Nuvama Wealth Management share price jumped over 6%, while 360 ONE WAM shares gained over 3% in early trade on Tuesday after foreign brokerage firm Jefferies initiated its coverage on the both the stocks with a ‘Buy’ rating.
Nuvama Wealth shares rallied as much as 6.08% to hit a fresh 52-week high of ₹5,346.55 apiece on the BSE. 360 ONE shares surged 3.6% to an intraday high of ₹747.20 apiece.
Jefferies believes Indian wealth managers are well-placed to ride on India’s economic growth and financialization of savings, especially into capital markets. Leading players will benefit from strong inflows and operating efficiencies to deliver 20-22% profit CAGR over FY24-27E.
Jefferies expects the active asset under management (AUM) of Indian wealth managers to double over FY24-27E.
Indian wealth managers are gaining share in the ultra-HNI segment (~80% of market) where global players are receding and smaller banks lack bandwidth for personalized solutions.
“We believe large Indian wealth managers should deliver 22-25% CAGR in active AUM (fee-bearing) over FY24-27E led by, net inflows of 12-17% from higher wallet share in existing or new wealth & network expansion in new geographies, and MTM gains (we factor ~8% CAGR), Jefferies said.
Moreover, the industry shift to full trail model as against upfront commissions has significantly improved long-term revenue visibility and supports valuations and re-rating. The share of annual recurring revenues (ARR) has increased to 60-65% of revenues from 40-50% in FY20 in the UHNI segment and Jefferies expects it to rise to 70-75% by FY27.
Nuvama Wealth Management
Jefferies initiated coverage on Nuvama Wealth with a ‘Buy’ call and a target price of ₹6,000 per share, implying an upside of 19% from Monday’s closing price. In its upside scenario, Jefferies has a target price of ₹6,750 per share, expecting an upside of 34%.
The company’s management is investing in wealth franchise build-out and Jefferies expects AUM and PBT CAGR of 22% and 20%, respectively, over FY24-27E.
“Nuvama’s valuation discount is driven by a lower mix of Wealth / ARR, and we expect the steady improvement in business mix to drive re-rating for the stock over the medium-term, however, near-term upside can be limited after the recent run-up," Jefferies said.
360 ONE WAM
360 ONE is the largest Indian wealth manager with UHNI focus and a leading asset manager in private markets. Over FY24-27E, Jefferies believes network expansion and growing client vintage should drive ~25% CAGR in active AUM of wealth business.
The AMC is entering a PE fundraising cycle as large maturities approach and should deliver a ~20% AUM CAGR. Despite some pressure on fees, operational leverage will drive a consolidated C/I ratio improvement of >400 bps over next 3 years and deliver PBT CAGR of ~22%, Jefferies said.
The brokerage initiated coverage on 360 ONE WAM with a ‘Buy’ rating and a target of ₹900 per share, implying an upside of 26%.
At 10:30 am, Nuvama Wealth shares were trading 4.81% higher at ₹5,282.05 apiece, while 360 ONE shares were trading 0.10% higher at ₹722.00 apiece on the BSE.