MOTILALOFS - Motilal Oswal Financial Services Limited Share Price

Here are the major questions and their respective answers from the Q&A section of the earnings transcript:

Question: "Could you help us with some color on your expectations for the distribution income in Q4 on a Y-o-Y basis? Also, why has the net flows market share seen a slight decline?"

Answer: We don't provide quarterly distribution growth guidance; however, we anticipate volatility in transaction-based revenues due to broader market weaknesses. The good news is our ARR revenues are scaling up, especially with the upcoming private credit offering. Regarding the AMC flows, while our net sales market share held at 7.6%, it remains higher than AUM market share, and 91% of our AUM is outperforming benchmarks.

Question: "How should we think about the operating expenses trend and the decline seen in opex across all businesses?"

Answer: The dip in operating expenses is linked to lower transactional revenues, as many costs, particularly personnel costs, are variable based on these revenues. Our operating margins stayed intact, and the decrease in headcount this quarter can be attributed to falling wealth management revenues, while other businesses demonstrated strong growth.

Question: "Regarding the distribution AUM from our own AMC, how significant is it?"

Answer: It's quite small; the Asset Management firm has substantially grown, and our contribution from our own AMC now stands just above 10%.

Question: "How are we stabilizing the top leadership at AMC? Are we looking for an external candidate?"

Answer: We have bolstered our investment team and have co-fund managers in place for smooth operations. We'll continue to hire for our investment teams, particularly in crucial categories. The investment team has substantially expanded, and we expect the new product pipeline to enhance our market position.

Question: "What are your expectations for net flow momentum for FY27?"

Answer: We anticipate strong net flows in Q4FY26 and for FY27, largely driven by the private credit fund's distribution through our internal channels. Though market slowdowns are affecting flows, our enhanced private banking capabilities should lead to substantial AUM growth.

Question: "Can you explain the fluctuations in distribution income across quarters?"

Answer: Transaction-based revenues are inherently volatile, influenced by market conditions and monetization events. While we aim for strong year-on-year growth, quarterly expectations will reflect the market's environment and specific deals' timing.

Question: "Given market volatility, how are you managing margins and capital allocation?"

Answer: Our net worth remains strong, with a consistent dividend payout ratio of ~20% of operating profits. We maintain sufficient cushions for risk management while ensuring that our capital allocation supports growth. This approach has yielded an operating ROE of ~24% and overall ROE of 26%.

Question: "What is the outlook for your Alternates business and any upcoming fund launches?"

Answer: Our Alternates business will see continued expansion, with more credit products anticipated over the next few years. We've recently launched a private credit fund and expect to tap into several new categories as this segment is still in its early stages.

These responses encapsulate the company's insights and strategic outlook while retaining relevant financial metrics and future guidance.