Motilal Oswal

Motilal Oswal

Motilal Oswal

Motilal Oswal

Motilal Oswal Financial Services

Motilal Oswal Financial Services

Annual Report - Motilal Oswal - 2009-2010

MOTILAL OSWAL FINANCIAL SERVICES LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

To
The Members

Your Directors have pleasure in presenting their 5th Report together with
the audited Accounts of your Company for the year ended 31st March, 2010.

Sterlite Industries, Petronet LNG, NTPC, Motilal Oswal, Taj GVK, Welspun Gujarat, Shree Renuka Sugars, PTC

Sterlite Industries, Petronet LNG, NTPC, Motilal Oswal, Taj GVK, Welspun Gujarat, Shree Renuka Sugars, PTC

Motilal Oswal Financial Services

Motilal Oswal Financial Services

Motilal Oswal

Investors with a penchant for high risk can consider the Motilal Oswal Financial Services (MOFS) stock. MOFS, with its diversified model straddling broking and wealth management, private equity and investment banking, appears well placed to benefit from the trend of improving market sentiment, promising pipeline of primary offers and increasing corporate deals. At current market price of Rs 166, the stock trades at about 15 times its likely FY10 per share earnings. Though the valuation is at a discount to the market, investors may be better off phasing out their exposure to the stock.
Expanding opportunity

Increasing retail participation and improving investor sentiment bode well for MOFS that derives a chunk of its earnings from equity broking.

Though the company has reported consecutive market share losses over many quarters — currently at 3.4 per cent down from previous quarter’s 3.7 per cent (4.5 per cent in the same quarter last year) — this hasn’t impacted its broking yield.

MOFS has improved its yield to 6.3 per cent from 5.8 per cent in the previous quarter (5 per cent in the corresponding quarter last year). This suggests that the company is veering away from chasing volumes to more profitable trades.

Despite the increasing share of derivative volumes in the stock exchanges (especially options trading), MOFS appears to have increased its focus on cash trades that enjoy higher brokerage commissions. Strengthening FII inflows may also help the company’s institutional broking business — its strong research team providing an extra fillip.

That said, improving overall yields from hereon might not be as easy, thus making it imperative for the company to focus more on the expansion of its client network. While the highly competitive nature of the business may keep client additions in check, MOFS’ expanding geographic presence and economies of scale do lend confidence.

Over the past year, it has expanded its reach to 576 cities from the earlier 487. What’s more, the expansion did not weigh on its margins, as it offset this through an optimisation of its branches. That this helped business is clear from the fact that MOFS grew its client base 14 per cent to 5.80 lakh over the past year. Addition of new clients would not only help improve volumes but also expand the scope for cross-selling.
Operating efficiencies

To align with the cyclical nature of the business, MOFS has managed to move to a flexible cost structure, through a model that hinges considerably on expansion through franchise networks. The company’s large size and strong market position also make it better placed to survive capricious fund flows in PMS business or even erratic volumes in its broking division.

This may explain how the company, despite the difficult market conditions throughout last year, managed to maintain its operating profit margins at about 40 per cent.

That the company has successfully steered itself through a number of market cycles also lends confidence on risk-management skills.
Improving revenue mix

Though broking income continues to be MOFS’ breadwinner — over 70 per cent of total revenues in FY09 — it has made significant strides in deriving revenues from its other businesses as well.

Increasing contributions from the investment banking, fund-based activities (margin funding and prop trading) and asset management fee (which includes fees from PMS and assets under advice in private equity) have helped arrest margin contraction as these businesses yield better margins.

For the coming years, the company is looking to further raise its non-broking business contribution to 40-45 per cent from the present 30 per cent. This may be achievable if the company’s AMC arm takes off.

For the quarter-ended September, the company clocked a sequential revenue growth of 15 per cent, driven primarily by improving brokerage yields, investment banking revenues and high ‘other income’ component (courtesy profit on sale of investments). Earnings too grew 31 per cent sequentially, helped by a three-percentage point expansion in operating margins to 44 per cent. Its fund-based income however fell 7 per cent sequentially (22 per cent down y-o-y), in spite of a stable loan book (now at Rs 170 crore).

