cannot display anything.
Brokerages like Dawnay Day help get around this by merely serving as intermediaries; they help investors buy art directly and hang it on their walls. And Edelweiss itself isn’t opposed to the idea. “Going forward, why not?” says Mehrotra.
Because of the nature of art-investment—lack of liquidity and objective valuation measures, and unregulated market —many brokerages are hesitant to offer advice on art. Dawnay Day is able to do so directly because its principals Guy Naggar and Peter Klimt have 25 years of experience of investing in art from across the world.
The Indian collection in the company’s office was handpicked by Peter Klint along with his Indian partner Alok Vajpeyi, who is the vice-chairman of the company and also an art connoisseur.
It’s pretty much like investing in stocks, explains Agarwal. “Big names are like large-cap stocks: They are priced above Rs1 crore. Then there are mid caps that are priced around Rs40 lakh or so. Then, there are the small caps priced at Rs50,000, Rs1 lakh and Rs2 lakh and so on. Sometimes, we buy the entire series by an artist,” he adds.
“One should not jump into buying if you are buying art for investment. One should make the rounds of good galleries, talk to people who know art, check out the rates at which works of the same artist have been sold at auction houses like Saffron Art, Christies and Sotheby’s,” says Krishnamachari Bose, an artist who recently curated a few exhibitions.
While professional advisors say judicial investment in art could yield returns of 15-20% a year, investors are being lured to the sector by the sudden rise in prices that the works of some Indian masters have commanded at recent auctions.
Until a few years ago, works of the better-known Indian artists sold in the Rs10-20 lakh range; some of these now fetch over Rs1 crore.
The recent economic boom has also contributed to the interest in art investment. “Many people have made large amounts of money in the recent economic boom and want to invest a part of it into non-traditional investments like art,” says Mehrotra of Edelweiss. Many are motivated by the huge gains people have made by investing in Chinese art. Analysts believe that when an economy grows, the value of its art appreciates too.
And much like Indian stocks, there is significant demand among foreign investors for Indian art too, says Bose. “Big collectors from France and England are in India now buying Indian art, from paintings to installations and sculptures,” he adds.