motilal oswal financial services ltd Management discussions

India entered FY2023 amidst uncertain macroeconomic environment. The threat posed by the Omicron coronavirus subtype quickly subsided but at the same time geopolitical conflicts arose between Russia and Ukraine. In addition to that, Chinas decision to continue lockdown in its cities due to the increasing number of Covid cases had a detrimental impact on the global supply chain. This led to significant increase in oil and food prices which in turn lead to rise in inflation across the global economies.

Due to the escalating inflation rates, several central banks have embarked on a course of action to increase interest rates. Notably, the US Federal Reserve responded by raising interest rates 10 times in a span of 14 months, resulting in a rate of 5.25%, the highest level observed in 16 years, in an endeavor to stabilize prices. Similarly, the European Central Bank opted to raise rates for the first time in 11 years.

In India, retail inflation, as indicated by the Consumer Price Index, attained an eight-year peak in April 2022 and consistently exceeded the upper tolerance threshold of 6.0% set by the Reserve Bank of India (RBI) for a significant portion of the year. The Monetary Policy Committee (MPC) of the RBI took a unanimous decision during an off- cycle meeting in May 2022 to increase the repo rate by 40 basis points. Subsequently, additional rate hikes were implemented, culminating in the sixth continuous rate hike since May 2022. In aggregate, the repo rate was raised by 250 basis points during the fiscal year 2023, reaching a level of 6.5%. Meanwhile, the reverse repo rate remained unchanged at 3.35%. Consequently, retail inflation subsided to a 15-month low of 5.66% in March 2023. In April 2023, the MPC maintained the repo rate at 6.5% while affirming its commitment to a gradual withdrawal of accommodative measures.

Indias GDP experienced double-digit growth of 13.1% in Q1FY2023 partially due to the base effect. However, growth slowed down in Q2FY2023 and Q3FY2023, reaching 6.2% and 4.5% respectively, due to high inflation and weakening demand. In Q4FY2023, growth bounced back to 6.1%, pushing the overall growth rate to 7.2% for FY2023. India continues to be one of the fastest growing major economies globally in FY2023.

The International Monetary Fund (IMF) revised Indias growth forecast for FY2024 to 5.9% from its previous estimate of 6.1%, citing a slowdown in domestic consumption and challenging external conditions. Additionally, the IMF reduced Indias growth forecast for FY2025 by 50 basis points to 6.3%. Despite these downward revisions, India will still maintain its position as one of the fastest-growing major economies globally. The Indian economy has demonstrated remarkable resilience in the face of the deteriorating global situation due to strong macroeconomic fundamentals. Steps to promote ease of doing business, skilled manpower, presence of natural resources, liberal FDI policies, huge domestic market and prospects of healthy GDP growth have made India an attractive destination for foreign investors. Thus, going forward, India is expected to see relatively stronger growth.

Equity Markets

Indian markets had a quiet FY2023 with major indices closing flat. The year started with ongoing Russia-Ukraine geopolitical tensions, accelerated monetary tightening by major central banks, volatility in commodity prices etc. Equity markets, which were down during the first quarter, bounced back with Sensex and Nifty achieving an all-time high of 63,284 and 18,812 respectively in the month of December 2022. The key factors that supported the bullish run were relative strong domestic growth, robust corporate earnings, optimistic growth outlook, large inflows into domestic institutional investors etc. Sensex and Nifty closed at 58,992 and 17,360 respectively in March 2023, down from all-time high due to US banking crisis where multiple banks were declared insolvent. Still, India was the second- best equity market performer among the emerging markets in FY2023 after South Africa.

India recorded FII outflows for the second consecutive year to the tune of ? 376 crore. June 2022 witnessed monthly FII outflows at ? 50,203 crore, 2^nd highest ever after March 2020. On the contrary, DIIs recorded highest ever inflows of ? 2.6 lakh crore.