This can be explained by the lower interest received on term deposits and the 3 percentage point dip in its margin funding yieldsSEBI’s move to allow exchanges to extend trading hours may however tell on the company’s margins (likely increase in costs). While the move could also help garner additional institutional interest and retail participation, the extent of benefit may be difficult to point out.

In August 2007, the company had tapped the primary market to raise over Rs 246 crore to build on its competitive position and support working capital requirements. It also planned to enhance financing facility for broking customers, infuse funds into subsidiaries and buy itself additional office space.

While it has since added generously to its client base (up by 77 per cent) and geographical reach, the company’s loan book has reduced by over 30 per cent - attributable mainly to market conditions and lack of retail participation in the current rally. Its PMS AUM on the contrary has grown, despite the equity downturn.

As for segment-wise performance, while the company’s retail broking, wealth management and institutional broking revenues have vacillated in tandem with the markets, those from its private equity and investment banking divisions have shown definite improvement.

While the PE division has turned around, the Investment Banking division has bettered earnings. The company has jointly with its subsidiary MOSL, acquired an office building at Prabhadevi in Mumbai for a consideration of Rs 165 crore last quarter.

via BL

Bajaj Auto, Cement Sector, Jindal SAW, Container Corporation, Motilal Oswal, Praj Industries, Royal Orchid Hotels, TCS, Ultratech Cement

Bajaj Auto, Cement Sector, Jindal SAW, Container Corporation, Motilal Oswal, Praj Industries, Royal Orchid Hotels, TCS, Ultratech Cement

Motilal Oswal

Motilal Oswal

Motilal Oswal, Rolta, TCS, NIIT

Motilal Oswal, Rolta, TCS, NIIT

Motilal Oswal, Titan Industries,Sun TV Network, Pfizer

Motilal Oswal, Titan Industries,Sun TV Network, Pfizer

Motilal Oswal

Motilal Oswal

Mahindra and Mahindra, Mphasis, Motilal Oswal, Pantaloon, Satyam, Sterlite Industries, TCS, United Spirits, Zee Entertainment

Mahindra and Mahindra, Mphasis, Motilal Oswal, Pantaloon, Satyam, Sterlite Industries, TCS, United Spirits, Zee Entertainment

Motilal Oswal, Tata Motors, Infosys

Motilal Oswal
CMP: Rs 1,874.30
Target price: Rs 2,400

Citigroup has maintained its buy rating of Motilal Oswal Financial Services, while raising its price target to Rs 2,400, after its stronger-than-expected third quarter earnings. “We are raising earnings by 27-46% for FY08E-10E to factor in stronger-than-expected industry growth, higher wealth management and fund-based incomes,” the investment bank said in a report. According to them, MOFS, which has a well-balanced retail and institutional franchise (over 60% retail), is relatively lower risk than its peers due to its lower margin finance dependence and is well positioned to benefit from the structural growth in financial services spectrum,” it said.

Mahindra Lifespace
CMP: Rs 844.90
Target price: Rs 1,096

Sharekhan has initiated coverage on Mahindra Lifespace Developers, a special economic zone (SEZ) developer, with a buy rating and price target of Rs 1,096 citing attractive valuation. “Given MLD’s operational expertise in SEZ and premium brand in the other verticals, we value the Chennai and Jaipur SEZs and the other planned developments at 1.0 times NAV (net asset value) of Rs 1,038 per share,” the retail brokerage said in a note to its clients. “We value the balance land for which it has no development plans in the short to medium term at Rs 58 per share, i.e. at a discount to the current market price,” it said. Sharekhan estimates the company’s earnings per share (EPS) in 2007-08 at Rs 8.8, as against Rs 4.4 in 2006-07. In 2008-09, its EPS is seen at Rs 33.7.

