Buy Nuvama Wealth Ltd for the Target Rs 1,860 by Motilal Oswal Financial Services Ltd
Steady growth business with attractive valuations
Robust flows in wealth management; asset services see a new peak
* Nuvama Wealth (NUVAMA) is a diversified play on multiple emerging themes in the capital market ecosystem, with a robust presence in UHNI Wealth Management, midsegment Wealth Management, Custody & Clearing, and IE&IB businesses. Its AMC businessis at a nascent stage with laid a strong foundation.
* Under the wealth segment (~31% of FY26 revenue), robust flows (16% of FY25 opening AUM), rising tilt toward MPIS (60% of new money), a sharper RM model, early use of GenAI-led advisory tools, and improving retention with steady costs will drive the revenue momentum. Operational efficiency with scale will lead to margin expansion of ~200bp over FY26-28.
* Nuvama Private (~24% of FY26 revenue) is witnessing strong flow momentum (INR141b in FY26 excl. heldaway assets), backed by a high-touch UHNI platform of over 140 RMs, a rapidly growing ARR base, a deeper offshore presence, and strong syndication capabilities. We expect a 20% revenue CAGR and ~150bp margin expansion over FY26-28, supported by steady traction in fixed income, structured products, real estate syndication, and improving RM productivity as ARR share rises.
* The Capital Markets & Asset Services segment (~43% of FY26 revenues) is poised for a steady rebound, with Asset Services achieving a new revenue peak in 4QFY26 after getting impacted by a client exit episode during the year. IE and IB segments are in a slowdown phase and are likely to be impacted by reduced institutional brokerage rates and slow IPO activity, while fixed-income activity remains steady. Supported by disciplined CIR and rising cross-platform flows, we expect ~15% revenue CAGR over FY26-28, with operating margins stable at ~63% during FY26-28.
* NUVAMA’s AMC & Alternates platform, strategically important but currently lossmaking, is in a phase of scaling up.
* Overall, we expect NUVAMA’s revenue/PAT to post growth of 18%/19% over FY26- 28. The stock is currently trading at one of the cheapest valuations in the capital market ecosystem at FY28E P/E of 19x, making it an attractive bet. We reiterate our BUY rating on the stock with a one-year (SoTP-based) TP of INR1,860, implying a target FY28E P/E multiple of 24x.
Strong industry tailwinds for wealth management
* India is adding millionaires at one of the fastest rates globally, driven by entrepreneurship, market-led wealth creation, and business exits—fueling demand for advisory, family office, estate planning, and refined products.
* Rising income, digital KYC, seamless onboarding, and SIP adoption expanded the investor base beyond HNIs, with participation from Tier-2/3 cities.
* Investors are increasingly seeking customized portfolios—including multiasset, goal-based, structured products, passive/index funds, ETFs, smart beta, and ESG—driving firms to broaden product offerings.
* Digital platforms, AI, and machine learning are transforming wealth management by improving client engagement and operational efficiency.
* SEBI reforms, including RIA norms, AIF regulations, disclosures, investor protection, and digital KYC, have boosted trust and formal participation, supporting long-term industry growth.
* India is expected to contribute the maximum to global financial wealth among all emerging markets (USD2t as per BCG 2026 Global Wealth report), giving visibility for the strong opportunity for wealth managers going ahead.
Valuation and view
* NUVAMA’s multi-engine model—anchored by stable annuity streams in Asset Services, cyclical but high-operating-leverage Capital Markets, and structurally compounding Wealth and Private platforms—supports a steadily improving earnings profile over FY26-28.
* The shift toward higher-quality, recurring revenue (ARR, clearing, custody, advisory) and disciplined CIR across segments strengthens confidence in margin durability despite market-linked volatility. While the AMC/Alternates business remains in an investment phase, it offers meaningful optionality through AUM scale-up, private-market monetization, and the forthcoming AMC license.
* Considering the MTM impact on wealth management AUM due to volatile equity market conditions, along with a slowdown in the IE-IB business, we have cut our PAT estimates by 4% each for FY27/FY28.
* Overall, we expect NUVAMA’s revenue/PAT to post growth of 18%/19% over FY26-28. The recent regulatory changes – STT hike on F&O, leverage tightening for securities lending activities, and borrowing restriction for proprietary trading – are not expected to impact the earnings significantly. However, there may be a second-order volume impact.
* The stock is currently trading at one of the cheapest valuations in the capital market ecosystem at a P/E of 19x FY28E EPS, making it an attractive bet. We reiterate our BUY rating on the stock with a one-year (SoTP-based) TP of INR1,860, implying target FY28E P/E multiple of 24x.
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