Detailed Rationale

Crisil Ratings has revised its outlook on the long-term bank loan facilities of Nuvama Wealth Management Limited [NWML, ultimate holding company of the Nuvama group] to ‘Positive’ from ‘Stable’ while reaffirming the rating at ‘Crisil AA-’. Further, Crisil Ratings has reaffirmed its ‘Crisil A1+’ rating on the short term bank facility and commercial paper programme of the company.

 

Crisil Ratings has also withdrawn its rating on Rs.500 crore of commercial paper as per client request (See ‘Annexure - Details of Rating Withdrawn' for details). The withdrawal is in line with the Crisil Ratings withdrawal policy.

 

The revision in outlook is driven by the expectation of sustained improvement in the business risk profile of the group – as evidenced by steady increase in managed assets with segmental diversity; and also factors in the group’s improving earnings profile.

 

The ratings continue to reflect the Nuvama group’s comfortable capitalisation and its strong market position among non-banking players in the wealth management business. These strengths are partially offset by the susceptibility of earnings to cyclicality and volatility in capital-market-related businesses as well as high concentration in lending operations.

 

The Nuvama group is a prominent player in the wealth management serving Ultra High Net Worth Individuals (UHNI), High Net Worth Individuals (HNI) and Affluent client segments. It offers wealth management solutions, covering investment advisory, estate planning, investment management, lending and broking services for individuals, institutions, CXOs, professional investors, and family offices. It also offers related products focused on HNI, UHNI, family offices and institutional clients, and is a leading player in asset services (clearing and custody) and capital markets [comprising institutional equities (IE) and investment banking (IB) businesses].

 

Consolidated client assets of the group stood at Rs 4,52,047 crore as on December 31, 2024, marking a nine-monthly growth of 31% and a compounded annual growth rate (CAGR) of 31% from March 31, 2022 to December 31, 2024. This growth has been a factor of healthy traction across most segments, particularly the wealth management portfolio which remains the largest business for the group – accounting for 69% of the total clients’ assets as on December 31, 2024. Furthermore, the asset services business (~29% of client assets) also grew at a healthy CAGR of 55% from March 31, 2022 through December 31, 2024, and stood at Rs 1,30,320 crore as of that date. Lastly, the asset management business, which started only in fiscal 2022, had a portfolio of Rs 11,267 crore on December 31, 2024, whereas the lending book (LAS, ESOP, SMTF) of the group stood at Rs 4,787 crore on the same date.

 

Alongside scale, the earnings profile of the company has also improved, supported by increased diversity in revenue streams, which mitigates the impact of the cyclicality inherent to different businesses on overall profitability. The wealth management business remains the highest contributor to the overall revenue base, at 48% for the nine months ended December 31, 2024 (compared with 57% for the full fiscal 2022), followed by 28% from the capital markets business, and an increased share of 21% (as compared to 13% in fiscal 2022) from asset services portfolio.

 

For the first nine months of fiscal 2025, consolidated profit of the group was Rs 730 crore, higher than Rs 444 crore for the corresponding period of last year and Rs 625 crore for the full fiscal 2024. Correspondingly, the return on equity for the respective periods was 31.9% (annualised), 23.8% and 24.2%. This steady improvement in profitability and thus, internal accretion has supported the group’s overall capital position. On December 31, 2024, the consolidated networth was Rs 3,216 crore whereas gearing was comfortable at 2.4 times.

Analytical Approach

Crisil Ratings has consolidated the business and financial risk profiles of NWML and its subsidiaries. This is because these entities, collectively referred to as the Nuvama group, have significant operational, financial, and managerial linkages, and operate under the common brand name, Nuvama.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Strong market position in the wealth management business with expanding presence in other segments: The Nuvama group is one of the leading non-bank wealth management players in India, well scaled with consolidated client assets[1] of Rs 4,52,047 crore as on December 31, 2024 (Rs 3,45,957 crore as on March 31, 2024) – of which, wealth management portfolio was Rs 310,460 crore on December 31, 2024, 25% higher than that as on March 31, 2024.

 

The group largely caters to affluent and high-networth individuals (HNIs), ultra HNIs (UHNIs), family offices and institutional clients across various business segments. Nuvama, as a provider of wealth management solutions, has a recognised market presence in the UHNI, HNI, and affluent client segments and remains a fast-growing franchise in this segment. Apart from wealth management (HNI and UHNI segment), it also operates in verticals such as asset services (clearing and custody business), capital market business including institutional equities business and investment banking, and asset management. Client assets under asset services, the second largest portfolio for the group, stood at Rs 1,30,320 crore on December 31, 2024 – marking a growth of 43% over March 31, 2024. The mix between custody and clearing assets was 67:33 on this date.

