Nuvama Wealth Management Limited (NUVAMA) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Nuama Wealth Management Limited Q2 and H1FI27 Earnings Conference Call. This conference call may contain forelooking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. And I'll hand the conference over to Mr. Ashish Khaer, MD and CEO. Thank you, and over to Mr. Khaer.

Thank you, Nirav. Good afternoon, everyone, and thank you for joining us for Nuwama's Quarter 2 and H1 FY27 earnings call. On behalf of all of us, I'd like to wish our shareholders, clients, all the analysts, investors, everybody a very, very happy Diwali. Joining me today, as usual, Bharat, our Group CFO, and SGA, our Investor Relations Advisors. We'll quickly begin with an overview of the performance and key developments, and then we can open the floor for the questions. Just to summarize, we delivered a reasonably good quarter of strong performance. Client assets now are about 5.5 lakh crores. Revenue was about 937 crores, operating pat about 319, with a yearly growth of 26%, and ROE remains strong at about 29%. Special mention on both wealth management businesses now, over the last three years, both these businesses have consistently compounded at more than 20% growth across all parameters. This quarter, I think the performance was not only well, but also a significant contribution came from our institutional businesses, particularly asset services and capital markets, which continue to scale well across different products and customer segments. I think our integrated approach, which we've always mentioned, spanning multiple businesses within the financial services, capital markets ecosystem across asset classes, client segments, It gives us multiple growth engines and also reduces dependency on any single market product or revenue source. It basically, in a sense, makes the business more resilient to any kind of adverse impact that may happen. I think the second thing which we followed for the last couple of years that also is playing out now, In WellPandMed, we particularly said that, you know, while many providers go and seek The equity managed assets of the clients, our view has been that asset class performances are cyclical, specifically equities. And for the last two, two and a half years, we kept harping on the importance to the clients of allocating to other asset classes. I think that has served us extremely well, which reflects in our strong net flows, despite the markets not doing anything for almost last two years. And I think the second was a recognition that technology and what generative AI can deliver can actually be path-breaking. Technology, of course, we always knew, but when the layer of generative AI came on top of it, it basically opened up many new avenues, not only to improve client experience, but also to improve efficiencies within the firm. And I think this is also playing out reasonably well across all our businesses now. Let's move on to the business segment updates now. We start with Novama Wealth. Managed products and investment solutions, which is MPIS, remains our core focus and growth engine. Client assets have now crossed about 46,000 crores, and net flows were very, very strong. For the last six months, we've had more than 6,000 crores. And Q2 was about 3,300. Revenue for Q2 may look slightly moderated, but if you look at some 7-8 quarters, every quarter... Out of the 7th, the revenue growth was more than 25% YOY. So, this quarter, because last year, Q2 had a very, very strong transactional income opportunity with our real estate fund. So, that basically has had a base effect. Otherwise, there is no structural change either in flows or yields for this. Lending, we've now kept saying that, you know, this is... This is an avenue which we will exploit for growth, and we've demonstrated this now over the last 12 months. Our loan book is, in this business, is about 6,000 crores, growing about 60% year on year. You know that the composition is all liquid assets like LAS, ESOP financing, margin financing, or MTF, with LAS and ESOP being almost 75% of the portfolio. Yields also saw an uptick in this quarter with marginal improvement in NIM because we've always maintained that a part of our borrowing happens through MLD and some hedging gains and losses can lead to these changes in the NIM. On sales capacity, we've added about 90 RMs over the last one year, and continue to strengthen the franchise, the deliberate focus on senior talent. The outcomes are actually encouraging. You can see them in the net flows, and also you can see them in the NPS scores, which have now reached an all-time high of 89 for us in this business. Lastly, on the technology and AI front, as I said, we continue to embed this across different parts of the value chain. We rolled out a new AI-powered client profiling and meeting prep tool for RMs in this quarter, and efficiencies for this are visible, like net new money and client assets per RM have increased by 25 to 30% year on year. Overall margins or cost-income ratios have improved by about 200 basis points year on year. Now I move to Nuwama Private and starting with our strategic focus there, the ARR assets. The ARR assets have now crossed about 60 to 62,000 crores. Again, very strong momentum in net-to-money in Q2. We saw about 5,000 crores getting added. Q1 was a bit moderated because we saw one outflow of an advisory asset which was yielding, but if I take Q1 plus Q2 put together, we are about 11 to 12% of the opening balance and our guidance has always been that we will be between 22 to 25%, which I think we are on track. ARR now contributes about 64% of the revenue. On our initiatives to improve this even further, we spoke about Pinnacle as one of our UHNI offering, which brings together multiple things. It basically brings advisory portfolio construction, governance support, curated opportunities, reporting in one single framework, and it's meant for our top clients. It basically... It improves the engagement with the client significantly, which automatically leads to an increase in wallet share. I think we are seeing an impact of this now happening. We may, over the next two, three quarters, start reporting to you specific impact. Moving on to lending, here also we had said that we will leverage the