NUVAMA — earnings call

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Prepared remarks

CHIEF EXECUTIVE OFFICER · MR. BHARAT KALSI – GROUP CHIEF FINANCIAL

MR. BHARAT KALSI – GROUP CHIEF FINANCIAL OFFICER AND HEAD OF STRATEGY SGA, INVESTOR RELATIONS ADVISOR Nuvama Wealth Management Limited November 05, 2025

Moderator · Conference Operator

Ladies and gentlemen, good day, and welcome to the Nuvama Wealth Management Limited Q2

Thank you.

Take our first question from the line of Prayesh Jain from Motilal Oswal.

Prayesh Jain

Congrats on a decent set of numbers given the challenge that we had on the Asset Services.

The first question is on the Asset Services side, wherein the yield has gone up in this quarter.

Is it again because of that one lumpy client going away, and these are more sustainable yields?

Is that the way to think about it?

That's the first question.

Second question is on the flows front, where we have seen strong flows in Wealth and Private both.

We think that this momentum can continue because in one of the segments, it's like almost the amount of flows that you've done in the first half is equal to what you have done in the entire of last year.

So how should we think about flows from here on in both Wealth And private?

And third is on the overall PAT.

Bharat, you mentioned that we should look at the way the mix has been changing.

But on an absolute basis, the PAT has been stagnant at about that INR250 crores mark for the past 4 or 5 quarters.

So how should we think about the profitability going ahead?

Those are my three questions.

Ashish Kehair

Thanks, Prayesh.

So first, on Asset Services, I think you have to look at two things in tandem, essentially the yield and the assets.

So what we've always maintained is that the earning assets, so there is one set of assets on which you earn custody fees and all that, which is one.

And one, on which you earn float.

In the one where you earn float is typically the clearing clients where there is a split between G- Sec and, let's say, bank deposits, which come through us.

Now that ratio keeps changing with the size of the clients.

So when you saw the yields went up, you also see that the clearing assets have come down.

So basically, yes, there is an impact of, let's say, that large client because that large client bought large amount of assets, so the ratio was skewed higher towards G-Sec, lower towards deposit.

If strategically, we are able to get a large number of smaller clients, the yields would be higher.

But if, let's say, some clients comes in and then scales up significantly, then their ratio would change.

So at least for the next 2 to 3 quarters, we can project the yields, and that looks to be in the range of 2.6% to 3-3.2% because we are in the acquisition mode of many, many clients.

And then if, let's say, somebody ramps up, maybe it corrects.

But when it comes down, there will be a simultaneous increase in the clearing assets.

On flows of both Private and Wealth, we are reasonably confident that it will continue.

There is no one-off here.

It's reasonably granular across different product categories.

Maybe 10- 15% up, down that keeps happening in our business QoQ.

But if you ask me from a directional trend perspective, we don't see anything changing in the strength of the flows per se.

And on PAT, like you, we also want to cross the INR250 crores, I don't know, it's an artificial threshold, which has come and something keeps happening.

Hopefully, now everything is Nuvama Wealth Management Limited November 05, 2025 behind us, and we come back to our 20% growth trajectory from here on because the rebasing of Asset Services should happen.

I think 1 quarter has passed.

And as I mentioned that in the next 3 to 5 months, we will recover fully what we lost from that client.

And thereafter, then it's again an upward move, which you will see because Wealth businesses is anyways performing what it should do, even better, I would say.

Asset Management, as it keeps adding, it moves into breakeven.

And even if it does not, I'm saying the adjacency benefit that it brings to other businesses is significantly high.

So as we add credit, maybe there will be some drag because new team will come and all that.

I'm not so much concerned.

But otherwise, that 20- 25% growth trajectory should be back once the rebasing of Asset Services happens.

Moderator · Conference Operator

We'll take our next question from the line of Manas Agrawal from Sanford C.

Bernstein.

Manas Agrawal

A couple of questions around Asset Services and then on the split.

Asset Services, essentially, is there any phasing impact also because assets have grown more than revenue despite yields going up?

So is there like a back-ended cadence to asset accumulation within that business?

That is A.

B, can you help us understand where the cost-to-income sits for the period because this is a slower growth quarter?

So as to say, historically, my understanding is in this business, you have operating leverage favoring you.

Third, this is hypothetical.

If weekly was to go away, any indication of what clients would do behaviourally or from a financial perspective?

That is on Asset Services.

And on the split, my first reaction to that whole discussion around doing a split is, is it aimed at improving liquidity so as to facilitate potential exits for shareholders?

That is my question on the split.

