An employee counts Indian rupee banknotes at a store in Hyderabad, India. (Photographer: Dhiraj Singh/Bloomberg)
An employee counts Indian rupee banknotes at a store in Hyderabad, India. (Photographer: Dhiraj Singh/Bloomberg)

Motilal Oswal Financial Services Expects AMC Arm To Drive Returns In FY20

Motilal Oswal Financial Services Ltd. looks to clock 20 percent return on equity in the ongoing financial year on the back of its asset management arm tapping into newer clients and digital platforms.

“We have the benefit of new clients coming in consistently and all the digital trends are accelerating the onboarding of clients,” Aashish Somaiyaa, managing director & chief executive officer of Motilal Oswal AMC, told BloombergQuint in an interview. “Also, it’s a natural progression for equity investors, bond holders and fixed deposit investors to avail professional management services.”

The AMC business can grow 25-30 percent year-on-year in terms of assets under management when there is a “virtuous cycle” as the inflows increase as returns kick in, said Somaiya.

Motilal Oswal Mutual Fund manages around Rs 19,700 crore in assets as of September, according to Bloomberg data. That comes as inflows for its systematic investment plans fell around 18 percent year-on-year to Rs 140 crore in the three months through September while market share, declined by nearly a third to 1.6 percent, according to the Association of Mutual Funds in India. However, the company expects the trend to reverse as it increase its distribution centres to 50 by the end of FY20.

MOSL has greater market share in terms of digital presence in the industry, Somaiya said.

Capital Markets Business

The firm’s capital markets business—comprising retail broking, institutional equities and investment banking verticals—registered a 25 percent annualised growth rate to Rs 1,250 crore in the 24 months through October on the back of cross-selling and increasing client base, said Navin Agarwal, chief executive officer of Motilal Oswal Securities.

“This has happened despite small and midcaps not performing very well where retail participation is very high and IPOs being lacklustre,” Agarwal said, adding there was a greater headroom to grow as corporate profit-to-GDP ratio is just 2.5 percent.

Will Zero-Broking Firms Eat Up Fee-Based Businesses?

Though in the short-run, brokerage firms charging zero charges may get a lot of clients on-board, the non-discount companies will sustain in the long run, said Agarwal. That comes as Bajaj Finserv launched zero-brokerage services with an annual subscription fee of Rs 500 this month. “A lot of first-time investors on zero-brokerage platforms will eventually need advice and discipline.”

Trading is injurious to wealth. And, when that trading is made very easy on a mobile app and cost of trading is zero, the time to reach zero (make a loss) is accelerated. So we provide discipline and advice to these clients. Some of the products such as Focus 35 we have cross sold are at their lifetime highs while their own trading portfolio is down dramatically.
Navin Agarwal, Chief Executive Officer, Motilal Oswal Securities.
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