lending book to improve. The book has grown by about 50% on an H1 basis and NII also has grown by about 50% on H1 basis. Yields remain stable. And I think there is still a lot of ideas available here to improve our lending book. On capacity here, we've added about 15, 14 to 15 RMs over the last one year or almost 10% of our. And we will continue to remain deliberate and measured in how we add RMs in the current environment. One thing we wanted to point out, like we started reporting our ARR net flows from beyond Tier 1. Now about 40% of that is coming from beyond Tier 1, which is not a reflection that whether we are really present there physically, But it's a reflection of how we are leveraging our distribution to access. Even places where we are not present. Here on the AI front, we've added a liquidity events module, which basically tracks all the IPOs and exits where promoters get money, and the whole end-to-end chain of tracking, allocation to RMs, and trying to convert is now moved on a digital platform, which gives us a far better cockpit view of the whole value chain as it progresses. And here also I see the impact on the productivity improvement in terms of ARR assets and ARR revenues per RM have almost grown by about 15% to 20% year on year, and margins have improved by about 70 basis points across the board. On transaction banking income, you will have some questions as to why there is a dip. Over last quarter of year of, I mean, Q2 FY26, again, as I said in wealth, there were large co-invest transactions, which we essentially did with our commercial real estate fund, and that revenue had a high base effect. Otherwise, 80 to 90 crores per quarter looks like a regular run rate because About 60 to 70% of this income is anyways recurring or reoccurring, keeps happening again and again every month, which is a combination of brokerage and equity brokerage and fixed income. Only 20-30% is episodic, but we will see in both businesses improvements in our transactional income, or maybe even ARR, as we launch our private credit and start building on it, our private credit fund, and as we launch our second commercial real estate fund, because they will throw up co-invest and syndication opportunities. I think this is a good segue to move into asset management. Asset management, starting with commercial real estate first, our previous fund is now about 50-55% committed. Another 2-3 months, 70% we will reach. So it's time to now launch the second fund, which is going to get launched anytime soon, in maybe another 2 weeks or so. And the target is to raise about 5,000 crores there. Then private credit, the full team is intact. And we will launch a private credit fund also in the next maybe 25, 30 days. And the target is to raise anywhere between, since it's the first fund, we will see how the progress goes, but we will go somewhere between 1500 to 2000 or 2500 crores. Again, over the next maybe 8, 10 months, we will want to raise that money. Private equity, we've been focused on returning the money on our previous funds, and as they reach closure, we are contemplating launch of a new fund and a new strategy with a new name sometime next year. So maybe in Q3 or Q4, we will give you further update around this. On public market, we are still on the transition phase, where we continue to lose money on our AIFs, because now STIFs have become far more tax efficient. Our STIF approval has come, and that launch is also expected in the next 25-30 days. So I think a lot of action in asset management in the next 30 to 40 days with large part of our product rollout bunching up together. And we shall see that activity playing for the next two to three quarters. Coming to asset services, exceptional growth, revenues about 50% year-on-year. Client assets have now crossed 1.6 lakh crores. So, H1 remained healthy at 2.7. We mentioned in the last quarter that there were some new clients which had very high cash collateral composition and that have now normalized. So, Q2, you will see yields are moderated to about 2.5. But I think if I take a full year perspective, we will be anywhere between. 2.6 to 2.7, 2.8 range. Because Q3, Q4, again, new client addition is going to happen. And we have visibility of about 2,000 crores of cash assets coming in. So, I think that will again give a bump up in it. But it will remain in this zone. There is no structural change in anything. Domestic business again continues to benefit with a large number of people setting up. Either PMSs or AIFs and that trend is just increasing and we continue to gain a lot of market share there. I think 20% growth is what we expect from this business. I don't see right now any structural changes to that aspiration. Capital markets, I think last quarter was slightly, I mean, dichotomous in terms of Secondary and primary markets behaved very differently. In secondary market, there was impact of introduction of cash, which had impacted derivative volumes and incomes related to derivative volume. But even the cash volume was down by about 12% QOQ. But primary market picked up. We tracked IPOs above 400 crores. From 4 to 38 IPOs. Q1 had about 4 IPOs and Q2 had about 38 IPOs. So there's a massive jump. We were also able to participate effectively. Fixed income, we mentioned in Q1 that we had had an extremely good quarter because of multiple things that had happened in Q1 where FTIs first went out, then they came in, and we were able to leverage both the sides. And we said that there was about 20-25 crore of extra income, which we delivered in Q1, which may not get replicated. So, FIM, therefore, saw a minor dip in that sense, and now is more normalized in terms of performance. Uh, overall... So, I would see why capital markets remain strong because we have a foot in each of the pieces, and even from a pipeline perspective on investment banking, we have right now about 14 transactions in the pipeline, about 13 in ECM and about 10 in advisory, with a reasonably high two-digit or early three-digit revenue target on that. So overall looks... This is definitely robust for the remaining part of the year. I think with this, I come to the end of the overview. I'll hand over to Bharat, who can take you through the specific numbers, and then we can open the floor for questions. Over to you, Bharat.

