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Motilal Oswal Financial Services Ltd.

BSE: 532892 Sector: Financials
NSE: MOTILALOFS ISIN Code: INE338I01027
BSE 00:00 | 17 Jul 782.60 7.25
(0.94%)
OPEN

799.00

HIGH

799.05

LOW

770.00

NSE 00:00 | 17 Jul 784.80 10.65
(1.38%)
OPEN

770.00

HIGH

791.60

LOW

770.00

OPEN 799.00
PREVIOUS CLOSE 775.35
VOLUME 5533
52-Week high 1585.00
52-Week low 735.30
P/E 87.74
Mkt Cap.(Rs cr) 11,379
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 799.00
CLOSE 775.35
VOLUME 5533
52-Week high 1585.00
52-Week low 735.30
P/E 87.74
Mkt Cap.(Rs cr) 11,379
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

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

Company chairman speech

Dear Shareholders

It gives me great pleasure to share with you our performance of the last year. Twoyears ago we initiated a strategic transformation of our business model into four enginesof growth - capital market business asset based business housing finance business andfund based business. Financial Year 2017 (FY2017) saw us delivering the initial results ofthis strategic transformation. Each of our businesses are building scale across assetssales and volumes as well as improving its market share. Our business model has beenmoving steadily towards annuity- type sources of earnings. Within our FY2017 consolidatedrevenue of Rs. 1818.32 crores 55.76% was contributed by annuity sources like housingfinance asset and wealth businesses. Similarly within our FY2017 profit after tax (PAT)of Rs. 359.99 crores 56.94% was contributed by housing finance asset and wealthbusinesses. This strategy of diversification towards annuity-based sources is drivingvisibility of our future earnings. In line with our stated objective of achievingsustainable 20% return on equity (ROE) over the long term our reported ROE in FY2017 was22.34%. All our businesses still offer significant headroom for growth. We have beeninvesting in manpower technology and processes and are well placed to capture theseensuing growth opportunities.

In terms of business verticals our asset based businesses (comprising of assetmanagement private equity and wealth management) saw solid traction in mobilization aswell as robust investment performance. In our capital markets businesses (comprising ofretail broking institutional broking and investment banking) our investments into ourdistribution and digital businesses in retail blocks business in institution and equitycapital market (ECM) business in investment banking showed results in FY2017. Our housingfinance business which focuses on affordable housing space is scaling up in assetsliabilities and network. We expanded into six new states in addition to earlier three. Asmuch focus is placed on risk management underwriting collections and asset quality as onscale. In our fund based businesses (comprising of sponsor commitments to our mutual fundsand private equity funds) most of the gains are still unrealized and yet to be booked inour Profit & Loss statement. Our long term track record in investment performance asseen from the 14-year CAGR returns of our flagship Value PMS scheme augurs well for thisfund based business.

In terms of financial performance our revenue of Rs. 1818.32 crores in FY2017 was anall-time high for the Group. This uptick in topline was backed by strong growth across allour businesses with housing finance up 159.91% year on year (YoY) asset and wealthmanagement up 69.08% YoY and capital markets up 37.28% YoY. Our PAT of Rs. 359.99 croresin FY2017 was also a high for the Group. This uptick was led by improved profitabilityacross all businesses with housing finance up 102.80% YoY asset and wealth management up236.95% YoY and capital markets up 177.71% YoY. We have made significant investments intomanpower brand technology and processes in recent years. Some of the operating leveragefrom these investments became visible this year as the PAT margin improved from 15% to20% on a YoY basis. However the full benefit of operating leverage is yet to unfold.While our ROE on the reported PAT was 22.34% in FY2017 it does not include impact ofunrealized gains from investments in our mutual funds. Had this been included our ROEwould have been much higher.

In terms of business wins we improved our equity market share in the high yield cashsegment in our overall broking business. Asset under management (AUM) in our distributionbusiness improved significantly this year. Given that only a small portion of our networkhas been 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 in tenECM transactions in our investment banking business which is the best ever performance innumber of deals and value of transactions. In asset management our position as a nicheequity specialist based on our QGLP investing process has been well accepted across thedistributor fraternity. We are also seeing initial interest in our offshore AMC product.In private equity our first fund is in exit stage and has earned us healthy carry returnsthis year. This business has scaled up across both the growth capital and real estatefunds. In wealth management a strong brand image is helping attract quality relationshipmanagers. We continue to see solid traction in mobilization and client count in thisbusiness. The housing finance business has been growing steadily.

We expanded into new six states while also seeing continued traction in our existingthree states.

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. Fils made a comeback with strong net inflows after a temporaryexodus during the demonetization phase. Even domestic investors have shown continuedinterest through the equity mutual fund route. The revival of the IPO market should onlybring more quality companies into the listed space. As these broader trends translatedinto business opportunities our investments into critical areas give us the ability tocapture these opportunities as they unfold further.

To sum up the strategic realignment of our businesses the reallocation of our capitaland the resulting changes in the value drivers has enhanced the earnings power of ourGroup. Our four engines of growth make us optimistic of continued strong performance. Iwould like to express my gratitude to our Board of Directors for their support andguidance. I am also grateful to all our stakeholders who have reposed their trust in usand given us constant support.

With best wishes

Sincerely

Motilal Oswal

Chairman Managing Director & CEO

Motilal Oswal Financial Services Ltd.