360 One Wam Limited (360ONE) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen, and welcome to 360 ONE WAM Earnings Call for Q3 FY '26. [Operator Instructions]. Please note, this conference is being recorded. On the call today, we have with us Mr. Karan Bhagat, MD and CEO; Mr. Yatin Shah, CEO of the Wealth Business; Mr. Anshuman Maheshwary, Chief Operating Officer; and Mr. Sanjay Wadhwa, CFO. I now hand it over to Sanjay Wadhwa to take this conference ahead. Thank you.

Thank you, Anil. Very good evening to all the participants. Over the past year, Indian capital markets navigated a period of heightened volatility shaped by evolving geopolitical dynamics and intermittent bouts of market consolidation. Encouragingly, even in such challenging market environment, the asset and wealth management ecosystem continued to demonstrate resilience with healthy inflows driven by record levels of mutual fund SIP contributions, sustained activity in terms of monetization events and a growing investor preference for alternates asset classes. Coming to our business, our total ARR AUM increased to INR 3,17,906 crores, up 28% year-on-year with Wealth ARR AUM at INR 2,18,957 crores and Asset Management ARR AUM at INR 98,949 crores. This growth was supported by strong net flows at INR 14,758 crores in Q3 FY '26 and INR 46,890 crores for 9 months FY '26. We expect this momentum to sustain as our newly onboarded high-quality teams continue to mature and achieve scale. In Asset Management, flows remain firmly on track, supported by healthy demand across funds spanning all asset classes. The Asset Management business saw good mobilizations during the quarter with over INR 2,000 crores raised in our real asset strategy, INR 2,500 crores of commitments in our private credit strategy and INR 2,000 crores raised in our mid- and small-cap focused listed strategy. Our ARR revenue in the quarter grew 45.4% year-on-year at INR 619 crores, led by strong asset growth as well as improved retentions. Our ARR revenue as a percentage of total revenue from operations stood at 77%. ARR retention remained strong at 81 basis points. Incremental carry revenue, during the quarter, contributed about approximately 6 basis points during the quarter, and the retentions are expected to normalize in the quarters to come. Transaction and broking revenues rose by 4.2% to INR 186 crores. As stated in our previous quarter, revenue from institutional equities business of B&K, which is now being rebranded to 360 ONE Capital, is being classified as TBR. This business integration meaningfully enhances the sustainability of TBR revenues and is expected to moderate the periodic volatility experienced in the past, thereby improving the overall quality of -- predictability of earnings. Total revenue increased by 21.8% to INR 826 crores, driven by strong growth in both wealth and asset verticals, partially offset by lower other income. Total costs were flat as compared to previous quarter at INR 399 crores, with corresponding cost-to-income ratio at 48.3%. This is after factoring the estimated impact of the new labor code, which in our case, was not very material, at INR 7.5 crores. We expect gradual improvement in this CI metric for the consolidated business over the coming quarters as we scale up and drive synergies from strategic initiatives as well as the incoming teams in the Wealth UHNI segment. We are very happy to report that the company recorded its highest ever quarterly PAT at INR 331 crores, an increase of 20.3% year-on-year. Tangible ROE rose to 21% as against 20.4% in the previous quarter. This ratio is expected to improve in the coming quarters as additional capital deployed in our lending and alternates businesses in FY '25 begins to reflect in the overall earnings. With that, I would like to hand over to Anshuman to cover key business and strategic highlights.

