360 One Wam Ltd (BOM:542772) Q2 2025 Earnings Call Highlights: Strong AUM Growth and Record PAT Amid Operational Challenges

360 One Wam Ltd (BOM:542772) reports a 41% increase in total AUM and a record net profit, while addressing higher operational costs and strategic shifts.

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6 days ago
Summary
  • Total AUM: INR2,42,619 crore, up 41% year on year.
  • Net Flows: INR9,786 crore for Q2 FY25; H1 FY25 net flows at INR15,335 crore.
  • Wealth ARR: INR1,56,849 crore, up 45% year on year.
  • AMC ARR: INR85,770 crore, up 33% year on year.
  • ARR Revenues: INR397 crore, up 27.8% year on year.
  • Total Revenue from Operations: INR589 crore for Q2 FY25, up 38% year on year.
  • Total Revenues: INR618 crore for Q2 FY25, up 40% year on year.
  • Total Costs: INR299 crore in Q2 FY25.
  • Employee Costs: INR224 crore.
  • Other Costs: INR75 crore.
  • Cost to Income Ratio: 48.4% for Q2 FY25; 42.9% for H1 FY25.
  • Operating Profit: INR289 crore, up 36% year on year.
  • Net Profit (PAT): INR247 crore, up 33.4% year on year.
  • Net Flows in Wealth Management: INR8,400 crore.
  • Net Flows in Asset Management: INR1,400 crore.
  • Total Client Base: Over 7,510 clients.
  • New Families Onboarded: Over 160 families with INR10 crore AUM; over 70 families with INR50 crore-plus AUM.
  • Private Equity and Private Credit Funds Raised: INR5,000 crore in commitments.
  • Institutional Mandate: $350 million from a global investor.
  • Focused Equity Fund AUM: Crossed INR8.5 crore.
  • Flexicap Fund AUM: Crossed INR1,000 crore.
  • Global Business New Flows: $160 million.
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Release Date: October 22, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • 360 One Wam Ltd (BOM:542772, Financial) reported a significant year-on-year increase in total AUM, reaching INR2,42,619 crore, up 41%.
  • The company achieved strong net flows of INR9,786 crore in Q2, contributing to a total of INR15,335 crore for H1 FY25.
  • Wealth ARR increased by 45% year-on-year to INR1,56,849 crore, while AMC ARR rose by 33% to INR85,770 crore.
  • The company reported its highest ever quarterly PAT in Q2, with a 33.4% increase to INR247 crore.
  • 360 One Wam Ltd successfully onboarded over 160 families with over INR10 crore AUM and over 70 families with INR50 crore-plus AUM in the last quarter.

Negative Points

  • The company experienced overall outflows of INR3,600 crore during the quarter, despite strong inflows.
  • Variable employment costs were high during the quarter due to sales incentivization and bonuses related to senior hires.
  • The cost-to-income ratio increased to 48.4% for Q2, indicating higher operational expenses.
  • Retention rates saw a slight decline due to a few advisory accounts with lower retentions and a basis point reduction in mutual fund assets.
  • The company anticipates a more conservative dividend policy, reducing payouts to 25% to 40% of profits, compared to previous higher levels.

Q & A Highlights

Q: Considering the strong performance this quarter, do you foresee revising the guidance of $250 billion to $300 billion upwards? Also, how are net flows from existing versus new clients?
A: The INR25,000 crore to INR30,000 crore flow number for the year is reasonable. Given the strong flows in the second quarter, there might be a potential increase by INR5,000 crore for the entire year, but we should wait to see how the markets hold up. Existing clients contribute around 25% to 40% of net flows, while new clients contribute 55% to 65%. Of the new clients, 60% are from new liquidity events, and 40% are transfers from other institutions.

Q: With Anil Ta Ta, the co-founder, moving out, how much AUM was under his management, and what is the succession plan?
A: Historically, the impact of a relationship manager change over 3 to 5 years is typically 1% to 4% of the book. Anil's departure is part of a structural change, and the business impact is expected to be minimal. North, where he was focused, contributes about 12% to 14% of our wealth management revenue. We have a large team of 140 to 150 senior bankers, ensuring succession is not an issue.

Q: How do you view Opex growth over the next 12 months, especially in relation to TBR?
A: There is no direct correlation between TBR and Opex. This quarter's Opex was slightly higher due to a UK case settlement and related legal costs. Typically, Opex is around INR68 crore to INR75 crore per quarter. TBR impacts the variable bonuses of employees, but not the Opex directly.

Q: How should we think about ARR retention from a medium to long-term perspective?
A: In the next 1 to 2 years, we expect ARR retention to return to the 70 to 72 basis points range. Over 4 to 5 years, it might be closer to 67 to 68 basis points due to changes in business mix, such as a shift towards advisory over distribution and a reduction in listed equity retention.

Q: Can you provide insights into the discretionary versus non-discretionary flows?
A: We aim for a two-thirds to one-third split between discretionary and advisory flows. While non-discretionary has been growing, we expect a transition towards discretionary as clients and relationship managers adapt. Our goal is to have 25% to 35% of incremental flows in discretionary over the next 12 months.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.