Thank you very much. We will now begin the question -and-answer session. We have our first question from the line of Dipanjan Ghosh from Citi. Please go ahead.
NUVAMA · Quarter ended Sep 2023
Nuvama Wealth Management Limited analyst Q&A
Hi. Good morning, sir. First, congratulations for the listing. Just a few questions from my side. First, you know, on your managed products in wealth division, both on private and Nuvama Wealth, if you can just give some split either on the AUM side or on the revenue side between the product mix that you have? And I think on your...
Mr. Ghosh, we are unable to hear you. Should we move to the next question, sir?
Yes.
We'll check his connection. Thank you. We have a question from the line of Jagannadham Thunuguntla from Techpro Ventures. Please go ahead.
Couple of queries. One is, in comparison to Q1 and Q2 performance, the expenses and the salaries, etcetera, appearing to be lower as a percentage of the revenue, which is to do with the Q1 has more bonus element and so on. I'm trying to understand so that there will be a seasonality element on the Q1.
Actually, no. Now, if you look at last year, our bonus provisioning was not as smooth because we were still adapting. But this year onwards, our bonus and incentive provisioning is in line with the revenues. The reduction in the cost income actually has come because of the improved performance on the revenue side. I don't think there is a severe movement on the cost side in that sense.
What I'm asking is, so employee costs more or less remain same between Q1 and Q2, and whereas revenue obviously more. So, it's more of, you can say, operating leverage playing out and efficiency is playing out. Is it to do with that?
Yes, I think that is the correct assessment. It is operating leverage which is playing out. And also, in Q2, we've had a little bit of carry coming in, about INR8 crores of carry coming in. And the performance of the capital market segment is significantly superior than Q1, which was slightly moderate in the balance period of the year. But I don't think y ou will see significant movement in the employee cost or the opex from the levels which you're seeing. It will trend upwards mildly, but not significantly.
Correct. So other point is, just to get the clarity on the asset side, is that client assets is INR2,17,000. And so, adding that INR65,000 crores of client assets, that's what you are saying, right? INR2,90,000.
So basically, if you look at the client assets, the total is around INR2,85,000 crores, INR2,89,000 crores. Wealth management is divided into two buckets. One is Nuvama Private, second is Nuvama Wealth. Nuvama Private is around 150-ish range. Nuvama Wealth is about INR65,000 crores. Asset management is INR6,200 crores. And custody and clearing is INR 65,000 crores. So, if you add everything together, it gets to the 280 range.
Okay, just last point. So, comparing it with the FY ‘23 figure that you had in the historical trend. So, FY ‘23, you had shown a figure of INR2,31,000 crores.
Absolutely.
So, the INR2,31,000 crores has grown to INR2,89,000 crore.
Yes, that's right.
Okay. Thank you. Thanks for the opportunity.
Thank you. We have a question from Dipanjan Ghosh from Citi. Please go ahead.
So, I'll just repeat my questions. First, on your Wealth division, I just wanted to get some colour on the managed products, both on the Private side and on the Wealth side. And on the Private side, you have given the mix between recurring and non -recurring. If you could give us some colour on the similar piece for the Wealth division, for your MPIS piece specifically? That would be my first question. Second would be on P&L reconciliation. While you state a core or adjusted revenue number out there of around INR909 crores for first half, I just wanted to get some sense of where does interest income and net gain on fair value change really sit within tha t? Because in your segmental revenues, you have not explicitly carved out the other income or the volatile part of the investment link part of the revenues out there. And third, on your cost trajectory, if you can give some colour on how do you see that shaping up from here onwards in terms of both business or franchisee or RM expansion and also productivity improvement across the RMs that is available out there. So, these are my three questions. I have two data-keeping questions that I can maybe ask at the end.
