MOTILALOFS - Motilal Oswal Financial Services Limited Share Price

Management's outlook conveys optimism about future growth and strong potential across the company's various business segments. They anticipate a substantial increase in the savings pool to USD 126 trillion by 2047, driven by financialization, which is expected to create significant tailwinds for all business operations.

Key forward-looking points include:

1. Growth in Assets Under Advice (AUA): AUA has crossed Rs. 6.7 lakh crore, with the customer base expanding to 14.5 million+. This base positions the company well to capitalize on the growing savings trend in India.

2. Annual Recurring Revenue (ARR): ARR now comprises 61% of total net revenues, indicating a strong shift towards predictable revenue streams, with fee-based revenue contributing 45%.

3. Asset Management Growth: The Asset Management business has achieved a market share of 2.6% in mutual funds and strong net flows of Rs. 20,011 crore in Q2FY26, signifying robust growth potential and operating leverage.

4. Private Wealth Management (PWM) Expansion: PWM's AUM has reached Rs. 1.87 lakh crore, with a 22% YoY growth in PAT, highlighting effective expansion strategies.

5. Investment Banking Leadership: The company ranks #1 in IPOs, QIPs, and Rights Issues, executing 39 deals worth approximately Rs. 49,000 crore in H1FY26.

6. Housing Finance Prospects: Housing Finance disbursements grew by 48%, and the management expects AUM to double within 2-3 years due to increased sales force.

7. Credit Rating Upgrade: The company received an AA+ rating, enhancing access to capital and reducing funding costs, reflecting solid financial management and a diversified business model.

In summary, management is poised for consistent growth through diversification, operational efficiency, and capturing market opportunities, positioning Motilal Oswal as a strong player in the Indian financial services landscape.

Question 1: As the financial services space gets more competitive, how is Motilal Oswal planning to build long-term differentiation, not just through product variety, but through deeper client engagement or from platform strength?

Answer 1: We aim to be a comprehensive Capital Market powerhouse, catering to clients through both broking and mutual fund routes. We focus on excellence across our businesses, including Asset Management and Investment Banking, with significant growth in HNIs and alternatives. Our strategy remains to engage deeply with clients, helping them invest wisely. We've positioned ourselves to lead by encapsulating the essence of "Think Equity, Think Motilal Oswal," ensuring a robust engagement model aligned with market dynamics.

Question 2: What internal steps or cost management planning do you think are most important to protect the margin if market volumes or fee structures keep on changing?

Answer 2: Our cost structure is primarily variable, with two-thirds of it tied to performance. Fixed costs are lean, allowing us to maintain stable operating margins during lower volume periods. The overall PBT margin remains above 50%, which is industry-leading. We are well-positioned to handle fluctuations thanks to this balance, ensuring that our operating margins and cost-to-income ratios stay resilient even as market conditions shift.

Question 3: How would the SEBI consultation paper impact Asset Management and Capital Market segments if the final regulations mirror the draft ones?

Answer 3: The preliminary impact is expected to be between 1% to 2% on Group Operating PAT, affecting both segments. Asset Management could see a minor impact due to regulatory updates, while the Capital Market business may bear a larger share of the changes based on its revenue structure. As this is still under review, we anticipate engaging with the industry to address concerns and ensure a balanced approach.

Question 4: What explains the sequential decline in brokerage incomes across Wealth Management and strong sequential growth in Private Wealth Management?

Answer 4: The Wealth segment's sequential decline stems from recent regulations impacting transaction revenues more severely than in Private Wealth Management, which focuses on ultra-HNIs. The latter segment's revenue is less affected due to stability in their client base and investment needs. This divergence reflects our tailored responses to client needs in varied market environments.

Question 5: What is your deal pipeline in the Capital Market segment, and how is the revenue outlook for Q3 and Q4?

Answer 5: We maintain a healthy deal pipeline in the Capital Market segment, bolstered by robust conditions. If current market dynamics hold, we expect to achieve continued growth and profitability similar to what we saw in the first half of the year. Our execution capabilities give us confidence in sustaining performance across upcoming quarters.

Question 6: What is the rationale behind moving certain real estate assets from Treasury to the Asset Management Business?

Answer 6: The reclassification of real estate assets reflects our strategic focus on revenue generation from high-quality credit opportunities within our Asset Management framework. It allows us to better align our operations and reporting, ensuring that these assets contribute directly to operational segments while optimizing growth potential and client offerings.

Question 7: Can you comment on risk management practices concerning treasury profits and exposures to firms, such as Zepto?

Answer 7: Our treasury book includes investments primarily in our mutual funds, with exposure to alternate products being measured and controlled. We ensure no single security can significantly impact our balance sheet. Contrary to reports, our direct investments are minimal, with a robust strategy geared toward diversified, prudent engagement. We emphasize solid risk mitigation practices across our portfolio.

These answers provide a detailed yet concise overview of the responses from the earnings call's Q&A session.