Mumbai, Oct 26, 2016: Motilal Oswal Financial Services Ltd., a leading financial services company, announced its results for the quarter ended Sep 30, 2016 post approval by the Board of Directors at a meeting held in Mumbai on Oct 26, 2016.
Performance Highlights:
Rs CroreQ2FY17Q2FY16YoY ChangeQ1FY17QoQ Change
Revenues461269?71%365?26%
PBT14959?152%106?40%
PAT10243?134%79?28%
Diluted EPS - Rs (FV-Rs 1)7.03.05.5
Performance for the Quarter ended Sep 30, 2016
Consolidated revenues were Rs 461 crore in Q2FY17, up 71% YoY. It was Rs 826 crore in H1FY17, up 72% YoY
Every business has fired in terms of revenue growth during the quarter. Housing finance was up 222% YoY, Asset management fee was up 48% YoY & Capital market businesses (broking & investment banking) were up 46% YoY
Full exit of the 1st growth capital PE fund, IBEF I, would also be a meaningful contributor in FY17/18
Consolidated PAT was Rs 102 crore in Q2FY17, up 134% YoY. It was Rs 181 crore in H1FY17, up 152% YoY
Q2FY17 included exceptional items, which comprised of share in profit on sale of investments (carry share) made in the 1st PE growth fund, as well as the impact of write-off on account of doubtful NPA. PAT impact of carry share was Rs 63 crore in H1FY17; of this Rs 37 crore was earned in Q2FY17
Impact of operating leverage is becoming visible, as PAT Margin improved to 22% in Q2FY17 from 16% in Q2FY16
Balance sheet had net worth of Rs 1,634 crore & gross borrowings of Rs 4,714 crore (including Aspire), as of Sep 2016
ROE for Q2FY17 was 26% on reported PAT vs 13% in Q2FYFY16. However, this does not include unrealized gains on investments in Motilal Oswal’s mutual fund products (Rs 273 crore, as of Sep 2016)
Speaking on the performance of the company, Mr. Motilal Oswal, CMD said:
“Each one of our businesses delivered robust revenue growth this quarter as compared to the previous year, as our investments into critical resources are now bearing fruit. Our business volumes, asset mobilization, market share and client addition have seen visible improvement. Our profits this quarter were the highest-ever quarterly profits for the Group, and our ROE for the quarter is double as compared to the same quarter last year. With diversification of business lines, contribution of Capital Markets businesses (Broking and Investment Banking) to overall profits has been coming down since the last couple of years. It was ~26% in H1FY17 vs ~62% in FY15. Contribution of Asset & Wealth Management was up from ~14% in FY15 to ~47% in H1FY17. Housing Finance contributed ~19% in H1FY17, while Fund based business comprised another ~8%. We have built strong a competitive positioning in each of our businesses and we are very excited about the scalability of our Asset Management and Housing Finance businesses and the potential returns from the Capital Market business and Fund based business”
Performance of Business Segments for the Quarter ended Sep 30, 2016
-Capital markets Businesses (broking & investment banking) are showing results following investments
-Broking & related revenues were Rs 186 crore in Q2FY17, up 39% YoY. During Q2FY17, MOSL’s revenue was up 34% YoY & 25% QoQ. PAT was up 51% YoY & flattish on QoQ basis. Q1FY17 included profit on sale of mutual funds of Rs 8 crore. Excluding this, the operating PAT in Q2FY17 was up 43% QoQ. Proactive investments into manpower, brand & technology have driven a meaningful traction in our business, & our overall equity market share has risen 1.8% in Q2FY16 to 2.2% in Q2FY17
-In retail broking & distribution, our investments into sales, advisory & technology are bearing fruit now. During the quarter, our monthly addition of retail clients was up 69% YoY, our retail market share improved in cash & F&O on YoY basis, & DP AUM was up by 52% YoY. Our tech-platforms evinced increased interest, & online business was ~41% of our retail volumes in Q2FY17, up from ~27% in Q2FY16. Mobile app comprised ~8% of business in Q2FY17 & it has been steadily rising. Our vast network of 2,200+ outlets is being leveraged to deepen product-penetration. Financial products AUM was up 64% YoY, & this will help build a sustainable annuity revenue stream
