Q3-FY09 Results Update - Motilal Oswal Financial Services
Keynote Capitals presents update on the Q3-FY09 results of Motilal Oswal Financial Services Ltd., a diversified financial services company.
Motilal Oswal Financial Services Ltd. (MOFSL) announced results for Q3-FY09. MOFSL listed on Indian stock exchanges following its IPO in August 2007 with an issue price of Rs 825 per share. The stock price of MOFSL is down 92% vis-a-vis the IPO price.
Analysis of Q3-FY09 results
Non-broking segment failed to perform during the challenging times in capital markets
The management expected to continue traction from the non-broking business, which would help diversify the revenue base and capitalize on the emerging opportunities in those spaces. However, the non-broking revenue was also affected during the quarter.
- Investment banking was down by 93% and its contribution to the overall revenues has fallen sharply to 1%, the reason being the delay in closure of some mandated projects.
- Fund based income, second largest contributor to the total revenues and for which MOFSL raised Rs246Cr also could not grow. Fund based income had helped reduce the impact of market downturn in Q2, but not during Q3.
Cost optimization through all possible ways...
- Consolidation in the outlets
The outlet count stand at 1,428 compared to 1,553 the last quarter. The closure of the outlets is attributable to merging of the outlets to have cost efficiencies. It looks to enter into new cities but is merging outlets within city.
- Employee cost declined by 57% y-o-y and 32% q-o-q
Head count was reduced by 300 during the quarter and today stands at 1400. In the last quarter too, they had laid off 300 employees. Management states the staff removed was mainly temporary. Evaluations are carried out for the new hires that are likely to join soon.
Key concern
Retail market share declining continually over last 4 quarters
Q4 likely to remain difficult
Investment banking is under pressure during the difficult times. Many of the IB deals which could have been booked in Q3 and were in advanced stages are likely to be now delayed to Q4. There are chances of a few deals not even materializing. MOFSL has 12 mandates in the pipeline.
Way ahead
- Òî tap new businesses like mutual fund business
This segment is in initial stages and MOFSL will look to develop it further with more concrete strategy which will be visible in next 2-3 quarters. It has already got AMC license and the basic infrastructure set-up has been done. This business is still in formative stage.
- Going forward, management will consider more means of cost optimization.
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Indian stock market daily morning report (September 02, 2010, Thursday)
Indian markets ended positive to a one month high yesterday on fund buying across the sector after firm global markets, strong auto sales, rising exports and expansion in manufacturing sector. Positive European markets also aggravated buying in the markets. TCS gained ~1.5% as its UK subsidiary Diligenta bagged contracts worth 250mn pounds. All sectoral indices closed positive with metal, real estate, IT and oil & gas led the market to close positive. Metals stocks rallied as a rebound in manufacturing in China propelled base metals.
Indian stock market and companies daily report (September 02, 2010, Thursday)
The market extended gains in morning trade and turned range bound in mid-morning trade. Strong global cues pushed the market sharply higher in the second half of trade. The market spurted to the day's high in mid-afternoon trade and extended gains in late trade as European stocks and US index futures rose. Strong auto sales, expansion in the manufacturing sector in August 2010 and resumption of buying by foreign funds underpinned sentiments. All the sectoral indices on the BSE were in green and the market breadth was strong. The Sensex and Nifty closed up by 1.3% each. BSE mid-cap and the small-cap indices closed up by 1.7% and 1.8%, respectively. Among the front liners, RCOM, Hindalco Industries, Sterlite Industries, Bharti Airtel and Tata Steel gained 3–5%, while Hero Honda, HDFC and ONGC lost 0–2%. Among mid caps, STC, FDC, United Breweries, Dredging Corp. and State Bank of Mysore gained 10–14%, while Allcargo Global, Shree Global Tradefin, Jain Irrigation, Fresenius Kabi Oncology and GSK Consumer lost 2–4%.
Indian stock market daily closing report (September 02, 2010)
The markets traded within a tight range after the positive momentum witnessed for two days and ended with modest gains. All the major sectoral indices ended on a very flat note. Sugar counters witnessed a significant spike on decontrol reports. The Sensex closed at 18,238 up 34 points and the Nifty was at 5,486 up 14 points after making an intra-day high of 5,513. The Mid cap and Small cap indices were up by 0.78% and 1.11% respectively. The breadth of the market was positive and the total turnover recorded at Rs.1,02,680 Cr. The Sept future ended with 3 points discount
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