360 ONE’s B&K deal may narrow its valuation premium over Nuvama Wealth

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Subscribe to enjoy similar stories. 360 One WAM Ltd and Anand Rathi Wealth Ltd were the listed pure plays in wealth management in India. However, that will no longer be the case with 360 One’s acquisition of B&K Securities and B&K Finserv.

360 One recently held an analyst call to discuss its acquisition of the B&K (Batlivala and Karani) group. B&K Finserv is into mutual fund distribution and fits well into 360 One’s existing business. As such, its acquisition price of ₹110 crore is small.

The big one to focus on is B&K Securities' stock broking business, which will be acquired through a combination of cash and equity, split into ₹600 crore cash and 360 One’s shares worth about ₹1,174 crore. Before getting into the merits of the acquisition, it is essential to understand 360 One's income streams. The company has two revenue streams—annual recurring revenue (ARR) and transaction-based revenue (TBR).

ARR is earned from AMC, PMS and AIF for selling their products and advisory fees for managing discretionary and non-discretionary equity portfolios. TBR is earned from the broking of listed and unlisted equity and debt products and the sale of structured products, etc. As 360 One did not have its own equity broking, it was earning this revenue by partnering with the other brokers.

360 One is likely to earn ₹2,400 crore in FY25 based on Motilal Oswal Financial Services’ estimates, with 70% coming from ARR and the rest from TBR. B&K’s equity broking revenue for FY25 is likely to be about ₹200 crore. The business has been valued at ₹1,774 crore or nearly 9X of revenue.