MOTILALOFS - Motilal Oswal Financial Services Limited Share Price

During the earnings call on April 28, 2025, Motilal Oswal's management provided a positive outlook focused on sustained growth across businesses. They highlighted that FY25 was a robust year with the group achieving an operating revenue of Rs. 5,161 crores, up 31% year-over-year. Operating profit also increased to Rs. 2,016 crores, marking a similar growth rate. Notably, the company serviced over 12 million customers, strengthening its market presence with 4.8 million unique broking accounts.

Key forward-looking points noted by management include:

1. Asset Management Growth: The management expects the asset management market share to continue rising in FY26 despite starting from a base of Rs. 1.23 lakh crores. They reported net flows increasing tenfold to Rs. 48,450 crores in FY25 and anticipated similar momentum.

2. Wealth Management Expansion: Net flows in the Wealth Management business grew threefold to over Rs. 10,279 crores, with significant investments made to enhance distribution capabilities, indicating a bullish sector outlook.

3. Housing Finance Expectations: Disbursements in the housing finance segment rose by 78% YoY to Rs. 1,794 crores. Management believes strong growth is achievable over the next 2-3 years driven by increased productivity from an expanded RM base.

4. Digital Strategy Investments: Management reinforced its commitment to technology by increasing tech spends by 100 basis points to 4.5%-5% of net revenues, ensuring scalability and efficiency in operations.

5. Long-term Financialization Trend: Acknowledgment of a long-term trend in Indian financialization is expected to result in a 10x increase in cumulative household savings from USD 14 trillion to over USD 125 trillion in the next 25 years, positioning the group favorably for growth.

With these fundamentals, management expressed confidence in delivering consistent profitability growth while maintaining a dividend payout strategy.

Q&A Section Summary from Earnings Transcript (April 28, 2025)

1. Question: What is the size of the book for loan against shares and margin trading funding, and how do you expect margin expansion with falling interest rates?
   Answer: The total lending book size, including margin trading and loan against securities, is Rs. 7,257 crores. Of this, MTF accounts for around Rs. 5,000 crores. As for margin expansion, our incremental cost of funds is now 50 bps lower, and we anticipate positive impacts on spreads and margins for both lending segments, supported by the favorable rate cycle.

2. Question: Why has cash market share declined recently, and can we expect future disbursement run rates for the housing finance business?
   Answer: The recent dip in cash market share is mainly due to market volatility causing clients to trade less. Despite this blip, our overall market share has increased over FY25. Regarding housing finance, our disbursement run rate has consistently grown, achieving a 78% increase over FY24, and we project continued growth with our enhanced resource base.

3. Question: What is driving the strong distribution income growth despite flat asset growth in the Wealth Management business?
   Answer: Distribution revenues surged due to a focus on enhancing our distribution business, with significant growth in ARR revenues and transactions in the insurance segment. Although some distribution revenues normalized in Q4FY25 due to reduced transaction volume, our annualization shows substantial growth overall.

4. Question: Can you explain the change in employee costs and its impact on revenues?
   Answer: We adjusted variable employee costs due to robust performance in earlier quarters, resulting in a lower overall cost in Q4FY25. Despite this reduction, our people cost to revenue remains stable at 33% year-over-year, indicating effective cost management amidst fluctuating revenues.

5. Question: On the Asset Management front, what's the outlook for average AUM trends moving forward?
   Answer: The average AUM is affected by market movements; January and February were weak, but March brought improvement. If April shows positive trends, we anticipate an upward trajectory for average AUM in Q1 and Q2.

6. Question: How are you preparing for technology changes in the financial services business?
   Answer: We invest 4.5% to 5% of our net revenues in technology, up from the previous year. Our technology team of 800 professionals, led by Pankaj Purohit, focuses on scalability and maintaining a competitive edge through ongoing advancements and digital enhancements.

7. Question: What updates can you provide on housing finance monetization or potential demergers?
   Answer: While we evaluate options including monetization and IPO for the Housing Finance business, no updates are available at this moment. We continue to focus on growth and will keep stakeholders informed of developments in the financial year.

8. Question: Regarding transactional revenue quality in Wealth Management, what is the typical mix?
   Answer: The transactional revenue mix can vary year-to-year based on market conditions. We expect significant growth in distribution income, while secondary market transactions and insurance also fluctuate with market activity but should grow consistently as we leverage new resources.

This captures the key points and responses for each question, providing a concise overview of the Q&A section from the earnings call.