Brokerage Firm Up 250% to Trade Ex-Bonus Next Week: What Investors Need to Know

Ever received a surprise gift you weren't expecting? It's a wonderful feeling.

Now, imagine opening your investment portfolio one morning to discover a delightful surprise - a sudden increase in the number of shares you hold in a particular company.

This isn't a glitch in the system, but rather the consequence of a company declaring a bonus issue, also known as bonus shares.

Often met with excitement by investors, bonus shares are a unique tool employed by companies to reward their shareholders and potentially enhance their overall market position.

This translates to potentially improved liquidity and a signal of confidence in the company's future trajectory.

For investors seeking such perks, Motilal Oswal Financial Services is slated to trade ex-bonus next week.

Here's all you need to know.

• At its meeting on 26 April 2024, the company announced a bonus issue of shares.
• Shareholders will receive bonus shares in a 3:1 ratio, meaning they will get three equity shares of face value Re 1 each for every one existing equity share of face value Re 1 they hold.
• The record date for this bonus issue is set for 10 June 2024.
• Following the bonus issue, the company's paid-up equity share capital will consist of 596 m equity shares, each with a face value of Re 1.
• To implement this bonus issue, Motilal Oswal will capitalise Rs 447 m from the securities premium account.

As of 31 March, the company had an aggregate amount of Rs 5.3 bn as an aggregate amount of its securities premium account.

This is the first-ever issue of bonus shares that the company has considered.

A Close Look at the Financials

For the March 2024 quarter, the company reported a remarkable 108% year-on-year (YoY) increase in revenue, reaching Rs 21.4 bn. The net profit for the quarter surged by 334% YoY to Rs 7.2 bn.

For FY24, the company saw a 69.2% YoY rise in revenue to Rs 706.8 bn, with net profit soaring by 162.4% to Rs 24.4 bn.

Between FY22 and FY24, the company achieved a compound annual growth rate (CAGR) of 28.3% in its revenue.

This impressive growth was largely driven by increased demand, which significantly boosted the company's sales volume and revenue.

Moreover, the company's profit grew at a CAGR of 23%, reaching Rs 24.4 billion (bn).

Additionally, the net profit margin improved from 30.5% in FY21 to 32.85% in FY24, reflecting enhanced profitability.

Motilal Oswal Financial Services Financial Snapshot (2022-24)

Particulars	31-Mar-22	31-Mar-23	31-Mar-24
Revenue (Rs in bn)	429.7	417.7	706.8
Revenue Growth (%)	-	-2.8	69.2
Net profit (Rs in bn)	13.1	9.3	24.4
Net profit margin (%)	30.5	21.3	32.8

Source: Equitymaster

Going forward, the company plans to improve its profitability and increase its services portfolio.

What Next?

Moving forward, the company anticipates its operating net profit to grow at a compound annual growth rate (CAGR) of 15-20%. It also aims to maintain or improve its existing internal rate of return (IRR) of 18%, while enhancing its net worth.

In FY24, the company's sales force doubled, and it plans to double it again in FY25. This expansion is part of a broader strategy to boost sales and improve market penetration.

The company also experienced strong disbursement figures during the quarter and targets to double these disbursements next year.

The company expects a significant improvement in its group financials, which could be a strong lever for a credit rating upgrade. It aims to improve its net worth, contributing to a more robust financial position.

The company plans to increase its share of low-cost finance from the National Housing Bank (NHB), which will help reduce funding costs and improve profitability.

The company prides itself on its robust asset quality, with a net non-performing asset (NPA) ratio of just 0.4%. This strong asset quality is crucial for maintaining investor confidence and securing favourable credit terms.

With a distribution penetration of less than 6% within a large client base of 4 million, there is a significant opportunity for cross-selling.

To capitalize on this, the company plans to scale up its Relationship Managers (RMs) by three times in the coming years. This increase in RMs will allow the company to better serve its existing clients and attract new ones.

How Motilal Oswal Shares have Performed Recently

Motilal Oswal shares have gained by more than 3% in past month. Over the past six months, the company's shares have gained 102%.

On a YTD basis, the shares of the company are trading 92% higher. While it has given a multibagger return of 258% in past one year.

Motilal Oswal touched its 52-week high of Rs 2,678.1 on 26 April 2024 while it touched a 52-week low of Rs 639 on 5 June 2023.

About Motilal Oswal Financial Services

Motilal Oswal Financial Services Ltd (MOFSL) is a non-banking financial company (NBFC) registered under the Reserve Bank of India Act, 1934.

The company offers a diversified range of financial products and services, including Institutional Equities, Asset Management, Housing Finance, Currency Broking, Private Equity, and more.

MOFSL serves a wide and varied client base, comprising retail customers (including High Net Worth Individuals), Mutual Funds, Foreign Institutional Investors (FIIs), Financial Institutions, and Corporate Clients.

The company operates its lending business through a Loan against Shares portfolio and retail mortgage-backed lending under the name Aspire Home Finance.

It is one of the largest full-service brokers in India, with the highest gross brokerage revenue as of 31 March 2023, amongst players in the broking industry.

For more details, see the Motilal Oswal company fact sheet and quarterly results on our website.

You can also compare Motilal Oswal with its peers:

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