Motilal Oswal Financial Services reports operating PAT of Rs 182 cr, +40% YoY in Q1FY23 

Mumbai, July 28, 2022: Motilal Oswal Financial Services Ltd. announced its results for the quarter ended June 30, 2022 post approval by the Board of Directors at a meeting held in Mumbai on July 28, 2022.

Performance for the quarter ended June 30, 2022:

• In Q1FY23, consolidated revenues grew by 13% YoY at Rs 965 cr. Operating profit (excluding gains on investments) for the quarter was Rs 182 cr, +40% YoY.
• Capital market business PAT grew by 16% YoY; Asset & Wealth +6% YoY. Housing finance business profit grew by 279% YoY to Rs 32 cr.
• Due to equity market correction, MTM on fund based investments has impacted total profits for the quarter.

Key highlights for the quarter ended June 30, 2022:

• Most of our businesses have delivered strong and sustainable performance.
• Our Asset under Advisory (AUA) across AMC, Wealth and Distribution businesses was Rs 2.9 tn.
• Capital Markets – Business has delivered consistent growth in various business parameters including 163% YoY growth in ADTO volumes, meaningful improvement in market share of retail F&O segment, growth in active clients & client addition led by traction in digital acquisition channel, robust net sales in distribution business, growth in funding book and strong Investment banking mandate pipeline.
• Asset & Wealth Management– AMC saw good traction of flows towards Alternates Assets. Net revenue yield was intact at 75 bps during Q1FY23. Launched Motilal Oswal Ethical Strategy fund- an Ethical and Shariah complaint PMS with strong visibility of inflows. Robust wealth management net sales of Rs. 1,990 cr, +88% YoY.  Our largest ever PE growth fund (IBEF-IV) with target size of Rs. 4,500 cr has raised Rs 4,000 cr till date and expect to close balance fund in coming quarters.
• Home Finance – Strong pick-up in disbursements of Rs. 170 cr, up 84% YoY, traction in login/sanction pipeline, expansion in sales force & collection team and diversification of liability franchisee.
• Consolidated net worth of Rs 5,650 cr, net debt is Rs 4,164 cr. Excluding Home finance, net debt is Rs 1,806 cr. Total D/E stood at 1.1x. Ex-MOHF D/E stood at 0.7x. Net of investments, we have a net cash balance sheet.
• Successfully completed buyback of 14.54 lakh shares amounting to Rs 200 cr.

Speaking on the performance of the company, Mr. Motilal Oswal, MD & CEO said “All of our businesses have delivered robust & sustainable performance in Q1FY23amidst challenging environment. Our retail broking business which is our cash cow business has improved its market share and benefitting from market expansion and industry consolidation. Our strategy to diversify our business model towards linear sources of earnings continue to deliver results. Our Asset Management business is likely to gain from process driven investing and its niche offerings. Our Wealth Management business has delivered consistent performance over years and on its way to achieve scale in this business. Our PE business has delivered on fund raise of its largest ever fund. Our Housing finance business has witnessed turnaround by improving disbursements trend and now geared up for sustainable growth. There is immense potential and opportunities in the market for each of our businesses to flourish. “

Performance of Business Segments for the quarter ended June 30, 2022

·    Capital markets Businesses (Broking & Investment banking)

o  Capital markets comprise of Retail Broking, Institutional Equities and Investment Banking business. Revenues for this segment were Rs 608 cr, +19% YoY in Q1FY23. Capital market businesses have contributed ~64% of consolidated revenues.

o  Profit grew by 16% YoY at Rs 91 cr in Q1FY23led by healthy volume growth of 163% YoY / 24%QoQ and improvement in retail F&O market share by 34 bps QoQ.

o  In Retail Broking & Distribution, total 210,000 clients acquired in Q1FY23 with traction witnessed in online channel. NSE active clients have registered 43%YoY growth at 9.3 lakhs as of Jun 2022.

