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Motilal Oswal Financial Services Ltd

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About the Company

Motilal Oswal Financial Services Ltd. was founded in 1987 as a small sub-broking unit, with just 2 people running the show. Today we are a well-diversified financial services firm.
The company has a network spread over 550 cities and towns comprising 2500+ Business Locations operated by our Business Partners and us and 16,00,000+ customers.

 

Q4FY22 Updates

Financial Results & Highlights

Standalone financials (in Crs)
  Q4FY22 Q4FY21 YoY % Q3FY22 QoQ % FY22 FY21 YoY%
Sales 532 373 42.6% 556 -4.3% 1869 1047 78.5%
PBT 38 3 1166.7% 54 -29.6% 112 -70 -260.0%
PAT 79 7 1028.6% 54 46.3% 153 65 135.4%
Consolidated financials (in Crs)
  Q4FY22 Q4FY21 YoY % Q3FY22 QoQ % FY22 FY21 YoY%
Sales 1055 1148 -8.1% 1034 2.0% 4320 3634 18.9%
PBT 370 550 -32.7% 300 23.3% 1616 1458 10.8%
PAT 302 469 -35.6% 239 26.4% 1312 1265 3.7%

Detailed Results:

  1. Company saw a good quarter on an operational front with operating PAT growing by 41% YoY however due to comparatively poor fund based returns, the overall PAT de grew by 35%.
  2. Segment wise ROE & % of net worth employed for FY22:
  1. A) Capital markets – 258% & 3%
  2. B) Asset & wealth management – 173% & 6%
  3. C) Housing finance – 10% & 20%
  4. D) Fund based investments – 13% & 72%
  1. Cash market share was up by 30 Bps to 6%.
  2. PAT in capital markets business grew by 79% which involves brokerage (22%), distribution (+47%) , interest income (+47%) & investment banking.
  3. Overall ARPU stood at 26,518 Vs 28,093 YoY due to higher base effect.
  4. Total retail client base stood at 2.85 Mn while active clients stood at 0.9 Mn.
  5. Total distribution AUM stood at Rs.168 Bn.
  6. SIP AUM & live SIP count stood at Rs.41.5 Bn & 1,65,117.
  7. PAT from AMC business decreased by 14% YoY on a quarterly basis.
  8. AMC EBITDA Margin and Opex to AAUM stood at 39% & 29% for FY22.
  9. Share of Alternatives share in AUM stood at 37% while Performance linked AUM share in alternatives stood at 30%.
  10. Private Equity & real estate investment unit PAT increased by 184% YoY on a quarterly basis.
  11. Wealth management PAT decreased by 12% YoY in Q4FY22 while PAT for FY22 increased by 116% YoY.
  12. Wealth AUM stood at Rs.344 Bn which was up 36% YoY while revenue per RM stood at Rs.13.5 Mn Vs Rs.10.3 Mn YoY.
  13. Disbursements in Home finance business stood at Rs.2.1 Bn in Q4FY22.
  14. GNPA & NNPA stood at 2.6% & 1.6% respectively as per new RBI norms.
  15. Collection efficiency in March was at 104%.
  16. Yields for FY22 stood at 13.9% while cost of funds & NIM stood at 8.2% & 7.3%.
  17. ALM for 1-3 years & 3-5 years was positive.
  18. 67% of the liability mix constituted of floating rate liabilities while net leverage stood at 2.3.
  19. Opex & cost to income stood at 36% while ROA & CRAR stood at 2.6% & 52%.
  20. Total equity investment including alternate funds for FY22 stood at Rs.40.5 Bn while total unrealized gain on these investments stood at Rs.17.1 Bn.

 

Investor Conference Call Details: 

  1. The company raised Rs.14 Bn in FY22 at an average cost of 7% vs an overall Cost of funds of 8.2%.
  2. The company’s ratings were upgraded by CRISIL & India Ratings to AA/Stable.
  3. The company’s net sales in AMC biz for Q4 was Rs.1000 Cr while its average AUM was lower due to mark-to-market impact.
  4. In the private equity division, the company charges a 2% management fee from the date of the first close on the entire fundraises and a 20% profit share at the end of the life of the fund meanwhile the life of the fund is 10 years which is extendable by two years.
  5. In the real estate fund, the fees would be 1% yield & 10% of the profit share meanwhile the life of this fund is 4-5 years & payout is relatively more frequent and faster as compared to private equity as this fund is primarily for income generation.
  6. The management states that the AUM constitutes 60% external and 40% captive because historically when the business was born, it used to be 100% captive and over some time that number has come down to 40% and it expects this to trend lower in the coming years.
  7. The management believes that the AMC biz will turn around in the coming time due to the recent healthy performance of its funds.
  8. The company’s key operating priority is – ‘Performance First, Yield Next, and AUM follow Suit.’
  9. The income from the IPO biz in FY22 was Rs.70 Cr.
  10. The management believes that it can double its disbursements from Rs.600 Cr in FY22 to 1200 Cr in the coming year meanwhile increase its leverage from 2.4X to 3.5X & the decreased cost of borrowings will help it achieve ROE of 15-16% in the coming period.
  11. The management states that its active & passive funds complement each other since it doesn’t have any international active funds and its passive funds are predominantly International.
  12. The company’s cost of acquisition of clients & ARPU through the digital side is Rs.2000 & 7000 respectively while ARPU through advisors is Rs.17,000.
  13. The bounce rate in the housing finance division is 13% on the new book & 19% on the overall book.

 

Analyst’s View:

Motilal Oswal is one of the most recognizable names in the broking industry in India. The company had a dismal quarter on the back of the continued decline of stock markets around the world and India. The other businesses including private equity and real estate lending businesses are doing good with NPAs in the latter at reasonable levels. The AMC business however has been on the decline along with the rest of the AMC industry. It remains to be seen how the company will fare in the near future with the widespread expectation of an oncoming recession and capital markets will staying down. Nonetheless, given the long history and brand image of the company along with its wide physical presence, Motilal Oswal is a good NBFC/broking stock to  watch out for.