Higher valuations driven by 'bumper' growth expectations: Raamdeo Agrawal
Multiples will come down if the companies fail to deliver on earnings growth, he said
 "Higher valuations driven by 'bumper' growth expectations: Raamdeo Agrawal")
High valuations, especially in the small- and mid-cap space, are driven by expectations of 'bumper' earnings growth, said Raamdeo Agrawal on Tuesday, adding that there is a threat that multiples may come off if these expectations are not met.
One of the impacts of the high liquidity in the equity market, he said, is that the availability of equity capital is no longer a worry for entrepreneurs looking to expand their business.
"The real problem is demand," the chairman and co-founder of Motilal Oswal Financial Services said.
According to Agrawal, the flow of retail money into the equity market will only grow over time, and the mutual fund industry is poised to benefit. He said that the assets under management (AUM) of equity mutual fund schemes could alone touch the Rs 100 trillion mark in the next 6-7 years.
"I believe all the asset management companies (AMCs) are cheap because of the high growth potential. There are few businesses like AMCs which can deliver 25-30 per cent yearly growth. The only risk is of the regulator trimming the margins," he said.
Motilal Oswal AMC recently achieved the Rs 1 trillion milestone with active mutual fund (MF) AUM of Rs 47,212 crore and passive MF AUM of Rs 25,000 crore. The portfolio management service (PMS) and the alternative investment fund (AIF) AUM stood at Rs 14,556 crore and Rs 13,801 crore, respectively.
Agrawal said the AMC is targeting a spot in the top five fund houses list and is building the competence and capacity to manage such a large AUM.
"In 10 years we have made the foundation. Now, we want to build on it. The industry has momentum and so do we. Even if we compound at 40 per cent yearly, the AUM will double in the next 24 months," he said.
Navin Agarwal, Group Managing Director, Motilal Oswal Financial Services, said the company was ramping up its physical presence as well as its digital infrastructure to enhance reach.