Motilal Oswal Profits Jump As It Targets Foreign Institutional Markets

Financial services firm Motilal Oswal Financial Services Ltd. reported strong profit and revenue growth in the final quarter of financial year 2016-17. The company with business arms ranging from broking to housing finance stated that its profits rose 113 percent year-on-year to Rs 360 crore for the year ended March, 2017.

Revenue jumped 66 percent to Rs 1,818 crore on the back of strong growth across its businesses. Housing finance registered a 160 percent growth year-on-year while asset management grew 68 percent. The capital markets businesses grew 40 percent during the year.

The firm said in a media statement on Thursday that it is beginning to see contribution from new businesses on its topline as well as bottomline. For instance, 57 percent of its profit came from assets and wealth management along with housing finance in the financial year 2016-17 as compared to 45 percent last year.

This is despite significant investments made by the company in adding manpower in its broking and housing finance arms as well as expanding branches for its housing finance segment. The company doubled its reach from four to nine states during the year, said Navin Agarwal, managing director of Motilal Oswal Financial Services.

The company declared a dividend of Rs 3 per share in the quarter taking the total dividend for the financial year to Rs 5.5 as compared to Rs 3.5 in the financial year 2015-16.

“Our strategy to diversify our business models towards linear sources of earnings is showing definite results, with over half of the revenue and profit pie now coming from these new businesses. They have built scale in the last year, while maintaining critical operating parameters,” Motilal Oswal, chairman and managing director of the company said in the media statement.

Speaking to BloombergQuint on Friday, the company’s Chief Executive Officer Navin Agarwal said that falling retail cash volumes have not resulted in falling yields even though consolidated results show them falling because the market has moved in favour of futures and options.

“There is no contraction in the yields like-to-like. The reason why you are seeing a contraction in the overall reported yields because there has been a mix-change in favour of the futures and options market that has been continuing for the last five years,” Agarwal said.

He added that all business arms of the company gained post demonetisation with housing finance bouncing back to record high disbursements in the last quarter as compared to pre-demonetisation quarters.

Agarwal said that the company is now looking to diversify into other areas such as foreign institutional managed assets where it has zero presence even though it has more than Rs 20,000 assets under management in the domestic market.

“Currently nearly two thirds of the institutionally managed assets of India are managed by foreign investors and only one-third are managed by domestic investors. So we are looking at gaining a worthwhile share in this foreign pool of assets over the coming years,” he added.