Nuvama Wealth capital markets outperformance drives earnings upgrades amid strong recurring wealth flows

Investment View and Valuation

Motilal Oswal Financial Services Limited (MOFSL) retains its Buy recommendation on Nuvama Wealth following a strong 1QFY27 performance, particularly in capital markets. The broker has revised its target price to Rs 2,100 using a sum-of-the-parts valuation, implying a FY28E price-to-earnings multiple of 23 times.

MOFSL's positive view is supported by sustained wealth-management momentum, recovery in asset services, a strong equity-capital-markets pipeline and gradually improving costs.

1QFY27 Financial Performance

Nuvama Wealth reported operating revenue of Rs 910 crore in 1QFY27, up 18 per cent year-on-year and 9 per cent above MOFSL's estimate. The beat was led by capital markets, where revenue was 22 per cent above the broker's estimate. Wealth revenue grew 13 per cent year-on-year, Nuvama Private revenue increased 27 per cent and AMC revenue rose 18 per cent. Asset-services revenue grew 34 per cent, while investment banking and institutional equities revenue was flat year-on-year.

Operating expenses increased 19 per cent to Rs 501 crore, 10 per cent above estimate, mainly due to a 17 per cent increase in employee expenses. The cost-to-income ratio rose to 55.1 per cent from 54.7 per cent a year earlier. EBITDA grew 17 per cent to Rs 410 crore, with the margin at 45.0 per cent versus 45.3 per cent in 1QFY26. PAT increased 16 per cent to Rs 303 crore, 7 per cent above MOFSL's estimate, while PAT margin declined to 33.6 per cent from 34.3 per cent.

Wealth-Management Performance

Nuvama Wealth

The Nuvama Wealth segment generated revenue of Rs 250 crore, up 13 per cent year-on-year, driven by 20 per cent growth in Managed Products and Investment Solutions (MPIS). MPIS contributed 58 per cent of segment revenue, compared with 54 per cent in 1QFY26.

Average client assets rose 17 per cent to approximately Rs 1,20,000 crore, supported by net new money of Rs 4,800 crore and mark-to-market gains of Rs 11,800 crore. MPIS net flows were Rs 3,000 crore, up 34 per cent year-on-year. The cost-to-income ratio improved to 64.1 per cent from 66.0 per cent, although retention declined to 85 basis points.

Management stated that Tier-2 and smaller cities account for more than 35 per cent of MPIS assets and added 40 relationship managers during the quarter.

Nuvama Private

Nuvama Private revenue was approximately Rs 200 crore, up 27 per cent year-on-year. Transactional revenue increased 52 per cent to Rs 81 crore and exceeded estimates, while annual recurring revenue grew 14 per cent to Rs 120 crore but missed estimates.

Average client assets grew 11 per cent. ARR assets increased 20 per cent to Rs 56,400 crore, while transactional assets rose 9 per cent to Rs 1,40,000 crore. Net new money into ARR assets declined to Rs 1,080 crore from Rs 2,880 crore as Nuvama exited low-yielding mandates. The cost-to-income ratio rose to 70.2 per cent, and operating PBT of Rs 58.8 crore was 9 per cent below estimate.

Management highlighted elevated competition in the UHNI segment, retained its medium-term cost-to-income guidance of 60-62 per cent and targeted FY27 net inflows of 20-22 per cent of opening AUM. Dubai offshore operations have broken even, while Singapore is expected to break even by FY27-end.

Capital-Markets and Other Businesses

Asset Services

Asset-services revenue reached a record Rs 260 crore, up 34 per cent year-on-year and 16 per cent above estimate. Average assets under clearing recovered to Rs 3,74,000 crore, the level seen before the exit of a large client, and the client base exceeded 275.

Management expects healthy but moderating FY27 asset-services revenue growth of 20-25 per cent. Commodity collateral and a proposed global-custodian partnership are viewed as potential opportunities.

Investment Banking and Institutional Equities

Investment banking and institutional equities revenue was Rs 180 crore, flat year-on-year but 31 per cent above estimate. Management expects activity to improve, supported by the IPO pipeline and pent-up issuance demand.

Asset Management Company

AMC revenue rose 19 per cent to Rs 22 crore, but the segment recorded an operating loss of Rs 7.7 crore. The AMC faced listed-equity outflows amid volatile markets and demand for SIFs. Continued investment in new verticals and the mutual-fund platform is weighing on profitability.

Earnings Estimates and Growth Outlook

MOFSL raised its FY27E and FY28E revenue estimates by 7 per cent and 9 per cent, respectively. PAT estimates were increased by 7 per cent for FY27E and 11 per cent for FY28E.

The revised forecasts imply FY26-28 revenue and PAT compound annual growth rates of 23 per cent and 25 per cent, respectively.

Key Factors to Monitor

• Competitive intensity in UHNI wealth management.
• Lower retention levels.
• Higher employee expenses and prospective office costs.
• Moderation in asset-services retention and growth.
• AMC losses and the gestation period for new AMC initiatives.
• The timing of recovery in capital-markets issuance activity.