Business Streams:

Motilal Oswal Financial Services Limited (MOFSL) is a diversified financial services company with stock broking business activity. MOFSL operates in businesses such as Retail Broking and Distribution, Institutional Broking, Investment Banking, Asset Management, Wealth Management, Alternates Asset, Housing Finance and Loan Against Securities. In each of the businesses, MOFSL offers unique value proposition to its customers and creates its niche in each of the business segment and commands premium position over peers.

Ratings:

Borrowings of Motilal Oswal Financial Services Limited enjoy the following credit ratings-

Nature of Borrowing	Rating/Outlook
	CRISIL	ICRA	India Ratings
Short Term
Commercial Paper	A1 +	A1 +	A1 +
Long Term
Market Linked Debentures	-	PP-MLD AA (Stable)	PP-MLD AA (Stable)
Non-Convertible Debentures	AA (Stable)	AA (Stable)	AA (Stable)
Long-term Fund-based/ Non-fund Based Bank Lines	-	AA (Stable)	AA (Stable)

Borrowings of Motilal Oswal Finvest Limited enjoy the following credit ratings-

Nature of Borrowing	Rating/Outlook
	CRISIL	ICRA	India Ratings
Short Term
Commercial Paper	A1 +	-	A1 +
Long Term
Market Linked Debentures	PPMLD AA (Stable)	PP-MLD AA (Stable)	PP-MLD AA (Stable)
Non-Convertible Debentures	AA (Stable)	AA (Stable)	AA (Stable)

Borrowings of Motilal Oswal Home Finance Limited enjoy the following credit ratings-

Nature of Borrowing	Rating/Outlook
	CRISIL	ICRA	India Ratings
Short Term
Commercial Paper	A1 +	A1 +	-
Long Term
Market Linked Debentures	PPMLD AA (Stable)	-	-
Non-Convertible Debentures	AA (Stable)	AA (Stable)	AA (Stable)
Bank Borrowings	AA (Stable)	-	AA (Stable)

Borrowings of Motilal Oswal Wealth Limited enjoy the following credit ratings-

Nature of Borrowing	Rating/Outlook
	CRISIL	ICRA	India Ratings
Short Term
Commercial Paper	A1 +	A1 +	A1 +

Capital Market Business Broking Business Industry Facts

The average daily traded volumes (ADTO) for the equity markets during FY2023 stood at ? 153.9 lakh crore, up 121% YoY from ? 69.5 lakh crore in FY2022. The overall Cash market ADTO declined by 21% YoY at ? 57,564 crore in FY2023. Within derivatives, options volume rose 125% YoY to ? 152.2 lakh crore, while futures volume declined by 4% YoY to ? 1.1 lakh crore. Amongst cash market participants, retail constituted 47% of total cash volume, institution 25% and and proprietary (prop) 28%. The proportion of DII in the cash market was 10%.

In FY2023, 2.5 crores new demat accounts were opened as against 3.5 crores in FY2022. This drop is attributed to various factors like volatile market conditions, tepid IPO markets etc. CDSL, the largest depository in India in terms of number of demat clients, crossed 8 crore mark. The total number of demat accounts, across CDSL and NSDL, stood at 11.45 crores as of 31^st March 2023, registering a growth of 28% YoY.

Indian equities witnessed net outflows from FIIs in FY2023. On the contrary, DIIs have offset FIIs selling pressure and recorded highest ever inflows of ? 2.6 lakh crore.

During the financial year, SEBI issued new guidelines for settlement of running accounts of clients funds or securities lying with stock brokers. Under the new guidelines, SEBI decided that the settlement of running account of funds of the client shall be done by the Trading Member after considering the End of the day (EOD) obligation of funds as on the date of settlement across all the exchanges on the first Friday of the quarter for all the clients. Further, clients can also opt for monthly settlement. The new regulation came into effect from October 1,2022. Indian stock markets also shifted to a shorter trading cycle settlement (T+1) on January 27, 2023 to bring in operational efficiency.

