Nuvama Wealth Management Limited — Q3 FY25 earnings call

Call held 3 Feb 2025

Management summary

Nuvama Wealth delivered a strong Q3 FY25 performance characterized by robust growth in client assets and profitability despite market volatility. The company successfully transitioned to self-clearing in its wealth business, which caused a temporary dip in Net Interest Income (NII) but is expected to improve capital efficiency long-term. Management remains highly bullish on the Indian wealth management story, focusing on scaling managed products and expanding its relationship manager (RM) capacity.

Highlights

  • Revenue for Q3 FY25 reached ₹723 crores, representing a 30% YoY growth.

  • PAT for the quarter stood at ₹252 crores, up 43% YoY; 9M PAT reached ₹731 crores, up 76% YoY.

  • Total Client Assets grew by 36% YoY to approximately ₹4.5 lakh crores.

  • Return on Equity (RoE) remained consistent and robust at 32% for both Q3 and the 9-month period.

  • Cost-to-Income ratio improved significantly to 54% compared to 59% in the previous year.

  • Nuvama Wealth (Affluent segment) AUM crossed ₹1 lakh crore, growing 38% YoY.

  • Nuvama Private (UHNW segment) client assets crossed ₹2.1 lakh crore, up 24% YoY.

  • Asset Services custody and clearing assets grew 57% YoY to ₹1.3 lakh crores.

Key financials

  1. Revenue ₹723 Cr +30%YoY
  2. PAT ₹252 Cr +43%YoY
  3. RoE 32%
  4. Cost-to-Income Ratio 54% -8.5%YoY
  5. Client Assets ₹4.50L Cr +36%YoY

What they filed

Q1 FY27: revenue up 0.5%, net profit up 15.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue516 385 218 422 188 −64%404 +5%172 −21%424 +0%
EBITDA371 251 64 278 76 −80%313 +25%31 −52%278 +0%
Net profit317 207 27 221 46 −85%280 +35%19 −30%255 +15%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Nuvama Wealth (Affluent)
    ₹1.00L Cr AUM24% Revenue Growth67% Cost-to-Income
  • Nuvama Private (UHNW)
    ₹2.10L Cr Client Assets₹8,000 Cr ARR Net Flows (9M)
  • Asset Management
    ₹11,300 Cr AUM₹1,200 Cr Net Flows (Q3)
  • Asset Services
    ₹1.30L Cr Assets Under Custody22% Market Share (Incremental AIF/PMS)

Guidance & targets

Margin

  • Wealth Management Cost-to-Income Ratio Margin · next 3 years · High confidence 60%

    From 65% today

    Now we are clear that in 3 years, Wealth will move from 65 to 60%.

    — Ashish Kehair, MD & CEO

  • Private Segment Sustainable Yield Margin · Q4 FY25 · High confidence 80-85 bps
    I think 80 to 85 basis points should be the sustainable yield and I think Q4, we should come back to that level.

    — Ashish Kehair, MD & CEO

Profitability

  • Asset Management Cost-to-Income Ratio Profitability · next 3 years · Medium confidence 80-90%

    From 127% today

    Asset management, which is now at 127%, will at least break even or become like 80-90%.

    — Ashish Kehair, MD & CEO

Capacity

  • Asset Management Breakeven AUM Capacity · 12 to 15 months · Medium confidence ₹20,000 crores
    I think by the time we crossed about INR 20,000 crores, so maybe another 12 to 15 months.

    — Ashish Kehair, MD & CEO

Volume

  • Normalized AUM Growth Volume · next 2-3 years · Medium confidence 25%

    From 30-35% today

    I don't think that to come down below 25% on an overall basis.

    — Ashish Kehair, MD & CEO

Risks & concerns

  • Market Volatility and Broking Volumes

    medium

    Secondary market volatility led to a 10% fall in market volumes, impacting broking revenues.

    Both acknowledged

  • Regulatory Changes in F&O

    medium

    Implementation of SEBI F&O regulations kept the market on its toes and hit broking revenues.

    Management acknowledged

  • Concentration Risk in International Asset Services

    low

    Management noted that while the top 10 clients change, the business is not dependent on just one or two.

    Analyst downplayed

Q&A highlights

3 direct
Yield pressure and NII dip in the wealth segment Direct
Out of this, INR 4 crores comes from [temporary borrowing for self-clearing]... average loan book itself was down by INR 100 crores... we will see the margins come back in Q4.

Clarifies that the margin compression was due to temporary operational transitions rather than structural business deterioration.

Asked by Prayesh Jain, Motilal Oswal

Lending business ROE and capital allocation Direct
We run an overall book at 2.5x leverage... the wealth management whole cluster ROEs are now upwards of 22%. We were sitting at 16-17% a year back.

Highlights the successful calibration of the loan book to improve overall capital efficiency and ROE.

Asked by Anirudh Agarwal, Valuequest

New family additions vs. mining existing customers Direct
30-40% is safe to assume would come new clients and balance from mining of old clients.

Provides insight into the growth engine, showing a healthy mix of new acquisition and deepening existing relationships.

Asked by Sanketh Godha, Avendus Spark

2 min read 5 chapters

Detailed narrative

Strategic Shift to Self-Clearing

Nuvama transitioned its wealth management clearing from the Asset Services division to a self-clearing model within the wealth business. This move, aimed at improving operating and capital efficiency, required a temporary borrowing of ₹800 crores for 45 days. While this caused a temporary ₹10 crore dip in Net Interest Income (NII) for the quarter, management expects margins to normalize in Q4 FY25.

Aggressive RM Capacity Expansion

The company added over 270 Relationship Managers (RMs) in the last 12 months, bringing the total count to approximately 1,237. Currently, 40-45% of the RM cohort has less than one year of vintage and is producing at roughly 1x productivity. Management anticipates a significant 'cost-income advantage' as these RMs mature into the 3-year+ bucket, where productivity typically jumps 4x.

Asset Management Path to Profitability

The Asset Management business currently operates at a 127% cost-to-income ratio when including allocated group costs, though it is breaking even on a standalone basis. Management has set a target to reach breakeven with allocated costs once AUM crosses ₹20,000 crores, a milestone expected within the next 12 to 15 months. Current AUM stands at approximately ₹11,300 crores with strong net flows of ₹1,200 crores in Q3.

Wealth and Private Segment Resilience

Nuvama Wealth's AUM crossed the ₹1 lakh crore mark, while the Private segment reached ₹2.1 lakh crores in client assets. The focus remains on 'Managed Products and Investment Solutions' (MPIS), which now contributes 90% of net flows in the wealth segment. Despite market volatility, ARR net flows for the Private segment reached ₹8,000 crores in 9M FY25, already exceeding the total for the full previous fiscal year.

Offshore Expansion and New Licenses

The company's first offshore location in DIFC (Dubai) is now live and generating revenue, with a breakeven expected in 6-9 months. Additionally, Nuvama is applying for a new 'Specialized Investment Fund' (SIF) mutual fund license from SEBI. This new category, featuring a ₹10 lakh minimum ticket size, is intended to house strategies like long-short and absolute return in a more tax-efficient structure for clients.

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