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Improving client, geographical, and product diversity

Expect higher costs due to the new business initiatives

* In its FY24 Annual Report, 360 ONE WAM (360 ONE) outlined the emerging growth opportunities in the Wealth Management industry in India and expects a 13-14% AUM CAGR over the next 4-5 years. The drivers for this growth will be: 1) an increase in the number of UHNIs and HNIs, 2) an increase in the wealth of existing HNIs, and 3) wealth transfer between generations.

* The company is likely to focus on diversifying its customer base from the existing INR250m+ net worth customers to adding INR50-250m net worth customers in India as well as overseas. This would present a huge opportunity to double its market share over the next few years from 4-5% currently.

* In addition, 360 ONE is looking to diversify its geographical presence from the top cities and metros to tier II and tier III cities (i.e., shift in focus from the traditional 10-15 cities to over 60 cities over the next few years, reflecting a significant demographic transformation).

* It recently launched a platform, known as ‘360 One Global’, to cater to the demands of non-resident Indians. With a robust product suite and human talent in place, 360 ONE is well-placed to address the growing global Indian wealth management opportunity (currently, ~30m Indians reside globally).

* Recently, 360 ONE acquired ET Money, a company that specializes in the digital distribution of financial products such as mutual funds, fixed deposits, NPS, and insurance. Further, it provides registered investment advisor services for investing in stocks and mutual funds. This acquisition is likely to expand the client base and solidify 360 ONE's position as India's premier wealth manager.

* In FY24, its total AUM surged 37% YoY to INR4.7t, with strong growth in both ARR and TBR assets. The ARR AUM jumped 36% YoY to INR2.28t, and Wealth Management’s ARR AUM increased 43% YoY to INR 1.55t.

* For FY24, 360 ONE’s operating revenue/PAT rose 18%/23% YoY to INR18.5b/ INR8.0b. Operating expenses jumped 33% YoY to INR9.6b from INR7.2b in FY23, mainly due to a 36% YoY surge in employee costs to INR7.1b.

* Valuation and view:

The company is looking to diversify its presence in terms of the mass-affluent client segment and geography (lower tier cities + international regions). The resultant investments in team building have kept costs at elevated levels. The benefits of these investments, however, are likely to be back ended in nature. We are building in a minimal contribution from these new (mid-market segment and global platform) diversifications in FY25 and FY26. We have also modeled higher costs due to these new business initiatives. We reiterate our BUY rating with a one-year TP of INR1,150 (based on 33x Mar’26E EPS).

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SEBI Registration number is INH000000412