In this article, we will explore Motilal Oswal Financial Services Ltd. fundamentally, understand its business model and industry, and determine whether it’s a good investment fit for you.
Overview of Motilal Oswal Financial Services Ltd
Motilal Oswal Financial Services Ltd. (MOFSL) is a financial services company with a presence in investment banking, retail broking, institutional broking, wealth management, asset management, and private equity. The company is headquartered in Mumbai, India, and has a pan-India presence with over 1,800 branches and a customer base of over 2.7 million.
MOFSL is one of the leading and biggest financial services companies in India. Among clients, it is known for its strong research and advisory capabilities. The company entered into investment banking in 2005, followed by private equity in 2006.
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Is the financial services industry a good sector to invest in?
The Indian financial services sector is expected to reach a size of US$1.7 trillion by 2026. It is one of the fastest-growing sectors in the country, driven by a number of factors including rising disposable incomes, increasing financial literacy, and a growing stock market. The sector is expected to continue to grow in the coming years, making it an attractive investment opportunity.
Experts estimate that the sector will grow at a CAGR of 12% between 2021 and 2026. Not only does it have a large number of participants including companies, but it also has regulators and other institutions like banks, insurance companies, asset management companies, and fintech companies.
The sector is well-regulated by the Reserve Bank of India (RBI) and other regulatory bodies too. With India’s rising disposable incomes and an ever-increasing middle class, there is a rise in demand for better and more lucrative financial products, which drives growth and revenues for these companies, not to mention intermediaries like banks.
Who are MOTILALOFS’s competitors in the financial services sector?
Here are some of MOTILALOFS’s competitors:
- Aditya Birla Capital Ltd.
- L&T Finance Holdings Ltd.
- Piramal Enterprises Ltd.
- IDFC Ltd.
- Nuvama Wealth
- IIFL Securities
History of Motilal Oswal Financial Services Ltd.
MOFSL was founded in 1987 by Motilal Oswal, a veteran of the Indian stock market. The company initially focused on retail broking, but it has since diversified into other financial services businesses. It has grown rapidly in recent years, and it is now one of the largest financial services companies in India.
Also Read: Understanding the basics of the broking industry and its recent trends
Acquisitions
In February 2006, Motilal Oswal Financial Services Ltd. expanded its presence in southern India by acquiring Peninsular Capital Markets, a Cochin, Kerala-based broking company for Rs. 35 crore.
Partnerships
To enhance its service offerings, Motilal Oswal Financial Services Ltd. established strategic partnerships with major Indian banks:
- In 2006, the company collaborated with State Bank of India to provide online trading facilities to SBI customers.
- In 2007, Motilal Oswal Financial Services Ltd. partnered with Punjab National Bank to extend online trading services to PNB customers.
- In 2013, the company joined forces with Axis Bank to offer online trading solutions to Axis Bank account holders.
These partnerships enabled Motilal Oswal Financial Services Ltd. to expand its customer base and strengthen its position in the Indian financial services industry.
Investing in MOTILALOFS
Pros
- Active clients have registered 43% YoY growth at 0.93 mn as of June 2022.
- 83% of new clients acquired from Tier II & III cities.
- Over FY17-FY22, MOFSL’s consolidated revenue expanded at a 17% CAGR to ₹43.2 billion.
- The stock is currently underpriced and not in the overpriced zone.
Cons
- Revenue growth has not kept up with the rest of the industry, with MOTILALOFS numbers at 8%, while the industry average well exceeded 10.5%.
- Market share has been decreasing over the last couple of years, although marginally.
- Over the last 5 years, net income has grown at a yearly rate of 8.41%, vs industry average of 33.78%
The finances
| Metric | Value |
|---|---|
| Market cap | ₹17,652 cr |
| Book value | ₹504 |
| Dividend Yield | 0.83% |
| ROCE | 12.9% |
| ROE | 15.6% |
| Face value | ₹1.00 |
Shareholding pattern of Titan Ltd.
Here’s the shareholding pattern of Titan:
- Promoters: 69.53%
- Foreign Institutional Investors (FIIs): 6.29%
- Domestic Institutional Investors (DIIs): 6.29%
- Public: 17.90%
FIIs have progressively been reducing their share in the company since June 2022 going down from 9.80% to 6.29%. Promoter holding has remained constant for the same period, while mutual fund holdings within DIIs have increased three fold to 0.33%.
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Peer multiple comparison
| Stock | P/E Ratio | P/B Ratio | Div. Yield |
| Motilal Oswal Financial Services Ltd | 18.97 | 2.81 | 0.84% |
| Aditya Birla Capital Ltd | 9.21 | 2.02 | – |
| L&T Finance Holdings Ltd | 23.14 | 1.74 | 1.32% |
| Piramal Enterprises Ltd | 2.08 | 0.67 | 3.56% |
The stock is definitely trading at a high P/E multiple compared to most of its peers, except L&T. Dividend yield, although low as per the industry, fits in with other financial services companies in the space. Nothing seems to be out of place with the P/B ratio.
Conclusion
So, that’s a brief overview of everything you need to know about Motilal Oswal Financial Services Ltd. before investing. This information is by no means, however, exhaustive, and we encourage you to do your own research before investing.
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