Motilal Oswal Financial Services Limited (NSE: MOTILALOFS) Q3 2026 Earnings Call dated Jan. 28, 2026
Corporate Participants:
Manish Kayal — Head of Investor Relations
Navin Agarwal — Group Managing Director
. Prateek Agrawal, — MD and CEO, Asset Management
Ashish Shanker — CEO, Private Wealth Management
Shalibhadra Shah — Chief Financial Officer
Analysts:
Mahek Shah — Analyst
Nidhesh Jain — Analyst
Lalit Deo — Analyst
Dipanjan Ghosh — Analyst
Aravind Ravichandran — Analyst
Sukrit Patil — Analyst
Dev Shah — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to Motilal Oswal financial services quarter three and nine months FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Kayal, head IR. Thank you. And over to you sir.
Manish Kayal — Head of Investor Relations
Thank you Michelle. Good afternoon. I welcome and thank all the participants on behalf of Motilal usual Financial Services Limited to attend our Q3 FY26 earnings call. We hope that you had an opportunity to go through our investor deck and press release uploaded on stock exchanges and on our website yesterday. We have also uploaded our Excel data book which has all the operational and financial numbers. Please note that today’s discussion may include forward looking statements. These forward looking statements are based on our macro assessment and actual outcome may vary.
With that. I’ll introduce our management. Participating on this call we have Mr. Randy Ji Agarwal, Chairman of the Group Mr. Motilaji Oswal, Managing Director and CEO Mr. Navinagarwal Group Managing Director Mr. Ajay Menon, CEO Wealth Management Mr. Pratik Agarwal, MD and CEO Asset Management Business Mr. Ashish Shankar, CEO of Private Wealth Management Mr. Sukesh Goval, CEO Housing Finance Mr. Sanchit Suneja, Group Chief Strategy Officer and Mr. Shali Badarasha, Group Chief Financial Officer. We will start this call with an opening remark by Naveen and then we will have a Q and a session. Over to you Naveen.
Navin Agarwal — Group Managing Director
Thanks Manish. Good afternoon once again everyone. I’ll start by sharing Some key highlights. Q3FY26 continues to witness strength in most of our businesses with growth being led by our annuity businesses. Our operating profit after tax grew by 16% YoY to 611 crores. Led by asset and private wealth business growing by 32% year on year. These businesses now contribute over 50% to the operating profit of the group and we expect the share of these two businesses as guided in the past to continue to rise in the quarters ahead. The current quarter profit number also includes the impact of 14.4 crores towards employee benefits under the new labor code.
The profit growth adjusted for the Labor Code expenses 18%. These results form a good base of a year that had virtually no benefit of mark to market in either the AMC or the private wealth or the distribution businesses of the group and also the impact of significant changes in FNO regulations in the wealth management business. For context versus this 18% growth, our 10 year operating profit growth has been strong at a compounded 31% per annum. Our annual consolidated annual recurring revenue now stands at 65% of the total net revenues. Once again we have been guiding that the share of ARR revenues will continue to rise in the years ahead.
Based on the strong performance, the Board has declared an interim dividend of 6 rupees per share up by 20% versus 5 rupees declared in the previous year. Once again, since Our listing in 2007 we have never diluted equity while consistently paying out dividends and executing three buybacks. This has only been possible due to our unique capital allocation model wherein our large investment book serves as a strong backbone to all our operating businesses. Before I deep dive into quarterly performance updates, I want to just once again reiterate that each of our businesses offer huge headroom to grow in the next decade and the following five points will corroborate this Savings invested in equities are at just 5% in India versus 40% in the US retail ownership of stocks and participation in broking is at just 10% versus 55% in the US which augurs well for our wealth management business.
Indian mutual fund AUM to GDP is at just 20%. This compares with 120% in the US once again a positive for our asset management business. For our alternate franchise, aum has grown by 54% in the past decade to reach $400 billion. For the industry this is expected to cross $2 trillion in the next decade and this number currently at a global level stands at 25 trillion and continues to grow strongly for our private wealth business. The investable wealth which is also the TAM that we are targeting is expected to grow by 15% over the next five years to reach 240 trillion or around 2.5 trillion rupees and this augurs well for our private wealth business.