To curb possible misuse of clients funds by brokers, the board of SEBI approved a proposal to introduce a regulatory framework on upstreaming of clients funds by Stock Brokers (SBs)/ non- bank Clearing Members (CMs) to Clearing Corporations (CCs). Under the approved framework, clients funds shall be upstreamed on End of Day basis, so as to ensure that clients funds are not retained by SBs/non-bank CMs. The funds shall be upstreamed only in the form of cash, lien on Fixed Deposit Receipts, or pledge of units of Mutual Fund Overnight Schemes. Further, stock brokers would no longer be allowed to use their clients funds for bank guarantees (BGs) from May 1, 2023 and existing BGs created out of clients funds shall be wound down by September 30, 2023.

Our Broking Business

Research and advisory is the foundation of the companys broking services. Broking business serves participant across retail, HNIs, domestic institutions and FIIs. This business comprises of two distinct units - Retail Broking & Distribution and Institutional Equities.

Retail Segment: Services offered include equities, derivatives, commodities, currency, depository services, distribution of investments products like portfolio management services, mutual funds, private equity and real estate funds, insurance and other investment products.

Our broking business focuses on "Phygital Business model" which offers best of both the worlds. We have a client base of ~35 lakhs, which grew at 23% YoY. During the year, the company added 6.5 lakh clients. We continue to strengthen our franchisee-based model in light of our 36 years of experience and consolidation opportunities in the brokerage industry. Our focus is to help new and existing franchisees develop an entrepreneurial spirit. Our strategy of acquiring smaller regional brokers and turning them into franchisees has resulted in significant expansion of our client base and penetration into new geographies. During FY2023, we added net 1,100+ franchisees, taking total count to 8,033.

Through enhanced customer experiences, high-quality advisory, digital initiatives, distribution of assets-based products, system-driven trading products, and network expansion, our business aims to increase scale and remain competitive. We have robust dedicated advisory desks for mass-retail and affluent clients. We set ourselves apart from discount brokers as we concentrate on knowledge and advisory.

During FY2023, we undertook a number of digital initiatives and revamped our digital ecosystem. We launched "Options Store" - industry first exclusive product to enable retail investors to take advantage of options trading and later on launched Pro mode for advance traders with features to create customise strategies. We introduced "Research 360" - a one stop shop to get end to end market research for investors and traders. We also collaborated with various Fintechs and Financial Institutions for acquisition, product, investment and technology. Further, we are planning to launch our Super App in FY2024.

In order to achieve linearity in the cyclical nature of the broking business, our focus continues to strengthen our distribution business. Our financial product distribution AUM was ? 21,300 crore as of March 2023, registering a growth of 17% YoY. Given the 55 lakh client base of our group, there remains a huge headroom to cross sell financial products and scale up this business.

Institutional Broking: Our institutional broking provides offerings in the forms of cash and derivatives to domestic and foreign institutions. We continued to acquire new empanelment leading to overall client base of 820+ institutions. We witnessed top domestic client rankings in several key accounts led by broad-based team servicing. We stood #1 in Corporate Access Team & Sales Person and #2 in Overall Sales & Execution Team category in Asia Money Poll 2022. We continued to strengthen our competitive positioning through research offerings, corporate access outreach and sales and trading capabilities. Our research product portfolio consisted of 250+ companies covering 20+ sectors. Our corporate access domain has always been a focus area with execution of successful events like Annual Global Investor Conference (AGIC) and many unique events in India. We conducted 18^th AGIC in September 2022 which was attended by 160+ corporates and witnessed over 80% CXO level participation. We also organized Ideation conference, MOBIZ conference, Capex conclave, Fintech Day etc. which were attended by numerous participants.

Investment Banking Industry Facts

IPO markets remain subdued in FY2023, after having an exceptional year in FY2022 on account of volatile market scenario and moderate listing performance. FY2023 witnessed 37 main board IPOs as compared to 53 in FY2022. The amount of funds raised through main board IPOs was ? 52,116 crore compared to all-time high of ? 1,11,547 crore in FY2022. The year recorded Indias largest IPO- LIC at ? 20,557 crore. Other major listing in the exchanges included Delhivery (? 5,235 crore), Global Health (? 2,206 crore) and Five Star Business Finance (? 1,593 crore). Most of the IPOs (25 out of 37) came in just 3 months (May, November and December) which clearly depicted volatile market conditions prevailed through major part of the year. The average number of applications from retail dropped to 5.6 lakhs in comparison to 13.3 lakhs in FY2022.