Ashish Kehair

Manas, can you repeat the first question?

I didn't understand when you said assets have gone up faster.

Manas Agrawal

So I'm looking at the press release, and I have not necessarily looked at the data book in detail at this point in time.

Your Asset Services assets have gone up 15%.

Your Asset Services revenue has gone up 5%.

Ashish Kehair

Okay.

You're comparing year-on-year?

Manas Agrawal

Yes.

Ashish Kehair

Actually, year-on-year closing assets in Asset Services is down 15%.

Manas Agrawal

Okay.

My mistake over there.

So we can skip that question.

That is fine.

That bridges the gap.

Cost to income and any potential impact on weekly expiry and then the split?

Ashish Kehair

Got it.

So cost to income, broadly, I think the range there is similar.

So overall, if you look at the segment of Asset Services and Capital Markets put together, last full year was 40%, Q1 was Nuvama Wealth Management Limited November 05, 2025 also 40%.

Q2 is also 40% because there is some amount of control you have on the cost side, especially the variable employee cost, which moves in line with the revenues.

So the range at which you operate in cost income will be between 38-39% to 43-45% unless there is a massive deterioration in the Capital Markets business.

Otherwise, this is the range we'll operate in.

So going forward, as we add clients and the rebasing happens because of the loss of large client, we will come back to the trajectory of operating leverage.

So you will see improvement happening from Q1 next year onwards.

The split actually was long overdue in the sense we've received a lot of representation from retail investors and all that.

And when we analyzed our own book of retail investors out of some 1– 1.3 lakh retail investors (Note: it was inadvertently said 2–3 lakhs on the call), which we have, more than 70-80% hold less than 10 shares and 50% hold less than 5 shares.

So there was a lot of this thing, which we then said, okay, let's just go ahead and do it.

It will have no bearing on exit planning for, let's say, a PAG because if you look at how a PAG exits, okay, I'm just talking about the theoretical modes of exit.

The most basic is selling blocks in the market.

Now selling blocks in the market happens to institutions, nothing to do with split.

Second is selling to other private equity or strategics, which also has nothing to do with split.

So exit of the shareholder and split actually do not have any correlation whatsoever.

If you look at the peer group and when we saw the peer group, everybody has done split, everybody trades in that 900-1,200, except maybe Anand Rathi, which has also done a split.

Otherwise, if you look at Motilal, if you look at 360.

If you look at IIFL, everybody has that INR2 or INR1 stock.

We were the only one remaining at that INR10.

So I think we just said we should just do it.

That's it.

Manas Agrawal

Understood.

Any discussion around weekly expiry potentially going?

Ashish Kehair

So it depends on what weekly converts to.

And see, this is one thing which we realized is that like the world of macroeconomics, there is no ceteris paribus here.

There are too many moving parts, right?

So like if you see the volumes that are happening in MCX, we would not have imagined that 2 years back.

That is picking up.

There is discussion around Gift Nifty and volumes there, how they will bring back.

So let's say, weekly moves to fortnightly, I don't think too much will change because the way you look at it is that if I have INR100 to deploy, I will still deploy INR100.

And if you divide the earning of the intermediaries who make money by trading in derivatives, I would split it in three buckets: one is brokers, second is exchanges and third is custodian and clearing agents.

Brokers and exchanges will get impacted because they earn on transaction, number of transactions and transaction volume.

Clearing and custodian does not get impacted that much because they earn on the position.

If your position size is still there, you will require collateral, you will require margin.

If you require margin, the earning of the custodian and the clearing agent is consistent.

So that doesn't change.

So that is how we look at it in terms of overall impact if weekly were to go.

Nuvama Wealth Management Limited November 05, 2025

Manas Agrawal

Understood.

One last question.

Sorry, you brought up MCX, so I'm asking.

Your clearing license is across asset classes?

Or is it only some asset class?

Ashish Kehair

No. Across.

Moderator · Conference Operator

We'll take our next question from the line of Dipanjan Ghosh from Citi.

Dipanjan Ghosh

I hope I'm audible.

A few questions from my side, maybe one on each of the segments.

First, on Nuvama Private.

Can you break up your recurring AUM and flows between corporate treasury and ex corporate treasury for 2Q and 1H?

And you also mentioned on the TBR pipeline, kind of sustaining in 2H also.

So should we expect a 2Q run rate or some moderation to that?

On the AMC business, just wanted to get some color.

I mean you mentioned that some of the deals are nearing their exit.

So should one expect carry booking gradually?

Or do you want to kind of defer it over the period?

