Motilal Oswal Home Finance Unlisted Shares

About Motilal Oswal Home Finance Unlisted Shares

Motilal Oswal Home Finance Unlisted Share: A Comprehensive Overview

Motilal Oswal Home Finance (MOHFL), a prominent player in the Indian housing finance market, offers an attractive investment opportunity, particularly for those interested in unlisted shares. Established on 1st October 2013, originally known as Aspire Home Finance, it operates as a subsidiary of Motilal Oswal Financial Services Limited (MOFSL), a well-respected financial services conglomerate. This article delves into the key aspects of MOHFL, its operations, financial growth, and the investment potential of its unlisted shares.

Incorporation and Parent Company

Motilal Oswal Home Finance was founded in 2013 and is part of the Motilal Oswal Group, which has built a reputation for providing wealth creation solutions to a broad spectrum of customers. As a subsidiary of MOFSL, MOHFL benefits from the group’s financial expertise, access to capital, and operational efficiencies. MOFSL’s solid market presence enhances the credibility of MOHFL, providing investors with confidence when considering Motilal Oswal Home Finance Unlisted Shares.

Business Focus and Operations

MOHFL’s primary objective is to promote financial inclusion for lower and middle-income (LMI) families in India by offering them long-term housing finance solutions. It specializes in providing home loans for purchasing, constructing, extending, and renovating houses. The company caters to individuals and families who may not have easy access to formal income documentation or credit bureau reports, particularly focusing on self-employed and cash-salaried individuals.

Loan Offerings

MOHFL offers a variety of home loan products aimed at addressing the unique financial needs of LMI families. These include loans for:

• Purchase and construction of homes
• Extension and renovation of properties
• Repairing or upgrading homes

Additionally, MOHFL has extended its offerings to self-employed individuals and cash salaried persons who may lack formal income proof, enabling them to secure loans based on internal scorecards and cash flow assessments. This inclusive approach sets MOHFL apart in India’s competitive housing finance market.

Underwriting and Risk Management

The underwriting process at Motilal Oswal Home Finance is highly structured to ensure minimal risk exposure. It utilizes a four-layer approval system for loan applications, with different layers of approval based on the loan size. The process begins with cluster credit heads and escalates to national credit heads for larger loans. Furthermore, a dedicated Risk Containment Unit (RCU) is employed to mitigate risks related to fraudulent income documents, profiles, and collateral.

Borrowing Sources

To fund its loan book, MOHFL relies on a mix of external borrowings. As of FY22, the company’s total borrowings stood at ₹1,860 crores, with an average borrowing cost of 9.60%. It raises funds through term loans from banks and issues commercial papers in the capital markets. This financial structure provides the company with the liquidity required to lend to its target customers, but it also exposes it to the fluctuations in interest rates and market conditions.

Financial Performance and Growth

Motilal Oswal Home Finance has seen impressive growth since its inception. The company’s loan book, which represents the total outstanding loan portfolio, has expanded consistently year after year. As of FY24, the loan book stood at ₹4,048 crore, reflecting a 6% year-on-year growth. The company’s net interest income (NII) and profitability have also improved significantly, with a net profit of ₹136 crore in FY23, an increase of 43.15% from the previous year.

Despite these positive growth trends, the company did experience a slight dip in profitability in FY24, with the net profit marginally decreasing to ₹132 crore. However, this could be attributed to external factors or increased operational expenses, which need to be monitored closely by potential investors.

Disclaimer*This research has been conducted for investment purposes based on available data. Investors are advised to perform their own research and due diligence before making any investment decisions. We do not assume any responsibility for financial losses or inaccuracies in the data provided.

Pros

• Strong Parentage: Backed by the well-established Motilal Oswal Financial Services group, MOHFL benefits from a solid financial foundation and operational expertise.
• Inclusive Focus: The company’s focus on serving the LMI segment gives it access to a large, underserved market, which offers substantial growth potential in the expanding Indian housing finance sector.
• Robust Underwriting: The multi-layered loan approval process and dedicated risk containment unit ensure that MOHFL maintains a healthy loan book with minimal risks.

Cons

• Valuation Concerns: With a price-to-book ratio of approximately 7x in FY24, some analysts suggest that the company’s shares may be overvalued, which could be a concern for investors.
• Dependence on Borrowings: MOHFL’s reliance on external borrowings could expose it to interest rate fluctuations and changes in market conditions, potentially affecting profitability.
• Profitability Fluctuations: Despite a strong growth trajectory, MOHFL experienced a slight decline in profit in FY24, which may point to operational inefficiencies or external pressures.

Key Details