So first, managed products and investment solutions or managed products in that sense, Dipanjan, is largely the same split as the industry. I mean, it will have mutual funds, PMS, AIF in case of private. And in case of Nuvama Wealth, we also add insurance, although that's a very small component. In terms of Nuvama Wealth, recurring and non -recurring revenue at an overall level, although I've always maintained in the past that we don't track that business on that basis. We normally look at the yield on the overall assets, which is about 1%. But if you look at the derived total income of recurring and non-recurring, about 50 odd percent or 49%, 45% to 50% is still coming as recurring, even in Nuvama Wealth. Your second question was on the net interest income.
It was on the other income. So basically, in your BSE release, you tend to mention interest income, net gain on fair value change, etcetera, other income separately. But in your MIS reporting for the segments like Private Wealth, AMC, you seem to have clubbed that within the businesses, or maybe you have kind of adjusted that in the P&L reconciliation. So just wanted to get that triangulation math.
Yes. So net interest income is largely split between Nuvama Wealth and Nuvama Private because those are the two businesses which have net interest income because of the client loan books which sit there. And in Nuvama Private, the net interest income for half year would be around INR32 crores. And in Nuvama Wealth, it will be around INR82 crores. On the other income side, Mihir, you want to take a shot?
So, on the other income, again, the accounting component of other income is purely relating to income tax refunds and stuff like that, or non -business income, but they've got apportioned in an appropriate manner to the extent they relate to the businesses.
Sorry. So just for me, just a follow -up, I mean, so would you, like, for the first half, your net gain on fair value changes, let's say INR142 crores. So does this entire INR909 crores capture this? I mean, does the INR142 crores sit within the INR909 crores?
Yes. So, when Ashish said NII, it covered every element. It would appropriately get captured either as a part of NII or a bond trade positions or security trade positions either into a wealth management business or in our capital market business, which has a debt capital market division, which takes trade positions for a short duration for the client facilitation.
I'll just add, Dipanjan, there that typically gets classified in distribution income, what Mihir is trying to explain that in two, three categories where, let's say, fixed income secondary or in unlisted securities, it actually passes through the books. So, you first buy and then you sell down to clients and the spread income is what you make, which in MIS gets classified as distribution income in either Nuvama Private or Nuvama Wealth, but in your accounting, it comes as net gain on fair value changes and all that. A very small portion will sit in the capital markets where they do this when they do the debt syndication business.
Got it. Ashish, on the third part, on the cost part, if you can give some colour?
So, cost broadly open, if you look at the first two quarters, 84 and 90, 90 has some INR5 crores of one-time, which is related to listing, which will go off. So, we will start Q3 on a base of around INR85 crores, INR86 crores, and we don't see quarter -on-quarter movement of more than 2%, 3% there. In terms of fixed and variable cost on manpower, I think broadly addition will be in line with, as you have seen betwe en Q1 and Q2, as we add RMs, but it will not be disproportionate. I mean, again, not more than 2%, 3% a quarter at max.
Yes, I'll just answer that. So basically, what happens, Dipanjan, when you onboard clients in the Ultra HNI segment, it's not necessary that you will get their entire assets or what they want to park with you or through you, everything together. And there are times when they will say that, look, I hold this outside. Why don't you give advice to me even on this or tell me what should I do? And they start sharing that data, which we start capturing in our system. The objective is that over a period of time, if you are able to deliver value to those clients on those assets, they start moving from held-away to your own.
Got it. But theoretically, as on this state, they are not a part of Nuvama's managed assets?
Absolutely. That's right.
Got it. Just a few more questions, one or two small questions. One is, again, what is the difference between fee-paying AUM and closing AUM in the asset management piece?
So, Dipanjan, when you do a product which has -- when you do a private equity product or a venture debt product, there are, or let's say even a credit fund or a commercial real estate fund, which are essentially Category II AIFs, which are drawdown-based. The fee charging model can be of two types. One is you can charge on commitment. And second is when you charge only on drawdown. Typically, products which are a fixed - income type delivery, the industry charges on drawdown and not on commitment. Otherwise, the client returns get compromised. So, the gap between, let's say, INR4,800 crores-INR4,900 crores, that full cluster, minus what you see as fee-paying is the undrawn amount, which will get drawn in the next, let's say, 12 months to 15 months.
