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Strong performance in capital markets; a PAT beat of 7%

* Nuvama Wealth (NUVAMA)’s 1QFY27 operating revenue at INR9.1b grew 18% YoY (a 9% beat, driven by a 22% beat in the capital markets segment). The wealth business grew 13% YoY (in line), Private grew 27% YoY (in line), AMC grew 18% YoY (14% beat), and overall Capital Markets business grew 18% YoY (22% beat). Within the capital markets segment, revenue from asset services grew 34% YoY, while IB/IE business was flat YoY.

* Total operating expenses grew 19% YoY to INR5b (10% above our estimate, led by higher employee costs), with 17% YoY growth in employee expenses. The cost-to-income ratio rose to 55.1% from 54.7% in 1QFY26 (our est. 54.5%).

* EBITDA came in at INR4.1b, up 17% YoY. EBITDA margins stood at 45% vs. 45.3% in 1QFY26. PAT was INR3.1b (+16% YoY; 7% beat). PAT margin came in at 33.6% in 1QFY27 vs. 34.3% in 1QFY26.

* In the HNI business, 40 RMs have been added to cater to the increasing demand from Tier-2 and beyond geographies. Flows in the UHNI business are expected to be at 20-22% of the AUM in FY27. Commodities are emerging as a significant opportunity in asset services, while IB/IE business will see recovery given the robust IPO pipeline and issuance demand.

* We raise our revenue estimates by 7%/9% assuming consistent performance in the wealth management business, while the capital market business is likely to witness a stronger growth trajectory. This is projected to result in a 7%/11% increase in our earnings estimates. Reiterate BUY with a revised TP of INR2,100 (based on SoTP valuations), implying an FY28E P/E of 23x.

Highlights from the management commentary

* In Nuvama Private’s offshore business, Dubai has already achieved breakeven, while Singapore is expected to breakeven by the end of FY27. Offshore operations are expected to contribute 5-7% of revenues over time.

* Retention in the HNI segment moderated sequentially due to the seasonally higher contribution of insurance income in 4Q compared with 1Q, along with mark-to-market movements in AUM.

* The medium-term cost-to-income ratio guidance remains at 60-62% for Nuvama Private

Valuation and view

* The wealth management business continues to see robust flows in the recurring revenue-earning segment. The asset services have recovered significantly following the exit of a large client, with revenue achieving a new peak backed by new client additions. While the asset management business is at a nascent stage, new teams are being set up to provide a complete set of offerings like private credit and SIF.

* Driven by the recovery in asset services business to pre-client loss levels, a strong ECM pipeline, sustained revenue momentum in wealth management, and a gradually improving cost trajectory, we expect a 23%/25% revenue/PAT CAGR for FY26-28.

* We raise our revenue estimates by 7%/9% assuming consistent performance in the wealth management business, while the capital market business is likely to witness a stronger growth trajectory. This is projected to result in a 7%/11% increase in our earnings estimates. Reiterate BUY with a revised TP of INR2,100 (based on SoTP valuations), implying an FY28E P/E of 23x.

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