Motilal Oswal Unlisted Share

Company Overview:

Motilal Oswal Home Finance Limited (MOHFL) is registered with National Housing Bank (NHB) and is amongst the leading new age Housing FinanceCompanies in India having its presence across 11 states in Western, North-Central and Southern India. MOHFL is a subsidiary of Motilal Oswal Financial Services Limited (MOFSL). MOFSL is a well-diversified, financial services company focused on wealth creation for all its customers, such as institutional, corporate, HNI and retail. MOHFL is registered with National Housing Bank (NHB) under section 29A of the National Housing Bank Act, 1987. The company is a professionally managed housing finance company with unique combination of financially sound and technically experienced parentage having built public trust of over 4 decades in the domain of financial services. The group is known for their professional ethics, robust knowledge and strong execution capabilities.

Motilal Oswal Housing Finance Ltd. cater to pure-retail affordable housing space through Motilal Oswal Home Finance (previously known as Aspire Home Finance Corporation). They concentrated their efforts in re-building home finance business in terms of processes, system, manpower and structure to strengthen their business. In FY2021, MOHFL on-boarded Mr. Arvind Hali as MD and CEO. Mr. Hali has more than 20 years of experience and was previously associated with Art Housing Finance, Intec Capital, AU Financiers, Dhanalaxmi Bank, SCB etc.

Due to Covid-19 induced lockdown, disbursements remained muted in the first few months of FY2021. However, they have gradually picked up and disbursements for the full year stood at R 273 crores, up 42% YoY. The loan book stood at R 3,512 crores across 47,665 families as of Mar 2021. They have witnessed sharp traction in collection efficiency in the month of March which has reached to pre-Covid level at 97%. Our average ticket-size at sourcing stood at R 8.6 lakhs in FY2021. They have put in place a vertical organization structure comprising sales, credit, collection and technical team. The implementation of cluster level credit layer along with 4 layer credit approval system based on loan ticket sizes and differentiated pricing methodology for loans based on risk type should likely result in improve underwriting, going forward. In FY2021, They have received sanctions from NHB for the first time. Apart from that, they also did securitization transaction under PTC route in the last quarter, thus diversifying their borrowing. MOHFL witnessed 95 bps reduction in cost of fund on YoY basis in FY2021 to 9.25%. Cost of funds for the month of March 2021 stood at 8.7%. MOHFL net gearing declined to 2.8x as of Mar 2021. They have limited borrowing repayments for next 1 year, strong undrawn borrowing lines and ALM places us in strong liquidity position.

Mission & Vision:

The company works on the business philosophy of financial inclusion of Lower Income Group Indian families by providing them an access to long term housing finance.

Several services that are offered by MOHFL:

1. Home Purchase Loan:

Motilal Oswal Home Loans helps to acquire a ready /under construction residential property / construction of a residential property on own land. MOHFL also provides loans to refinance home loan availed by the customer from other Banks / HFCs.

2. Construction Loan:

Home Construction Loan gives tailored and flexible finance to put building blocks for construction of home. The loan is disbursed as per the stage of construction, giving you the flexibility to contribute your share too in parts. MOHFL Home Construction Loan is extended to construct residential premises either from a contractor or contractual builder on a freehold owned plot of non-agricultural land as per plan approved by the local authority.

3. Home Improvement Loan:

It offers loans for renovation of an existing space for a more comfortable environment and a better quality of living. This loan facilitates internal and external repairs and other structural improvements in existing home. Towards this end, the MOHF Home Improvement Loans would typically cover the following improvements: Tiling, Flooring, Roofing, Painting, Electrical work, Plumbing work, Furniture work, Waterproofing, and Grill work for windows.

4. Home Extension Loan:

MOHFL provide loans to construct additional room/s or floor within the permissible building plan.

5. Loan Against Property:

MOHFL Loan Against Property product, provides the opportunity to leverage assets for fulfilling financial needs.

Competitive Strength:

• MOHFL have invested significantly in technology to reduce operational costs and turnaround-times. In FY2021, we launched Digital MO Partner app. They have developed in-house “Loan Origination System” (LOS) and “Loan Management System” (LMS). These newly developed systems provides lot of ease of access, operational convenient, efficiency enhancement and fast tracking of processes. The mobile apps for sales and credit teams coupled with newly framed processes are expected to deliver much better outcomes in future.