Thanks, Sanjay. Good evening, everyone. Building on Sanjay's thoughts on our overall business performance, I would like to begin with some comments on our core businesses. Our 9-month net flows stood at approximately INR 47,000 crores, with robust organic flows at over INR 26,000 crores, having already equaled our full year 2025 numbers. Despite attrition-related outflows that we've spoken about earlier in H1, we've delivered strong organic net flows of INR 19,000 crores or 12% of our opening ARR AUM in Wealth Management in this 9-month period. The strong performance reflects the fundamental strength of our franchise, the differentiated platform, proposition and products and most importantly, the continued ability to attract senior talent across our key geographies. The total net flows in wealth stands at approximately INR 40,000 crores with the flows being spread across the different regions. Within Asset Management, we continue to witness strong flows across asset classes. Net flows of over INR 4,400 crores for this quarter were driven by new funds launched as well as inflows in existing strategies in the listed, unlisted, credit and real estate space. While we maintain our leadership on advising global institutions on listed equities, we are excited to see increased interest and engagement from institutions, seeking exposure to India's private markets. In this regard, we are happy to state that we have our first mandate from a global institution in the private equity vertical in quarter 3. Leveraging our established alternative investment capabilities, we are well positioned to capitalize on such opportunities in the future. While in parallel, we have continued to deepen our distribution footprint in the listed space with a particular focus on expanding reach through the MFT channel. Looking ahead, visibility on multiple fund launches in the AIF and SIF segments, along with ongoing discussions around institutional mandates across strategies reinforces our confidence in the strength and durability of the overall pipeline. A quick update on the key strategic initiatives. Starting with UBS, I'm pleased to announce that the signing of our comprehensive global collaboration framework for wealth was completed in November of last year. We are already witnessing encouraging early traction on cross-border client referrals and remain excited about emerging synergies in Asset Management as well as other areas. With strong leadership commitment from both organizations, we are well positioned to unlock the potential of this partnership, and we'll continue to update on the progress over the next few quarters. Secondly, on the HNI segment, our conviction on the potential of that business segment continues to strengthen as we gain momentum in client additions as well as flows. With over 60 RMs across 12 locations, we are now well poised to accelerate the scaling up and build this segment as a vital feeder pipeline as well for our UHNI proposition. Thirdly, ET Money is undergoing a transition from a transaction-led investing app to a comprehensive wealth platform for the affluent segment, with monetization embedded at every stage. By combining choice-led engagement models and expanding product suite, which aligns with our core proposition, and technology-enabled human advice, ET Money is continuing to build a differentiated yet scalable moat, which we are quite excited by. And lastly, we are pleased to share that B&K Securities is now rebranded as 360 ONE Capital, integrating corporate and institutional equities as core capabilities. This integration not only expands our capital markets footprint but reinforces our positioning as one of India's most comprehensive financial services platform, spanning wealth management, asset management, alternates, lending, enhanced institutional and capital market capabilities as well as superior global access. Overall, we remain focused on consolidating our multiple business lines to deliver a full stack financial services offering aimed at further strengthening our leadership position with our core clients. At 360 ONE, technology remains a critical investment priority, spanning internal operations, cybersecurity and client-facing innovation. We are advancing AI-powered pilots across key functions to drive efficiency gains and informed decision-making, positioning ourselves to expand these capabilities as they further mature. Lastly, I would like to thank our clients and stakeholders for their continued trust and confidence, which has been integral to our journey and progress. And with that, I'd like to hand it over to Karan for his thoughts.

