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Motilal Oswal Financial Services Ltd.

BSE: 532892 Sector: Financials
NSE: MOTILALOFS ISIN Code: INE338I01027
BSE 00:00 | 21 Feb 619.75 40.30
(6.95%)
OPEN

593.10

HIGH

624.85

LOW

593.00

NSE 00:00 | 21 Feb 617.70 39.50
(6.83%)
OPEN

614.95

HIGH

625.90

LOW

581.15

OPEN 593.10
PREVIOUS CLOSE 579.45
VOLUME 15953
52-Week high 1212.65
52-Week low 549.75
P/E 36.85
Mkt Cap.(Rs cr) 9,024
Buy Price 616.05
Buy Qty 17.00
Sell Price 623.00
Sell Qty 125.00
OPEN 593.10
CLOSE 579.45
VOLUME 15953
52-Week high 1212.65
52-Week low 549.75
P/E 36.85
Mkt Cap.(Rs cr) 9,024
Buy Price 616.05
Buy Qty 17.00
Sell Price 623.00
Sell Qty 125.00

Motilal Oswal Financial Services Ltd. (MOTILALOFS) - Chairman Speech

Company chairman speech

Dear Shareholders

It gives me great pleasure to share with you our performance in the last year. FY2018marked continuing progress towards the strategic objective outlined a few years ago toachieve a business model offering greater linearity and higher Return on Equity. We remainexcited by the overall positioning of each of our businesses to capitalise on the varioustailwinds created by financialisation of savings shift from unorganised to organised dueto demonetisation and GST and several other macro trends. We reported our highest everannual revenues and profits in FY2018. FY2018 consolidated revenue of Rs.2770 crores up43% YoY. FY2018 PAT of Rs.562 crores up 56% YoY. In line with our stated objective ofachieving sustainable 20% ROE over the long term our reported ROE in FY2018 was 28%. Allour businesses still offer significant headroom for growth. We have been investing inmanpower technology & processes and are well placed to capture these ensuing growthopportunities.

In terms of business verticals our asset-based businesses (comprising of assetmanagement private equity and wealth management) saw solid traction in mobilisation aswell as robust investment performance in asset management. In private equity businessfunds are delivering on profitability and scalability fronts and in wealth managementstrong RM addition and their vintage will drive profitability. In our capital marketsbusinesses (comprising of retail broking institutional broking & investment banking)our strategy in retail broking to bring in linearity through the trail- based distributionbusiness is showing results. In institutional equities business our rankings withexisting clients and contribution of domestic institution improved and new clientadditions were encouraging. Investment banking showed strong results in FY2018 withhighest ever revenues and deals with marquee clients led by the ECM business. Our housingfinance business which focuses on affordable housing space has seen a year ofconsolidation with cautiously calibrated growth amid seasoning of the book and rising NPLscenario. Asset quality deterioration was mainly on account of delay in setting up ofcollection & legal organization and prolonged impact of external shocks in the economy(Demonetization GST and RERA). In FY18 we have set up a strong collection vertical. Wehave also strengthened the management team along with ramp-up of critical functions likeCredit Technical Collections Operations HR Business Process & Quality andCompliance. In FY18 several measures were taken by strengthening systems processesoperations & people in order to build a strong foundation for sustainable growth infuture. In our fund based businesses (comprising of sponsor commitments to quoted equityand private equity funds) most of the gains are still unrealized and yet to be booked inour reported P/L. As per IND- AS these gains will form a part of reported earnings fromFY19. Our long-term track record in investment performance as seen from the 14-year CAGRreturns of our flagship product augurs well forthisfund based business.

In terms of financial performance our revenue of Rs.2770 crores in FY2018 was ahighest for the Group. This uptick in topline was backed by strong growth across most ofour businesses - asset and wealth management up 66% YoY and capital markets up 47% YoY.Our PAT of? 562 crores in FY2018 was also a high for the Group. This uptick was led byimproved profitability across all businesses - asset and wealth management up 60% YoY andcapital markets up 64% YoY. We have made significant investments into manpower brandtechnology & processes in recent years.

While our ROE on the reported PAT was 28% in FY2018 it does not include the impact ofunrealized gains from investments in our mutual funds. Had this been included our FY2018ROE would have been~32%.

In terms of key business highlights we improved our equity market share in the highyield cash segment in our overall broking business. Our distribution AUM improvedsignificantly this year up 71% YoY. Given that only a small portion of our network hasbeen tapped so far the potential to increase cross-selling still remains immense. Ouronline initiatives are evincing significant client interest apart from expanding ourreach and productivity at incrementally lower costs. Following continued efforts blocksactivity in institution broking has gained significant traction. We participated infifteen ECM transactions in our investment banking business which is the best everperformance in terms of a number of deals and value of transactions. In asset managementour position as a niche equity specialist based on our QGLP investing process has beenwell accepted across the distributor fraternity which can be seen in our net sales amountwhich has more than doubled from FY2017 level to Rs.128bn+125% YoY. In private equityour first fund is in exit stage and has earned us healthy carry income this year. Thisbusiness has scaled up across both the growth capital and real estate funds. In wealthmanagement a strong brand image is helping attract quality RM talent which has grown at ahealthy rate. We continue to see solid traction in mobilization and client count in thisbusiness. The housing finance business has been consolidated this year. We invested intocollection manpower technology strengthening of credit underwriting and processes.

At a macro level the shift from physical savings to financial savings in India augurswell for our businesses. The government continues to drive the right initiatives in theaffordable housing space. Domestic mutual funds have witnessed unprecedented inflows. Therevival of the IPO market should only bring more quality companies into listed space. Asthese broader trends translated into business opportunities our investments in criticalareas give us the ability to capture these opportunities as they unfold further.

To sum up our strategy of the diversified business model towards linear sources ofearnings is showing definite results with 56% PAT growth in FY18. All our businessescontinue to grow strongly make significant investments are building scale and offeroperating leverage. Our brand is now being recognized in each of our businesses. RoE isbest in class at 28% and 32% including unrealised gains. We remain excited about theheadroom to grow in our businesses and remain sharply focused on each of our businesses.

With best wishes

Sincerely

Motilal Oswal

Chairman Managing Director & CEO

Motilal Oswal Financial Services Ltd..