Despite revenues in the broking business being up only 5.7 per cent and segmental profit down 41.5 per cent year on year in the first half of FY16, Motilal Oswal, Chairman and Managing Director of Motilal Oswal Financial Services, remains focussed on the broking business. But beyond broking, Oswal is interested in capital market activities such as asset management and housing finance. Both are fast growing businesses for the company today.
In an interview with BusinessLine , Oswal talked about the company’s performance and the way forward.
The broking business, which is our core business, is expected to register 20 per cent growth. The housing finance and asset management businesses have been the fastest growing. Our housing loan book has crossed ₹1,000 crore in terms of disbursements and we expect it to touch ₹2,000 crore by FY16-end. We currently have 35 branches covering 10,000 families in four states, namely Maharashtra, Gujarat, Madhya Pradesh and Telangana. Our recently started initiative, women focused home loan centre (MALA), which currently runs in Mumbai and Pune, has touched ₹3 crore disbursement and is showing good promise in its early days.
Our assets management business, which includes mutual funds, portfolio management services and private equity, is currently about ₹12,000 crore and has more than doubled in one year.
We are planning to raise ₹1,000 crore in our real estate private equity business, which we will invest in both debt and equity. The fund will invest at the project level in the affordable housing segment. Our first fund is 100 per cent equity and second is only debt.
Why have you not ventured into personal loans, gold loans or automobile loans?
We don’t want to be in that business as it does not fit into our business strategy from a core value offering and risk-reward appetite perspective.
Your employee costs have jumped quite significantly, which is partly responsible for subdued net profit growth in the first half. Will this continue?
In FY16, we have invested significantly in ramping up capacity, which will impact our net profit growth in the short term till these investments start showing full throughout.
We have 2,500-odd employees (up 60% year on year) out of which roughly 1,800 are in the broking business.
We are planning to add another 200 people in the broking business.
What is your view on Indian equity markets?
The markets are becoming more or less stable. Domestic money flow remains strong though inflows from foreign institutional investors have slowed down.
But globally India is in a sweet spot though we have not seen significant improvements in quarterly numbers, GDP or IIP. My sense is that it will take a couple of quarters more for interest rate transmission to happen.
Are you open to acquisitions in either of your businesses?
Our aim is to grow organically as a strategy. We are not keen on inorganic growth. Our (acquisition of) …a broking business a few years back has not added great value.
Has the RBI’s front-loaded rate cut started benefiting your housing finance business?
As our housing finance business builds scale, we will see gearing go up to industry levels (currently debt / equity of 4 times).
Typically housing finance is a spread business and has relatively faster transmission of interest rate changes.
However, improvement in the credit rating during the last quarter due to deeper seasoning of our loan book and the overall rate reduction environment will augur well for improving the spread in this business in the near future.