Thank you, [indiscernible]. Thank you, Sanjay. Thank you, Anshuman. And thank you, everybody, for joining in on a holiday. Let me start off by wishing everybody a happy New Year. I want to spend 2 to 3 minutes quickly on broadly the last 9 months and our continued focus areas for the next 12 months to around about 3-odd years and post that, take a pause and take questions from there. So I think as we look forward and look at the back, I think we continue to be super, super positive on the business lines we spent the last 15, 16, 17 years going deeper and deeper into. Over the last 17 years, I think we've spent a lot of time and energy on building 2 critical businesses. One is the ultra-high net worth wealth management business and second is the alternates business over the last 8 to 9 years. We continue to remain extremely buoyant about those 2 businesses. Our brand recall as well as our acceptability among clients above INR 50 crores continues to remain at the highest. Our proposition has become deeper and deeper. Our ability to provide clients advice across multiple asset classes, provide solutions across their entire asset portfolio, our ability to work and sit with them and build their investment policy statements for their entire life cycle continues to be the strongest ever. Both monetizations on the listed side, unlisted side, sometimes even change of wealth manager on the ground without liquidity events, all of them continue to be fairly active programs for us. And over the last quarter to the last 9 months, one of the most active things for us has been the ability to add new clients and relationships. And it's fair to say over the last 3.5, 4 years, we more or less doubled our entire -- or maybe 2.5x our entire client base, which we kind of accumulated over the last 12 to 13 years preceding the last 3 to 4 years. The second portion of business which we are really, really kind of excited about continues to be the alternates business. Now, there, we're really thankful to the regulator, and SEBI has taken a lot of proactive steps where we've seen at least 3 very -- 3 excellent kind of new initiatives on the AIF side. One, clearly, the introduction of the co-investment vehicles. Second is the introduction of large value funds being introduced from -- reduced from INR 75 crores to INR 25 crores. And thirdly, the introduction of AIF investors, on the alternative investment fund side, gives us a lot of maneuverability and flexibility to be able to kind of keep building our AI business across multiple strategies. Over the last 8-odd years, we built 4 clear strategies on the AIF side. And on the real asset side, on the unlisted side, pre-IPO as well as on the -- recently on the listed side with the PIPE fund. So I think we continue to remain very, very buoyant about the alternates space. And with the new regulations, both on the LVF side as well as on the co-investment vehicle side, it gives us a lot of additional ammunition to be able to really take advantage of the INR 50,000 crores we've already kind of built in the space over the last 7 to 8 years. Performance there continues to be fairly robust. I think 95% of our funds are in the top, are rated 90 percentile and above from a performance perspective. And most of our old clients continue to kind of come into the new schemes as the older schemes continue to mature. While we remain extremely excited about these 2 businesses along with our listed asset management business, we are eagerly looking forward to the new businesses we are squarely excited about. On B&K, the first fruits of our merger together will come through on the equity brokerage side over the next 12-odd months. We definitely would see -- we definitely see a 25%, 30% increase on our high net worth equity brokerage as we've typically seen over the last 4 to 5 years. There, we are working very hard to ensure that the research product reaches our ultra-high net worth clients and family offices clients in the right way. And effectively, while they have been doing wealth management with us for the longest time, we are able to kind of get them to also looking at equity advice on our platform. Along with that, obviously, over the next 6 to 12 months, we'll build out good equities and a banking practice. Most of that would come in the second half of the next calendar year. But we are early days of attracting talent, and it's really heartwarming to meet talent, and we feel encouraged that we are seeing a lot of people who are aspirationally looking at building the business along with us over the next 12 to 18 months. On the segment side, I think, obviously, on the ultra-high net worth side, we've been fairly positive. We want to extend it to the mid-segment between the INR 5 crores to INR 50 crores. And that's something which we are working very hard to build on the reserve side. Happy to say that business started off with less than INR 400 crores, INR 500 crores of AUM at the beginning of the current financial year. In a very steady format, it's grown to around about INR 3,000 crores plus. We've built -- we kept the retention strong at 100, 110 basis points in that business, building it in a very measured manner, ensuring that we get the building pillars of the business right. We've now got close to 58 relationship managers on that business. And we've got net new flows of nearly INR 2,000 crores, INR 2,200 crores for the financial year from that business. ET Money is a business we'll still kind of take a little bit longer, 3 to 6 months, to kind of discover the exact monetization model. But what gives us a lot of confidence there is both the brand recall as well as engagement on the platform continues to be at historic highs. Outside of these 2, obviously, there's a fair degree of excitement in the ability of building the right inward platform from GIFT City. I think there are a lot of institutions across the world interested in being able to understand institutional as well as family offices and are able to -- in the ability to understand how to access India through the GIFT City. Overall, if I just kind of combine these business lines together with our client segments, I think we have a large play across multiple asset classes. And it's not restricted only to listed equity. We've got a very, very significant opportunity to be able to play on listed equity, unlisted equity, real assets, including REITs, InvITs, yield-based assets, real estate, fixed income, performing bonds, AAA credit, sometimes structured credit, and all of these things put together kind of -- and the entire global platform. So all put together, has kind of given us a fairly wide, wide platform to play with. And it's kind of isolated us with a little bit of sensitivity to the capital markets also because we're able to kind of tug along in our business lines across multiple asset classes. So I think very focused business lines, multiple asset classes, and what we really now want to kind of -- and multiple segments. What we now want to kind of expand is to multiple geographies. I think we've been -- again, done extremely well in Phase 1 and kind of building out Bombay, Delhi, Bangalore, Chennai, Pune and Calcutta. Over the second phase, over the last 5, 6 years, we've built out the next 10 cities, Hyderabad, Rajkot, Indore, Bhavnagar and so on and so forth. We've kind of really focused hard on building out to those regions. I think today, honestly, if I can think of another 10 cities, including places like Dubai, Singapore, it's a big, big market. So fourth, obviously, we have to kind of ensure that we are able to build a much more significant geographical presence. In keeping and kind of ensuring that these 4 things, which is basically asset classes, business lines, segments and geographies, we are able to go deeper and deeper. Two things we'll have to constantly ensure. And that gives me the maximum -- these 2 things give me the maximum amount of confidence. First is, obviously, the platform has to be super robust and has to be able to offer the right set of solutions to the client. We worked very, very hard over the last 17 years to ensure that our platform is very robust, and we are able to meet every need of the client, whether it's on the advisory side, whether it's on the planning side, whether it's on the lending side and whether it's on the brokerage side. And we are proud to say today, we have a fairly fully aligned platform, which is able to meet all the needs of the client. And second, obviously, we can't compromise on the depth of talent. And that's something which we've kind of worked very hard on. I think from pretty much from 2008 as professional entrepreneurs, we shared our rewards in a very, very proportionate way, which has led us to having a very, very deep bench of talent. And as we continue to grow, we are able to attract phenomenal amount of talent also. And as we faced a little bit of attrition over the last 12 to 24 months, our own ability to add a fresh set of legs and an equally enthusiastic and capable set of legs in all our -- in locations as Delhi and Bangalore, has really kind of given us a lot of confidence to be able to kind of invest deeper and keep growing larger. And most importantly, I think the depth of talent gives us a lot of confidence. I feel much, much more confident as a professional entrepreneur compared to 10 to 12 years back, where effectively, we used to hear things like there are only 400, 500 people with similar talent across the industry. I think today, that number across businesses is a much larger number. And it's something which we can kind of really invest with a lot of confidence saying we will have the right talent to back our aspirations. So all put together, I think 4 clear, clear strong business lines, want to kind of build ourselves mostly on the -- in a very, very, very large way on the ultra-high net worth segment, ensure that we do the right things with the different segments, expand ourselves to different geographies and keep our talent as well as our platform as strong as possible. And a culmination of all of those things will hopefully kind of allow us to continue growing in the right direction. Thank you. So Anil, we'll just open it up to questions, please.

