Fin Services Firms Make the Most of Bull Run, FI Interest
Growth prospects in the sector and favourable demographics point to good days ahead for these players which have surged on the bourses
Mumbai: While most sectors are stuck with single-digit growth, some fee-based financial services firms, such as Motilal Oswal, IIFL, Edelwess, Geogit and JM Financials, have reported fantastic results with an average top line growth of 42% and bottom line growth of 57% for the quarter ended June 2017. The terrific results come in the wake of an increasing interest from institutional investors in the Indian stock market and a strong revival in the primary market. IIFL, Motilal Oswal and JM Financials reported net sales growth between 44% and 48%, while Edelweiss and Geojit have reported year-on-year sales growth of 29% and 21%, respectively, for the quarter.
Although stock prices of some of these firms have more than doubled in the past year, there is still upside left considering the growth prospects in this space, said analysts.
“Companies with diversified business models and consistent strategies are more likely to gain from India’s strongeconomicgrowth,demographic advantage, increase in disposable income, and rising rural income,” said G Chokkalikgam, founder, Equinomics Research & Advisory. “Also, as long as the current bull market continues, these firms will make good business not only from broking but also from lending, margin funding etc.”
Almost all the top five stocks in the space have doubled in the past year: while Geojit stock gained 155% to Rs 84, IIFL, Motilal and Edelweiss shares have gained about 120%.
“Successful implementation of major reforms, such as GST and RERA, has boosted the confidence of investors,” said Nirmal Jain, chairman, IIFL Holdings. “The wealth management business is going from strength to strength, and loan book also has seen robust growth.”
Motilal Oswal, CMD, Motilal Oswal Financial Services said the opportunity size in “all our business segments is still huge, and they are well placed to benefit from these opportunities”. The BSE Sensex has risen 4% in the June quarter with an inflow of nearly Rs 30,000 crore from domestic institutions, and Rs 12,000 crore from foreign institutions. Indian corporate houses have raised nearly Rs 7,600 crore through IPOs and Rs 25,000 crore from qualified institutional placement.
“The quarter saw acceleration in the reforms process with the GST implementations being relatively smooth, along with a significant jump in the number of new registrations, reflecting a strong increase in India’s tax base. This continues to generate confidence around India’s continuing growth momentum and the resulting tailwinds which are also positive for all Edelweiss businesses” said Rashesh Shah, chairman & CEO, Edelweiss Financial Services.