-In institutional broking, the 12th Annual Global Investor Conference was one of the biggest format events in this industry. It saw participation from 120+ companies & 750+ global investors, resulting in 4,000+ corporate investor meetings. The share of Blocks has steadily increased within our institutional volumes
-Investment banking fees were Rs 20 crore in Q2FY17, up 177% YoY. Our ECM business has gained definite momentum in recent quarters with deal closures & revenue growth. We successfully closed a QIP, IPO, OFS & Buy back in Q2FY17. Key transactions include ~Rs 750 crore QIP of Bharat Financial Inclusion, ~Rs 241 crore IPO of SP Apparels & OFS of Igarashi Motors Ltd. Lower growth in PAT as compared to the topline is attributable to higher personnel cost provisions during Q2FY17. We are optimistic on the growth prospects for this business
-Capital markets businesses contributed ~45% of revenues in Q2FY17, as compared to ~52% in Q2FY16
Asset and Wealth Management Businesses have seen strong business traction
-Total AUM/AUA across asset management & private equity businesses was Rs 18,070 crore, up 59% YoY. Wealth management AUM was Rs 8,557 crore, up 70% YoY
-In asset management, our AUM across mutual funds, PMS & AIF was Rs 15,029 crore. In Q2FY17, revenue was up 28% QoQ but EBITDA was up only 6% QoQ. This was due to an incremental Rs 4 crore spent in advertising. We are methodically building our positioning as “equity specialists” with our QGLP philosophy, which has consistently delivered on performance. Our rank in Equity AUM improved to 11 as of Q2FY17 vs 18 in FY14. Our market share in Equity MF Average AUM was ~1.3% in H1FY17. Importantly, our market share in Equity MF Net Sales was significantly higher at ~4%. Our overall net inflows remained strong at ~Rs 1,077 crore in Q2FY17 vs ~Rs 872 crore in Q1FY17, as we deepened existing distributor relationships & added few large distributors. Our new AIF platform mobilized a commitment of Rs 600 crore, with a drawdown of Rs 196 crore as of 30 Sep 2016. Our new Dynamic Equity Fund raised Rs 330 crore in its offer period. We are tapping global pools of capital with our offshore business initiatives, which is under ay with the launch of Motilal Oswal India Fund
-In private equity, we manage an AUM of Rs 3,042 crore across 2 growth capital PE funds & 3 real estate funds. The PE business has demonstrated high profitability & the RE business has shown significant scalability. We expect these attributes to continue, going ahead. The 1st growth fund, IBEF I, has seen 6 full-exits & 2 partial exits in 2 companies, translating into ~201% capital returned (INR). It is in advanced stages for 1 exit in the coming months, which may allow it to return an additional ~14% capital. It is likely to deliver a gross multiple of ~3.5X. The 2nd growth fund, IBEF II, has committed ~89.5%, after raising commitments from marquee institutions. The 1st real estate fund, IREF I, has seen full/partial exits from 6 projects, translating into ~86% capital returned. The 2nd real estate fund, IREF II, has committed ~96% across developers. The 3rd real estate fund, IREF III, is in fundraise stage with an AUM target of Rs 1,250 crore. It announced its 2nd close & raised commitments of ~Rs 850 crore It has committed ~27% from the fund
-Asset Management fee (asset management & private equity together) were Rs 85 crore in Q2FY17, up 48% YoY. This contributed ~19% of consolidated revenues this quarter, as compared to ~21% in Q2FY16
-In Wealth management, the traction in RMs from 64 to 82 YoY, led to a 70% YoY growth in AUM & a 21% YoY rise in client families. We have seen good traction in deepening of client wallet-share & product penetration. We enjoy a high yield, due to the higher share of equity & real estate products in our AUM. This business offers enormous scope for scalability as it builds synergies with the Group’s other businesses to deepen its reach
Housing finance has shown traction in assets & liabilities, while maintaining risk & operational parameters.