Thank you, Ashish, and good afternoon, everyone, and warm welcome to all the participants on the call. Before I start on the numbers, a very happy Diwali to everybody. Roshri has already covered the headline number. So this quarter has been a very good and steady quarter for us. Our revenue for the quarter was around 937 crore, which is a 21% YOY growth. And our H1 revenue has also grown around 20% to 1850 crore or so. The quarter to profit also was exceptionally very decent growth of 26% on the operating side with 319 crore of FAT. This was coming from all the businesses, so it was not very concentrated. Obviously, asset services at times gives you the higher profits, but it is from wealth and private as well. If you look at the presentation, you would have noticed that there is a one-time exceptional charge of around 16 crore rupees, I want to call it out upfront. This is really a one-time charge wherein we actually pre-closed our venture debt fund. Which we launched sometime in FY23. This fund was with a 7-year of a tenure. But the underlying strategy for the fund was to actually deploy in combination of debt as well as equity warrants. And as you know that over the last few years, The growth stage company has got a lot of multiple ways to have a fund raise which is non-delutive in terms of equity, like a private credit. So the underlying strategy of the fund is actually not generating the expected return as we thought, and mainly because of the equity warrants, market is not up to the mark as we thought initially. So what we have decided is that we will actually pre-close this fund and we will start returning the money to the fund. That will lead to a one-time charge of around post-tax of around 16 crore rupees and this will also lead to an accelerated amount on the called-in capital which is in the NML business. So that will be another 9 to 10 crore but that will come over the next 12 months or so. So there is a really one-time charge of around 16 crore post-tax on the overall basis because of this. Having said that, otherwise, if you look at our overall client asset, that has grown to 5.5 lakh growth, which is a 25% growth. And within the wealth management, our assets are now at 3.7 lakh growth. And as Ashish was also alluded to the fact that NPS and ARR asset is growing much faster than what is our overall growth. It has grown to 1.1 lakh growth at a 27% growth. Net new money, the numbers what we discussed is that on the Novama wealth it is 3300 crore and on the private side it is 5000 crore for Q2 but this is the highest ever also for both the businesses and we are on full track in terms of the guidance which we gave that we should be growing anything around 20 to 25% on our focus assets. Asset management, we again deliberated. Ashish covered a lot of things in terms of various strategies which we are launching. Currently, the asset under management is around 12,000 crores. Asset service is at 1.63 lakh crores with a very strong growth if you compare it with the Q2 of FI26. Coming back to the revenues, happy to share that wealth business, when I say wealth business, wealth plus private business has actually crossed the 500 crore quarterly revenue mark. This is a growth of around 14%. Ashish also mentioned about the transaction revenue which was there in Q2 FI26, but otherwise crossing a 500 crore mark is a good achievement. On the asset services side, the growth is around 53% of IO1 and at 245 crore. It's mainly because of the lower base in the quarter to FI26. Capital market also grew by 9% to 175 crores, wherein the institutional equities grew both YOY as well as on a quarter-on-quarter basis. This is despite the fact that we had a cash effect in the month of August and September, which is expected to be over. It's kind of now over, but despite of that, the quarter has actually grown. Investment banking, it was like ECM was low in quarter one, which has picked up in quarter two because of the primary market activity, and our fixed income continues to strongly grow over the quarter on quarter as well as on a year on year basis. Coming to the cost point, our cost for the quarter was around 507 crore, which is a growth of 16%. Within that, if you look at that, our employee cost has grown actually by 19% to 382 crore. See, if you look at over the last 12 months, we have almost added a 7% capacity or give and take 250 odd employees in the company, 90% or 85, 90% of the people will be in the business facing units, whether it is RMs or the investment peoples and all. So that is the reason one where the cost has gone up to 19% and obviously there is an annual increment which has happened. And the variable cost, which is linked to the business performance, that is leading to a 19% growth on the employee cost. Our employee cost for quarter two also includes our new ESR scheme, which we have actually granted sometime in the first week of September. The cost of that ESR charge is around 6 crore. I'm talking all numbers as pre-tax. So 6 crore is the office charge because of that employee cost. That for the full year of FI 27 will come to around 45 crore rupees or a 20 crore rupees a quarter charge. This 20 crore rupees of a quarter charge will be there for next four quarters and from there onwards it will start taping down and this is as per the accounting standard. So this is how this has to be accounted for. That's a 20 crore charge for next four quarters after that it will drop. Similarly, if you look at our operating expenses, there's hardly any increase. It is 9% on a YOY basis. Typically, this much expense will always increase. Two-thirds of it will be on account of our inflation link charges, and one-third will be towards the, say, new investments, wherever we want to focus on our business. So, that's where the OPEX has grown by 9%. So, our full year BAEU OPEX should be around. Give and take 520 and 530 crore against our last year number of 464 crore. As we mentioned in the last call also, we have actually finalized our new HO in the BKC. This will be, we will start our rent-free period will start from November. That typically, again, as per the accounting standard, you will have to do a ROU, right of use accounting for that, and that will lead to around 25 crore fees of charge for this year, FY27. So, if I add our BAU expense as well as the new HO expense, we may close the year at anything around 550 crore of an OPEX for the year. This is where the OPEX growth is expected to be on the full year basis. Profit we discussed, which is at 319 crore. Operating profit is strong, 26% growth. Wealth management also grew 22% to 184 crore. But again, a number to look at is that our NOAMA wealth. Which is our S&I segment, has actually crossed the PBT mark of 100 crore in Q2. This is the first time they have actually crossed the 100 crore mark. Otherwise, our asset services and capital market has actually shown a growth of around 34% year-on-year basis. One other thing which we would like to update to the investors and the community is that the board has decided actually not to declare any H1 FI27 dividend. So there are a few reasons. So if you look at that, our loan book, as Ashish was also mentioning, that it's actually grown up by 2000 crore in the first six months of this year. And we are already at our debt-to-equity gearing of around 2.9. So, basically, the idea is that we will be more comfortable if our debt-to-equity is around 2.5 plus minus you basis point here and there, but 2.5 is where ID we want to be. Plus, the way we are looking opportunities both on the lending side as well as on the syndication opportunities or asset management where we have to actually make investments, we deliberated internally and decided not to declare dividend for H1. However, we'll continue to look at this dividend policy as part of our annual results, which will happen, obviously, sometime in April 27. With that, and one more thing within the dividend is that, see, our ROE is also at around 29%. So we can actually look back to how we utilize our capital, how much we retain, how much we actually declare, and how much we put it back to the business. I think those are detailed deliberation will also happen in the yearly results, and that's when we decide on the final dividend.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

