Capital markets player 360 ONE WAM's stock price cracked over nine percent in the morning session on January 28, as reports suggested the income tax department was conducting search operations IIFL on tax evasion concerns.
On January 27, 360 ONE WAM reported 42 percent YoY jump in net profit in December quarter at Rs 275 crore while its revenue rose 45 percent to Rs 678 crore. However, the firm's AUM declined slightly on a sequential basis due to negative mark-to-market in equities and redemptions in the matured PE funds.
The company also announced the acquisition of Batlivala & Karani Securities India for Rs 1,884 crore. "B&K is a leading mid-cap brokerage, servicing almost all leading foreign and domestic financial institutions. The company is a full-service broker dealing with institutional investors and also offers corporate treasury services to its set of clients, serviced by a team of over 300 professionals," said 360 ONE WAM in a press release.
At 9.30 am, shares of the firm were quoting Rs 997.05, down 7.4 percent from the previous session's closing price.
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"While we agree that the acquisition has a business case, we need more clarity on potential synergy benefits that can make it a strong complementary fit. This transaction does not yet straightaway augment 360 One’s IB/ECM capabilities, as they are still being built and could need further investments in hiring teams," said Kotak Institutional Equities in a note.
Kotak added, "While management highlighted the deal takes it closer to the full-service model (i.e., wealth, asset management and capital markets verticals), we are not sure if this was always the end goal." The brokerage reiterated its 'reduce' call, with a price target of Rs 1,150 per share.
On the flip side, Motilal Oswal said, "The company’s plans to diversify across client segments (mass affluent) and geography (lower-tier cities) is gaining traction and the global platform has also seen green shoots. While we have not factored in incremental revenue from the acquisition of B&K, the transaction is likely to be value-accretive." The brokerage trimmed its target price on the firm to Rs 1,350, while maintaining its 'buy' rating.
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