Note on Nuvama Wealth & Investment Ltd.

Objective: To add a second MLD issuing entity in the Model portfolio for the purpose of
diversification.

Strategy:

It’s been our constant endeavour to look for additional MLD issuers that can bring
diversification of MLD investments in the Model Portfolio.

Since the allocation of MLDs as part of the Model Portfolio is up to 35%, it is extremely
important to do a thorough due diligence on the Credit Risk of the Issuing entity before adding
a new MLD issuer.

It is for this reason that till now we choose to stick with our internal issuer, i.e. ARGFL and not
an external Entity.

However, it is always prudent to have diversification when it comes to Credit Risk of the
underlying MLDs Issuers.

Hence after thorough due diligence, we are adding an External MLD issuing Entity, i.e.
Nuvama Wealth & Investment Ltd.

Nuvama Wealth & Investment Ltd. Was earlier called Edelweiss Broking Ltd. (EBL)

Please note that this is only a change of name, there has been NO CHANGE in
 Management and Board of DIrectors
 Holding composition of the Investors
 Balance Sheet, etc.

We have put down some of the key data points post conducting the Due Diligence Process

Due Diligence Process:

As part of the Due Diligence Process, We have evaluated the following parameters
1.) Entity Holding Pattern
2.) Line of Business
3.) Balance Sheet of the Entity
4.) Lending Profile (subset of Assets)
5.) Debt to Equity Ratio

Let us now look at all these parameters

1.) About the Issuing Entity Nuvama Wealth & Investment Ltd. and its holding pattern:

 Nuvama Wealth & Investment Ltd. is the issuing entity of the MLDs.
 This is a 100% subsidiary of Nuvama Wealth Limited (Formally known as Edelweiss Wealth Ltd.)
Nuvama Wealth Limited is a subsidiary of Pacific Alliance Group (PAG)
 o About PAG – Largest Asia Focused Fund manager founded in 2002 that is managing
$42Billion+ Assets
 Holding Pattern of Nuvama Wealth Ltd.  56% (Pacific Alliance Group) & 44% (Edelweiss
Financial Services)
 Management Board constitution  The 12 Board of Directors for Nuvama Wealth Ltd. include 6
from PAG, 3 from EFSL, 2 Independent Directors and the CEO. Owing to PAG having the
maximum seats on the Board, they have the controlling stake and therefore are responsible in
appointing the CEO.

Hence, with PAG being at the helm of affairs, having 20+years of experience in managing businesses
across Asia and with an AUM of over $42 billion, it gives us comfort on the Corporate Governance of this
entity.

2.) Business Line of the entity

 Nuvama Wealth & Investment Ltd. is the largest contributor of PAT for the Nuvama Wealth
Management Group. They account for 40-45% of Nuvama Wealth Ltd.’s consolidated PAT.
 Nuvama Wealth & Investment Ltd. is a non-NBFC corporate entity regulated by SEBI and the
Company’s Act.
 Nuvama Wealth & Investment Ltd. key businesses include Securities Broking, Loan against
ESOP/MFs and Distribution of Financial Products.

Hence, Nuvama Wealth & Investment Ltd. is the most significant subsidiary of the group and
also has a steady stream of Income from Broking and Distribution of Financial Products to their
Wealth clients.

3.) Balance sheet of Nuvama Wealth & Investment Ltd. (As on Sep 2022)

 Total balance sheet size: 2471 Cr. (excluding unsettled trade receivables/payables in the BS)
 About Assets of Nuvama Wealth & Investment Ltd. 
o Cash & bank balances : 536 Cr. (21.7%)
o Lending Assets : 1191Cr. (48.19%)
o Securities held for trading & Derivatives: 582 Cr. (23.55%)
o Other Assets & Deferred Tax : 162 Cr. (6.56%)
 About Equity and Liabilities of Nuvama Wealth & Investment Ltd. 
o Total Equity : 640 Cr. (25.9%)
o Borrowings : 1709 Cr. (69.16%)
o Other Liabilities : 122 Cr. (4.94%)

Hence, with over ~21.7% of the Assets in Cash and with Equity being almost ~25.9% of Total
Equity and Liability indicates a strong Balance Sheet.

4.) Lending Profile (A subset of Assets)

 Lending Book exclusively in the form of ESOP funding and Margin Trade Funding (MTF)
against high quality securities
 Average Ticket size of <1Cr. and maximum lending done to a single group is around 20Cr.
 Current NPA stands at 0%

Hence, with a loan profile that has over 1.7X to 2X cover of liquid collateral coupled with zero
NPA since 2019 indicates a well-managed and a strong Lending Profile of the entity.
 5.) Debt to Equity Ratio of Nuvama Wealth & Investment Ltd.:
 The Debt to Equity Ratio of Nuvama Wealth & Investment Ltd. stands at 3.12X

After evaluating the Credit Risk component through the Due Diligence Process as well as the
MLD product pricing, we are adding “Nuvama Wealth & Investment Ltd.” as the second MLD
issuer to our Model Portfolio to the tune of 5% out of the 35% allocation in MLDs.

B) Product payoff and description:

3Yr. Nuvama Wealth and Investment Ltd. Magnifier 48%

1.) Product Specifications:

Issuer Nuvama Wealth and Investment Ltd.

Payoff Tenor (Days) 1230 (3yrs and 4.5mths)
Contingent Coupon 48.00% (@12% NIFTY Performance)
Maximum IRR 12.34%
Participation Rate 960% (From 107% - 112% of Initial Fixing Level)
Decay Multiple 1.25x (below -20% )
Underlying Nifty 50 Index
Initial Fixing Date Trade Date
Initial Nifty Level Trade date nifty closing plus 150 points rounded to next 100
Final Obs Date Closing NIFTY on last Thursday of 34th,35th and 36th month
Final Nifty Level Average of closing Nifty on Final Obs Dates.
PP/Non PP Principal is not Protected
Listed/Unlisted Unlisted
Early Exit Option NOT AVAILABLE (Till last 30 days before maturity date)

2.) Product Payoff:

Product
Nifty Level Nifty Performance XIRR
Returns

27380 48% 48.0% 12.3%

22200 20% 48.0% 12.3%
20720 12% 48.0% 12.3%
20350 10% 28.80% 7.8%
19980 8% 9.6% 2.80%
19795 7% 0.0% 0.00%
18500 0% 0.0% 0.00%
14800 -20% 0.0% 0.00%
14798 -20.01% -25.01% -8.19%
12950 -30% -37.5% -13.0%

3.) Back testing probability:

Particulars Normal %
Total Observation 4704
% of time Product return has given maximum return 3960 84.18%
% of time Product has given zero or positive returns 4702 99.96%
Standard Deviation 3.82%
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