Nuvama Wealth share price jumps over 6% after Jefferies initiates coverage with a ‘Buy’ call, sees 34% upside

Nuvama Wealth Management share price jumped over 6%, while 360 ONE WAM shares gained over 3% in early trade on Tuesday after foreign brokerage firm Jefferies initiated its coverage on the both the stocks with a ‘Buy’ rating.

Nuvama Wealth shares rallied as much as 6.08% to hit a fresh 52-week high of ₹5,346.55 apiece on the BSE. 360 ONE shares surged 3.6% to an intraday high of ₹747.20 apiece.

Jefferies believes Indian wealth managers are well-placed to ride on India’s economic growth and financialization of savings, especially into capital markets. Leading players will benefit from strong inflows and operating efficiencies to deliver 20-22% profit CAGR over FY24-27E. 

Jefferies expects the active asset under management (AUM) of Indian wealth managers to double over FY24-27E.

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Indian wealth managers are gaining share in the ultra-HNI segment (~80% of market) where global players are receding and smaller banks lack bandwidth for personalized solutions. 

“We believe large Indian wealth managers should deliver 22-25% CAGR in active AUM (fee-bearing) over FY24-27E led by, net inflows of 12-17% from higher wallet share in existing or new wealth & network expansion in new geographies, and MTM gains (we factor ~8% CAGR), Jefferies said.

Moreover, the industry shift to full trail model as against upfront commissions has significantly improved long-term revenue visibility and supports valuations and re-rating. The share of annual recurring revenues (ARR) has increased to 60-65% of revenues from 40-50% in FY20 in the UHNI segment and Jefferies expects it to rise to 70-75% by FY27.

Nuvama Wealth Management

Jefferies initiated coverage on Nuvama Wealth with a ‘Buy’ call and a target price of ₹6,000 per share, implying an upside of 19% from Monday’s closing price. In its upside scenario, Jefferies has a target price of ₹6,750 per share, expecting an upside of 34%.

The company’s management is investing in wealth franchise build-out and Jefferies expects AUM and PBT CAGR of 22% and 20%, respectively, over FY24-27E. 

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“Nuvama's valuation discount is driven by a lower mix of Wealth / ARR, and we expect the steady improvement in business mix to drive re-rating for the stock over the medium-term, however, near-term upside can be limited after the recent run-up,” Jefferies said.

360 ONE WAM

360 ONE is the largest Indian wealth manager with UHNI focus and a leading asset manager in private markets. Over FY24-27E, Jefferies believes network expansion and growing client vintage should drive ~25% CAGR in active AUM of wealth business. 

The AMC is entering a PE fundraising cycle as large maturities approach and should deliver a ~20% AUM CAGR. Despite some pressure on fees, operational leverage will drive a consolidated C/I ratio improvement of >400 bps over next 3 years and deliver PBT CAGR of ~22%, Jefferies said. 

The brokerage initiated coverage on 360 ONE WAM with a ‘Buy’ rating and a target of ₹900 per share, implying an upside of 26%.

At 10:30 am, Nuvama Wealth shares were trading 4.81% higher at ₹5,282.05 apiece, while 360 ONE shares were trading 0.10% higher at ₹722.00 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.