Participants, we may press star and 1 to ask a question. First question is from the line of Paris, Shane, from OT Laloswal.

Please, go ahead.

Yeah, hi. Good afternoon, everyone. Firstly, a very happy Dibadi to all the team. And congratulations on a good set of numbers. So, a better time for the explanation on the cost and overall front, but if you look at the cost to incomes on the wealth management side, we have seen quite a bit of improvement. Now, rather than talking about the cost to income, the absolute cost run rate in both private and wealth, is this, we have, we reached a sustainable rate in terms of RM additions and everything. And similarly, if I even talk about the asset management, where, you know, we are building teams on SIS and everything, there too the cost has, absolute cost has come down from 1Q to 2Q2. So how do we think about the cost on each of these segments and cost to income the way we think about these three segments?

Wealth and private... In terms of, I think, we've reached a steady state, like you said, where we know that we are going to hire a certain set of people, and obviously there will be some attrition, but on a net-net basis, like we keep saying that we want to improve by 100 basis points. So I think in both the businesses this year, over last year, we would see an improvement anywhere between 100 to 200 business points. And that journey should continue for the next couple of years at least. Asset management is a different story altogether. Because one of the segments, which is a public market, It actually was on a path of, you know, profitability and was, had started making money. But with this change of regulation, which brought in SIF, it became a bit of a detour, where we had, we have to bring SIF, we have to see where the flows will go. And to get an SIF, you have to build a MF, which requires a separate infrastructure, separate, everything, pretty much everything separate is needed. So that additional layer of cost came in, but we had no choice because we had 5,000 crores of assets there, which was earning revenues for both wealth management and asset management. So we did that. And therefore, you see an elevation of cost happening there. And secondly, we built the whole private credit team where revenues have not started coming in. So, I think in asset management, the real cost-income reflection may... Start appearing after 12 to 15 months from now when these expenses which we have incurred are actually put to use and money comes in and we start earning on them. Right now, I think it's too premature to talk about that. But yes, of course, after Q4, when the fundraise in each of these is happening and as and when that goes up, you will see gradually the cost income will start improving. do you have any follow-up question?

Yeah, yeah. So, you know, in the asset management, you mentioned about private credit fund launch. Which category this will be? Performing credit, special situations, IG credit, what kind of fund that we are launching here?

Performing, between performing and special situations, so not IG, and not full special situation, which is 20 plus. This will be like 15 to 18, 15 to 17, that range.

