Motilal Oswal Financial Services reports Q4FY19 PAT of Rs 147crores. Full year dividend maintained at Rs 8.5 per share (50% payout).

Mumbai,May 11, 2019: Motilal OswalFinancial Services Ltd. announced its results for the quarter and year ended March31, 2019 post approval by the Board of Directors at a meeting held in Mumbai onMay 11, 2019.

Performance for the quarter and year ended March 31, 2019

• Consolidated revenues stood at Rs 711 crores in Q4FY19 and Rs 2677 crores in FY19. Consolidated PAT was Rs 147 crores in Q4FY19 and Rs 294 crores in FY19. FY19 profit was lower on account of higher provisioning/ write offs taken in Aspire Home Finance and lower MTM on fund based investments. Consolidated adjusted PAT was up 9% YoY to Rs 358 crores. (Adjusted PAT excludes Aspire Home Finance, fund based investments and lumpy share of profits on the exit of PE investments).
• Some of the key highlights include 36% growth in FY19 PAT of Asset Management business, 18% growth in FY19 PAT of Broking business, 27% growth in Distribution business AUM, no write offs and return to profit in Q4FY19 in Aspire Home Finance, name change of home finance business to “Motilal Oswal Home Finance”, dividend maintained and payout increased to 50% of profits despite lower PAT.
• Consolidated net worth stood at Rs 3053 crores, gross borrowing was Rs 5114 crores and net borrowing was Rs 4590 crores (including Aspire). Excluding Aspire, gross and net borrowings were Rs 1554 crores and Rs 1113 crores respectively and this is less than the market value of quoted investments at Rs 1440 crores. Overall gearing remains conservative at 1.7x; ex-Aspire it is at 0.5x and considering market value quoted investments, we are effectively net cash balance sheet.
• Asset and wealth business was highest contributor to profit, ahead of capital market business for the 1^st time.
• Besides financial performance, the last few quarters have been very eventful in terms of our successes in brand building, advertising and several other fronts. In FY19, MOFSL, yet again listed in top 20 BFSI companies as a ’Great Place to Work’ for 3rd consecutive year. Aspire Home Finance won the ‘Digital Excellence in Urban Finance’ award at the Digital Customer Excellence Awards, 2019. MOPWM won the prestigious ‘Best Boutique Wealth Manager India’ at the Asset Triple A Award 2018. MORE won ‘Best Real Estate Product’ at India Wealth Awards 2018. MOFSL awarded as “Best Broking Business of the Year” at the Moneycontrol Awards 2018. These, and several other awards, are recognition of Motilal Oswal as a preferred consumer and employee brand in the financial services space.

Speaking on the performance of the company, Mr. Motilal Oswal, CMD said “Ourstrategy to diversify our business model towards linear sources of earningscontinues to show results, with bulk of the revenue pie now coming from thesenew businesses. Asset & Wealth businesses are now the largest contributorto profits and ahead of the Capital market businesses for the first time. Eachof our 7 businesses offer significant headroom for growth and operatingleverage as they scale up. Prestigious awards like Bestbroking business of the year, Top-20 Best Places to Work, Best boutique wealthmanager and several others have made all associated with the group immenselyproud”.

Performance ofBusiness Segments for the quarterand year ended March 31, 2019

·      Capital markets Businesses (Broking& Investment banking)

o   Capital markets comprises of Retail Broking,Institutional Equities and Investment Banking business. Revenues for thissegment were Rs 1171 crores in FY19 and contributed ~44% of consolidatedrevenues. Profits were Rs 181 crores in FY19 and contributed ~42% of consolidatedPAT. Broking and distribution business profit grew by 18% YoY at Rs 173 croresin FY19 led by strong operating margin expansion by 200bps to 34% on account ofbetter operating leverage on the higher and linear revenues.

o  In RetailBroking & Distribution, our Market share in high-yield cash segment hasbeen maintained on sequential basis. Overall market share stood at 2.6% (ex-prop)in Q4FY19 despite higher F&O volumes.

o  Our strategy to bring in linearity through thetrail-based distribution business is showing results. Distribution AUM was Rs 9572crores, +27% YoY in FY19. With only 16% of the near million client basetapped, Distribution income is already at 14.4% of retail broking grossrevenues. We expect a meaningful increase in AUM and fee income as number ofclients to whom we have cross sold and number of products per client cross soldrises.

o  In InstitutionalBroking, rankings with existing clients improved, domestic institutionscontribution improved and new client additions were encouraging. Every aspectof the business, research, sales, sales trading and corporate access is beingstrengthened.

o  Investment Banking business has continued to engage and conclude some significanttransactions in this period. We have completed 6 ECM transactions in FY19. Overalltransaction pipeline remains encouraging. 