Got it. Just one last question. On the net new money now, since you've given just one number, I would assume that it would also include a lot of volatility from the transaction of the broking piece, which kind of goes in and goes out. Because if I look at your event of net new money, I mean, for example, in Private, you have a significant amount of outflows, and Nuvama Wealth also. I mean, if I compare quarter -on-quarter or last year trends, I think it has dropped. So, ex - of the transaction, I mean, if you can just put some colour on the money or the core flow that is coming in from clients in the managed products, or in the AMC on some of the products, if you can just give some colour on that?
Yes. So, if you look at Nuvama Private, the first half net new money on a total basis is about INR1,200 crores. But if you see the ARR and transactional assets, that's about INR4,700 crores. Out of that, around 80% is ARR. And again, Nuvama Wealth, we don't t rack it in this manner. It's largely managed products and investment solutions. In the transactional assets or the brokerage asset, the movement is relatively small. It's more to do with the MTM there. But to be precise, the total movement in H1, in the broking assets, is about INR61 crores out of the INR3,700 crores of net new money in Nuvama Wealth.
So, Ashish, can you just repeat the Private portion, if I understood correctly, out of your INR1,200 crores of money movement?
INR1,200 crores, there is a positive of INR4,700 crores, which is the assets with us. And held away is reduced by the rest. So, the outflow is more from the held away assets and not from the assets which we have.
Got it. So, this INR4,700 crores is the net positive.
Net positive, yes.
This will include money going into broking also, right?
Yes, this will include, and broking would be about, broking is again an outflow of INR1,000 crores.
Okay. So, basically around INR5,700 crores of net new money in your MPIS, broadly?
Yes, that's right.
Got it. And why do you specifically carve out the expenses which are mapped to revenues, as in on both services, which are mirrored basically on your reconciliation? I mean, do you give, what would be the sub-broker payout of some colour on that model on that part of the business?
Mr. Ghosh, I request you to join back the queue, sir.
Sure. Thank you.
Thank you. We have a next question from the line of Mohit from BOB Capital. Please go ahead.
Yes, congratulations on listening and I've got two, three questions. First is that I wanted to understand your strategy, whether you'd be targeting HNI or UHNI, the typical yield that you earn in the HNI and the UHNI segment and some colour on the attrition, if you could give both on the client and the RM side?
So, actually, if you look at the numbers in the data book, it will be reasonably clear. In the Private segment, our ARR yield is around 1%. And on the transactional revenue, we make about INR50 crores a quarter. And if you take, if in that INR50 crores, ab out INR25 crores comes from, let's say INR20 crores comes from broking and that comes from non-broking. So, non-broking yield on the full base would be around 20 basis points, 30 basis points and 1% on ARR assets. On Nuvama Wealth yield on overall assets is about 1%, 1.1%. So, that's on the yield side. What was your second question?
So, in Nuvama Private, we've lost about three people, regret attrition and Nuvama Wealth, the attrition, regret attrition is about 1.5% to 2%. Customer attrition, very frankly, doesn't happen in our businesses. This is a question I've been asked many number of times and I've explained that customer attrition actually means customer closing accounts and going away. That's sub -1% across the board typically happens when people move out of the country, or they are closing the full relationship. It doesn't really typically happen there.
All right. And basically, your strategy, that you would focus more on the UHNI or the HNI market. I mean, what would be your strategy going forward? Which piece you focus more within a Wealth?
Our view is very clear. You really need to focus on both , because if you look at the stage at which we are in wealth management business in India, it's extremely nascent. It's not like a fully developed business that you have to become extremely sharp in targeting. I think pieces are expanding. As of today, both Ultra HNI and HNI and affluent have become extremely profitable as client segments. Most players have tapped Tier 1 and maybe Tier 2, Tier 3, Tier 4. There is significant amount of wealth creation that has happened. In fact, to be very candid, whenever any of us visits Tier 2, Tier 3 towns, it's an opportunity sitting there where wealth and clients are actually growing at a pace far faster than the pace at which industry is adding RMs. So, I don't think we are at a stage right now where you need to diversify your focus. Both offer opportunities because at the back end, there is tremendous amount of synergies, right? Asset classes are similar. Product construct may change. There may be different, personalization's and specializations you will build at the margin, but you are significantly able to leverage the same infrastructure to target both the customer segments. There is no point in right now saying, I will focus here more or focus there less. As a firm, we will focus on wealth and asset management more. That's a stated strategy.