Sure, sure. Thank you, Karan. [Operator Instructions]. First in line, we have Mohit Mangal.

Yes. Congratulations on a good set of numbers. So I've got a few questions. Starting off with, we have a very good net flows this quarter. So just a couple of sub-questions into that. Has the growth come from the increase in the wallet side of existing clients or through the newer clients who are putting in more flows? And secondly, how do you see financial year '27 now that financial '26 is on a very solid base?

I think -- Mohit, thanks for the encouragement. And I think on net flows, honestly, I think it's a culmination of many things. It's a lot of things kind of coming together. I think after many quarters, we've had a very strong net flow number even in the asset management business, close to INR 5,000-odd crores. And we've kind of -- to be honest, we've had a good gross flow number for the last 3, 4 quarters, but it's just that our redemptions -- or not redemptions, but rather our distributions, from our first PIPE fund, more or less, we've got -- kind of fully paid those funds out -- not more or less, we've actually fully paid those funds out in the last quarter. So in that sense, the net flow number on the asset management business at INR 4,500 crores, INR 5,000 crores looks very, very strong. I don't see it as a onetime. I think we've got a lot of new products on the annual. So feel fairly confident about it. On the wealth management side, it's a combination, like you rightly said, of enhancement of wallet share as well as new clients kind of coming in. I think new clients obviously add to the net flow from a revenue perspective, kind of come into play only over the next 3- to 6-odd -- 3 to 6 months as a part of the passive outflow -- passive AUM, which comes in, kind of moves into active AUM over the next 3 to 6 months. But overall, I would say on the asset management side, it's INR 4,500 crores, INR 5,000 crores. The rest of the flows are largely a combination of increase in wallet share as well as new money coming in. Again, that's a ratio of around about 50-50, 60-40.

