I am not a SEBI REGISTERED ANALYST. This blog is just to clear my thoughts and note down my findings. I can completely go wrong in my assumption and this is not to buy or sell advice. Please do you due diligence. I will not be responsible for any of your loss or profit.
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Business Vertical
1. Broking and Distribution:
Research and advisory form the foundation of the company’s broking services. Brokerage serves participants across FIIs, domestic institutions, HNIs, and retail. This business comprises of two distinct units - Retail Broking & Distribution and Institutional Equities.
Retail Segment: Services offered include equities, derivatives, commodities, currency, depository services, distribution of investments products like portfolio management services, mutual funds, primary equity offerings, and other investment products. Total retail client 19.72 Lakh
2. Asset Management – Comprises PMS, AIF, MF.
Size – Rs 45692 crores
MF – 28136 cr.
PMS – 14700 cr.
AIF – 2656 cr.
1.8% market share in Equity MF declined from 2% in 2017
3. Private Wealth Management:
Rs 25286 Crores
No of Families: 5004
In FY2021, Mr. Ashish Shanker was promoted as CEO. He joined MOPWM as Head Investment Advisory in 2012 and was instrumental in building the investment, research & advisory platform.
4. Home Finance:
In FY2021, Mr. Arvind Hali onboarded as MD and CEO. Mr. Hali has more than 20 years of experience and was previously associated with Art Housing Finance, Intec Capital, AU Financiers, Dhanalaxmi Bank, SCB etc.
Loan Book – 3512 cr.
Families – 47665
Average loan of Rs 8.6 lakh
Cost of Fund 9.25% in this quarter it has further reduced to something 8.75%
5. Institutional Equities:
Offerings in the forms of cash and derivatives to domestic and foreign institutions
760+ Client
6. Private Equity:
Private equity (PE) refers to capital investment made into companies that are not publicly traded. Motilal Oswal Private Equity (MOPE) was founded in 2006 with the vision of partnering high potential mid-market companies.
Manages 3 growth capital Fund and 5 real estate funds
Capital raised for growth Fund 2300 crore
Capital raised for Reality Fund 2820 crore
7. Investment Banking:
Investment banking is a specific division of banking related to the creation of capital for other companies, governments, and other entities.
ICICI Bank for its largest ever QIP of Rs 150 bn
The QIP of HDFC aggregating to about Rs 177 bn
Sole Lead Manager for Granules India Ltd for its Rs 1.4 bn of share buyback program
8. Insurance broking business:
Insurance Brokers represent you, the customer, and are licensed to give you policies from any insurance company. They can provide expert advice on the insurance policies suitable to you and are paid a brokerage by the company whose policy you finally choose. Motilal Oswal started with the Insurance broking business in FY2020 and registered a strong premium collection of around Rs 40 crore in FY2021, envisaging future business potential. They have tie-ups with HDFC Life, ICICI Pru Life, and Bajaj Life for life insurance products
Other key numbers
· Total investment 3096 crore
· Return in FY21 : 779 crore
· Free Cash available : 790 crore
Actual income : 2184 – 537 = 1647 crore
Expense: 1258 crore
PBT: 1647 – 1258 = 389 crore
PAT: 265 crore for the year FY 20-21
They mentioned in the annual report they started housing finance business to grow ROE in my opinion Housing business is the one that is dragging their ROE as of now
“In line with the long-term strategy to grow RoE sustainably, MOFSL had made a strategic allocation of capital to long-term RoE enhancing opportunities like Motilal Oswal Home Finance Ltd, and sponsor commitments to our mutual fund and private equity funds.”
Some Key takeaway
The average daily traded volumes (ADTO) for the equity markets during FY2021 stood at Rs 27.41 lakh crores, up 90% YoY from R 14.44 lakh crores in FY2020. The overall Cash market ADTO reported growth of 66% YoY at Rs 64,951 crores in FY2021. Delivery saw growth of 39% YoY to R 12,718 crores.
In FY2021, a record of 1.44 crores new demat accounts were added as against 0.48 crores in FY2020. This spike is attributed to the disposable income and saved time due to work from home culture coupled with strong rally in equity markets. CDSL, the largest depository in India in terms of number of demat clients, crossed the 3 crore accounts mark in January. The number of demat accounts stood at 5.51 crores in FY2021, a growth of 35% YoY.
Indian equities witnessed continued net inflows from FIIs for most of the part of the financial year, with December recording the highest ever inflows. Highest ever FII inflows was recorded in FY2021, greater than the cumulative inflows of the last six years. On the contrary, DIIs recorded the first outflows after five years of inflows.
Opportunities and Threats
Opportunities
Long-term economic outlook positive, will lead to opportunity for financial services
Growing Financial Services industry’s share of wallet for disposable income.
Regulatory reforms would aid greater participation by all class of investors
Leveraging technology to enable best practices and processes
Corporates looking at consolidation / acquisitions / restructuring opens out opportunities for the corporate advisory business
Threats
Execution risk
Short term economic slowdown impacting investor sentiments and business activities
Slowdown in global liquidity flows
Increased intensity of competition from local and global players
Market trends making other assets relatively attractive as investment avenues
Final notes
If we consider next 3 year will be good for Indian stock market and there will be continues flow of new investor into the stock market according to me the best PAT they can do is around 470 crore (excluding net fair value gain component) that gives an EPS of somewhere 33-34 and if you give PE of say 35-40 than the stock price can be around 1200-1300 in next 3 years that makes a CAGR of 13% based on the current price of Rs 930.
I don’t find safety in investing at current price as potential upside itself is not looking eye-catching.
My buying price range will be around Rs 500- 700