Right. You know that this is helpful. So, the next question is on the revenue. I think from Q3 onwards, is it safe to assume that all your revenues would be in the trail mode and there will be no upfront recording there?
So, there are product categories. Now in AIFs, there is a methodology now prescribed by SEBI, which is what we are following in mutual funds and PMS that was done a couple of years back. Let's say a product like fixed income and structures and unlisted, they will always remain on a transactional basis for every player in the industry because there is no method by which you can make them trail giving. When you sell a fixed income, you earn at that point in time and the rules have basically mad e it mandatory that you have to recognize the income at that point in time. So those will remain as transactional. The proportion of transactional will keep coming down over a period of time, but they will always remain transactional.
Yes, we don't really see too much changing there because incentives are linked to typically revenues. It could change only if we have a dramatic increase in revenues. Then yes, the variable cost component will change, but then profitability will also rise.
Right. Perfect. Thanks, and wish you all the best.
Thank you.
Thank you. We have a next question from the line of Abhijeet Sakhare from Kotak Securities. Please go ahead.
Good morning. Sir, to start off, I had a few clarifications on the Nuvama Wealth business. So, if you could just give some colour on what do you mean by MPIS? Like which are the products you're including here?
So typically, first category, Abhijeet, is managed products and managed products have four segments, alternative investment funds, mutual funds, portfolio management service, and insurance. And then beyond that, you have products which are ex-off exchange traded. So, your fixed income, MLDs, unlisted securities, all those also come in the investment solution. So, combination of these two is we call managed products and investment solutions. So virtually you can say everything other than direct equity or currency or commodities is here.
Okay. Because when I look at the yields, the implied yields are almost 2%, which looks higher for at least the investment funds part of the business. So, I'm guessing the higher yields is driven by products like MLDs and some of the other ones that you mentioned?
MLDs. So typically, the yield on gross sales here would be in the range of 2.5% to 3.5%. Only insurance is more, but insurance is a component for us. Even in this business, if I look at an estimate of full year basis, will not be more than 8%, 9% of the re venues. But that also bumps up the yield a bit. But yes, 2.5% to 3% is what you typically are able to make if you do fixed income or MLDs or unlisted security.
Understood. And then second one, the client asset composition, almost 60%, 65% is classified as others. So there again, if you could give some broad breakups would be helpful?
Actually, we'll start sharing this over a period of time. So about 35% will be managed products and investment solutions, and that is growing at a very, very fast pace. This you're asking only Nuvama Wealth right now?
Yes. Nuvama Wealth, others, which was 63% in first half?
So that would have, let's say some brokerage asset and some other unlisted securities and all that sitting there. But from a component perspective, that is now dropping, except if mark-to-market happens, that we can't help.
Understood. And then the second one on the wealth business, the impact of AIF change in the recognition of fees, if you could share the absolute amount of assets with upfront income and the associated fee amount that was booked, let's say last full year or I think the regulation changed only in the second quarter this year. Right so if you could at least give us last years what the number would be?
First of May is when the regulation actually changed. Basically, it essentially changed from booking upfront and we were actually not on full upfront, Abhijeet, we were around 60% and that has now fallen. So, if I look at the revenues that would have, actu ally we've done a computation on what would have been the incremental revenues had we not changed. For let's say this half year, it would be around INR40 crores to INR50 crores more in the full wealth cluster if we had continued with the last year's booking methodology.
And any quantification of the amount of assets itself?
Amount of assets, I think this year we would have sold around INR2000 crores INR2200 crores.
