Buy Nuvama Wealth Ltd For Target Rs.2,160 by Motilal Oswal Financial Services Ltd
Strong flow momentum; PAT miss due to a one-off
* Nuvama Wealth (NUVAMA)’s 2QFY27 operating revenue of INR9.4b grew 21% YoY (in line). Wealth management revenue grew 14% YoY (in line), AMC grew 6% YoY (40% miss) and the overall capital markets business rose 31% YoY (in line). For 1HFY27, operating revenue grew 20% YoY.
* Total operating expenses grew 16% YoY to INR5.1b (in line), with 19% YoY growth in employee expenses. The cost-to-income ratio improved to 54.1% vs. 56.6% in 2QFY26 (our est. of 53.9%). EBITDA came in at INR4.3b up 29% YoY. EBITDA margin came in at 45.9% vs. 43.4% in 2QFY26.
* PAT was INR3b (+19% YoY; 8% miss owing to the one-off impact of the pre-closure of a venture debt fund). PAT grew 18% YoY in 1HFY27.
* Wealth and Private RM hiring has reached a steady state, with a 100–200bp improvement in the CI ratio expected this year in wealth management and further improvement over the next few years. In AMC, CI ratio improvement is expected over the next 12–15 months.
* We broadly retain our estimates, considering the in-line operational performance in 2QFY27. Reiterate BUY with a revised TP of INR2,160 (based on SoTP valuations), implying an FY28E P/E of 24x.
Highlights from the management commentary
* Private credit and the launch of the second commercial real estate fund should expand future transactional income opportunities.
* Asset services yield expected at 2.5–2.8% for FY27, supported by INR20b of incremental cash assets expected in 2HFY27 from new client additions.
* Investment banking pipeline remains healthy, with ~40 transactions in the pipeline.
Valuation and view
* The wealth management business continues to see robust flows in the recurring revenue-earning segment. The asset services business has recovered significantly following the exit of a large client, with revenue growth backed by new client additions. While the asset management business is at a nascent stage, new teams have been set up with SIF and private credit offerings to be rolled out soon. In capital markets, the investment banking pipeline remains robust.
* We broadly retain our estimates, considering the in-line operational performance in 2QFY27. Reiterate BUY with a revised TP of INR2,160 (based on SoTP valuations), implying an FY28E P/E of 24x.
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