UBS Collaboration And Key Acquisitions Will Expand Wealth Management Opportunities

Key Takeaways

• Strategic collaboration with UBS AG and acquisition of UBS India's assets likely enhance product offerings and boost global reach, supporting future revenue growth.
  
• Acquisitions of B&K Securities and ET Money may significantly improve operating revenue, client engagement, and net margins through expanded capabilities and synergies.
  
• Volatile markets, decreased AUM, ROE challenges, and integration risks could impact revenue, margins, and client retention amidst geopolitical and operational uncertainties.

Catalysts

Engages in the provision of wealth and asset management services primarily in India.

• The strategic exclusive collaboration with UBS AG, one of the world’s leading wealth managers, presents opportunities for deep cooperation in asset management and capital markets, potentially expanding the firm's global reach and enhancing its product offerings, thereby supporting future revenue growth.
  
• The integration of UBS India’s Wealth Management business into 360 ONE Wealth adds approximately ₹26,000 crores of active AUM and recurring revenues, likely increasing net margins due to the scale and enhanced service offerings.
  
• The expected issuance of warrants to UBS AG, representing a stake of 4.95% in 360 ONE WAM, reinforces trust in the company's growth potential and the India growth story, likely improving earnings as synergies from this collaboration unfold.
  
• The recent acquisition of B&K Securities and its strong business performance indicates potential growth in operating revenue, which could significantly bolster the earnings from brokerage, equity capital markets, and merchant banking operations.
  
• The achievement of regulatory approvals for the ET Money acquisition and its integration into 360 ONE WAM could drive further client engagement and AUM growth, potentially enhancing both revenue and net margins through increased digital capabilities.
  

360 One Wam Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming 360 One Wam's revenue will decrease by 1.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 26.4% today to 45.4% in 3 years time.
• Analysts expect earnings to reach ₹16.4 billion (and earnings per share of ₹41.27) by about April 2028, up from ₹10.1 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 50.5x on those 2028 earnings, up from 41.3x today. This future PE is greater than the current PE for the IN Capital Markets industry at 19.5x.
• Analysts expect the number of shares outstanding to grow by 6.12% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.82%, as per the Simply Wall St company report.

360 One Wam Future Earnings Per Share Growth

Risks

• The company experienced volatile capital markets and geopolitical uncertainty during FY '25, which could continue to impact revenue and earnings if these conditions persist.
  
• There was a decrease in AMC AUM on a Q-o-Q basis due to negative mark-to-market impacts, which could further affect net margins if market conditions do not improve.
  
• A tangible ROE decrease from 30.1% in FY '24 to 24.3% in FY '25 indicates potential challenges in efficiently using shareholder equity, affecting future profitability.
  
• The integration of UBS AG’s India Wealth Management business and ongoing regulatory approvals could increase operational risks and lead to increased costs, impacting net earnings.
  
• The reduction in senior relationship managers and the resulting outflows of ₹2,300-2,400 crores from the ARR AUM side suggest potential risks in maintaining client retention and growth in wealth management net flows.

Valuation

• The analysts have a consensus price target of ₹1164.8 for 360 One Wam based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹36.0 billion, earnings will come to ₹16.4 billion, and it would be trading on a PE ratio of 50.5x, assuming you use a discount rate of 14.8%.
  
• Given the current share price of ₹1059.75, the analyst price target of ₹1164.8 is 9.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.