Larsen & Toubro
CMP: Rs 4,062
Target price: Rs 5,003

Lehman Brothers has initiated coverage on L&T with an overweight rating and a 12-month price target of Rs 5,003 citing expectation of strong earnings and order book growth. “We project an earnings CAGR (compounded annual growth rate) of 45% over FY07-10 and ROE (return on equity) of 31% in FY08E (adjusted for investments in subsidiaries),” the investment bank said. Lehman expects the company’s order book to grow 40%, on a compounded basis, toll 2009-10. “We expect L&T Infotech, L&T Finance and certain manufacturing subsidiaries to record growth in excess of 30% over the next three years. Value discovery in some of the subsidiaries is a strong possibility over the next three years, in our view,” it said.

Infosys
CMP: Rs 1501.80
Target price: Rs 1,900

JP MORGAN Securities remains cautious on Infosys, after its third quarter earnings, as it expects pressure on volumes/prices from financial services clients from the fourth quarter (January-March). “With Infosys’ revenue growth on a declining trend (Y/Y US$ revenue growth has moved from 41% in 1QFY08 to 32% in 3QFY08), we wait for results from TCS and Wipro to see the sector trend,” the foreign brokerage said. “On a share price basis, the stock has been already weak pricing in some of the disappointment and would trade sideways in our view,” it added.

Tata Motors
CMP: Rs 769.25
Target price: NA

MERRILL Lynch has rated Tata Motors a neutral amid talk the company is the front-runner to acquire two loss-making premium brands. “We believe the stock is undervalued on existing operations, but we expect upside to be capped on likely acquisition of loss-making global brands. We could turn positive if the stock comes off sharply post-deal announcement or if Tata loses the bid,” the investment bank said. Merrill remains positive on the company’s businesses.

“We expect 25.3% EPS CAGR over FY08-10E driven by growth in buses, due to government thrust on urban transport, light vehicles, and new cars including Nano. We also expect a rebound in trucks and cars in fiscal 2009,” it said. On the expected launch of Nano, Merrill said, “In our forecasts, we have assumed 75K (75,000) in FY09, and 200K (200,000) in FY10, with profit breakeven at a volume of 225k (225,000).

We see some positive risk to these estimates, given the potential of the market, and also the positive feel on initial specs,” it added.

Axis Bank, Bharati Shipyard, Infosys, Motilal Oswal, Nitin Fire, Indian Hotels

Axis Bank, Bharati Shipyard, Infosys, Motilal Oswal, Nitin Fire, Indian Hotels

Motilal Oswal

Motilal Oswal

Motilal Oswal - Listing

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Motilal Oswal will list on September 11, 2007

Motilal Oswal Financial Services IPO subscribed 27 times

The IPO of Motilal Oswal Financial Services was subscribed 27.33 times by 17:00 IST, as per data availed on NSE website. The issue closed today, 23 August 2007. The IPO received bids for 8.15 crore shares compared to 29.82 lakh shares that were on offer.

The price band for the IPO was Rs 725 to Rs 825 per share. At the offer price band of Rs 725-Rs 825, PE works to 27.9 (on lower band) to 31.7 (on upper price band).

Motilal Oswal Financial Services (MOFSL) is the Motilal Oswal group’s holding company with stake in four group companies: Motilal Oswal Securities (MOSL – the stock broking arm), Motilal Oswal Commodities Brokers (MOCB - the commodity business arm), Motilal Oswal Venture Capital Advisors Pvt Ltd (MOVC - the venture capital advisory arm) and the Motilal Oswal Investment Advisors Pvt Ltd (MOIAPL - the investment banking arm).

The object of the issue was to raise funds to enable the group to improve its competitive position and support growth plans through deployment of long-term working capital, enhanced financing facility for broking customers, and additional office space and technology advancement.

MOFSL’s consolidated net profit rose 15% to Rs 69.58 crore, on 39% growth in income from operations to Rs 358.75 crore in FY 2007 over FY 2006.

Motilal Oswal IPO Analysis

Motilal Oswal IPO Analysis

Motilal Oswal Financial Services

Motilal Oswal Financial Services