o  Our incremental Demat account market share improved by 40 bps QoQ to 3.1%

o  Our strategy to bring in linearity through the trail-based distribution business is showing results. Distribution AUM grew by 23% YoY at Rs 17,221 cr as of Q1FY23. Distribution Net Sales registered a 7x YoY growth to Rs 375 cr. With only 16% of the ~30 lakh client base tapped, we expect a continued increase in AUM and fee income as number of clients to whom we have cross sold and number of products per client cross sold rises.

o  Our robust Funding book grew by 17% YoY to Rs 2,030 cr.

o  Strengthening our digital ecosystem with focus on revamping digital infrastructure, setting up data science team, reorienting digital business unit and launching multiple digital products

o  In Institutional Broking, there is strong improvement in domestic client rankings with top 3 rank retained in most clients. This has been the result of focus driven differentiated research products with 250+ companies covering 21 sectors.

o  Investment Banking There is a strong pipeline of signed IPO, Equity Capital Market and Private Equity mandates which will start entering the markets with improvement in macro environment, as a result further revenue traction can be witnessed in coming quarters.

·    Asset & Wealth Management businesses (AMC, PE and PWM)

o  Asset Management business AUM across MF, PMS & AIF stood at Rs 43,423 cr. In Q1FY23, revenues stood at Rs 140 cr.

o  Equity MF AUM stood at Rs 27,417 cr. We have seen improvement in performance of several products.

o  Added around 47k new SIPs in Q1FY23, with traction witnessed in active funds (+10% YoY).

o  Our share of Alternate assets, comprising ofPMS & AIF, is the highest among AMC’s at ~36%.

o  Private Equity business AUM of Rs 11,400 cr across 3 growth capital PE funds and 4 real estate funds. In Q1FY23, revenues grew by 35% YoY at Rs 32 cr. The 1^st growth fund (IBEF 1) has delivered an XIRR of 26%+.Average IRR on exited investments in Real estate funds is 21%+. PE biggest fund IBEF IV with a target size of Rs 4,500 cr, has raised Rs 4,000 cr till date and expect to close balance fund in coming quarters.

o  Wealth Management business AUM grew by 20% YoY at Rs 34,436cr in Q1FY23. Wealth business revenue grew by 20% YoY to Rs 47 cr in Q1FY23.This growth was led by strong net sales of Rs 1,990 cr, +88% YoY in Q1FY23. RM count of this business stood at 143. Our trail revenues pre dominantly cover our fixed costs. Strong operating leverage is visible led by improvement in RM productivity. We continue to invest in this business by adding RMs.

o  Overall Asset and Wealth Management revenues were Rs 219 cr, +9% YoY in Q1FY23. Asset & Wealth contributes 23% of consolidated revenues. Profits were Rs 58 cr +6% YoY in Q1FY23.

·   Housing finance business

o  Motilal Oswal Home Finance (MOHFL) reported profit of Rs 32 cr in Q1FY23, +279% YoY.

o  NII grew by 15% YoY and NIM expanded to 7.7%in Q1FY23.

o  Yield on Advances stood at13.7% in Q1FY23 while Cost of Funds was down by 69 bps YoY to 7.9%, resulting in expansion in Spread by 64 bps YoY to 5.9%.

o  Disbursements grew by 84% YoYin Q1FY23 to Rs 170 cr. Business is geared up for stronger growth in disbursements.

o  GNPA of 2.2% in Q1FY23 with collection efficiency of 100% in June 2022.

o  Net Gearing stands at 2.3x and Tier 1 CAR remains robust at 51%.

·     Fundbased investments includes sponsor commitments to our AMC, PE funds, RE funds and strategic equity investments.

o  Total investment including unrealised gain swas Rs 4,440 cr as of June 30, 2022.

o  Total equity investment including alternate funds was at Rs 3,840 cr as of June 30, 2022. XIRR of 23%on PE/RE investments.

o  Cumulative XIRRof ~18% on total investments (since inception).

About Motilal Oswal Financial Services Limited

MOFSL 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. MOFSL employs 10,000+ employees serving to 50 lakh clients via distribution reach in 550+ cities. MOFSL has AUA of Rs 2.9 tn.

For further details, contact: