Nuvama shares rally 4% as $1.6 billion buyout buzz offsets Jane Street overhang

Economic Times

a day ago

Shares of Nuvama Wealth rose 4.3% on Monday, recovering part of Friday's losses after a Sebi order, as reports of a potential $1.6 billion buyout lifted investor sentiment. Global private equity giants CVC, Permira, EQT, and HSBC are in advanced talks to acquire PAG's controlling stake, triggering fresh interest in the wealth manager amid a highly competitive bidding race.
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Jane Street overhang lingers
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India's wealth market draws global eyes
Shares of Nuvama Wealth Management climbed as much as 4.3% on Monday to Rs 7,574.60 on BSE, recouping some of Friday's losses after a Sebi order rattled investors. Fresh reports of a potential billion-dollar buyout by global private equity majors reignited interest in the stock.Private equity giants CVC Capital Partners , Permira, and EQT are in advanced talks with Asia-focused investor PAG to acquire its controlling stake in Nuvama (formerly Edelweiss Wealth Management) in a deal potentially valued at $1.6 billion, according to a report in The Economic Times, citing people familiar with the matter. HSBC, Europe's largest bank by market value, is also in contention, making it a fiercely competitive bidding process.The four shortlisted bidders submitted non-binding offers late last month and are currently conducting due diligence. Binding offers are expected by the end of July, although analysts believe this timeline may be difficult to meet.PAG owns a 54.78% stake in Nuvama, valued at Rs 14,383 crore as of Friday's close, out of the company's total market capitalisation of Rs 26,150.87 crore. Any deal resulting in a change of control will trigger an open offer for 26% of the shares held by minority investors.Warburg Pincus is also said to have made a verbal indicative offer and is being considered as a fallback option. Meanwhile, domestic fund ChrysCapital is reportedly exploring a possible smaller deal or a consortium-based investment. 'Consortia are likely to get formed as the cheque size is expected to be large,' one of the people cited told The Economic Times.Nuvama's stock fell 11% on Friday — its sharpest drop in three months — after India's securities regulator barred U.S.-based Jane Street from the domestic market over alleged index manipulation to extract large profits through derivatives trading. While SEBI did not name Nuvama in its 105-page interim order, the firm came under scrutiny due to its role as Jane Street's on-ground trading partner in India.'The Jane Street episode will be a one-time hit but will not have a structural impact,' an executive cited in The Economic Times report said. 'However, valuation may be impacted if the matter drags on.'Despite being cleared in an earlier NSE investigation that was closed in May, Nuvama's prior association with Jane Street triggered investor caution. The company had responded to NSE's queries as part of that probe.Jane Street is believed to be a major client of Nuvama's institutional services business, with some analysts estimating it accounts for up to 40% of revenue in that segment, although this figure could not be independently verified.According to Jefferies, the impact of SEBI's action is expected to be uneven across institutions. While BSE may see limited disruption, Nuvama could face a more significant hit.Nuvama reported a 58% year-on-year rise in profit after tax in FY25 and delivered a strong return on equity (ROE) of 31%. In the March quarter, asset services—including custody and settlement—accounted for 47% of revenue, while wealth management contributed 35%, with the remainder coming from equities and investment banking.The asset services division handled $14.7 billion in institutional assets in FY25, with revenue jumping 85% from FY24, according to company data.Nuvama was listed in September 2023, following a demerger from Edelweiss Financial Services. Since its debut, the stock has rallied over 114%, including a 55% gain over the past year.PAG had acquired control in March 2021 through a $325 million investment, and kicked off the sale process earlier this year, appointing JP Morgan and Morgan Stanley as advisers for the transaction.Investors are eyeing Nuvama for its rapidly growing wealth management franchise in a fragmented Indian market, where only 15% of wealth is professionally managed, compared to 75% in developed markets. India's wealth management industry currently manages an estimated $130–160 billion of the country's total $1–1.2 trillion in wealth.According to ICRA, Nuvama's key strengths include its diversified business model and strong financial performance, although the firm remains exposed to market volatility and reputational risks.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)