 

In the institution equities business, the group is one of the largest domestic brokerage houses. The group is also a leading player in the investment banking business, operating across segments such as initial public offers, mergers and acquisitions, private equity and fixed income. The asset management business is at a relatively nascent stage, comprising alternate investment funds and portfolio management schemes. This business had an AUM of about Rs 11,267 crore as on December 31, 2024 – 62% higher than that as on March 31, 2024.

 

The group holds a competitive position in majority of businesses and is expected to further strengthen its market position through growth and diversification, over the medium term.

 

• Improving earnings profile, backed by increased diversity in revenue streams: The earnings profile of the group has improved, additionally benefiting from a more diversified asset mix. Return on equity (RoE) has sequentially improved to 31.9% in the nine months ended December 31, 2024, (21.6% [adjusted]3 for the corresponding period of the previous fiscal), from 24.2% in full fiscal 2024 and 14.6% in fiscal 2023. For the respective periods, the group reported a total income of Rs 3,045 crore (Rs 2,229 crore reported in the nine months of fiscal 2024) as against a full year total income of Rs 3,158 crore for 2024 and Rs 2,230 crore in fiscal 2023. Similarly, the consolidated profit for 9M 2025 was Rs 730 crore vis-à-vis Rs 625 crore of PAT (profit after tax) for full fiscal 2024 and Rs 305 crore for fiscal 2023.

 

Apart from the growth in total income, cost optimization has been another key driver for improvement in profitability. From 73% in fiscal 2021 and 70% in fiscal 2022, cost to income ratio has rationalized to 54% for the first nine months of fiscal 2025. Crisil Ratings expects the same to sustain over the medium term.

 

Another driver for sustenance in earnings metrics has been the increased emphasis on, and thus share of, annual recurring revenue (ARR) in the wealth management business, growing scale and share from asset management business and improvement in market share for businesses such as clearing and custody. The contribution of operating profit before tax (PBT) from wealth declined from 54% in fiscal 2024 to 36% in the first nine months of fiscal 2025, reflecting a more diversified revenue mix with increased contributions from asset services and capital markets. These impart higher stability and predictability to the operating and overall earnings profile.

 

• Comfortable capitalization: Capital position remains healthy, supported by improving internal accrual. The Nuvama group had a networth of Rs 3,216 crore as on December 31, 2024 (Rs 2,899 crore as on March 31, 2024) and is well-placed to support its growth plans for the medium term. Most of the businesses are fee-based, with borrowings largely comprising onward for working capital requirements and short-tenor lending to the wealth business clients for margin/ESOP financing and loan against shares (LAS).

 

The consolidated gearing of the group stood at 2.4 times as on December 31, 2024, against 2.3 times as on March 31, 2024, and has remained within 3 times since March 31, 2022.

 

Weaknesses:

• High concentration of LAS in lending operations: Nuvama group extends LAS to its clients through its group company, Nuvama Wealth Finance Limited (NWFL). As on December 31, 2024, the total loan portfolio of the group stood at Rs 4787 crore, having marginally de-grown from Rs 4,863 crore as of March 2024. More than half of this portfolio comprised of LAS, while the remaining was constituted by ESOP financing and other products, including margin trading facility. Typically, the size of this portfolio exhibits strong correlation to the ebbs and flows of capital and money market and remains susceptible to both domestic and international macro events.

 

Against this loan portfolio, Stage III assets have remained nil since March 31, 2024 till date. Further, the Gross non-performing asset continue to remain nil as on December 31, 2024. However, asset quality here remains inherently vulnerable to the vagaries of capital markets and will remain a monitorable.

 

• Susceptibility to cyclicality and volatility in capital-market-related businesses: Since corporate and investor sentiments drive portfolio flows in the wealth management business, business and earnings are susceptible to cyclicality and volatility in capital markets as well as various other political, social and macroeconomic factors.