• Motilal Oswal’ is a well-established brand among retail and institutional investors in India. MOFSL believes that its brand is associated with high quality research and advice as well as corporate values like integrity and excellence in execution. The company has been able to leverage its brand awareness to grow its businesses, build relationships and attract and retain talented individuals.

• The promoters, Mr Motilal Oswal and Mr Raamdeo Agrawal are qualified chartered accountants with over three decades of experience each in the financial services industry. The top management team comprises qualified and experienced professionals, with a successful track record. The company believes that its management’s entrepreneurial spirit, strong technical expertise, leadership skills, insight into the market and customer needs provide it with a competitive strength, which will help to implement its business strategies.

• The broad range of offerings under Broking and Distribution, Institutional Equities, Asset Management, Wealth Management, Investment Banking, Private Equity and Housing Finance business, helps to foresee client requirements and provide full-fledged services under single platform. The production and distribution of all financial products and services helps the company’s advisors and clients to attain client’s financial objectives with best in class services.

• Risk exposure is monitored and controlled through a variety of separate but complementary financial, credit, operational, compliance and legal reporting systems. Risk management department analyses this data in conjunction with the company’s risk management policies and takes appropriate action where necessary to minimize risk.

Key Strength of MOHFL:

• Motilal Oswal’s operating margins continue to remain stable despite the fluctuations in market volumes and revenues. This is a result of creating a robust business model that can withstand the cyclical fluctuations in business volumes and simultaneously capture the opportunities provided by the structural growth of India. During the year, CRISIL Limited reaffirmed the Credit Rating of “CRISIL A1+” to the Commercial Paper Programme of Rs. 1500 crores (enhanced from Rs. 1300 crores) of the Company. CRISIL Limited reaffirmed the Credit Rating of “CRISIL A1+” to the Commercial Paper Programme of Rs. 2500 crores and “CRISIL A1+” to the Commercial Paper Programme of Rs. 800 crores (enhanced from Rs. 500 crores) of Motilal Oswal Finvest Limited, a subsidiary of the Company. CRISIL has also reaffirmed its ‘‘CRISIL AA-/CRISIL PP-MLD AA-r/Stable/CRISIL A1+’’ rating on the debt instruments and bank loan facilities of Motilal Oswal Home Finance Limited. ICRA Limited assigned the credit rating of “[ICRA] AA (Stable)” to the NCD programme of Rs. 100 crores and reaffirmed the credit rating of “[ICRA] AA(Stable)” to the NCD Programme of Rs. 200 crores of the company. ICRA has reaffirmed its ‘[ICRA]A+ (Stable)/ PP-MLD ICRA A+/Stable/ICRA A1+’ rating on the debt instruments and withdrawn rating for bank loan facilities of Motilal Oswal Home Finance Limited. India Ratings and Research reaffirmed rating of “IND A1+” to Commercial Paper Programme of Rs. 1500 crores of Motilal Oswal Financial Services Limited. India rating also reaffirmed rating of “IND A1+” to Commercial Paper Programme of Rs. 3000 crores and assigned a new rating of “IND A1+” to Commercial Paper Programme of Rs. 300 crores of Motilal Oswal Finvest Limited. During the year, India Ratings has assigned a short-Term issuer rating of ‘IND A1+’ to Motilal Oswal Home Finance Limited. The ratings indicate a strong degree of safety regarding timely servicing of financial obligations.

Promoters and ShareHolding Pattern:

Peer Comparison:

Financials: 

Source: Company Filing Form AOC-4

Source: Company Filing Form AOC-4

Source: Company Filing Form AOC-4

Valuations:

The ROE during the year FY2021 stood at 38% vs 6.6% in FY2020. ROE was lower in FY2020 primarily on account of MTM based loss. EBITDA and Net profit margins stood at 57% and 34% respectively in FY2021. Debt to Equity ratio stood at 1.3x. As of Mar 2021, Motilal Oswal’s total quoted equity investments stood at Rs.2,180 crores. Total investments including alternate investments stood at Rs. 3,096 crores as of Mar 2021. Motilal Oswal witnessed highest ever gain on fund based investments in a year in FY2021 at R 779 crores.

News:

1. Motilal Oswal Home Finance receives USD 50mn commitment from U.S. International Development Finance Corporation (DFC).
    https://motilaloswalhf.com/press-release-info/?CONTENT_ID=20101

2. Motilal Oswal Home Finance Ltd(MOHFL) inaugurates its 107th branch in India with a new branch in Gurugram.
   https://motilaloswalhf.com/press-release-info/?CONTENT_ID=20174