Our Investment Banking Business

FY2023 was a challenging year for our investment banking business because of tepid market. We completed total 4 deals in FY2023 which includes IPOs of Dreamfolks Services, Tamilnad Mercantile Bank, Radiant Cash Management and fund raise for Simpolo Group. Dreamfolks witnessed overall subscription of around 56 times and fund raise for Simpolo Group was the largest private equity deal for our IB business. We follow an expertise-led approach focusing on specific sub-segments of strength, where we have relationships and track record. Sectoral focus on BFSI, Auto, Consumer, Healthcare and Industrials is expected to yield benefits in the medium to long term. We continue to have rich pipeline, and are constantly engaging on a wide cross-section of mandated transactions across capital markets and advisory.

The Capital Market business revenue grew by 11% YoY to ? 2,833 crore in FY2023 predominately due to 6% YoY growth in gross brokerage to ? 1,675 crore & 34% YoY in interest income to ? 743 crore. PAT for this business stood at ? 505 crore led by healthy volume growth of 2.8 times on YoY basis. Retail F&O market share improved by 116 bps on a YoY basis to 3.9%.

Asset & Wealth Management Business

Asset Management

Industry Facts

Overall mutual fund industry AUM was ? 39.4 lakh crore in FY2023, a jump of 5% YoY. On the front of equity mutual fund (excluding arbitrage), AUM stood at ? 19.3 lakh crore, registering a growth of 10% YoY and contributing 49% of the total AUM. Equity category witnessed net inflows of ? 1.6 lakh crore in FY2023, a reduction of 29% YoY. Around 2.5 crores of new SIPs were registered in FY2023 as compared to 2.7 crores in FY2022. SIP monthly contribution touched an all-time high of ? 14,276 crore in March 2023. SIP flows for FY2023 stood at ? 1,55,972 crore vs ? 1,24,566 crore in FY2022.

FY2023 started with the deadline for SEBIs regulation banning the use of brokers pool accounts for mutual fund transactions extended to July 1, 2022. Subsequently, the regulator barred mutual funds from launching fresh schemes for the first three months of FY2023 until the industry complied with the new rules. SEBI also included asset management companies in the stringent SEBI Prohibition of Insider Trading regulations and specified a list of people who will be considered insiders. Further, fund houses are also required to publish MF holdings of their fund managers and designated people on stock exchanges. Long-term capital gains (LTCG) tax benefit on debt mutual funds, ETFs, international funds, gold funds, and certain categories of hybrid funds (that invest less than 35% in Indian equities) were removed. In effect, they will be treated as short-term capital gain (STCG), in much the same way as bank FDs.

On PMS front, SEBI introduced performance benchmarking and categorization for the PMS industry, akin to the current norms in mutual funds. The move will help investors assess and compare the performance of service providers and came into effect from April 1, 2023. Moving to bring parity between multiple modes of investment and reduce mis- selling and high commission charges, SEBI introduced direct plan for AIF investors and removed upfront commission model. These rules will become effective from May 1,2023.

Our Asset Management Business

Motilal Oswal Asset Management (MOAMC) operates MF, PMS and AIF in the public equities space. MOAMC has crafted its niche with majority of AUM in equities. Total AUM stood at ? 45,620 crore as of March 31,2023. Our mutual fund AUM stood at ? 29,560 crore, PMS AUM stood at ? 10,210 crore and AIF AUM stood at ? 5,620 crore. We have a diverse passive product basket with a variety of categories to choose from- Indian equities, International Equities, Factors, Sectors, Commodities, Multi Asset and Debt. During FY2023, we launched 7 passive funds- 3 index funds, 3 ETFs and 1 FoF. Our presence in passive category will help us to on-board clients from the bottom of the pyramid, which are typically new to the equity asset class or have lower risk appetite. On Alternate side, we launched 4 AIFs. We added around 2.6 lakh SIPs in FY2023. Inflows from SIP remained subdued during the year at ? 1,550 crore on account of RBI restriction on international investing.

