All cylinders are firing and that led to record Rs 1,400 crore profit for Motilal Oswal group in Q1: Raamdeo Agrawal
ADVERTISEMENT How was the quarter gone by? It was marred by some challenges, regulatory hurdles, etc. The FII sentiment was a little dampened, there are question marks on tariffs. How did business shape up for you?
Raamdeo Agrawal: The capital market jashna (celebration) is still on as the kind of expansion that is happening in the capital is historical. Irrespective of what I have seen in the last 40-50 years, this is unprecedented and that is impacting the performance of Motilal Oswal. We have 24% operating revenue growth and 21% bottom line growth year on year which is a record and the declared profit at Rs 1,430 crores for the quarter is also very big but that has to be seen in terms of what happened in Q4 in terms of mark to market.
There was a loss in the Q4 and that kind of over amplifies the profit in this quarter, but nevertheless, it is a bumper result by every measure. It is led by two-three segments which have been doing exceptionally well. Our AMC had the highest growth – 70-75% growth in AUM – and hence profits. The PWM also grew very strongly. In the capital market, we have become the number one QIP company. Every day, so many companies are closing their QIPs or IPOs and block deals and that is where we have raised about Rs 30,000 crore for Indian corporates in this quarter and that has led to expansion in revenues.
On top of it, the Treasury has done exceptionally well in this quarter because the market itself is up about 9-10%,. Maybe the entire treasury is up 14-15%. All in all, all cylinders are firing and that led to over Rs 1,400 crore profit for this quarter which in our history is by far the biggest.
Want to talk about these segments individually. Let's talk about the brokerage income first because you are seeing a little bit of muted performance. But again that was the story of Q1. How do you see that panning out in the future quarters?
Raamdeo Agrawal: This is muted because of this change in the regulatory framework, weekly expiry and all that peaked out sometime in September last year. Another quarter of a muted performance from only broking is going to continue because the peak was in September last year. I would think that July, August, September – the current quarter would also compare very well with the April, May, June quarter. But by year-on-year comparison, it will look muted and then things will start picking up. By the fourth quarter, it will look like a 30-40% growth kind of situation and that is the one segment that is almost 50% of the entire revenue and profit, which year-on-year is looking a bit weaker because of regulatory action. Otherwise, other segments of the market, other businesses are doing very well.
Is it coming as a relief that Sebi has now lifted restrictions on Jane Street? That was also sort of dampening sentiment.
Raamdeo Agrawal: Yes, I mean, they were not my clients, so we were not that greatly impacted but yes, broader market activities could have got impacted and now normalcy will be restored once they start trading. I would not know what exactly was the impact, but if that was a main factor in terms of counterparty volumes, then that will help us.
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What does the future hold for the Motilal Oswal Group? Wealth management is a key segment that you are focusing on. What are the IPO plans? Is it before the close of this fiscal?
Raamdeo Agrawal: No, I do not think any segment of the company is going to go public. They are all drawing a lot of strength from each other. So, I do not think there is anything on the cards for taking one particular segment of the company public. I mean, at some point of time, of course, housing finance will go public, but otherwise the rest of the capital market will remain under one roof.
As far as the future is concerned, the expansion of the capital market which started from 2020 on the back of relentless participation by retail in a big way with the number of demat accounts jumping from 40 million to 200 million and we are set to again double from 200 million to 400 million in another five years.
ADVERTISEMENT I see a relentless expansion of new clients and existing clients also participating very strongly because the returns are very attractive compared to the fixed income segment in the market. The only caveat is that corporate performance is not that rosy. So far, in Q1 we have seen very few very good results. So, we have to see how the monetary and fiscal loosening that has happened in the last six months plays out in the second half of the year when the economy picks up. Except for the concerns over corporate earnings or some kind of hesitation at this juncture, I would say everything is fine, inflation is under control, interest rates are low, liquidity is ample, banks are being asked to lend. So, you got to have a little patience in the market. In the longer run, we are very well placed to be one of the sectors in the economy which will grow 20-25% for the next five to seven years.
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