Nuvama Wealth Management Ltd. is one of India’s largest wealth management platforms, servicing over 3,300 of India’s wealthiest families as well as ~11,00,000 affluent and high net-worth individuals.
- About the company
- Journey Since Inception
- Board Members
- Shareholding Pattern
- Business Segments
- Revenue Segments
- Cost Structure
- Financial Parameters
- Management Key Highlights
- Strengths & Weaknesses
(A) About
Nuvama is one of India’s leading integrated wealth management firms. It oversees ₹2,89,281 Cr of client assets and also caters to a diverse set of clients, including ~11 lakh affluent and HNIs and ~3,300 of India’s most prosperous families.
Nuvama offers wealth management solutions, covering investment advisory, estate planning, investment management, lending as well as broking services for individuals, institutions, CXOs, professional investors, and family offices. It also offers a wide bouquet of alternative asset management products and is a leading player in capital markets.
(B) Journey of Nuvama Wealth Management
Nuvama(formerly known as Edelweiss Securities Ltd.) was a part of Edelweiss Financial Services Ltd. (EFSL), A diversified financial services company in India, with businesses across wealth management, credit, insurance, and capital markets.
In 2023, EFSL underwent a demerger, as a result, separating its wealth management business into a new entity - Nuvama Wealth Management after PAG (a global alternative investment firm) became a majority shareholder in Edelweiss Securities Ltd.
(C) Board of Directors of Nuvama Wealth Managment
(D) Shareholding Pattern
(E) Business Segments
Nuvama operates in three business segments:
(A) Wealth Management
This arm caters to investors across various categories, including retail securities, broking services, distribution of financial instruments like mutual funds and bonds, investment advisory, as well as borrowing against securities.
(B) Asset Management
This arm of Nuvama focuses on a more specialized client base – Alternative Investment Funds as well as Portfolio Management Services. Further, They manage investments for these entities, utilizing various strategies to cater to specific risk appetites and financial goals.
(C) Capital Markets
This arm of Nuvama offers institutional broking services, debt advisory services and also custody and clearing services.
As of Q2FY24, Segment Wise AUM stands at 2,17,278 Cr. for Wealth Management, 6175 Cr. for Asset Management and also 65,828 Cr. for Capital Markets Business.
(F) Revenue Segment
(G) Cost Structure
(H) Financials of Nuvama Wealth Management
The company's revenue has grown at a CAGR of 29.92% over the past 4 years from Rs 780.26 Cr. in FY20 to Rs 2223.31 Cr. in FY23. While, The company's PAT has grown from Rs 285.96 Cr. in FY20 to Rs 305.08 Cr. in FY23 at a CAGR of 1.63%. However, The company's ROE has decreased from 26.42% in FY20 to 13.53% in FY23.
(I) Management Discussion & Concall Highlights
- The company's wealth management business (AUM) grew by 26% compared to last year, consequently reaching Rs 2,89,281 crore in the first half of the current financial year.
- The company's future growth will be primarily driven by the wealth management and also the asset management businesses.
- The company plans to double the number of Relationship Managers over the next 5 years.
- Nuvama plans to build on its diverse offerings to provide comprehensive financial solutions for potential as well as existing Ultra High Net Worth Individuals. Furthermore, The company wants to expand to the NRI client segment and deepen existing relationships with its customers.
- The company plans to increase Assets Under Management by 6x-8x over the next 5 years.
Concall Highlights
- The company's cost-to-income is 65% in H1FY24 and further, it is targeting to reduce it to 60% in the next 3-5 Years.
- The company expects the AUM in Asset Management Business to increase to around 15000-20000 Crores over the next 3-5 years.
- Nuvama has market leadership in Wealth management as well as in Institutional Equities(5.4% market share) and is India's 2nd largest broking and Investment Banking Firm.
- The company plans to expand its offerings by developing an offshore full-stack wealth proposition for Ultra High Net Worth Individuals and also NRI Clients.
- The company plans to shift from a products-oriented approach to a Portfolio Solutions approach in Wealth Management and also the Asset Management Business Segments.
- In FY23, Around 30% of Investment Banking Clients opted for the company's other offerings and further became wealth management clients.
(J) Strengths & Weaknesses
Strengths
(i) Established market position in wealth management business
NWML's business is divided into four divisions: private and affluent wealth management, asset management, institutional equities, and also advisory services. Furthermore, It is the second-largest independent wealth management company, with client assets of 2,89,281 crore as of Q2FY24, and net new money of 17,574 crore. Furthermore, Despite being in its early stages, the asset management business has an AUM of ~6200 crores.
(ii) Strong and resourceful promoter
PAG is a global alternative investment firm that manages private equity, real estate, and hedge funds, among other asset classes. Moreover, It is regarded as one of Asia's largest private investment firms with over US $50 billion in assets under management in private equity and real estate. However, PAG is mostly focused on three sectors: finance, health, and pharmaceuticals. As a result, the group's overall investment plan has highlighted NWML (wealth management business) as a significant emphasis area.
Weaknesses
(i) Exposure to volatile capital markets, regulatory risk, and attrition risk
NWML's earnings are vulnerable to capital market volatility, and reduced net inflows may impact revenue growth. Furthermore, the capacity to retain key individuals is critical in the wealth management company because a change in relationship personnel may result in a change in relationship with the client, affecting client attrition.
(ii) Concentrated resource profile
The resource profile of NWML remains concentrated with the company’s borrowings largely being from PP-MLDs (around 58% of the consolidated borrowings as of March 31, 2023), as well as on significant reliance on commercial papers (CPs) (20%). Also, The other sources of funds include non-convertible debentures (8%), bank facilities (5%) and others (9%).
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References: Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets and Management Interviews, Industry Publications.
Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.
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