Got that. And last question on the clearing custody business, what's the mix between the FII, FPI, foreign money and domestic in terms of assets or revenues, whichever way you can split it for us?

Broadly, you know, it ranges in some quarters, it will be... 25, 75, in some quarters it will be 20, 80, but the range is, I mean, if you take on a full year basis, it's normally between 25 domestic and 75 FPI.

Got that. Thank you and all the best. Thank you.

Next question is from Lainaf Lalit Deo from Equirus Securities. Please go ahead.

Yeah, hi sir. Good afternoon and congratulations. Good set of numbers and athletes have everybody. So there's two questions. Firstly, on the AMC, so just to understand the loss which we had recognized in this quarter as a one-time loss. So is it more because that we were that we had we had assigned some returns to the investors and probably because of the because the strategy was not able to give those returns. So that is why we are incurring those losses or is it some or is it more of an operational losses that we are incurring? We have incurred in this and secondly on the clearing business like as you mentioned there's like that in the for this year the yields are likely to be in the range of around 2.7 to 2.8, 2.6 to 2.8 percent. So how should we look at the retentance for the next two couple of years?

So, first on the asset management side, it's not any committed return related loss to investors. Basically, this fund was launched in an era where AIFs could pay upfront distribution cost. So, that upfront distribution cost, because you are pre-winding the fund, the un-amortized portion, so let's say we raise the fund of 1000 crores, out of which we called for only 300 crores. So, that balance 700 related distribution cost, we have to fast forward the amort and write it off, right? So, that is what happened in this 16 crores. And what Bharat mentioned that... There will be accelerated amortization of remaining, which is for the 300. Over the next 12 months, as we give money back from the previous deals, that 8-10 crores will also get amortized. So, it's basically an amortized distribution cost and not to do with the client returns in any manner. On clearing assets, I think it's a function of two things. One, It's a function of the split between cash collateral and GSEC collateral. If the cash collateral and GSEC collateral, which right now for us hovers around, 38 to 40 percent is cash and rest is GSEC. And if the yields on the deposits remain at the place where we are with, let's say, plus minus 50 basis points, then your yield should be between 2.5 to 2.8 percent, even for the next two years. In a scenario where some FPI becomes very, very large, then these ratios of cash to GSEC collateral breaks down. Because when they become very large, they want higher GSEC, lower cash. Yield will fall, but your absolute income will still grow. So I think it's not relevant right now to focus that much because right now if you project an increase in collateral which is more in line with reasonable numbers of say 15, 20, 25 percent, then you can assume that the yield stays here. If let's say the collateral doubles from here, then the yield will fall because those ratios of GSEC and cash changes. So I think for your purpose, you can assume the yields to remain between 2.5 to 2.8 for next two years.

Sure, sir. Thank you.

Thank you. Participants, you may press star and 1 to ask the question. Question is from the line of Manas Agarwal from Stanford C. Bernstein. Please go ahead.

Hi, thank you for the challenge to ask a question. I just want to understand a couple of things. I think the Anugra liability was settled in your favor. So I assume there was some surplus capital in the clearing entity that was being carried forward. Is that now going to be released at a subsequent date or that gets consumed in the lending business? That is question number one. Question number two, if I just look at your asset services. Assets under custody on a QOQ basis. I see, I think, a 12% increase. Now, Q2 was the cash quarter where we saw a lot of hesitation from writers. So, did you increase margin requirements or this was just organic growth in assets under custody? That is question number two.

So, Anugrah-related excess capital was not very high because we had placed a specific bank guarantee and bank guarantee requires only 25% cash. So, let's say we had to place about 500 crores of bank guarantee which was essentially We are marked for Anugrah with the Clearing Corporation that required only 125-130 crores of cash. So, that will get used in the business, either in the clearing business for newer clients or in other businesses. It will not create a situation of excess capital in that sense because we have not used cash in the first place. On the increase of the collateral, I think... The impact of cash was actually not felt in the clearing business at all. So this was largely organic because the clients changed their strategy and they did different stuff. And for us, actually, we did not see any impact on any client in terms of reduction and we did not increase the margin, of course. The margin levels were the same. So I think it was not led by margin increase.

Understood. Thank you.

Thank you. Next question is from Lano Sanket Goda from Amandas Park. Please go ahead.

Yes, thank you for the opportunity. Ashish, you said that your 25% of asset clearing business largely comes from domestic guys. And you're aware about the fact that incrementally new domestic custodian licenses are given. So, just wanted to understand from your perspective, how do you see risk to domestic business? Eventually, if these guys also get foreign licenses, maybe in a couple of years, then how do you see this risk? Maybe clients will not move, but whether there will be a fair probability that your ability to demand for more cash collateral will come down, and therefore, yields in this asset-clearing business potentially could be under pressure going ahead. So that's my first question. And second question, I just wanted to give a qualitative point, just to understand from private wealth management or the ultra-HNI wealth management business point of view. Your attrition, if you can give a bit of color there, and if there are any meaningful, then any immediate slowdown in flows or growth potentially can happen in near term till you manage to get new rising.