Okay. All right. And the last one is asset servicing business, how to look at the revenue driver? Is it the jump? Is it driven by interest rates? Do we get client money where we earn float? Is that true?
Yes, that's right. The combination of two things actually, assets under clearing. So, there are two ways in which you can look and I think we've also deliberated this internally and we will modify and update the data book to help you understand more. Essentially, there are two buckets in which assets are divided there. One is assets under custody and second is assets under clearing. In that INR 65,000, the assets are broken in these two categories. Assets under custody, actually the revenue doesn't come here directly. It's taken as a profit pickup because it's an entity which is an associate entity. Assets under clearing is what you should see, and the revenue is reflective. So around between 1% to 1.5% because within assets under clearing, there is float assets and non-float assets. On the overall, you earn some fees and some transaction charges and fund accounting charges which are all annually in nature. And on float, you earn the interest income. So, combination is between 1% to 1.5% is what we are for the full year basis.
Understood. Thanks a lot and thanks a lot for disclosures.
Thank you.
Thank you. We have our next question from the line of Manan Poladia from MKP Securities. Please go ahead.
Yes. I don't know if this is a repeat question. I've been listening to the call. I don't think it is, but I'll go ahead . So, my question is with respect to the Nuvama private revenues, we've seen an 8%, 9% jump this year, but this quarter, but we are not seeing the same in terms of profitability. What I want to understand is, is it that our RMs , we have over hired currently and we are planning to get to that kind of revenue later where this cost is year-on-year going to be attractive to our bottom line or what is the case? I'd just like to understand?
So, I think one, what you're saying is correct. We have added about 15 RMs and their productivity will flow through in the next 12 to 18 months. Second is that we were describing , that there is a change in accounting that has happened in how we recognize income from AIFs, specifically category two AIFs, which earlier we were recognizing about 60% upfront and balance in trail. That has now changed to about 30% which comes in year one and balance in trail. So, there is an impact of about INR30 crores, INR35 crores, INR30 crores in Nuvama private specifically because of this thing. And so, if you add that back, you will see that even Nuvama private, theoretically the profit would have grown by 20%, 25%.
Correct. I understand that. That's perfect, sir. Thank you.
There is one more thing. Third is that if you look at the way, as I mentioned earlier in my call, the way we had provisioned for variable cost last year, it was skewed in Q3, Q4. So H2 was fairly higher than H1, whereas if you look at the revenues, they were fairly consistent. It was not highly gradient, whereas this year we have smoothened that variable. So, you will see that positive also kicking in H2 for Nuvama private.
Right. Perfect. Thank you, sir. Thank you so much for the explanation. Sir, my other question is on your balance sheet side. What I understand is there's a lot of like bank balances which have like spiked up from March 31st to this quarter. Our cash balance, bank balance is up INR4,500 crores. And there is some liability and debt security. I just want to understand which part of the business is this relating to and whether this is steady state or there is going to be some cha nge with respect to this?
So, I'll just speak a bit about it and maybe Mihir can add. Our, net debt is about INR4,000 crores. The rest of it is cash which is related to client margin money and corresponding security. So, it sits in the balance sheet, but it's not our money. We have about INR600, INR700 crores of excess cash. And we are right now deliberating on our dividend policy and what to do with that. Because if you understand in the context of Nuvama, we are just a two and a half year old independent entity. And in last two and a half years, this was the first time we we nt into the markets and started borrowing. And before that, we never had any independent borrowing. So, we conserved cash because in the last two, two and a half years, there were a lot of rules which also changed around margining for institutional clients and for individual clients. So, we wanted to conserve cash, but I think now we are in a comfortable position and we will have a dividend policy and we will come back and disclose to the market soon. So, some amount of this cash will go down, but that excess cash which you see is actually not our cash. It's margin in the exchange and corresponding client money.
Correct. So, if I were to look at Nuvama as a company alone and not have any client debt or cash or whichever, you're saying your net debt is about INR4,000 crores. So, if that would put your EV at today's market cap of about INR10,000 crores market cap plus INR4,000 crores net debt to INR14,000 crores EV? Is that the right way to look at it?