We onboarded Prateek Agrawal, an industry veteran, to lead business and investment strategy in FY2023. We strengthened Risk Management framework and revamped investment processes with focus on consistent returns. All these measures led to turnaround in performance of our active MF schemes, which in turn led to improvement in gross sales and decline in redemptions. We firmly believe in our Quality, Growth, Longevity and Price (QGLP) philosophy and will continue to hold and improvise it.

On a blended basis, our net yield stood at 76 bps in FY2023. Alternates contributes about 35% of total AMC AUM which is one of the highest in the industry. As of March 2023, ~43% of our Alternates AUM was performance-fee- linked. We aim to push more performance-linked AUM in both PMS and AIF, as it would help push net yields. We have

significantly invested in branding and advertising in past few years and the same is expected to reap benefits in terms of brand-recall in the long run.

Private Equity Industry Facts

2022 witnessed start-up attention beginning to wear off as macroeconomic factors slowed consumer spending. PE- VC firms invested $35 billion in Indian companies across 1,530 deals as compared to $48 billion across 1,624 deals in 2021. The start-up sector attracted the most investment with $7.4 bn worth of investment across 991 deals. The start-up sector was followed by e-commerce, BFSI and education sector. The year witnessed 12 deals worth $500 mn or more, led by Bodhi Tree Systems $1.8 billion investment in Viacom18 Media. Bengaluru which is the "Silicon Valley of India" tops the charts in terms of volumes as it is home to a majority of companies. Mumbai topped the charts in terms of values and accounted for 27% of total values.

The Indian economy continues to be a favorable spot for PE players given the robust credit cycle, improving capex cycle, rising incomes leading to higher consumption and supportive government policies. Indian economys tremendous performance in 2022 and the positive outlook for growth in the coming decade make India one of the best investment destinations for both foreign and domestic investors across multiple sectors. Further, expectations of peaking interest rates and an uptick in IPOs and other investment exits improve the prospects.

Our Private Equity Business

Our PE arm manages three growth capital funds and four real estate funds. The QGLP philosophy is extended in private equity business too. The growth funds focus on themes that may benefit from structural changes like domestic consumption, domestic savings, infrastructure, etc. PE Funds have been successful in gaining investors confidence with stellar returns over the years. IBEF I has exited from all investments and delivered a portfolio XIRR of ~27%. IBEF II has committed 100% across 11 investments so far after raising commitments from marquee institutions and portfolio exits from the fund have commenced. IBEF III was launched in FY2018, which, after exhausting its green-shoe option, stands fully raised at 2,300 crore. IBEF III has fully deployed across 11 investments. Our 4^th growth fund, IBEF-IV, with a target size of ? 4,500 crore, was launched in FY2022. The fund witnessed overwhelming response from investors as we were able to raise the full amount within a year of launch. The fund has invested around 36% across 6 companies.

The encouraging performance is not limited to growth funds but also real estate funds. IREF I has fully exited from all 7 investments, translating into ~118% capital returned to investors. IREF II is fully deployed across 14 investments. The Fund has secured 13 complete exits and has returned money equaling 152% of the Fund corpus back to the investors. IREF III has made 26 investments. The Fund has secured 18 full exits and has returned money equaling 117% of the investible fund. IREF IV has deployed ? 2,017 crore across 36 investments. IREF V, with a fund size of ? 1,210 crore, has deployed ? 885 crore across 16 investments.