·      Asset Management businesses are nearingcritical mass

o  Asset Management business across MF, PMS & AIF reached the mark of Rs 38,893 croresAUM, +9% YoY this year. Our AMC now ranks 11 by total equity assets, PMS ranks#1 while AIF assets are growing rapidly. Net Sales is Rs 401 crores in FY19. Revenuesare Rs 139.6 crores and Rs 578.6 crores (+11% YoY) in Q4FY19 and FY19respectively. PAT is Rs 35.5 crores (+12% YoY) and Rs 149.9 cr (+36% YoY) inQ4FY19 and FY19 respectively. Asset management business offers highestscalability and operating leverage among all businesses.

o  OurEquity MF AUM of Rs 19,979 crores is just 2% of the Industry Equity AUM of Rs 10.2lakh crore. Our market share in Equity MF Net Sales (including balance) stoodat ~2.2% in FY19. The direct AUM is now 35% of total MF AUM.

o  Ourshare of Alternate assets, comprising of PMS & AIF, is the highest amongAMC’s at ~49% and continues to grow very strongly. Yields and profitability ofAlternates is higher. As of March 2019, ~20% of Alternates AUM isperformance-fee linked, and our target is to increase this further.

o   PrivateEquity manages an AUM of Rs 6,370crore (+36% YoY) across 3 growth capital PE funds and 4 real estate funds. Thisbusiness has delivered on profitability and scalability fronts. In FY19, PATexcluding lumpy share of profit on exits was Rs 22.4 cr, +133% YoY. The 1stgrowth fund (IBEF 1) has delivered an XIRR of 27%, and alpha of 10% and isexpected to return nearly 6x MoC (Multiple of Cost). Strong performance andpositioning has also aided new fund raise. We have launched IBEF-3 in FY18 andreceived phenomenal response by garnering Rs 2300 cr. We have launched IREF IV inFY19 with a target size of Rs. 1200 crore has achieved 2^nd close at~Rs. 850 cr.

o  Wealth Management business AUM grew by 19% YoY at Rs 17,464 crore in FY19 with netsales of Rs 2,395 cr. In FY19, revenues grew 11% YoY at Rs 109 cr and PATexcluding impact of intergroup transfer pricing was Rs 18.9 cr. RM count ofthis business has reached 126 with average RM addition was up +30% YoY in FY19.As ratio of new adds to opening RM falls and the vintage of RM improve, bothproductivity and profitability of the business will scale up.  

o Overall Assetand Wealth Management revenues were Rs 800 cr in FY19, +2% YoY andcontributed 29% of consolidated revenues. Profits were Rs 191 cr and contribute44% of consolidated profits, with highest scalability and with least capitalemployed among our portfolio of businesses.

·      Housing finance business

o   Loan book stood at Rs 4,357 cr asof FY19. NII remained stable at Rs 231 cr in FY19.

o   Disbursements in Q4FY19 were Rs80 cr and in FY19 was Rs 290 cr.

o  Zero delinquencies in new book generated inFY19. Strong improvement in collection efficiency

o  Name change to “Motilal Oswal Home Finance” to yieldmultiple benefits.

o   Asset qualitydeterioration in FY19 was on account of seasoning of legacy portfolio. However,proactive clean-up of the legacy book, expected positive trends indisbursements in coming quarters along with improvement in collectionefficiency in FY19, augur well for future asset quality and profitabilityoutlook.

o   Provisionsstood at Rs 352 cr in FY19, on account of higher write offs in Q2 and Q3 ofFY19 to clean up the legacy book. There were no write-offs in Q4FY19. Furtherprovision coverage has been stepped up to 70% including write-offs in FY19.

o  Strongsupport from parent continues with capital infusion of Rs 200 cr in FY19 takingtotal capital infusion to Rs 850 cr. Gearing remains conservative at 4.3x.

o   Limitedborrowing repayments till March 2020, equity infusion, strong undrawn borrowinglines and ALM place us in comfortable liquidity situation.

·      Fund based investments includes sponsorcommitments to our AMC & PE funds and strategic equity investments.

o  Fund Based activities like commitments to our asset management products, notonly helped seed these new businesses by investing in highly scalableopportunities, but they also represent liquid resources for futureopportunities.

o  Totalquoted equity investment including unrealised gains was Rs 1,440 crores as of Q4FY19.MTM on these gains are now part of reported earnings under Ind-AS reporting.Cumulative XIRR of these investments is ~19%, which is the see-through RoE.

About Motilal Oswal Financial Services Limited

Motilal Oswal Financial Services Ltd. is a financial services company.Its offerings include capital markets businesses (Retail broking, Institutionalbroking & Investment banking), Asset & Wealth Management (Asset Management,Private Equity & Wealth Management), Housing Finance & Equity basedtreasury investments. Motilal Oswal Financial Service won the ‘Brand of theYear’ award at the IBLA CNBC TV 18. Motilal Oswal Securities won the ‘Best Performing National Financial Advisor EquityBroker'' award at the CNBC TV18 Financial Advisor Awards for the 6^th time.It was ranked the Best in Events/Conferences, ranked amongst Top-2 for OverallSales Services & Best Roadshows/Company Visits & amongst the Top-3 inBest Local Brokerage, Best Execution & Sales Trading Visits at the Asia MoneyAwards 2015. Motilal Oswal Private Equity won the ‘Best Growth CapitalInvestor-2012’ award at the Awards for PE Excellence 2013. Motilal OswalPrivate Wealth Management won at the UTI-MF CNBC Financial Advisor Award in HNIWealth Management category for 2015. Aspire Housing Finance was awarded‘India’s Most Admired & Valuable Housing Finance Company’ at India LeadershipConclave 2015.

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