Institutional equities business proves to be a drag on Motilal Oswal Financia's Oct-Dec topline

25 January 2024

The sequential performance of leading brokerage and financial services firm Motilal Oswal Financial Services Ltd in the December quarter was marred by a fall in broking business income from its institutional equities business segment, according to information disclosed by the management in its post-earnings investor call on Wednesday. Motilal Oswal Financial reported that its brokerage revenue fell 8% on quarter to 5.36 bln rupees in Oct-Dec.

The management of Motilal Oswal Financial told investors in the call that during the December quarter the retail broking business was flattish on a sequential basis but the institutional equities business saw "lower volumes." The firm's total brokerage revenue of 5.36 bln rupees made up for slightly above 50% of the total revenue.

The institutional equities segment of the broking operations of the firm provides extensive research on more than 250 companies covering 21 sectors, as per information in the company's post-earnings investor presentation. This segment currently caters to around 840 institutional clients.

Motilal Oswal Financial is a full service brokerage firm earning from fees charged to retail, corporate, and institutional investors on their trading in cash and derivatives segments of stock exchanges, commissions from mutual fund distribution, and non-broking charges in institutional deals. As of Dec 31, Motilal Oswal Financial had around 8,22,000 active clients on the NSE. The Motilal Oswal Group of which it is a part also operates in investment banking, asset management, wealth management, private equity, and housing finance businesses.

Compared to the year ago period Motilal Oswal Financial's revenue from broking business rose 23% but was significantly below the total revenue growth of 36%. The other major revenue-earner for the brokerage firm in its standalone operations is interest income which comes mainly from financing margin trading by equity traders and other sources.

In Oct-Dec, it recorded interest income of 3.54 bln rupees in Oct-Dec, 12% more than the previous quarter and 68% up from the year-ago quarter. It made up for 34% of the total revenue of the brokerage firm.

In its investor presentation Motilal Oswal Financial said that it was among the "top three brokers in terms of gross brokerage", and was aiming to further improve its market share in the fast growing market.

The flattish revenue growth on a sequential basis from retail broking in Oct-Dec was on the back of the average daily turnover in the stock exchanges rising by just 8%. Motilal Oswal Financial said its retail cash average daily turnover market share went up by 42 bps on quarter to 7.5%. It further said that its share in the futures and options premium for the last month of the December quarter was 8.7%.