This is Mihir here. That's a fair way of looking at it.
All right. All right. Thank you, Mihir. Thank you so much. I think that does cover my questions for now. Thank you so much.
Thank you.
We have our next question from the line of Lalit Deo from Equirus Securities. Please go ahead.
Yes. Hi, sir. Good afternoon. So firstly, like in the Nuvama Wealth business, so like there are two models. One is the RM model and the second one is the external RM model. So, could you give us more colour in it like the accounting treatment and what is the like does the sub -broker payout in the external RMs add pressure? That would be my first question.
So, accounting treatment is actually what Mihir was explaining earlier is that we net it off when we earn and whatever payoff we have to make, we net it off. But I think in the published accounts, it's shown as gross revenue at the top and then the payoff is shown below in the operating expense. But what we have produced for investor relations and all, we have netted it off. Our overall net revenue is split almost 75 -25. 75% are direct RMs and 25% are external wealth managers. And these are not, because you use the word sub-broker, I wanted to clarify. Sub-broker will be a very small component in this. Typically, these are people who in their journey of wealth management had been single product distributors. Some would have been MF distributors; some would have been insurance and some would have been sub -brokers. What we have done in the process over the last seven, eight years is converted them into a multi -product wealth manager and our treatment with them is exactly same like the way we deal with our own RMs. So, the entire training platform, technology platform, compliance framework, product platform, everything is available to them. The only difference is that they don't get compensated or fixed compensation, they get variable part of the revenue because that is their business model. But other than that, their relationship interaction with the clients should be exactly similar to our relationship managers. And this is a fairly well -established model in the international markets. Actually, if you go to markets like Singapore, Switzerland and all, in large wealth management outfits, like in the likes of UBS and all, more than 40%, 50% now, the terminology used in those markets is EAM, External Asset Manager. In India, we have started this as External Wealth Manager.
So, is it fair to say like that then the clients on the wealth side will have some overlap, wealth we have -- will be managed by the RMs as well as the external managers or they are exclusive, the clients are also exclusive as per data we have?
The clients will be exclusive. So, you can imagine like, if there are two relationship managers in the firm, they will have clients. Similarly, this is a third relationship manager who's not on our roles. So, overlap typically doesn't happen unless there is an existing client and the external wealth manager has a very strong relationship. Than this -- so that will be a bilateral mutual discussion on how will we share revenues. But otherwise, these are typically exclusive clients.
And just to clarify some point, whatever the payout which we are making to this external relationship manager, that gets netted off and whatever we report as net revenues, that is the net revenues which we earn. There is no payout further to this external RMs in their opex line item?
That's right.
Sure, sir. And then secondly, on our Nuvama Private Business, so just to understand, so we have revenues coming from advisory pool as well apart from the managed products. So, within our assets, will there be a component of advisory assets as well or is it just the distribution assets which we do right now?
No, it will be a combination of both distribution and advisory assets.
So, is it, could you please quantify the same, sir?
We will actually share, but it will be order of magnitude around INR10,000 crores.
Thank you. We'll move on to the next question from the line of Deepak Poddar from Sapphire Capital. Please go ahead.
Yes, thank you very much, sir, for this opportunity. Sir, in one of the press release, I read that, we are looking to double the RMs in next five years, right? So, what ideally means for our AUM and in that respect, our revenue growth?
Both should move at a faster pace than the addition of RMs because your current base productivity obviously will go up. And if you look at our last three years, three years to four year track record, we've nearly increased the RMs by maybe about 40%, 50%, but revenue has grown at a CAGR of around 45%. So, I'm not saying that, we will maintain the growth of the past, but yes, it will be higher than the rate of RM growth.
Okay, so next five years, whatever our, if you have to double it in five years, so our CAGR, we are talking about a 15%, let's say in terms of RM. So ideally, our revenue and AUM should grow at a much faster rate than this 15%...
Correct. And given that our bottom line, our opex growth is lower than your revenue growth. So, your bottom line growth should be faster than your revenue growth, right?