Wealth Management

Industry Facts

As per Knight Franks latest edition of The Wealth Report 2023, the number of ultra-high net worth individuals (UHNWIs) has globally declined by 3.8% in 2022 after a rise of 9.3% in 2021 as the wealth and the investment portfolio were impacted by economic slowdowns, frequent rate hikes and rising geopolitical uncertainties. On the other hand, number of high net worth individuals (HNWIs), those with USD 1 million or more in net assets expanded by 3%. In India, the number of UHNWIs fell by 7.5% YoY in 2022, however the HNI population continued to remain on a growth path registering a YoY growth of 4.5% and Indias billionaire population rose by 11% YoY in 2022. Indias UHNWI with net worth over USD 30 million is expected to rise by 58.4% in the next five years. Three out of the top ten highest growth spots across the world were currently held by Asian markets in the ultra-wealthy population. By 2027, it is projected that Asia will surpass Europe in terms of UNHWI count and will stand second to the Americas.

Our Wealth Management Business

Our wealth AUM crossed ? 50,000 crore mark in FY2023 and was at an all-time high of ? 52,000 crore as of March 31, 2023, registering a growth of 51% YoY. We reported highest ever net sales of ? 5,800 crore in FY2023, witnessing a jump of 8% YoY. Our aim is to significantly scale up this business in the next few years. In light of that, we have bolstered our leadership team with senior management hiring to strengthen Ultra HNI offerings, regional heads and advisory capabilities. Overall 63 new RMs were hired in FY2023, taking the total count to 182. We will continue to invest in this business by appointing more RMs. We have diversified product basket across various asset classes. Further, our adoption of open architecture model is enabling the incremental sales to be driven by non-captive products, resulting in more diversified products offering. No. of families stood at 5,358 as of March 2023, a growth of 15% YoY. Our product mix contains ~70% of the equity products which helps in garnering higher yields. Around 51% of revenues were generated from trail bearing (recurring) assets and that covered 71% of fixed costs in FY2023. This will provide cushion to margins in downturn.

The Asset & Wealth Management business revenue was flat at ? 955 crore in FY2023 mainly due to subdued equity markets. The business reported PAT of ? 258 crore.

Housing Finance

Industry Facts

As per ICRAs report, the total outstanding housing finance credit for NBFC-HFC as on December 2022 stood at ? 13.2 lakh crore. Within HFCs, the loan book of affordable housing segment stood at ? 83,052 crore, registering a robust YoY growth of 25%. The share of AHFCs remains small in the overall housing finance industry, which is estimated at 6%. With on-book portfolio growth and continued recoveries driven by healthy collections, the GNPAs continued to trend downwards quarter on quarter. GNPAs stood at 2.8% as on December 31, 2022 vis-a-vis 3.2% as on March 31, 2022. ICRA expects disbursement to remain healthy and retained its estimates of 11-13% growth in HFCs on-book portfolio in FY2023 and projects similar growth in FY2024.

Our Housing Finance Business

Motilal Oswal Home Finance Ltd. (MOHFL) continue to focus on providing home loans to individuals and families for purchase, construction and extension of house. MOHFL also provides loans for repair and renovation of houses and home loans to families in the new to credit, self-employed, cash salaried category where formal income proofs, Credit Bureaus reports are not easily available, and the repayment capacity of such families are appraised based on their cash flows and Internal Score Cards.

MOHFL had signed a MOU with National Housing Bank (NHB) which is the Central Nodal Agency under the Pradhan Mantri Awas Yojana (PMAY) for the Credit Linked Subsidy Scheme (CLSS). MOHFL has assisted various economically weaker sections of the society to claim subsidy under this scheme.

FY2023 was a landmark year for us as we recorded highest ever profit after tax of ? 136 crore, registering a staggering growth of 44% YoY. Disbursements crossed ? 1,000 crore milestone, with YoY growth of 57%. Loan book was up by 10% YoY to ? 3,772 crore. ROA improved by 97 bps to 3.5% largely driven by better utilization of existing infrastructure, control over delinquencies and reduction in cost of funds. In FY2023, cost of funds was down by 24 bps YoY to reach 8.0%, resulting in improvement in spread and NIM at 5.9% and 7.7% respectively as compared to 5.7% and 7.3% in FY2022. MOHFL looks forward to a linear growth in AUM and improved profitability/ROA/ROEs.

