Summary of earnings call for Motilal Oswal Financial Services Ltd published on 01 Aug, 2025
Motilal Oswal Financial Services Limited
Q1 FY26
Call date · July 25, 2025
1 · Management Commentary
Key Positives
- Highest ever quarterly PAT at ₹1,430 crores, up 40% YoY; operating PAT up 21% YoY to ₹522 crores.
- AMC reached ₹1.5 lakh crores equity AUM; strong market share gains in mutual funds and alternates.
- Capital markets business reported highest-ever revenues; robust deal pipeline and execution.
- Housing finance AUM crossed ₹5,000 crores, up 22% YoY; disbursements up 57% YoY.
- Assets under advice at ₹6.5 lakh crores, up 28% YoY; net worth up 28% YoY to ₹12,537 crores; annualised ROE at 48%.
- Fee-based revenue contribution increased to 44%; recurring revenues at 52% of net revenue.
Key Negatives
- Sequential increase in gross NPA in housing finance, attributed to seasonal collection patterns.
- Employee expenses rose sharply (34% YoY, 23% QoQ) due to senior hiring and increments.
- F&O brokerage growth muted sequentially; focus remains on cash brokerage.
Forward Guidance
- Capex: Tech spend budgeted at ~₹250 crores for FY26 (4.5–5% of revenues).
- New products/segments: Launch of private credit vertical; new AI-driven digital tools and RISE app upgrade; GIFT City international fund offerings.
- Client wins/losses: Relationship manager base at 615; PWM families up from ~13,400 to ~16,600 YoY.
- Revenue/margin outlook: Expect continued strong double-digit growth across businesses; maintain ~50% PBT margin; annuity/trail revenues to rise further.
- Strategic initiatives: Focus on increasing fee/trail-based revenues, expanding distribution, scaling alternates, and leveraging technology; expect housing finance AUM to double in 2–3 years; robust deal pipeline in capital markets.
2 · Q&A Highlights
Q 1 (Composite): What is driving the shift from broking to distribution income in wealth management, and will this trend continue?
A (Management):
• Distribution income growth is a long-term, structural trend with significant runway; dedicated teams and account aggregator initiatives to boost cross-sell.
• Broking revenue’s share will continue to decline as distribution and NII outgrow it; seasonality/lumpiness in distribution income expected.
Q 2 (Composite): Concerns on housing finance asset quality and credit costs; outlook for the business?
A (Management):
• Asset quality robust in new book (GNPA 0.6%); overall GNPA increase is seasonal and expected to recover; strong provision coverage and capital adequacy; AUM expected to double in 2–3 years.
Q 3 (Composite): Capital markets deal pipeline and revenue outlook given volatility?
A (Management):
• Record performance in Q1; deal pipeline for Q2 is robust with multiple IPOs and QIPs; expect coming quarters to be as strong as Q1, subject to market conditions.
Q 4 (Composite): Drivers and sustainability of sharp increase in employee expenses; margin outlook?
A (Management):
• Increase due to senior hiring (450+ in 18 months), increments, and variable pay; expect people cost/revenue ratio to remain similar to last year; margins remain strong (~49–50% PBT).
Q 5 (Composite): Private Wealth Management (PWM) client growth, product trends, and headroom for expansion?
A (Management):
• PWM families up to ~16,600; strong growth in both HNI and UHNI segments; increasing interest in alternates and solutions; significant headroom for growth, especially in UHNI/family office.
Q 6 (Composite): Distribution income drivers and seasonality; breakdown between MF/insurance/alternates?
A (Management):
• Distribution revenues include secondary market transactions in private securities and alternates; insurance is seasonally lumpy in Q4; non-seasonal growth driven by secondary bonds/equities, still under-indexed.
Q 7 (Composite): Technology initiatives and digital adoption; AI and mobile channel progress?
A (Management):
• 75–80% of transactions now online; dual digital and advisory models; new AI tools and RISE app live; tech spends at 4.5–5% of revenue (~₹250 crores budgeted).
Q 8 (Composite): International fund strategy and GIFT City plans?
A (Management):
• Domestic international fund capacity capped; new products launched in GIFT City with strong early traction; not a major revenue driver currently.
3 · Other Key Numbers
- PAT: ₹1,430 crores (up 40% YoY)
- Operating PAT: ₹522 crores (up 21% YoY)
- Assets under advice: ₹6.5 lakh crores (up 28% YoY)
- Net worth: ₹12,537 crores (up 28% YoY)
- Annualised ROE: 48%
- Fee-based revenue: 44% of total
- Recurring revenues: 52% of net revenue
- Customers serviced: 13.6 million+ (8.6 million+ MF portfolios, 5 million+ broking accounts)
- Wealth Management retail cash broking ADTO: ₹3,179 crores (market share 7.1%)
- F&O premium market share: 7.9%; total ADTO market share: 7.5%
- Distribution book: ₹38,129 crores (up from ₹11,032 crores in Mar’21)
- AMC equity AUM: ₹1.51 lakh crores; gross flows: ₹14,568 crores (up 59% YoY)
- Net flows (AMC): ₹8,469 crores (Q1FY26 vs ₹5,317 crores Q1FY25)
- SIP flows: ₹3,437 crores (monthly run rate June: ₹1,200 crores); SIP AUM: ₹26,051 crores
- Alternate AUM: ₹33,810 crores (up 29%)
- PE fee-earning AUM: ₹10,185 crores; IBEF V first close at 80% of ₹8,000 crores target
- Real estate Series VI fund closed; private credit vertical launched
- PWM topline growth: 53% YoY; bottom-line growth: 49% YoY; RM base: 615 (33% >3 years vintage)
- Capital markets: 16 deals in Q1FY26 (issue size >₹29,500 crores); IB fee income up 89% YoY
- IB business: #3 in IPOs executed, #5 in IPO value (up from #12/#21 last year)
- Housing finance AUM: ₹5,000 crores (up 22% YoY); disbursements: ~₹400 crores (up 57% YoY)
- Housing finance GNPA: 1.2%; NNPA: 0.6%
- Sales RM force (housing finance): 1,430 (up 50% YoY)
- Treasury investments: ₹8,853 crores (up 26% YoY); XIRR >20% since inception
- Tech spends: 4.5–5% of revenue (~₹250 crores for FY26)
- Online transactions: 75–80% of total
- PWM families: ~16,600 (up from ~13,400 YoY)
- Senior hires: 450+ in last 18 months
- Cost of funds (wealth management): down 40 bps QoQ, 80 bps YoY
- Book-to-bill ratio (capital markets): 2–3x last year’s revenues
- PWM organic growth: 20–25% (extra growth from monetization events)
- Relationship manager productivity expected to improve as vintage increases
All figures as stated in the call; undisclosed numbers marked as Not disclosed.
Note: This is an AI generated summary of the earnings call. There may be inaccuracies in the summary. Please refer to the original transcript before making investment decisions.