 

The group is also exposed to regulatory risk. Unlike lending operations, wealth management is largely fee-based, and thus, any credit event has a relatively lower impact on the capital base. However, these businesses operate in a highly regulated environment, and any unanticipated change can adversely impact the business model. For instance, in the last few years, regulations that prohibited upfront commissions, led to a sharp erosion in commission income. Many players saw their margins getting eroded as they have adapted, or are in the process of modifying, their respective business models. Similarly, in the broking business, regulation on the upfront margin requirement by the Securities Exchange Board of India (SEBI) has increased borrowing requirements of players, thereby impacting their leverage and earnings.

 

While group has built a comprehensive platform that caters to multiple client segments through a wide range of products - which partially mitigates the risks, any regulatory change that couldadversely impact the business, will remain a key monitorable.

1Earlier referred to as Assets Under Advisory (AUA)

3adjusted for net income accounted for demerger of Wealth Management business undertaking of Edelweiss Financial Services Limited into Nuvama Wealth Management

Liquidity: Strong

Liquidity profile of the Company has remained adequate, as evidenced by its demonstrated track record of maintaining adequate liquidity cover over debt obligations scheduled to be honoured over the succeeding two months. As on December 31, 2024, the group had liquidity of Rs 2,889 crore of which Rs 1,090 crore was in the form of cash and bank balances, which adequately covered the debt obligations scheduled for maturity till June 2025.

Outlook: Positive

The Nuvama group will continue to scale its business through steady growth in managed assets across segments, while maintaining stability and diversity in earnings and adequate capitalisation metrics.

Rating sensitivity factors

Upward factors:

• Significant growth in market position across product segments
• Sustained improvement in earnings profile supported by diversification in revenue streams, with overall return on equity remaining above 18% on a sustained basis

 

Downward factors:

• Regulatory actions in product segments of the group weakening the overall business risk profile
• Significant increase in gearing to, and it remaining above, 3.5 times for a prolonged period

About the Company

NWML, incorporated in 1993, is the flagship company of the Nuvama group. It is also the holding company and registered as a trading with the National Stock Exchange of India Ltd (NSE), Bombay Stock Exchange Ltd (BSE) and Metropolitan Stock Exchange of India Ltd, National Commodity Exchange of India Ltd, and Multi Commodity Exchange of India Ltd. NWML carries on the business of broking and trading in equity securities (including derivatives and currencies) listed on stock exchanges in India and in futures contracts, for institutional and non-institutional (including retail) clients. NWML’s institutional equities business covers both securities and futures contracts, and it provides equity sales, research, and trading services to institutional clients ("Institutional Equities"). As part of its institutional equities business, NWML is licensed with SEBI to, among other things, distribute research reports on Indian Securities to its clients. The company is also registered as an Investment Adviser and Merchant Banker with SEBI.

About the Group

The group comprises Nuvama Wealth Management Limited (NWML and its 12 subsidiaries and 1 associate and 1 joint venture. On June 4, 2024, the group incorporated wholly owned subsidiary in the name of Nuvama Wealth Management (DIFC) Limited in Dubai.

 

The equity shares of NWML were listed on the NSE and BSE on September 26, 2023. As on December 31, 2024, PAG along with its affiliates (classified as promoter and promoter group), held 54.9% stake in NWML while the balance was publicly held.

 

With an operational history of over 25 years, the group had client assets worth Rs 4,52,047 crore on December 31, 2024, and caters to a diverse set of clients that includes 12+ lakh affluent and HNIs and 4,200+ of India’s prosperous families. The group offers wealth management solutions, covering investment advisory, estate planning, investment management, lending and broking services for individuals, institutions, CXOs, professional investors, and family offices. It also offers a range of alternative asset management products and is a leading player in asset services and capital markets.

Key Financial Indicators

As on/for period ended	Unit	December 2024	December 2023	March 2024	March 2023
Reported networth	Rs crore	3216	2709	2899	2259
Total assets	Rs crore	26278	19325	20387	12716
Total income	Rs crore	3045	2229	3158	2230
PAT	Rs crore	730	444	625^	305
Stage III assets	Rs crore	Nil	Nil	Nil	Nil
Gearing	Times	2.4	2.7	2.3	2.4
Return on assets^	%	4.2%	3.7%	3.8%^	2.6%

^For March 2024, the PAT figure includes the impact of net income accounted for the demerged undertaking in its books (Rs 44.28 crore). Upon adjusting the same, the normalized PAT and RoA for Fiscal 2024 would be Rs 584 crore and 3.53%, respectively.

Any other information: Not applicable