And last question on your Capital Markets business.

In terms of the IB, IE, first is, if you can split it between IB, IE, and also just -- let's say, hypothetically, if all of your primary market deals were to convert over the next 12 to 18 months, what should revenue quantum can one really expect in that business?

Ashish Kehair

So Private, let me start.

Corporate treasury is actually negligible in both Q2 and H1.

Actually, Q2, there was a loss on an outflow of about INR300 crores from a corporate treasury.

Rest, all is non-corporate treasury.

Transactional income, if you see the way we look at it is that we should see an almost 15% to 17% growth over last year.

And once we look at H1 numbers, that basically gives a sense that Q3-Q4 should be order of magnitude between INR75-INR80 crores as against the INR100 crores of Q2. AMC carry, we don't accrue.

We typically start book only when it gets realized at the end.

So this exit, we will not lead to a booking.

Right now, no. See, once our Commercial Real Estate Fund moves into that zone, we will start doing an accrual and booking.

And once we launch credit, these two asset classes render themselves more to a carry, accrual and booking.

Our sense is that on equity products, we still want to be conservative and want to do it more towards the end and not do an accrual or an estimated probabilistic accrual as of now.

That's our stand.

Capital Markets, IB plus IE, it keeps changing Dipanjan.

But broadly from a profit perspective, if, let's say, both put together contribute in a year about 20% of the profits, then anywhere between 12- 13% comes from IE and 7- 8% comes from IB.

And the last question was if all our ECM deals were to convert.

So you are assuming a probability of 100%, then the revenue is INR250 crores.

If I apply probability, which we do, then it comes to about INR150 crores.

Dipanjan Ghosh

Got it, sir.

Just one question on the regulations part.

I mean, if this consultation paper from SEBI on MF were to go through, I think we obviously don't get color on the exact details of the business, but on your IE business and on the distribution income.

Nuvama Wealth Management Limited November 05, 2025

Ashish Kehair

About INR20-25 crores on top line basis.

If it goes exactly in the shape and form it has come and we charge 0 on research.

So we don't charge anything on research, and you charge only 2 bps. Derivatives is already less than 1 bps, so no impact.

And on cash side, there is a blend of DMA and non-DMA.

So we are not at 12 bps. Nobody is at 12 bps, except people like yourselves who are MNC brokers.

So we would be lower, much lower.

If this settles anywhere around 5-6 bps, we will actually benefit than lose.

Dipanjan Ghosh

Sorry, sir.

And on the distribution front, I mean, the similar circular, any effect on distributors.

Ashish Kehair

No, not to us.

Our total MF income is still quite low.

I mean both businesses put together would be less than 5-6% of our revenues, so not too much to us.

I think for people who are higher on distribution on MF, they will get impacted on that 5 basis points depending on how the split is decided.

But for us, no. Right now, no.

Dipanjan Ghosh

And just to be clear, this INR20-25 crores is on an annual basis, right?

Ashish Kehair

Yes.

Moderator · Conference Operator

We'll take our next question from the line of Lalit Deo from Equirus Securities.

Lalit Deo

So just two questions.

One, so we have seen a good increase in the lending book in this particular quarter.

But however, the margins have declined from 6% to around 4.4%.

So anything particular to read over there?

And secondly like in the Wealth business, like as compared to the, last quarter's presentation, the RM count seems to have declined from 1,200 to 1,100.

So like, are we seeing some attrition over there?

Ashish Kehair

So on the lending book, like I said in my opening remarks, you have to see three, four things.

What impacts the NII?

One is basically the most basic is the composition of the book.

So that part has no impact.

I'd say how much is margin financing, how much is loan against shares, how much is ESOP, margin financing being the most profitable, but that for us has remained consistent.

So that has not had a bearing.

Second is that what proportion of the ESOP books churns in a quarter.

So let's say, you exercise ESOP, there is a processing fees charged that gets amortized over the period of the loan.

Now you've taken a loan for, say, 6 months or 1 year, amortization will happen monthly.

But you happen to sell your ESOP in the second month, then in that month, the entire realization is booked.

Now when the underlying stock price moves faster, we see behaviourally people exit their ESOP loans faster, and processing fees gets booked faster, which happened in some of the underlying ESOPs for us in Q1. And the reverse of that happened in Q2. So it's just a timing difference.

And the third, I think, more important thing is, when our book size increases, you have to see the timing.

If the timing is towards the latter part of the quarter, then it acts as a negative in that quarter because we have to book what is called expected credit losses as per RBI, and that booking is done on the end-of-period book size basis.

