From being a pure brokerage few years back, Motilal seems to have build two new solid businesses over the last 1-2 years.
Low cost home financing(average ticket size 10 lacs) is growing at a strong pace with ~1000cr of loans disbursed as of Sep 30 2015 in just one and a half year of operation. And the Management has a plan to increase this to ~3000-3500cr by Mar’17. The yield on loans they provide is 13.5%. The inspiration on this business seems to have come from Gruh and Repco. They aim to reach 20% ROE by increasing the leverage to 7-8x in coming years.
The other second business is Asset Management including PMS where they have grown 3-4 x in last one year and have total assets ~10,000cr as of Sep 30. 2015. Their Mutual funds performed one of the best in last one year, so that is one cause for AUM to rise in addition to subscribers rise. Other thing is being a good performer, this pulls lot many individual investors to their Mutual funds in coming years. That will mean strong increase in AUMs in coming years.
Other thing Motilal management points out is that both these business have breaken even. So, any further rise in AUM or Aspire Home finance business should disproportionately add to profits going forward as fixed costs are recovered. Their guidance is that brokerage business will reduce to 1/3rd of overall business in next couple of years…so that will address lumpiness of earnings to large extent and also fortells the confidence of Management in rapid rise of these businesses.
The current Market cap is ~4600cr.
I haven’t researched or studied it in lot of depth, but at the outset it seems to me a super-multibagger in the making. Other than Good Management which aims at building new businesses, opportunity size is humongous in both home loan (low cost, 10lacs cr. opportunity)and Mutual fund(if you are perceived to be one of the best). Above all current size is small to be able to make big strides for atleast next few years.
Risks of execution(as businesses are new especially home loan) and also stock markets(going up and down) to some extent are the ones I foresee.
Disclosure; I have initiated a position ~10% of my portfolio.
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