360 One, Nuvama Get 'Buy' From Jefferies On 22% Profit Growth Hopes

India's leading wealth managers are likely to deliver 20–22% annualised profit growth over FY24–27, given the strong economic growth in the country creating a larger opportunity in financialisation of savings, according to Jefferies. This would ensure strong inflows and operational efficiencies, it said.

The brokerage has initiated coverage on 360 One Wam Ltd. and Nuvama Wealth Management Ltd. with a 'buy' rating.

The brokerage expects rising clients and RM vintages to drive down cost-to-income ratios by 3-5% and aid earnings growth of 20–22% despite a marginal compression of fees over FY24–27 due to an increasing share of advisory. "As investments in newer segments (HNI and global) start yielding AUMs, operational leverage can sustain itself beyond FY27," it said.

In addition, the brokerage sees a 70–75% rise in share of trail fees by fiscal 2027, which improves earning visibility and supports valuation rerating.

"While changing regulations have impacted fee rates of active AUMs by 20 basis points over the last 5 years to around 45 to 60 basis points, the industry shift to a full-trail model (vs. upfront commissions) has significantly improved long-term revenue visibility," the brokerage firm said. "Share of annual recurring revenues has increased to 60–65% of revenues (vs. ~40–50% in FY20) in the UHNI segment and will rise to 70–75% by FY27."

The downside risks for the brokerage's call include adverse regulations, intensifying competition, and prolonged market downturns.

Jefferies has set a target price of Rs 900 apiece for 360 One Wam, implying an upside of 25%.

"360 One is the largest IWM with UHNI focus and a leading asset manager in private markets," according to the brokerage. "Over FY24-27, we believe network expansion and growing client vintage should drive 25% annual growth in active AUM of wealth business."

In the medium term, the brokerage expects the company's growth profile to remain in the 18–20% range with stable margins due to a rising share of ARR revenues and the scale-up of AMC's business. "Hence, earnings compounding can sustain well beyond FY27," it said.

Jefferies has set a target price of Rs 6,000 apiece for Nuvama, implying an upside of 19% from Monday's close, citing management's aggressive investment in wealth franchise build-out (RM network set to double over FY23-27E).

Further, "despite a strong FY24 base, we expect an AUM CAGR of 22% over FY24–27," it said. "Improving RM productivity should offset fee pressure and aid a healthy 20% PBT growth in wealth."

However, it sees a limited upside in the near term as it expects the capital market-linked businesses to drag overall PBT growth. "We initiate with a 'buy' and expect the steady improvement in business mix to drive rerating for the stock over the medium term; however, near-term upside can be limited after the recent run-up," it said.

Shares of Nuvama Wealth Management rose for the sixth consecutive session on Tuesday to hit its lifetime high of Rs 5,350 apiece, while those of 360 One Wam hit their highest since Feb 28 at Rs 748.4 apiece.