Deep Dive into the Business Model, Risks & Valuation | TheIndianMarkets.com
If there’s one sector in India that offers structural, long-term wealth creation potential, it’s the capital markets. Driven by a rising GDP, a young demographic, and the steady financialization of savings, Indian households are increasingly allocating capital to equities—both directly and through mutual funds.
To give you context:
- Monthly SIP inflows have grown from ₹8,000 crore (FY20) to over ₹25,000 crore today.
- Equity mutual funds saw a record inflow of ₹4.17 lakh crore in FY25.
- The number of Demat accounts has jumped from ~4 crore to ~20 crore in just five years.
This momentum strongly supports businesses in the capital market value chain—CDSL, CAMS, KFinTech, Angel One, HDFC AMC, 360 ONE, and among them, Motilal Oswal Financial Services (MOFSL) stands out due to its diversified presence.
Why Motilal Oswal Is Back in Focus
MOFSL’s share price has surged 5x since 2023, triggering massive retail participation.
- Shareholder count rose from ~67,000 (Mar 2023) to 2.87 lakh (2024).
- Yet, institutional interest remains cautious. FII stake is low (~6%) and Parag Parikh Flexi Cap Fund has gradually reduced its exposure.
This raises a crucial question:
Are we near the peak of the cycle—or is this a sustainable long-term story?
Understanding the Dual-Engine Business Model
MOFSL operates via two main verticals:
1. Core Business (Operating Income)
This includes:
- Wealth Management: Retail broking + third-party product distribution via 1,800+ RMs and 9,000+ independent partners.
- Capital Markets: Retail and institutional brokerage, F&O income, investment banking (IPOs, M&As, etc.)
- Asset & Private Wealth Management: Direct management of funds via Mutual Funds (AMC), PMS, AIFs, and PE.
- Housing Finance: A smaller vertical offering home loans.
2. Treasury Investments (Proprietary Book)
MOFSL invests its own surplus capital into its in-house equity strategies. These returns show up as Mark-to-Market (MTM) profits/losses in quarterly reports, and not as realized gains or losses.
In FY25, while core operations remained healthy, a sharp Q4 market correction resulted in a MTM loss of ₹743 crore, which impacted reported PAT despite stable core performance.
FY25 Segment-Wise Performance
| Business Segment | Revenue Contribution | PAT Contribution |
|---|---|---|
| Wealth Management | ₹2,339 Cr (45%) | ₹783 Cr (39%) |
| Capital Market | ₹568 Cr (11%) | ₹258 Cr (13%) |
| Asset & Private Wealth Mgmt | ₹1,911 Cr (37%) | ₹825 Cr (41%) |
| Housing Finance | ₹343 Cr (7%) | ₹127 Cr (6%) |
- Total Core PAT: ₹2,016 Cr (YoY Growth: 31%)
- Treasury PAT: ₹478 Cr
- Total Reported PAT (FY25): ₹2,494 Cr
Key Risks to Consider
Despite long-term tailwinds, capital market businesses are highly cyclical and market-sensitive:
- MOFSL’s stock has corrected 40–65% multiple times during bearish phases.
- Treasury income is volatile and can swing quarterly PAT drastically.
- Valuations in broader markets appear stretched, led by liquidity more than earnings (e.g., Dixon Tech trading at >100 P/E).
- FY25’s first three quarters were exceptional—repeating that level of YoY growth in FY26 will be challenging.
Valuation Check: Where Does MOFSL Stand Now?
- Current P/E: ~21x (vs. 5-year median of 11x)
- MOFSL’s complex structure (AMC + broking + wealth + treasury) makes peer comparisons tricky.
- It doesn’t fit neatly into a single basket like pure-play AMCs (e.g., HDFC AMC), brokers (e.g., Angel One), or wealth firms (e.g., 360 ONE).
In short, current valuations are at the higher end of its historical range.
Final Take — Should You Invest Now?
Bull Case:
- Strong brand and distribution
- Plays the full capital market cycle
- Aligned with long-term financialization theme in India
Bear Case:
- High-beta, volatile stock
- Quarterly earnings heavily influenced by market movement
- Currently trading at peak multiples
Verdict from TheIndianMarkets.com
Motilal Oswal Financial Services is a powerful long-term play on India’s capital market evolution. But it’s not a smooth ride. The business is cyclical, the valuations are not cheap, and the quarterly results can be misleading due to treasury MTM swings.
For long-term investors who understand capital markets and can stomach volatility, this might be worth tracking. But those looking for near-term stability or passive growth should consider waiting for better valuations or more favorable entry points.
What’s Your View?
Do you believe Motilal Oswal has more room to grow—or has it run too far, too fast?
Tell us in the comments or connect with us on TheIndianMarkets.com for more research insights.
Disclaimer
This article is for educational and informational purposes only and should not be considered as investment advice.
Investing in the stock market involves risks. Always consult a SEBI-registered financial advisor before making any investment decisions. TheIndianMarkets.com is not responsible for any financial losses that may occur as a result of investment decisions based on this content.