Fund based activities focusing on skin in the game approach and enhancing Return on Equity

In line with the long term strategy to grow RoE sustainably, MOFSL had made strategic allocation of capital to long term RoE enhancing opportunities like MOHFL, and sponsor commitments to our mutual fund and private equity funds. As on March 31,2023 our total listed equity investments stood at ? 2,730 crore. Our total investments including alternate investments stood at ? 4,280 crore.

Key Ratios

The ROE during FY2023 stood at 18%. EBITDA and Net profit margins stood at 45% and 22% respectively in FY2023. Net Debt to Equity ratio stood at 1.1x.

Human Resources

As of March 2023, the employee strength stood at 9,885.

Opportunities and Threats Opportunities

Positive long-term economic outlook will lead to opportunity for financial services

Growing Financial Services industrys share of wallet for disposable income

Regulatory reforms would aid greater participation by all class of investors

Leveraging technology to enable best practices and processes

Corporates looking at consolidation / acquisitions / restructuring opens out opportunities for the corporate advisory business

Threats

Execution risk

Short term economic slowdown impacting investor sentiments and business activities

Slowdown in global liquidity flows

Increased intensity of competition from local and global players

Market trends making other assets relatively attractive as investment avenues

Strengths

Strong Brand name

Motilal Oswal is a well-established brand among retail and institutional investors in India. MOFSL believes that its brand is associated with high quality research and advice as well as corporate values like integrity and excellence in execution. The company has been able to leverage its brand awareness to grow its businesses, build relationships and attract and retain talented individuals.

Experienced top management

The promoters, Mr Motilal Oswal and Mr Raamdeo Agarawal are qualified chartered accountants with over three decades of experience each in the financial services industry. The top management team comprises qualified and experienced professionals, with a successful track record. The company believes that its managements entrepreneurial spirit, strong technical expertise, leadership skills, insight into the market and customer needs provide it with a competitive strength, which will help to implement its business strategies.

Integrated financial services provider

The broad range of offerings under Broking and Distribution, Institutional Equities, Investment Banking, Asset Management, Wealth Management, Private Equity and Housing Finance business helps to foresee client requirements and provide full-fledged services under single platform. The production and distribution of all financial products and services helps the companys advisors and clients to attain clients financial objectives with best in class services.

Independent and insightful research

MOFSL believes that its understanding of equity as an asset class and business fundamentals drives the quality of its research and differentiates it from its competitors. The research team is focused on equities, derivatives and commodities.

One of largest distribution network with presence across 550+ locations

MOFSLs financial products and services are distributed through a Pan India network. The business has grown from a single location to a nationwide network operated by business associates or directly through own branches in 550+ locations. This extensive network provides opportunities to cross sell products and services, particularly as the company diversifies into new business streams. In addition to the geographical spread, MOFSL also offers robust digital platforms to service customers.

Established leadership in Franchisee business

One of the key strengths has been the successful establishment of the franchisee business. The companys relationship with the franchisees has become stronger as they grew. MOFSL has multiple business partner models in franchising and is strongly committed to enhance growth and profitability of each of its franchisee.

Strong risk management

Risk exposure is monitored and controlled through a robust financial, credit, operational, compliance and legal reporting systems. Risk management department analyses this data in conjunction with the companys risk management policies and takes appropriate action where necessary to minimize risk.

State of art infrastructure

MOFSL has consolidated its businesses under one Corporate Office - Motilal Oswal Towers. The integration of multiple MOFSL businesses provides a great opportunity to present a holistic solution to client needs and facilitates the "One Firm" philosophy. The infrastructure has been extensively leveraged upon to build deeper connect with our customers, business partners and corporates.

Financial prudence

MOFSLs operating margins continue to remain stable despite the fluctuations in market volumes and revenues due to our robust business model that can withstand the cyclical fluctuations in business volumes and simultaneously capture the opportunities provided by the structural growth of India.

