December 2024 Results Preview | Sector: Non Lending
Financials – Non Lending
Result Preview
Regulations and weak markets to impact performance
Profitability trend to be muted sequentially
Company
HDFC AMC
ABSL AMC
Nippon AMC
UTI AMC
Angel One
BSE
MCX
360 One
Nuvama Wealth
Anand Rathi Wealth
Prudent Corp
CAMS
Kfintech
CDSL
Star Health
ICICI Lombard
HDFC Life
ICICI Prudential
SBI Life
Max Financial
Across segments, the regulatory environment is likely to influence the performance of
non-lending financials in 3QFY25. While F&O regulations are anticipated to have an
impact on BSE/ANGELONE, new surrender charges will affect LI players. GI players will
be impacted by the changes in the reporting of gross premiums for long-term policies.
Nifty for the quarter was down 8.4%, which will impact AUM growth for AMCs/CAMS/
KFin. However, SIP flows have held up strong in Oct’24/Nov’24 at more than INR250b.
Yields are likely to be stable given the limited impact of telescopic structure in
3QFY25. Most notably, other income will see a sharp fall due to market correction.
BSE’s premium turnover has been stable despite a sharp decline in notional turnover
due to F&O regulations. Additionally, the decline in notional turnover will aid margin
expansion as regulatory fees have a direct linkage. On the other hand, ANGELONE’s
order flow is expected to be weak during the quarter. Lower cash volumes will have an
adverse impact on CDSL’s transaction charges.
Wealth managers will incur an MTM hit from the market corrections, which would be
partially offset by the inflows. Transaction revenue would also be down sequentially.
LI players are seeing through the implementation of surrender charges wherein
product IRRs and commissions have been altered. VNB margins will be influenced by:
1) product mix – the share of ULIPs remained strong, 2) some benefits of non-par
repricing, and 3) the impact of surrender charges. For our coverage universe, we
expect a change of -40bp to +70bp sequentially.
GI players will face an impact from the implementation of the new practice of reporting
GWP on a 1/n basis for the long-term business. This will lead to a higher opex ratio,
driving up the combined ratio. The health segment’s loss ratios will also remain elevated.
We maintain our high conviction on the capital market plays as highlighted in our
recently released thematic report (click
here).
The current weak trends are transitory
and will reset the base for longer-term growth. Our top picks in this space are BSE,
ANGELONE, HDFCAMC, and Nuvama.
Insurance stocks have seen a sharp correction due to media articles on the regulator
constraining the role of the bancassurance channel (https://tinyurl.com/4y6zp26k). In
such a scenario, we expect LIC and IPRU to outperform, given their lower dependence
on the bancassurance channel.
Demat monthly run-rate declines; volumes dip after the new F&O regulations
Cash ADTO continued its MoM downward trajectory during the first two months
of 3QFY25 with declines of 12%/6% MoM in Oct’24/Nov’24. A slight recovery
was witnessed in Dec’24 with a 3% MoM growth in cash ADTO.
In the F&O segment, options volumes witnessed a significant decline after
partial implementation of the new F&O regulations in Nov’24, resulting in F&O
ADTO dipping 3.5%/14.8%/33.1% in Oct’24/Nov’24/Dec’24.
BSE’s market share in the options segment continues to scale up in terms of
notional/ premium turnover, reaching 29%/15% in Dec’24 vs. 27%/13% in
Sep’24.
Incremental demat account additions declined from 4.4m/month in 2QFY25 to
3.5m in Oct’24 and 3.2m in Nov’24. Similarly, incremental NSE active client
count has fallen to 1m/0.7m in Oct/Nov ’24 from an average of 1.2m in 2QFY25.
MCX has maintained its momentum with volumes remaining above INR50t in
Nov’24/ Dec’24. Futures ADTO increased to INR280b in 3QFY25 from INR270b in
Research Analyst: Prayesh Jain(Prayesh.Jain@MotilalOswal.com)
|
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com)
Research Analyst: Kartikeya Mohata
(Kartikeya.Mohata@MotilalOswal.com) |
Muskan Chopra
(Muskan.Chopra@MotilalOswal.com)
October 2020
are advised to refer through important disclosures made at the last page of the Research
Investors
1
Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.