Yes.
And then my second question is a little on the sequential basis. If you see last five quarters, six quarters, we have done phenomenally well. I mean, in terms of growth, we have been growing on a quarter and quarter basis also. So, are we looking to, have that trend going forward as well or some sense would be quite helpful, sir?
So actually, we've not formalized the policy of quarterly guidance right now. So, I will refrain from commenting on that. But we will be in line with the industry growth is what we can say or slightly better than that. And if there is a marginal or there is a significant improvement in the industry uptrend, we will follow that. But we are discussing internally on how do we want to guide for the future. This is our first call. And maybe over one quarters to two quarters, we will reach a conclusion. And then by end of the year, we will start guiding.
Fair enough. That's very helpful, sir. I think, that's it from my side. And all the very best to you. Thank you.
Thank you.
Thank you. We have our next question from the line of Chintan Shah from JM Financial Family Office. Please go ahead.
Hi, thank you so much for the opportunity. Just a couple of questions. So, my first question is, if you can just broadly help us to understand, what is the competitive advantage for us versus peers in terms of a tech or product or an RM incentive structure or retention? And secondly, in our journey, if you could also highlight basically what are the things we are working on that we need to improve? That would be the first question. And secondly, in terms of guidance, while you gave a broad idea in terms of revenue, in terms of profitability over a longer term, say three years to five years, if you could help us understand, say, maybe how the cost to income would move ahead, that coul d be helpful? Those were the two questions.
So, on competitive advantage, whatever I can say, I will say because some of the things we may not want to disclose. I think one is the comprehensiveness of the product platform which we have created, where the ability of the relationship manager to comprehen sively solve all the needs of the clients in the Wealth Management space. Very frankly, if you look at the entire market right now, there are a few players who has reached that position. If you ask me between five years to ten years from now, everybody will reach because most of the peer set is working towards that. And the industry is right now, as I said, and I keep saying, it's nascent, so it will evolve. And so, we will have to continuously keep upping the game to maintain that edge. The second question you asked was, which are the areas we are working on. In Nuvama Private, we are working on creating an offshore full stack Wealth Management proposition because now we see that ultra HNI clients do have a need to access overseas markets , set up family offices there. And it's time now to work on it. And similarly, for Nuvama Wealth, we are working on an NRI proposition and comprehensively moving to a portfolio solutions approach instead of a product approach there. And in both the segments, we will leverage technology and analytics to reduce our cost to serve. That will become a very, very strong proposition from our side internally to improve the efficiency metrics, which leads to your next question on cost income. So, if you see the industry cost income in these categories, Wealth Management typically operates between 58% to 63% range. We are right now, borderline 65%. We were at 70, we improved by about 5% this year. Asset management, fully scaled, operates again at 5 0%- 55%. And capital markets operates at around 70%. I think, if you ask me in the next three years to five years, our target at a firm level would be about 60%, where Wealth should be best in the industry. Every year we hope to reduce by 100 basis points to 150 basis points. Asset management right now is an investment phase for us. So, we don't look at it from a cost income angle. Once we cross INR15,000 crores to INR20,000 crores of AUM is when the real operating leverage kicks in. And maybe in three years to five years, we should be 4x - 5x from here. So broadly, if you ask me, if we a re at 65%- 66% this year, clearly between three years to five years, you should see us at 60% levels at a firm level.
Okay, got it. Thank you. Thanks for the detailed answers. That's it from my side.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand the conference over to Mr. Ashish Kehair for closing comments. Over to you, sir.
Thank you. Thank you for taking time out for this call. It was, I think, an interesting session for me. We will take these questions as input and feedback. And some of you, we will, of course, meet over the next three months, four months. And as I said at the beginning of the call, we will continuously improve the quality and content of the disclosures which we are making. Just bear with us. And I think in one quarter to two quarters, hopefully we should be able to answer most of your questions through our data book itself.
Thank you. On behalf of Nuvama Wealth Management, that concludes this conference. Thank you for joining us and you may now disconnect your lines.