Risks and concerns

The Board Level Committees viz. Audit Committee and Risk Management Committee oversee risk management policies and procedures. It reviews credit and operational risks while the Asset Liability Management Committee reviews policies in relation to investment strategy and other risks like interest rate risk and liquidity risk.

Internal control systems and their adequacy

The companys internal control systems are adequate and provide, among other things, reasonable assurance of recording transactions of operations in all material respects and of providing protection against significant misuse or loss of company assets.

Internal audit is conducted by Aneja and Associates, to assess the adequacy of the internal controls procedures and processes, and their reports are reviewed by the Audit Committee of the Board. Policy and process corrections are undertaken based on inputs from the internal auditors.

Outlook of the Company

We have delivered sustainable performance in FY2023 despite of market headwinds. Our strategy is to further diversify our business model towards more annuity sources of earnings. Our Asset Management business has seen improvement in performance. Our Wealth Management business is on its way to achieve scale as we continue to invest in Relationship Managers. Our Housing Finance business has witnessed turnaround by improving disbursement and profitability parameters. Our brand is now being recognized across each of our businesses. Each of our business segments offer huge headroom for growth and we are well placed to benefit from this.

REPORT ON CORPORATE GOVERNANCE (Contd..)

REPORT ON CORPORATE GOVERNANCE

[As per Regulation 34(3) read along with Schedule V(C) of the SEBI (Listing Obligations and Disclosure

Requirements) Regulations, 2015]

Corporate Governance Philosophy

The Company has set itself the objective of achieving excellence in its business. As a part of its growth strategy, the Company believes in adopting the best practices that are followed in the area of Corporate Governance. The Companys Philosophy on corporate governance oversees business strategies and ensures fiscal accountability, ethical corporate behavior and fairness to all stakeholders comprising regulators, employees, customers, vendors, investors and the society at large.

The Company continuously monitors its governance practices and benchmarks itself to the best governed companies across the industry. The Company believes in pursuing holistic growth and realizes its responsibility towards its stakeholders and environment. The Board considers itself as a Trustee of its Shareholders and acknowledges its responsibilities towards them for creation and safeguarding their wealth. The Companys comprehensive Corporate Governance practices ensures that the Company always works optimally, protecting the best interests of the stakeholders and withholding the reputation and status of the Company.

Board of Directors ("Board")

Composition of the Board:

The Company is in compliance with the provisions of Section 149 of the Companies Act, 2013 ("the Act") and Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations") (as amended from time to time). As on March 31, 2023, the Board consists of Ten Directors comprising of Three Executive Directors, Two Non-Executive Directors and Five Independent Directors including Two women Directors. The Company has a Non-Executive Chairman & he is Promoter of the Company and thus, 50% (Fifty Percent) of the total number of Directors are independent. The Management of the Company is headed by Mr. Motilal Oswal, Managing Director & Chief Executive Officer of the Company, who operates under the supervision and control of the Board. The Board reviews and approves strategy and oversees the actions and results of management to ensure that the long-term objectives of enhancing stakeholders values are met.

There were no material, financial and/ or commercial transactions entered into between the Senior Management and the Company which could have potential conflict of interest with the Company at large.

Confirmation of the Board for Independent Directors:

Based on the declarations received from the Independent Directors, the Board has confirmed that they meet the criteria of independence as mentioned under Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations and that they are independent of the management.

The Independent Directors have also registered their names in the Data Bank maintained by the Indian Institute of Corporate Affairs as mandated in the Companies (Appointment and Qualification of Directors), Rules, 2014, Further, apart from receiving commission and sitting fees, none of the Independent Directors have any other material pecuniary relationship or transaction with the Company, its Promoters, or Directors, or Senior Management which, in their judgment, would affect their independence.

As required under Regulation 46 of the Listing Regulations, the terms and conditions of appointment of IDs including their role, responsibility and duties are available on the website of the Company at www.motilaloswalgroup.com.