Nuvama Wealth Management Limited November 05, 2025 So let's say, hypothetically, your book was INR100 crores at the end of Q1, and it remained at INR100 crores, INR100 crores for the next 2 months.

And in third month, it became INR200 crores.

So now you earned NII on INR200 crores only for 1 month. but you paid the expected credit loss on the full INR200 crores.

So the benefit will start coming from next quarter onwards, which you will see.

So that ECL or expected credit loss was high.

And the third is, again, a timing difference of the profit or loss that happens on MLD hedging.

So we have about 25% of our borrowing that comes from MLD.

And that hedging can move plus/minus 0.5%, plus to minus, which is a 1% range actually.

And in Q1, Q2, we moved from plus to minus.

Q3 expected, again, we'll move back to plus because on a full year basis, you end up making a 0.5% profit, which reduces your cost of funds.

So I think these are the three things.

Hopefully, in Q3, Q4, you'll see an uptick on NII, which will happen, which will benefit the business, the cost income, productivity, everything.

On Wealth RM also, Lalit, I mentioned, you remember that we are changing the composition of the RMs.

What we had earlier on a full population basis, we are upgrading them almost by 70-80% fixed cost basis.

So numbers may not actually talk to each other.

If I lose two RMs of, say, INR7 lakh, and if I hire one of INR14 lakhs, I'm at the same level because productivity of 5x will deliver the same revenue, but my opex goes down, my training cost goes down, my supervisory, everything else goes down.

So that is the transition that is happening.

But having said that, Q3 onwards, we will start adding RMs on a net basis also, which you will see from next quarter results.

Moderator · Conference Operator

We'll take our next question from the line of Sanketh Godha from Avendus Spark.

Sanketh Godha

Ashish, my question is on the net flow number.

So last time when we spoke, you highlighted around INR24,000-25,000 crores of flow happening in FY'26.

And we already are closer to INR13,000 crores in 1Q for all products put together.

So you still want to maintain that guidance?

Or do you think it will surprise positively?

And if it's the case, then which segments can be doing that?

That's the first question.

And the second thing is just wanted to understand probably a bit of color on your asset clearing business, whether your HFT guys are predominantly Nifty guys, or they even do a lot of Sensex?

The reason I'm asking this question is that the Sensex in general as an index has been taking a lot of market share, whether your participants or HFT clients are heavily skewed towards Nifty, or they have an equal -- or they move in line with the industry, how Sensex contribution has gone up for the industry?

So these are the two questions.

Ashish Kehair

So on the first one, Sanketh, I think right now, so we feel that it will be in the lines what we had guided earlier, which is INR25,000-26,000 crores.

If we happen to launch a few more products in asset management, that could lead to a positive spin there, or maybe both the Wealth and Private businesses can add a bit more, but I don't want to build that anticipation right now.

On HFT, I think your assessment is reasonably accurate that they actually move in line with the industry because see, they ultimately will follow where the volumes happen.

They have to do that whichever segment will produce volumes, they have to chase that.

They don't have a choice Nuvama Wealth Management Limited November 05, 2025 because that's where their algos will work because they need volumes to work.

So in fact, most of them operate across both and in general, will move in line with the market volumes between Nifty and Sensex.

Sanketh Godha

Understood.

Understood.

And lastly, Ashish, this SIF thing, what you mentioned in the opening remarks, is it fair to say that the way SIF will go live, then given tax angle you mentioned, is it fair to say that your AIF money, which is sitting in public markets today in AMC business, will largely get directed or sales will happen more there?

Ashish Kehair

Yes.

No, no, that is by far the desired end outcome only.

Even if the client doesn't shift on their own, we will make them shift because it is superior for them.

Sanketh Godha

And the yields or your realization, which is around 60 bps on the public markets today, that number will still hold up, or it will be better relatively, from your perspective?

Ashish Kehair

So basically, if you look at it from a 2-year perspective, I think it will go up because we will add a larger number of distributors.

We have now more performance on the belt.

So in both these categories, from a performance perspective, we are really the top players across the board.

I think the issue is that many of the retail-oriented or affluent-oriented distributors are not able to touch our product because of the minimum ticket size, that changes.

So hopefully, the yields will inch upwards.

Sanketh Godha

Understood.

But you might be enjoying carry in the larger ticket size, right?

So that advantage will go away?

Ashish Kehair

See, the carry also brings down the fixed fee Sanketh?

Sanketh Godha

Understood.

Understood.

Ashish Kehair

Yes.

And anyways, we like fixed fee more than carry because certainty is higher and everything is higher.