So on the first one, Sanket, actually very difficult for anybody to comment because what value proposition will the competing players bring plus most of the new license holders happen to be strong asset managers themselves. And whether that will lead to any kind of resistance from newer guys to open, that is point number two. Point number three, I think this business never had dearth of competition. I mean, even if you look at it today, there are about 18 to 19 competitors which exist, and these are not trivial names. These are names which are formidable. These are names which are very, very strong in terms of brand, in terms of their ability to give technology, in terms of their ability to leverage their balance sheet and provide So, I think it's a fair field. We will have to continue to up our game if we want to maintain market share. Competition is always good because it brings improvement across the board in the product quality. We feel we are reasonably ahead in the race in terms of the value proposition we deliver because otherwise for us to command this kind of market share in such a hyper competitive industry would not have been possible. But having said that, I mean, we'll have to wait and watch as to what others bring to the table and how we counter that. On private wealth management, attrition remains normal. There was one team movement that happened, but we were able to arrest about 75-80% of that. And we looked at the numbers on a quarter-on-quarter basis. We will actually end up with higher number of RMs only basis previous quarter. So not that much of a dent. Either we don't foresee dent in revenue flows or number of RMs.

Understood. And Ashish, if you can qualitatively give our market share in asset clearing in domestic and FIIs, just to refresh on or rather to tell a new number, it will be useful.

In domestic, we basically track PMS and AIF as a segment on a book basis. For EMS, I think we are around 6-7%, and on AIFs, we would be order of magnitude maybe around 8-9% of the total book. Of the new registrations that happen every year, this is not of the AUM, this is about the new players who get added every year. We are able to capture 25% of those new additions as our clients. Now, how much each of them will grow is a function of their product, their performance, and how they deliver. But of the new inflow, we are able to capture, what, 25%. FPI, very difficult to give any market share because maybe next time around we can come back with the numbers because we play. Bracket is Perfect.

This is very useful. Thanks.

Hi, good morning, everyone. So, few questions from my side. First, on the wealth business, obviously, flows have been very strong in Novama private. Just wanted to understand how much of that will be led by monetization events, just specifically for the quarter, and how much would be organically from your existing client's kitty? So, that's the first question. Second, If I look at your... To look at the overall yields in Novama Private X of the loans piece, it seems that there has been some improvement. So was there any upfront AIF-related fee booking or fixed income transactions on that part? Can you give some color? And third piece on the wealth businesses, on both the businesses, private plus wealth put together, if you can quantify the insurance-led revenues for a 526, what would be that proportion? That would be useful. So these were on the wealth businesses. I have one question on the other business, which I maybe can ask later.

So, let us go one by one. So, we will start with insurance, maybe that's easiest. In private, insurance is zero. In wealth, insurance would be about 12-13% of the revenue. That was first. First, in private, when we spoke about the yields, and you said there's a yield improvement, so it would be largely because the proportion of category 2 AIF. May have gone higher. And that is the only thing that changes the yield apart from lending. But since you're looking at X lending, that is the fixed income part gets booked in the transactional income. So it doesn't sit in here. And the third one is the monetization impact on net new money. I don't know the numbers for the quarter, but if I look at it for the last 15 months. About 35 to 38% of our net new money came from monetization clients. And balance 60 would be from non-monetization, which could be a mix of existing and new clients both.

Got it, Ashish. Maybe just one small question on your overall capital markets business, and especially more towards the ECM part. You get some color in your commentary, but any quantification of a steady state run rate in terms of new mandates or new deals? What's your hit rate amongst the broader industry from a revenue perspective, and how has that been tracking, let's say, for the past few quarters or years?

I think, frankly, on the ECM side, there is a scope for us to improve. In terms of the total number of transactions, we would range between 15 to 18 percent participation share. So, let's say out of every 100, we would be there in 18 to 20 mandates. We are not so strong in blocks. And maybe slightly better in QIPs and even better in IPOs. So that would be the range. And we are right now actively working on improving our market share on blocks. So that will be an upside which we will see. In terms of the pipeline on which we are sitting right now, as I said, we have about 30 mandates on ECM side and about 9 on advisory, which can total on a probability adjusted revenue of between 85 to 90 crores.

Got it. And on the asset servicing business, I think in your presentation, you rate somewhere that you intend to offer more services in the ecosystem and probably this brings back to building.

