Anand Rathi Wealth Ltd's (ARWL) Ebitda margin dropped to 34% in the June quarter (Q1FY27), from 47% a year ago. The fall was largely due to a one-time ESOP charge that pushed employee costs up 53% year-on-year. However, reported profit after tax surged 74% year-on-year to ₹163 crore, aided by mark-to-market gains on the company's investment in its subsidiary.
Client stickiness remained strong. Q1FY27 client attrition was only 0.09% of AUM, lower than 0.11% a year ago. Importantly, 61% of client families have been associated with ARWL for over three years, and these contribute 82% of total AUM.
A big concern after relationship managers (RMs) exited in FY26 was whether client assets would follow those advisors, but that did not happen. The company has retained nearly 90% of the AUM linked to earlier RM exits. This suggests client relationships are tied more to ARWL platform, than individual advisors.
Growth engine
What are the next growth triggers besides acquiring new clients?
For a wealth management company, growth driven by existing clients is typically more profitable and sustainable than growth driven solely by client acquisition.
Market share gains are crucial too. ARWL’s share of industry equity mutual fund net inflows increased from 0.18% in FY20 to 2.30% in FY26. AUM market share has increased from 1.01% in FY19 to 1.48% in FY26, leaving room for further expansion.
Valuation hurdle
For FY27, ARWL has guided for revenue, profit after tax and AUM of ₹1,415 crore, ₹460 crore and ₹1.2 trillion, respectively.
However, the company faces a potential headwind from total expense ratio (TER) compression, with the management indicating that asset management companies have already passed on around 1-2 basis points of lower commissions. As a result, near-term margins could remain under pressure.
Investors can’t complain as the stock has gained about 35% so far in 2026. However, Motilal Oswal Financial Services believes that while flow momentum is expected to remain stable, current valuations appear stretched. The brokerage has downgraded the stock to 'Sell', with a one-year target price of ₹1,700 based on 50x FY28 estimated EPS. ARWL stock is currently trading at around ₹2,080.