Mumbai: Motilal Oswal Financial Services Ltd, the non-banking finance company that owns one of the largest equity brokerage operations in India, made a sparkling Tuesday debut on Indian bourses with a 21% premium over its issue price of Rs825. The stock listed at Rs999 on the Bombay Stock Exchange and eventually closed at Rs 977.45, up 18.47%.
“We expect at least 10% to 15% upside for the stock in the short-term. On the
longer-term, it is a very attractive buy recommendation,” said Lalit Thakkar, head of equity research at Mumbai-based Angel Broking Ltd. Some other large brokerages in the city had asked their analysts to stay tight-lipped on the issue because Motilal competes with them directly.
On track: A file picture of Motilal Oswal dealing room. The issue has generated huge interest from institutional investors as they subscribed 13.9 times the available portion os shares.
Motilal Oswal, chief executive of the firm, said that the listing has opened a new chapter for the company. “We plan to become one of the largest integrated financial firms in the country,” he said. “The money from the issue will be spent on current operations. We will also look for attractive opportunities to acquire domestic financial services firms, which could help us grow bigger and faster.”
Apart from the equity brokerage that accounts for 81% of Motilal’s total revenue, the company offers private equity, investment banking, commodity broking, portfolio management services and venture capital services.
Motilal reported Rs70 crore profit during financial year 2007 on revenues of Rs 380crore. “We are expecting 40% growth in profits in the financial year 2008. For the financial year 2009, we have estimated another 25% growth,” said Oswal. The firm said it has 251 institutional clients, including 165 foreign institutional investors.
At Tuesday’s close, Motilal has a market capitalization of about Rs2,776 crore. Indiabulls Financial Services Ltd with a market cap of about Rs11,846 crore, is the largest listed company in this sector. Others, such as JM Financial Ltd and India Infoline Ltd, also command a higher value than Motilal. Those with a lower market cap include Geojit Financial Services Ltd, which was capitalized at Rs902 crore, and Infrastructure Leasing & Financial Services Ltd with a market cap of Rs447 crore.
Many of these listed peers have also rallied over the past two days because of the Motilal listing. Emkay Shares & Stock Brokers Ltd was the biggest gainer, adding over 10.3% in last two sessions. Emkay’s current market capitalization is at Rs345.6 crore. Arihant Capital Markets Ltd spurted about 9%, while IL&FS and India Infoline gained over 5% during this period.
Last year, Motilal had sold about 10% of its equity to two foreign private institutional investors—New Vernon Private Equity Ltd and Bessemer Venture Partners—at a price of Rs208 a share with face value of Rs2 a share. This works out to Rs520 per share at Rs5 face value of each share. The offering had generated huge interest from the institutional investors, as they subscribed 43.9 times the available portion of shares. Including retail and high net worth individuals, the overall subscription was over 27 times.
Ashwin Ramarathinam contributed to this story.