Trustee and RTA for AIFs and PMSs, and trustee services, both should go live, at least RTA will go live with minimum. Value proposition by end of November or December and full-blown by March. And trustee also between Q3 and Q4 will go live.

Got it. Thank you, Ashish, and the team, and all the best.

Thank you. Parasabans, you may press star and want to ask a question. Next question is from the line of Sanidia from Unicorn Assets. Please go ahead.

Hi, Dean. Good afternoon. So, it's updating to all of you. First question is on the asset services in the capital market. So, if you see quarter and quarter, we see marginally flat to lower revenues on both the streets. So, if you could highlight the impact of cash versus the normal organic growth that we were seeing in the client relations, also in the fixed income products and others, that would be helpful.

Yeah, so capital markets, if you see, there were three vectors which were playing. In Q1, we had an exceptional quarter in the fixed income side, and we had said that there is about 20 to 25 crores of... Extra revenue in our assessment as compared to BAU run rate and that has played out. So fixed income between the two quarters fell by that point and now we are at a steady state basis. ECM was opposite. ECM Q1 was... Fully dry. There were only four IPOs in our target market segment across the market, and that increased 240 IPOs, or 38 to be precise, and there we were able to capture a large number of deals. Obviously, revenues of some of those deals will come in Q3 also, so not everything could have been monetized, but there was more than 2.5, 2.6x gem between quarter 1 and quarter 2 on ETM. Institutional equity, on the other hand, again divergent. We saw deal-related revenues going up because of the ECM share, but cash had an impact of at least 2 to 3 crores per month, which I think from December after the old model comes in, it'll get reversed. So I think these three vectors basically led to that combined number which you're seeing.

So, cash impact would be partly on the asset services part, right?

No, cash impact was only on institutional equities, broking income. Asset services was no impact at all.

Okay, so, already we were seeing that 414 asset services review was

going because of the new client additions and the overall part of the season. So, Q1, we had mentioned that, you know, there were some new client additions where the... Collateral had just come in and the proportion of cash was higher and that get normalized by Q2. That normalization happened in Q2. Although the assets have still gone up, but because of the normalization, that revenue came up.

Yeah, and now we're seeing the activity in the offshore market is also back to normal. The BSC and C is also catching up. So, should we expect that largely from here on, it should be normal growth, four to five growth in whatever is the normal base?

Yeah, I think that should be appropriate.

Okay, and on the other part is the private, so anything to read other than the few quarterly differences in the composition, so this quarter ARR is higher than the traditional, it says the traditional was lower, so therefore ARR is higher, like 60% to 30D normal?

Between 60 to 65, which you keep ranging.

And lastly, on the custody business, so we have 0.9% J, we saw quite a decline in the revenue extent of its vote. Could you have it with us?

That's a very small profit entity, and much of the revenue actually comes through referral into the clearing entity itself. It may have been related to some cost that would have been incurred in that. So the overall quantum of profit there, which sits there, is actually minimal.

Do we plan to like merge it or acquire the suitable program? Yes, we will.

As the new license regime is now changing, we will also proceed to do that. But we have to first go to our board, and then our counterparty has to go to their board. So all those procedures, we are talking to the regulators, but eventually, yes, it will happen.

So, I just elaborating this a bit to do we, like, how do we see the opportunity overall and even now the newer players are also learning. So, I guess, Mokilag has also got a new license in this regard.

I think over the next two years, you will see more number of licensees coming in. Mostly all financial services firms will apply and get if SEBI is liberal in giving the licenses. But I think there are actually the number of licenses which are existing even today are reasonably high. So, environment will become a bit more competitive. So, I think the value proposition of every player will have to improve to

maintain market share and to keep growing the market share.

But market is also expanding substantially. I think over the last 10 years... If you see, the market has expanded multifold, whereas the service providers have not expanded. So I think it's now time for a bit of correction on that front. But we are fairly confident that we will want to keep improving our product proposition and maintain our lead. I think the acquisition part would more likely drive the

urge for us to even improve on what we are offering and rather gain some than lose some, right?

Not necessarily, because that doesn't drive. The revenue capture largely happens in clearing, whereas the service is the custody service, where I think we are top-notch. I don't think that acquisition will lead to any change in our outlook or value proposition. It's just a legal adjustment of the entities. That's it.

Okay. Any impact we see on clearing revenues as well if there's some loss in the custody part?

Given the competitive environment, no. Right now the licenses do not cover the FPI business is what we understand and it will take at least 2-3 years more. And we will see how the business evolves over the 2-3 years because we are also making changes and doing additions in terms of our product which will have more client segments to reach. So I think that is also happening right now.

I don't know, which business segment we declare the custody income? It's a return.

Yeah, so asset services is where it comes, and then custody is a profit pickup, which comes because it's 49 only, so we don't consolidate line by line.

Thank you. Thank you.

