This company is profiting from India’s wealth boom in a massive way
360 One, formerly IIFL Wealth Management, is one of India’s most prominent wealth and asset management companies. It offers various products, from wealth and asset management (AMC) to lending solutions.
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The company manages total assets of ₹4.66 trillion as of Q4FY24, reflecting 37% year-on-year (y-o-y) growth, driven by significant inflows and mark-to-market (MTM) gains.
Wealth management generates 65% of its revenue, with the AMC segment contributing the remaining 35%. Additionally, wealth management is responsible for 68.1% of operating profit, while AMC accounts for 31.9%.
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360 One’s wealth management segment
The wealth management segment is the largest, with assets under management (AUM) growing at a CAGR of 26.1% over the last five years, reaching ₹3.94 trillion in FY24. It serves ~7,500 high-net-worth individuals (HNIs) and Ultra-high-net-worth individuals (UHNI) clients.
It also contributes the highest, 74%, to the company’s total revenue, generating ₹1,362 crore in FY24. This has grown at a CAGR of 15.2% over the past five years. This strong growth has led to a 13% decline in the segment’s cost-to-income ratio to 49%.
The wealth management segment is well-diversified, offering advisory services through 360 One Plus, distribution of asset classes, lending, and broking services. Let’s break it down further.
360 One Plus: 360 One Plus oversees client portfolios encompassing discretionary, non-discretionary, and advisory services. Its AUM has grown at a CAGR of 42.1% over the last five years to ₹72,240 crore in FY24, driven by strong inflows and MTM gains. This is likely to be the next area for the company’s growth.
Product distribution: It also distributes products and has strong brokerage capabilities. It operates across multiple asset classes, including equity, fixed income, currency, and commodities. The distribution AUM has grown at a CAGR of 41.1% to ₹76,960 crore in the last five years, driven by strong MTM profits.
It also operates in the lending segment, with a loan book of ₹6,430 crore.
ARR ensures a steady revenue stream for the segment
All three products mentioned—360 One Plus, distribution, and lending—generate revenue based on annual recurring revenue (ARR), providing stable and predictable income.
360 One Plus’s client attrition rate is also just 1.4%, the lowest in the industry. This indicates that its customers stay with the company for a long time, giving it stable revenue. However, this relies on capital market activity.
Interestingly, its wealth ARR book stands at ₹1.55 trillion, growing at a CAGR of 39% from ₹40,655 crore in FY20. This has helped its ARR revenue grow at a 20% CAGR to ₹847 crore. This contributes the most, 62.2%, to the wealth segment’s total revenue of ₹1,362 crore.
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Transaction and broking
It provides transaction and broking services (TBR) to its wealthy clientele. This segment’s AUM has grown at a CAGR of 19.9% to ₹2.39 trillion. The company earns a one-time fee for facilitating transactions from this segment.
TBR revenue has grown at a CAGR of 9.2% in the last five years to ₹515 crore in FY24, contributing 38% to the segment revenue of ₹1,362 crore.
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Tapping UHNIs as the next big growth area
The company is fostering growth in its wealth division by concentrating on UHNIs with assets over ₹25 crore, a segment anticipated to expand more quickly than other wealth brackets.
Moreover, it also addresses the mid-market, serving HNIs with wealth ranging from ₹5 to 25 crore. As of FY24, it had 2,750 clients with an AUM of over ₹10 crore. This accounts for approximately 2-2.5% of total revenue. It anticipates increasing this to around 10% over the next three years, with a 15-17% profitability mix.
The company aims to increase its presence from approximately 20 cities to nearly 70. It sees substantial growth opportunities in tier II and tier III markets by focusing on the HNI and UHNI segments.
Furthermore, the company has broadened its presence in global markets to enhance its reach. It has already received new flows of $160 million in this segment. MOFSL estimates three crore Indians globally, which presents a substantial opportunity.
360 One Asset
This is the company’s asset management segment. It offers alternative investment funds (AIFs), portfolio management services (PMS), and mutual funds. It is a pioneer in AIFs in India, providing seed stage to pre-IPO, real estate, etc. It has over 33,000 empanelled partners, of which 2,000 were added in FY24.
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Strong AMC AUM growth
The AUM of 360 assets accounts for 15% of the company’s overall AUM. Over the past five years, it has experienced a CAGR of 34.7%, reaching ₹72,248 crore in FY24. AIFs and discretionary PMS have primarily driven this growth. As a result of the AUM increase, the cost-to-income ratio has decreased by 41% during this period.
The AMC segment generates recurring revenue. Its ARR has also grown at an impressive CAGR of 34.8% over the last five years to ₹483 crore in FY24. This is due to strong growth in the number of folios, which grew at a CAGR of 36.3%, and increased MTM amid robust capital markets.
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AIF is expected to grow exponentially
Given the vast opportunity, the company intends to invest ₹800 crore of ₹2,250 crore raised to enhance its AIF operations. According to PMS Bazaar, assets managed by the AIF industry, which includes PMS and AIFs, are growing at a CAGR of 33% and are currently at $18.9 trillion. This is expected to grow fivefold to ₹100 trillion by FY30.
What about financials?
In FY24, 360 One’s total revenue rose 17.9% y-o-y to ₹1,846 crore, while profit after tax (PAT) grew 20% to ₹802 crore. This increase was fueled by strong inflows and a high retention rate despite a 2.88% rise in the cost-to-income ratio.
Revenue growth received a boost from a 13.6% rise in ARR revenue, amounting to ₹1,331 crore. This represents 72% of the total revenue. Given that ARR provides consistent revenue, this significant contribution reduces earnings volatility in case of market volatility.
Also Read: For more such analysis, read Profit Pulse.
Over the last five years, its revenue has grown at an impressive CAGR of 19%, with PAT growing at 40.4%. On the other hand, the ARR has grown by a CAGR of 24.3%.
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What about valuations?
360 One is currently trading at a price-to-earnings (P/E) ratio of 43.5x, significantly above its five-year median P/E of 31.3x, reflecting a 39% premium. It also commands a hefty 48% premium compared to its newly listed peer, Nuvama Wealth Management, which trades at a P/E of 29.3x.
However, 360 One has a larger share of ARR than Nuvama, which derives 39% of revenue from the cyclical capital market segment. This distinction may explain why it trades at a premium valuation.
MOFSL projects its ARR AUM will increase at a CAGR of 24% from FY24 to FY27E, which is anticipated to result in an earnings CAGR of 23% during the same timeframe. It projects a one-year target price of ₹1,350 per share, based on a PE of 38x, implying a gain of 13.7% over the current price.
Additionally, it recently secured funding at ₹1,013 per share, which is 15% lower than the current price of ₹1,187, providing strong downside support.
360 One is a niche wealth management player, well-positioned to benefit from the growing HNIs and UHNIs. Its expansion into new domestic geographies, entry into global markets, and targeting the HNI category are expected to drive the next growth phase from FY25 onwards.
However, note that this is a cyclical business. Any slowdown in the capital market will also impact its AUM, ARR, and profitability. There is also the threat of high competition and any regulatory changes related to expense ratios.
Note: Throughout this article, we have relied on data from www.screener.in and Tijorifinance. Only in cases where the data was not available have we used an alternative but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Madhvendra has been a passionate follower of the equity market for over seven years. He is a seasoned financial content writer. He loves reading and sharing his honest opinion about publicly listed Indian companies and macroeconomics.
Disclosure: The writer does hold the stocks discussed in this article.
