Wealth Management Sector Likely To Grow 8x In 8-10 Years, Says Nuvama’s Ashish Kehair
Nuvama Wealth Management, the demerged wealth management company of Edelweiss Financial Services, got listed and admitted for dealing on the BSE and the National Stock Exchange (NSE) on 26 September. With this listing, Nuvama Wealth has joined the league of listed wealth management companies such as Anand Rathi Wealth and 360 One. Shares of Nuvama opened at Rs 2,750 on the NSE and at Rs 2,699 on the BSE.
The demerger process was completed in May this year. Post-demerger, PAG continues to own a majority stake of 56.1 per cent in Nuvama, Edelweiss through its subsidiaries holds 13.74 per cent stake, and the remaining 30 per cent is owned by the shareholders of Edelweiss.
Nuvama aims to double its number of relationship managers (RMs) in the next three to five years, expand its presence beyond 100 Indian cities and offshore, and launch innovative products, said Managing Director (MD) and CEO Ashish Kehair in an exclusive conversation with Outlook Business.
The company offers a comprehensive range of wealth management solutions, including investments, asset management, lending, and investment banking.
What factors distinguish Nuvama's listing on the Indian capital market from others?
The wealth management industry is at a relatively undiscovered stage, with only a couple of listed companies in this space. The businesses are also at a nascent stage, and from a maturity perspective, the whole sector is growing at a rapid pace and has the potential to grow by eight times in the next 10–12 years due to an expanding base and increasing penetration. Currently, the formal wealth management sector has a penetration of around 10–15 per cent, whereas, mature markets like US and China have reached 80 per cent and 35-40 per cent respectively. Hence, as an industry, if we are able to achieve 10-20 per cent in the next 10 years, the base will increase by four times at a 15 per cent compounding rate.
Nuvama is one of the leading wealth and asset management companies in the country. The platform has been built over the last 10–12 years and is likely to be one of the biggest beneficiaries of this growth. We will ride this full wave and operate in the entire value chain, Kehair said.
What key aspects differentiate Nuvama from other listed asset and wealth management companies?
Before Nuvama, as you are aware, there were only a couple of listed companies in this space. The business models of these companies are different. In wealth management, you can classify the customer segments into three broad buckets: retail, affluent and HNI, and ultra HNI. Nuvama operates in both ultra-HNI and affluent HNI. That gives us an edge because when you're straddling across multiple segments, you are able to have a higher target audience, which means the total addressable market (TAM) is much higher.
However, the constraints in both models are different. It is very difficult to make an affluent business model profitable because it’s more granular; you need to have a physical presence in various locations, and investment in technology is significantly higher. In the last 10–12 years, we have created a profitable business that is now easier to scale.
Nuvama has a diversified set of businesses. It has asset management, custody clearing, investment banking, and institutional equities. Diversification offers you some resilience because if one segment is not performing well, the other segment catches up. So, a diversified revenue stream, a complete platform, and multiple customer segments differentiate Nuvama.
Can you provide insights into Nuvama's business model and its compelling value proposition for investors and clients?
For our clientele, the value proposition is extremely sharp. At the upper end, we provide bespoke solutions to large families and clients. At the other end, Nuvama has a full-service wealth management model, including distribution, manufacturing, exchange-traded products, lending, and everything under the wealth management umbrella.
For investors, the company will offer high growth, strong governance, adequate capitalisation and shareholding support. So, this combination makes it a compelling investment opportunity for them.
The value proposition is built around the needs of our clients. Nuvama’s comprehensive platform addresses all financial needs of the clientele by providing a portfolio based service rather than a product based relationship. We believe our business model should be a reflection of how the client's wallet works, and that’s how we built our value proposition.
Can you share some key financial performance indicators or achievements that showcase Nuvama’s strength in the market?
In FY23, Nuvama reported total revenue of Rs 1,575 crore and an operating profit of Rs 368 crore. The total client asset stood at Rs 2.3 trillion as of March 2023, up from Rs 1.7 trillion in March 2021.
Over two years, profits grew from Rs 200 crore in FY21 to Rs 360 crore in FY23, while revenue increased from Rs 998 crore in FY21 to Rs 1,575 crore in FY23.
In Q1 FY21, total revenue reached Rs 417 crore, up 19 percent year-on-year, with operating profit after tax (PAT) at Rs 95 crore, marking a 74 percent increase year-on-year. As we continue, the figures will improve, allowing us to improve our performance.
How does Nuvama adapt its services and offerings according to the dynamic nature of the financial industry?
If we consider the industry, its dynamism primarily comes from frequent regulatory changes, which are warranted as the industry moves from a small, mom-and-pop shop model to a more organized and large-scale wealth management sector. The role we play is highly fiduciary, involving the management of people's savings and investments. These regulations need to be stringent to prevent 'Fly By Night' operators from misusing client assets. As the industry continues to mature and become more robust, these regulations will continue to evolve, and we will adapt to these changes accordingly.
Additionally, dynamism comes from market fluctuations, which can significantly impact customers' preferences for different asset classes. Consequently, we have to continuously evolve, innovate on products, and identify new investment opportunities to meet changing demands.
What are Nuvama's expansion plans, both in terms of market reach and service offerings?
In terms of market reach, our goal is to double the number of RMS (Relationship Managers) in the next three to five years. Currently, we have a geographic presence in 69 cities and aim to expand to 100 locations in the next two years and 300 cities in the next five years. We also plan to extend our operations to offshore locations with a growing market for bespoke wealth management services, such as Singapore, APAC, and the Middle East.
While we currently offer private equity and listed equity, we are actively developing products that generate yield, as mutual funds and insurance have come under taxation. Insurance and MLDs have also come under taxation. Looking ahead, we are diversifying our offerings to include commercial real estate funds, private credit funds, and absolute return funds.