Thank you. Next question is from the line of Shrenik Mehta from Indo-Alchwell.

Please go ahead. Franek, may I request you to unmute your line and proceed with your question, please. Can you hear us? Did you know response?

We move on to the next participant. Next follow-up question is from Nanof Manas Akarwal from Sandport C. Wernstein. Please go ahead.

Hi, follow-up question. I think a couple of last con calls you mentioned that you're trying to get your asset services clients also engaged in the commodities market. Wanted to get a sense of what the feedback has been from clients over there and how activity levels are ramping up.

So, they are starting out, but overall assessment of the opportunity, what we see right now is like, you know, 7-8% of the size of the opportunity in equity, the equity derivative. People are keen, out of our client set, I think 4-5 have started and some are ramping up the margins also. Maybe it will take another 2-3 quarters to see the steady state level.

Understood. Thank you. Thank you. Next follow-up question is from the line of Preyash Jain from Othi Lalaswan. Please go ahead. Vesh, may I request you to meet your line and proceed with your question, please?

Yeah, sorry. So, this is just a question, follow-up question. So, on commodities, what you were mentioning right now, what's the kind of factors that are restricting them to go for it all out? Does a co-location is a requirement for them? What is the kind of entrance that you are getting a feedback from them?

I think it's just prioritization and where they want to focus first and sequencing. I don't think it's the restriction on the side of the infrastructure provided by the exchanges or India right now. That's what my sense is. Maybe I'll have a detailed understanding in the next quarterly call update further, but I don't think it's right now because whatever discussions we've had... We've not heard the team saying that if this happened, it can become faster. It's just sequencing and the time it takes because the teams are separate. They have to get those teams organized. They will take a call whether they want to set up a research team in India or not. Then the infrastructure, then the algo, then the testing of the algo. So it's a full battery. It's not just buying and selling a single trade.

All right. Got that. The other question was, if you look at your balance sheet now, you were mentioning about the debt equity at 2.9x, want to be comfortable at 2.5x. Would this restrict your possibility to grow the business on the lending side in any way? How do you think about the balance sheet? You know, just stopping dividends for a half a year wouldn't play a meaningful role in sending it. So how do you think about the balance sheet from here now?

So we'll have to look at the dividends and maybe see whether we overall continue with that 40 to 60 payout because that can now become detrimental for shareholders. When we started or when we went into that dividend of 40 to 60 percent, we felt that. It's better to give the money back than to keep with us. But with ROEs now ranging at 29%, we are getting opportunities to deploy. I mean, one way is to continue to give dividend and raise capital from the market, which personally we feel is not the correct way because people end up paying taxes on dividend and then you are going and diluting further. By raising a QIP or doing stuff like that, maybe a more senor approach is if you are having a more productive use of capital inside, you reduce the dividend to certain level, keep a minimal dividend and then improve your debt equity and also continue to deliver growth. So I think that is a debate we are having with our board right now.

But Aajji, does it restrict you to grow the lending book in any form?

It will know, see, we are not a corporate or a big bank on NBFC. So, our peers, let's say both Moti Lal and 360 would be at a debt equity of 1.5. Okay, our rating and 360 rating are at the same level. Moti is one notch above. If we continue to increase the DE, it puts rating also under watch. It pulls up the covenants of banks also who have given lending. It pulls up the covenants of NCDs also. So for a NBFC of our type, generally we have seen rating agencies, banks, everybody is comfortable. If you are below 3, and they are very, very comfortable if you are around 2.5. So, if you are actually coming back to two and a half, And then, if you are able to generate a profit of, say, 1200 to 1300 crores a year, if you give out dividend of even, say, 200 crores, and these are all hypothetical numbers, please, because nothing has been discussed with the board. Then on 1000 crores with 2.5, you can add another, maybe, you know, 3000 crores. So, 4000 crores of expansion is available to you for the book. Which on a book of let's say 6 plus 3, 9 or 6 plus 4, 10 right now, you still can grow by 40%. So I think right now it seems like the internal accruals are enough to fund the future expansion and we may not need to access the capital markets.

Got that. And last question, anything on PAG, stake sale, we keep hearing news in the markets with respect to various things. Anything that you want to kind of, that you can highlight on this call?

Nothing as of now. I mean, that process is being done by the shareholders. As I said, if anything meaningful happens which requires us to disclose, we will immediately disclose.

Got that. Thank you. Thank you very much. As there are no further questions, I will now hand the conference over to the management for closing comments.

Thank you, Nirav. I want to thank all the participants for taking time out on this extended weekend. It is a Diwali weekend and would like to apologize for introducing them. But thank you for being here. We look forward to meeting everybody in the next quarter. I wish you a very happy Diwali once again.

Thank you so much. Thank you. On behalf of Norma Wealth Management Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines. Thank you.