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

The Economic Times - - Smart -

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.

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