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Transaction revenues drive earnings beat

* In 4QFY24, 360ONE’s total revenue grew 46% YoY to INR5.7b (25% above our estimates). The beat was on account of a surge in TBR income (109% above our estimates), which jumped 91% YoY.

* Total AUM rose 37% YoY to INR4.67t, with strong growth in both ARR and TBR assets.

* Total opex jumped 62% YoY to ~INR3b, which was 26% higher than our estimates, led by higher variable employee costs. The cost-to-income ratio rose ~520bp YoY to 52.3% (vs. our est. of 51.9%).

* PAT grew 57% YoY to INR2.4b (26% above our estimates) in 4QFY24. For FY24, 360ONE’s revenue/PAT grew 18%/23% YoY to INR18.5b/INR8.0b.

* The Board approved a dividend of INR3.5 per share.

* We have increased our EPS estimates by 6.3%/3.2% for FY25/FY26 to factor in higher transaction revenues. Also, we have built in higher costs relating to new business initiatives (mid-market segment and global platform). We retain our BUY rating with a one-year TP of INR950 (based on 30x Mar’26E EPS).

Strong AUM growth of 37%; yields decline YoY for ARR assets

* Total AUM rose 37% YoY to INR4.67t, with strong growth across ARR and TBR. ARR AUM jumped 36% YoY to INR2.28t, and the yields stood at 64bp in 4QFY24. The TBR AUM increased 38% YoY to INR2.39t, and yields jumped to 37bp from 18bp in 3QFY24.

* In 4QFY24, AAUM for 360ONE plus (IIFL ONE) grew 95% YoY to INR737b, led by a sharp rise in non-discretionary AUM (+205% YoY to INR533b) and advisory AUM (+10% YoY to INR109b). However, discretionary AUM declined 9% YoY to INR94b.

* Yields on ARR assets stood at 64bp in 4QFY24 vs. 70bp in 4QFY23. Yields on ARR assets for wealth management stood at 62bp (vs. 67bp in 4QFY23) and for the asset management segment, it stood at 74bp (vs. 75bp in 4QFY23).

*  Yields in 360ONE Plus witnessed a marginal decline sequentially to 18bp (26bp in 4QFY23) as yields on discretionary AUM declined to 42bp in 4QFY24.

* Yields in AIF were flat sequentially at 93bp (92bp in 4QFY23) as increase in yields on credit & real estate asset were offset by Listed Equity AUM.

Highlights from the management commentary

* Active ARR AUM should grow at annualized growth of 25% (including MTM gains). 360ONE expects net-flows (inactive ARR flows cloud witness volatility) growth of 10-15% on an annual basis. Yields are expected to remain steady between 68bp and 72bp. TBR asset income is expected to stay between ~INR 4b and INR 6b depending upon capital market sentiments.

* For the HNI segment, the first set of target customers will be the 3,000+ existing families with less than INR100m of net worth. The second set will be the circle of influence of the UHNI customer base and the third set would be the acquisition of new customers by RMs.

* Over the next three years, the new business should contribute 15-20% of the total revenues. The mid-market segment should start contributing from FY25, while the launch of Global platform is expected from Oct’24 (not much revenue contribution in FY25).

Valuation and view:

Strong 4Q performance; reiterate BUY 360ONE is looking to diversify its presence in terms of client segment (mass affluent) and geography (lower tier cities). It is also building a global platform. Resultant investments into team building has kept the costs at elevated levels. The benefits of these investments are likely to be back ended. We have increased our EPS estimates by 6.3%/3.2% for FY25/FY26 to factor in higher transaction revenues. Also, we have built in higher costs relating to new business initiatives (mid-market segment and global platform). We retain our BUY rating with a one-year TP of INR950 (based on 30x Mar’26E EPS).

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