Housing finance related income was Rs 148 crore in Q2FY17, up 222% YoY
On the assets side, the loan book was Rs 3,066 crore, up 210% YoY. It has funded ~32,000 families so far
Disbursements for Q2FY17 were Rs 666 crore vs Rs 442 crore in Q2FY16, up 51% YoY. Disbursements in H1FY17 stood at Rs 1,146 crore vs Rs 644 crore in H1FY16, up 78% YoY
The traction in the book is in line with the strategy of deepening our network in existing geographies. The branch count was 74 as of Sep 2016, up 100% YoY
On the liabilities side, it had credit lines from 25 banks & 1 NBFC vs 11 a year ago. Approx 61% of borrowings are from the capital markets. The ratings of Crisil A+/Stable & ICRA AA- (Stable) augur well for future fund-raise
Cumulative capital infusion by sponsors till-date is Rs 500 crore. The total infusion in H1FY17 was Rs 200 crore. The strong liquidity in the Group’s balance sheet (~Rs 880 crore) allows us to fund investments in Aspire Home Finance
As of Q2FY17 on an annualized basis, our ROA was 3.6%, ROE was 17%, GNPL was 0.3%, NIM was ~418 bp & D/E ratio was 6.0x
PAT for Q2FY17 was Rs 23 crore vs Rs 10 crore in Q2FY16, up 138% YoY. PAT for H1FY17 was Rs 36 crore, as compared to Rs 40 crore in fiscal year FY16
Housing Finance contributed ~32% of consolidated revenues this quarter, as compared to ~17% in Q2FY16
Fund Based Business includes sponsor commitments to our AMC & PE funds, and NBFC LAS book
Fund based income was Rs 19 crore in Q2FY17, down 21% YoY
Our investments in Motilal Oswal’s mutual funds (at cost) stood at Rs 607 crore. The unrealized gain on these was Rs 273 crore. The same is not reflected in the P/L. The XIRR of these investments (since inception) is ~25% & is significantly higher than the 7-9% post tax returns earned prior to the shift in capital allocation two years back. This validates the demonstrated long term performance track record of our QGLP investment philosophy
Our investments in Motilal Oswal’s alternative investment products stood at Rs 232 crore. The 1st Growth fund, which is in exit mode, has returned close to 2 times till date. The portfolio gains booked in H1FY17 were Rs 29 crore; of which Rs 6 crore was booked in Q2FY17
Both these commitments have not only helped “seed” these new businesses by investing in highly scalable opportunities, but they also represent highly liquid “resources” available to use for future investments, if required.
NBFC LAS lending book was Rs 264 crore, as of Sep 2016, which is run as a spread business
Other income was Rs 2 crore in Q2FY17.
In line with its goal to achieve 20%+ ROE, consolidated ROE for the Group for H1FY17 was 24% annualized (without unrealized gains on mutual funds of Rs 273 crore). Within this, Housing Finance was 15% annualized, Asset and Wealth Management business was 272% annualized, Capital Markets was 36% annualized and Fund based business was 4% annualized (without unrealized gains on mutual funds).
About Motilal Oswal Financial Services Limited
Motilal Oswal Financial Services Ltd. is a financial services company. Its offerings include capital markets businesses (retail broking, institutional broking & investment banking), asset & wealth management (asset management, private equity & wealth management), housing finance & equity based treasury investments. Motilal Oswal Securities won the ‘Best Performing National Financial Advisor Equity Broker' award at the CNBC TV18 Financial Advisor Awards for the 5th time. It was ranked the Best in Events/Conferences, ranked amongst Top-2 for Overall Sales Services & Best Roadshows/Company Visits & amongst the Top-3 in Best Local Brokerage, Best Execution & Sales Trading Visits at the AsiaMoney Awards 2015. Motilal Oswal Private Equity won the ‘Best Growth Capital Investor-2012’ award at the Awards for PE Excellence 2013. Motilal Oswal Private Wealth Management won at the UTI-MF CNBC Financial Advisor Award in HNI Wealth Management category for 2015. Aspire Housing Finance was awarded ‘India’s Most Admired & Valuable Housing Finance Company’ at India Leadership Conclave 2015.
Mr. Ramnik Chhabra
Motilal Oswal Financial Services
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Motilal Oswal Financial Services
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Paradigm Shift Public Relations
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