Understood. Sir, any revised upward guidance for financial year '27?

I think, to be honest, guidance is kind of automatically revised upwards every year because now I'm just going back to my old model that we need to grow our AUM by 22% to 24%. And assuming a 10-odd percent kind of mark-to-market on a steady basis across all asset classes, alternates, listed equity, we've obviously averaged higher than that. But assuming a 9% to 10%, we need to do 12% to 13% of opening AUM as net flows. So I think as the opening AUM and closing AUM, there's a large gap. So obviously, the next year target automatically becomes 12% of the closing AUM. So to that extent, aspirationally, we would always want to get net flows in the region of 10% to 12% of our closing AUM. So in some senses, our guideline -- our kind of guidance is not changing in percentage terms. But in absolute terms, obviously, we need to work much harder to get to that 12% net flows.

Understood. My next question is towards the TBR revenue. So if I look at the TBR revenue, even excluding B&K, they have been very, very solid. So can you just share some reasons for this kind of stronger growth there?

So TBR revenue is a very interesting line item. I think while they are strong, if you see on a Q-on-Q basis, it's kind of come off a bit. And sequentially on a year-on-year basis also, it's not really kind of grown dramatically. I think we've worked really hard. We've kind of more or less now -- I would say, TBR revenue coming out of pure financial products in terms of managed accounts is practically 0, right, because we are hardly booking any upfront from -- there's no upfront in mutual funds, AIFs are practically a really, really small amount. So the rest of the TBR revenue, which is really left is largely, in some ways, brokerage and syndication, right? So the good thing there, obviously, is we've got brokerage and syndication across multiple asset classes. So if you look at brokerage and syndication today, we've got nearly 6 or 7 lines on which we are booking income. The first line, which is obviously there is the secondary brokerage coming on stocks, right? So there, obviously, now we are kind of covering 2 segments. We are covering the institutional segment and the family office segment through the B&K transaction. And we are servicing the -- and we are covering the high net worth individuals on the second retail side. So I think those 3 things put together today aggregate to around about a INR 60 crores to INR 70 crore kind of equity brokerage number on a INR 60-odd crores -- INR 60 crores, INR 65 crore equity brokerage number on a quarterly basis. The remaining INR 115 crores, INR 120 crores, you've got unlisted equities, you've got fixed income and bonds, you've got real estate, you've got a little bit of real assets. And then you've got a really small portion maybe coming through, maybe INR 1 crores or INR 2 crores coming through insurance and stuff like that. So I think transaction brokerage revenue will really be a function of our ability to work through these 5 or 6 asset classes. And eventually, once we build it out a little bit more over the next 3 to 6 months, you'll see some revenue additions coming from things like investment banking and us taking on some ECM mandates and so on and so forth. So today, I think, to be honest, overall, I would say the quality of TBR is better than where it was 24 months back or even 12 months back. While the number itself might not have grown dramatically over 12 months. But I think from a quality and sustainability perspective, it's a much better number. I don't see it dramatically increase over the next 2, 3 years. I think it shows a healthy inflation-linked growth. But obviously, I think a part of that resultant growth will show up in the ARR AUM growth because it kind of gives us the ability to continuously add more to the ARR as compared to the TBR.

Understood. So my last question is that now that the team is there, do you think operating leverage will kick in and maybe over the next 18 to 24 months, the cost-to-income ratio would look lower?