And even for the distribution community, the fixed fee product works much better than the carry product because it brings more predictability to their revenue streams.

Moderator · Conference Operator

Next question is from the line of Mohit Mangal from Centrum.

Mohit Mangal I got three questions.

My first question is, if you see the net new money within the Wealth segment, actually, saw a big jump from INR2,800-3,800-odd crores.

So was this because of the increasing wallet share from old clients, or the newer clients contributed to this increase?

Second question, I mean, you explained that the transaction income within the Private division grew abnormally higher because of the syndication opportunities.

So safe to assume that your transaction would grow higher than ARR, and that ARR as a percentage of the segmental revenue would be less than 50%?

And my last question is I was looking at your consolidated balance sheet, and the loans and investments have seen a big increase.

So what could be the reason for that?

Yes, that's it.

Nuvama Wealth Management Limited November 05, 2025

Ashish Kehair

So first one, in Wealth, INR2,800-3,800 crores, I think the contribution from deepening of existing clients is higher than new.

Typically, for us, that's the case.

In certain quarters, only new clients contribute more.

But in a general basis, you have a larger pool of existing clients.

So if you take the full revenue and full flow and split between the two, the contribution from existing will be higher.

On Private, let me give you a bit of color on the transactional income in general, and then we can go into the specifics.

See, in Private, transactional income is basically driven by four, five drivers.

One is your classic brokerage, then your fixed income and MLD, MLD being very, very miniscule, fixed income largely.

Then you have unlisted shares, and last is syndication.

So if you look at INR100 of, let's say, transactional income, almost INR70-80 crores comes from BAU, which is brokerage and fixed income.

Only INR20 to INR30 will be what we call episodic, which is unlisted and syndication.

And episodic syndication for us now, because I keep saying we don't have credit funds, so we work with external credit fund managers where the deal supply is slightly more sporadic.

Once we have our own credit funds launched and we are deploying every month, you will see this syndication also become a part of BAU like for some of our peers.

So it's a combination of this.

But if you're asking whether between ARR and transactional, the share of transactional will go up like in this quarter.

For a full year basis, the answer is no. On a full year basis, we will still end up, I think, with more than 55% being ARR and 40-45% being transactional.

And loan book and investment book gone up.

Investment is basically client facilitation where we hold stuff on our book to downsell.

So that is in line with the growth of business.

Both fixed income and any other syndication or unlisted deals, if it is sitting on the balance sheet and the transaction has not yet concluded with the downselling, then that's just temporary.

But loan as a part of design, we said that we will grow.

Because if you look at our overall lending income, it's, let's say, 10% to 12%, whereas if you look at our peers, it's about 20%.

So there is a 50% gap, which is a clear scope available for us to ramp up the loan book.

This is the first step we have taken, directionally.

We will keep increasing that.

Moderator · Conference Operator

Next question is from the line of Raghvesh from JM Financial.

Raghvesh

So I had one question on the Wealth space.

So when I try to calculate the retention which you are having on the MPIS, it's coming to somewhere around 1.5-1.6%.

So can you explain that?

Or am I doing something wrong?

So on the MPIS in the Wealth space, when I'm looking at somewhere around INR37,000-38,000 crores of client assets and the revenues which you are giving, my retentions are coming to somewhere around 1.5-1.6%, which appears slightly high.

So can you explain how that number is coming in?

Ashish Kehair

So if you look at the products there, it's essentially mutual fund, PMS, AIF, these three would be managed products.

And there, depending on the underlying asset class, the yield could range Nuvama Wealth Management Limited November 05, 2025 between 70 basis points, to 1.2%, depending on the product class which we are dealing with.

On a blended basis, maybe we hit about 90 basis points, to 1%.

And then there is fixed income, there is insurance, there is MLD, there is unlisted, where you are earning more transactional income and the yield is on gross sales, which is higher.

Combination of these two essentially gives you that 1.5-1.6%, which is broadly in line with, let's say, what, if you look at an Anand Rathi Wealth also makes, it's similar to that range.

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, due to time constraints, we'll take that as the last question for today.

I now hand over the call to management for closing comments.

Over to you, sir.

Ashish Kehair

Thank you.

I think I really want to thank all of you for being there on a holiday.

We were expecting a lower participation.

I think it has been higher than what we had expected.

Would look forward to meeting you all once again in quarter 3, hopefully, with positively surprising all of you.

Thank you once again.

Bharat Kalsi

Thank you.

Moderator · Conference Operator

Thank you.

On behalf of Nuvama Wealth Management, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines.