Alternative business has generated 147 cr (approx) profit last year, however it has lot of carry income yet t hit P&L. It is likely to result in reported profit from FY25 onwards.
Here is a good explanation for carry income from Brookfield. They have explained the carry income concept very well IMO. It is applicable to alternative business of edelweiss.
Hi, Does anybody share the gist of the following article? Itās beyond the pay wall. TIA
can you paste the screenshot of the news, its paid article soā¦
I have the the ETprime subscription, so basically they are trying to say that they are very bullish on the wealth management space as in India wealth is managed mostly based on tips from friends and family and that this will change so growth will be very strong. Also they share an important stat that 48% of customers are from urban cities and 52% from rural areas and they are experiencing higher growth in the rural segment as opposed to the notion that wealth management demand would be more in cities, it also talks about the business mix that is changing as previously wealth management had certain fixed products but nowadays personalisation is a key factor based on an Individualās goals and thus it is very hard to standardize the product. In the end they conclude that though Nuvama is in a very high growth but it is also at an expensive valuation and also share one key thing that their competitors would be banks in the long run but since it is a space where the best fund manager gets the most capital so it is a place where the winner takes all kind of market i.e top 3 players would get majority share in it as it is asset light.
Mohnish Pabrai also said similar things about wealth management space and probably that is the reason he might have invested in Edelweiss as he mostly might have seen as a demerger opportunity he invest in this business.
I have worked in a prominent bank in IB both in India and in the EU where wealth management has matured. I slightly disagree that banks would be fierce competitors to Nuvama. In the medium term, yes probably banks might vie for the same pie, but over the long run, wealth management is a very specialized business and Indian banks certainly cannot offer the tailored service which big ticket sizes need. Certain banks can compete but theyād have to pivot their entire business model geared towards wealth management like UBS / Credit Suisse.
Disclosure:
Present Edelweiss shareholder, have divested Nuvama post demerger. Will enter once valuation becomes favourable and once I gain full clarity of their business financials
At 380 cr PAT- it is available at 20 PE, which seems ok. Any specific reason why you sold Nuvama after demerger?
I needed more clarity on their business financials. Usually companies dress up their financials prior to an IPO, I wanted to get a full year data prior to taking a stance on its return metrics and valuation.
As well I took a calculated gamble of there being some selling pressure initially in Nuvama because of the quantum of investors who had invested in parent co Edelweiss just to unlock value from Nuvama.
Nuvama has a lot of equity capital invested in itself and so far hasnāt delivered proportionate returns as compared to some of its peers. Hence, I felt for now, till thereās clarity on its financials and return ratios, it does not deserve to trade at these valuations.
However, having said that, Edelweiss Wealth is a very old player in the industry, has some of the best talent working for them and now has an international parent with deep pockets with resources to support its growth. Hence, once thereās clarity and the selling pressure is absorbed, Iāll look to buy again
with 2.5 lakh crore aum, less or = 1 % of which is revenue and 35 to 40 % marginā¦ books do not seem to be made up, will end up at same numbers. because if you see presentation of edelweiss since last two years, they have been posting the aum and other updates of wealth division regularly
in fact the profits are less perhaps they are investing heavily on growing if you compare with AUM size.
Look at the debt levels 5000+ Crs.
Reminds me of Piramal Pharma demerger, where the demergerd entity had similar debt levels. Nuvama should be able to pay it off faster given that its an asset light business, nonetheless that could be a reason behind people selling or I could be wrong.
No holdings
With Debt level of 5000 cr. they have also cash and cash equivalent is 5000 cr. that means Net Debt free
Pabrai Funds are not there in Nuvama Sep Shareholdingā¦ Perhaps thatās why stock came down to 2200 immediately after listing, may be he has divested his complete stock holding in Nuvama.
I have done quite opposite, have exited from edelweiss and added in Nuvama after its listing expecting faster returnsā¦
Pabrai Funds is still holding their Nuvama stake. It is just their holding is of Pabrai Fund 2,3,4 individually is less than 1% each (after demerger)
For eg if you see Bih Sa sep 2023 edelweiss stake is 3.91% and nuvama stake is 1.17%. Only more than 1% stake name are shown.
FII are still holding 9.45% stake in nuvama and pabrai is for sure present in it.
thatās helpfulā¦ Thank youā¦
could you please explain the rational behind the debt in Nuvama , why it increased where as peer Anand Rathi is debt free. I can understand Motila Oswal and all have lending business, where these debts are used for Nuvama.
What do u guys think about edelweiss arc i see huge potential there!!