No, no. We have to increase operating leverage. There's no doubt about it. I think -- because at the end of the day, I think, today, at around about 48.5%, 49% cost to income, I think one of the key objectives we would have for next year is obviously cost optimization. Now cost optimization can happen through 3, 4 things. It doesn't need to happen at the cost of growth. But obviously, it happens out of 3, 4 things. The first and most important is if I kind of break up the cost-to-income ratio of today, 48.2%, 48.3%, we've got nearly 3.5%, 4% coming out of 2 kind of businesses, which are, I would say, not in the mature stage, which is ET Money and our reserve business, which is the HNI business. Those 2 kind of contribute to around about 3.5%, 4% on the cost-to-income side. So on a steady-state basis, the rest of our businesses are at 44.5%, 45%. I see both businesses kind of being close to reserve definitely, HNI business definitely breaking even next year or middle half of next year. And ET money, hopefully, on a run rate basis being close to breakeven next -- towards the end of next financial year. So I definitely see, let's say, out of the 400 basis points, I see around about 200 basis points on an annualized basis, 150, 200 basis points recovery on the cost-to-income ratio on these 2 items put together. And on the core business, I think we need some productivity gains. I think -- I wouldn't say -- productivity gains obviously comes in 2 formats. I think there are some places where we may have kind of over recruited over a period of time, over the last 3 to 4 years, which automatically kind of gets adjusted through growth in business. And second, obviously, as we build out new businesses, we have a lot of talent within the system, which we kind of -- which we have the ability to kind of move around. So overall, I think we should be able to achieve 100, 125 basis points or 150 basis points improvement in cost to income on the core business and potentially another 125, 150 basis points on the new businesses. So we would definitely, as a team, want to target 45% to 46% for next year. Hopefully, we can get to 45% aspirationally. But otherwise, 46% for sure compared to the 48.2% we are at now.

[Operator Instructions]. Next in line, we have Niranjan Kumar.

Congratulations on the good set of numbers. So basically, I have 2 questions. One, on the flows -- on the retention, like where can we see the retentions for both in the wealth management business and the asset management business? Second, carry income, in PPT, it is mentioned, it is 6 basis points. So on what basis it has been calculated because my number is a little different from the number which is reported in the data book. That's it from my side.

Sorry, what was the first question?

Where do you see the retention is settling?

Retention.

Yes. So retention will be similar. I don't see any dramatic change in retention. I don't think so there's any industry-wide change in -- from a retention perspective. I think on the alternates side, we continue to see approximately a 70, 75 basis points retention ex of carry. We see ourselves booking approximately 15 to 20 basis points of carry. And potentially, the listed side of the business will continue between the 55 to 60 basis points. Potentially, that's where it may go down to 50. So I think broadly, depending on the mix between the alternates and the listed side, we'll be approximately at the 73 to 75 basis points kind of retention. And wealth continues in a similar kind of orbit. So really, from a pure retention perspective, on the ARR AUM, I don't see much change at all. On the TBR side, obviously, it's not going to be linked to the AUM exactly. It's going to be linked to some of the parameters I spoke to -- spoke about earlier. On the 6 basis points, I'll just request either Anshuman or Sanjay to comment.

Sorry. The 6 basis points refers to the incremental carry that has come in and that has got recognized in this quarter itself. There is a -- we've shared earlier as well, we have a carry accrual policy, a relatively conservative carry accrual policy. And this is just referring to the incremental carry that's come in. On a normalized basis, therefore, we expect the retentions to go back to the 75, 76 basis points level for next quarter onwards.

Next in line, we have Nidhesh Jain.

One question is on retention. So if I look at retention, managed accounts, so the retention has gone up quite a bit. So is it because of carry that we have got in that segment?

Yes, a little bit because of carry, 3 to 4 basis points. But otherwise, it's broadly in the region of -- sorry. One second, let me...

So it has gone up 80 basis points.

Yes. No, no. So 3 to 4 basis points is naturally. The rest is largely on account of carry.

Okay. And carry be account on an accrual basis each quarter? Or is it one of the quarter? Because I think last quarter...

No, no. So broadly, the way we've been accounting for carry, we've kind of described it in a note earlier. But broadly speaking, we do it on a fairly conservative basis. So 2 or 3 things we kind of take into account. Number one, carry for the fund should have kind of crossed the hurdle more or less for the entire life of the fund, okay? So effectively, the chance or the probability of the carry getting reversed is next to negligible because if it's a 6-year fund, it should have crossed the hurdle for the entire time period. And secondly, the fund should be 18 months away from maturity. So I think these are the 2 things which we broadly follow from a recognition of carry perspective.

And from a timing perspective, in any quarter where we reach this eligibility, then we recognize carry? Because I think last...