You can’t really value a aggressively growing company with an existing metric. If you do, it always looks like overvalued.
That is why you look outside the company and how it impacts future of the company(revenues, sales etc)
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Somehow my question is not understood. I’m just asking about how to value a wealth management company…not how to value Nuvama or implying if it’s overvalued.
What I have found so far is that most common multiples used when valuing wealth management firms are EV to EBITDA, EV to AUM, and EV to revenue multiples.
That said I have a specific question about Nuavama.
Their asset under management is some 70000 cores but 12 months trailing annual revenue is 2800 which translates into roughly 4% fee. I believe that’s way too high for a wealth management firm. Given that a big chunk of their revenue is concentrated in wealth management, what could be reason for such high fee? Is it sustainable?
₹2,41,837 Cr Client assets as of Dec 23 for Wealth Management.
I think this might help
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I guess you have not even had a look at presentation or any one con call of the company… If you watch above video you will get quite an insight about this business, and if your seriously thinking to invest then irrespective of your question you must watch the video.
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Jio + BlackRock entry into this space,
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Does anyone know the tax implication of selling stocks aquired via demergers? Might help if someone can summarize or provide some links to read.
Following is the scenario for context:
I purchased Edelweiss stock in Feb-Mar 2022. So I had the holdings already for more than a year before the allotmemt of Nuvama stocks in 2023.
Now, I have sold all the Nuvama holdings in Apr-2024. I dont know whether it will be taxed at LTCG or STCG? Also, what will be considered as the buying price to calculate profits to be taxed?
I still own all the Edelweiss stocks purchased in 2022.
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I think a price based on your edelweiss price will be calculated and LTCG will be applied.,
Eg:say at feb 2022 your Edelweiss at rs 70 , then Nuvama price will be rs 1900 during demerger
Con Call Notes for Q4-24 (CMR 80) . PPT
Co-Lending
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Making a lot of backend investment. 2/3rd focus is building the backend.
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HFC 880 cr equity. Following the old model Housing Fiance model 1.0.
- HF 2.0 - Co-Lending
- In 4 to 5 quarters, will be double-digit ROE (from 3% in Q4). Expect a fairly good uptick in it.
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ARC dominant player- 40% market share
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Wholesale reduction will take another two years, but it is becoming more and more insignificant.
- Projects are going well. Sell down are expensing. 15/20% more expensive.
- There are 4/5 projects we might have to go to NCLT, but wholesale is becoming insignificant
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In the next two years- By selling, AIF/Nuvam will be liquidated in 2 years. Current net debt shall be reduced from 7500 to 3500 cr in the next two years.
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Business will start giving dividends from the underlying dividends.
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Insurance business losses have peaked. They will reduce going forward
Mutual Funds
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NON-ETF- 100,000 cr in another 18 months.
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MF industry- A good driver of profitability is equity AUM. In the next couple of years, we aim to achieve 50% of equity AUM. Most good players are between 50-60%
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Equity AUM has an upfront cost.
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Good cost to income 50 -60%. Ours is 85. Aiming to bring it in line with the industry
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Last year invested. Opened new offices in new cities. Only in 30 cities. We could go to 100 cities.
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Each branch takes 50/60 lakhs to set up. The branch will break even in 6/8 months, depending upon the product mix.
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Staying power is very important.
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13rd largest AMC in India
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It is a scale business.
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It takes about 5 yo 7 year and 100,000 to get to scale. New players needs 5/7 years and 3000 cr of investing to come to 100,000 cr AUM and need lof of AUM.
Corporate Debt
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13,000 cr now
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3000 cr of liquidity is holding
AIF (Alternative)
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Lot of competition in private credit.
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They are on third funds in most of our strategies. Carry income from the first and fees from the second coming in.
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They have a track record. It matters when you are scaling your business. It need strong distribution within India.
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They have distribution in India and abroad.
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Deployment of around 7k in FY23 and Fy24.
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The primary focus is risk management, not deployment.
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FY24 will focus on closing funds, and FY25 will focus on deployment. Hope to scale the business in Fy25
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Clocking 250 to 300 cr annualised profit (based on 75 cr PAT in Q4)
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In the next six months (Oct to Dec quarter), long-term plan for the business including listing.
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There are 5/6 segments called AIF. We are only in two
1- PE. We hope to do business
2- Private Credit
3- Infrastructure
4 Real estate (e.g. REIT)
5- Hedge Funds (PMS/Public)- No there -
Enough space to grow within existing spaces and also to enter into new spaces.
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The key is expertise, which takes 5/10 years to build and build a track record and distribution.
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Globally, when there is a fee plus carry, it is called an Alternative.
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Valuation
- AIF trade to 10-20% of AUM
- Blackrock acquired a company and paid 15% of AUM.
- India - PE multiple is 30 to 40 for different asset management companies
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RBI action.
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Quick Google:
The Reserve Bank of India (RBI) has imposed business restrictions on two Edelweiss Group companies, ECL Finance Ltd and Edelweiss Asset Reconstruction Company Ltd (EARCL), due to material supervisory concerns. These actions are based on observations from supervisory examinations, which found that the group entities were acting in concert to engage in structured transactions for evergreening stressed exposures of ECL using the platform of EARCL and connected alternative investment funds. This was done to circumvent applicable regulations.
Specifically, the RBI has directed EARCL to cease and desist from the acquisition of financial assets, including security receipts (SRs), and reorganizing existing security receipts. For ECL Finance, the RBI has directed it to cease and desist from undertaking any structured transactions in respect of its wholesale exposures, other than repayment and/or closure of accounts in its normal course of business.
The RBI has also highlighted incorrect valuation of security receipts by both EARCL and ECL, and other supervisory observations for ECL include submission of incorrect details of its eligible book debts to its lenders for computation of drawing power, non-compliance with loan to value norms for lending against shares, incorrect reporting to the Central Repository for Information on Large Credits system, and non-adherence to Know Your Customer guidelines.
The RBI’s actions are based on concerns that these activities circumvent regulations which permit asset reconstruction companies to acquire financial assets only from banks and financial institutions. The restrictions will be reviewed after the rectification of the supervisory observations by the group to the satisfaction of the Reserve Bank.
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