So basically the tailwinds across all the key businesses of the firm continue to be quite robust. Muthiral Oswal is the largest integrated capital markets player with a promoter holding of 70%. We are ranked among the top 150 companies on trailing 12 months profit after taxes and among the top 200 companies by market capitalization. We see improvement in these rankings given our continued higher earnings growth potential versus the markets going forward. Turning now to our segmental performance and starting with our asset and private wealth business. These businesses comprise the AMC business which invests in listed stocks, the private equity business which invests in unlisted stocks, real estate funds and the private wealth business.
The asset management business continued its momentum during the year with strong market share gains. Net flows in Q3 were robust at 11,600 crores. Our AUM stood at 1.89 lakh crores as of 31st December up by 33% year on year we continue to invest in talent in distribution reach and marketing. The operating leverage from rising AUMS should also be a driver to our profits going forward. Starting with our AMC businesses, the net flow of the AMC business increased to 10,700 crores in the third quarter. 26. We continue to build on our sales team to service expanding distribution network.
91% of our AUM outperformed the respective benchmarks in the past three years. The AMC continues to gain market share with mutual fund AUM market share at 2.7% which is the highest ever. We believe this is still headroom to increase further given our net flow market share is much higher than this 2.7% number and stands at 7.6%. Our quarterly SIP flows have crossed 4,500 crores 1.5 times of the same quarter of previous year with highest ever market share of 5% resulting in SIP AUM book of 31,800 crores plus as on December 25th. We launched the consumption fund in the third quarter and raised 1,100 crores.
Our alternate AUM grew to 34,284 crores. Our headcount has increased to 620 in December 25th. This was 536 in March and at 300 in March 24th. So we have more than doubled our manpower in the last 21 months time. Turning to the alternates business, our IBF Fund 5 has cumulatively raised close to 8,000 crores and expect the final close in fourth quarter with a target size of 8,350 crores nearly two times our fundraise by context right from our first fund when we raised 62.5 million dollars. In Fund 2 we raised 125 million, Fund 3 was was 250, Fund 4 was 500 million and Fund 5 was 950 million dollars.
So we’ve been doubling our fund sizes for the last 17 years across the five series of funds that we have launched. We also launched our private credit fund in January of 2026. This is our entry into the emerging private credit segment. We believe alternate business provides multiple opportunities that we haven’t explored yet. And remains a very large tan to target for us as the wealth of the country rises over the next 10 years time with the above fundraisers in alternate segment it will boost our recurring revenue base of the group. Our private equity business has a fee earning AUM now of nearly 18,000 crores across the growth and the real estate funds during the current quarter we recognize accrual income as select funds have progressed to a stage where recognition criteria are met and systematic approvals have commenced.
The income is currently accruing from only two mature schemes indicating significant headroom for scaling up as newer fund vintages advance along their life cycle. As you know the fund sizes have been doubling with the latest fund being close to $1 billion. Hence we expect these accruals to be recurring and growing contributor on a quarter on quarter and yoy basis to our alternates business going forward as visibility and certainty of realization have materially improved based on the substantial outperformance with the funds delivering IRRs of over 20% way above the hurdle rates for these funds. Overall these accruals represent a structural high quality ARR income and scalable earning lever for our group profitability and predictability as the alternates platform matures.
This is in line with the best practice followed by large global alternate listed platforms. Turning to our private wealth business which is on a strong growth path, our AUM grew by 31% to 1.96 lakh crores. We have 8200 plus families. This number grew by 41% year on year. This is served by a high quality RM team of over 410. We expect the RM productivity to to improve as only 34% of the RMs have a vintage of over 3 years. Our revenues at 816 crores for 9 months are up by 16%. We are second among listed players by revenues in this segment.
Profit after tax is 280 crores for the nine months nine month period is up by 14% on a year on year basis. Cost to income ratios improved to 53% in the nine month FY26 and the share of private wealth in the group profit after tax has increased over the years as a result of operating leverage and a comprehensive proposition straddling HNI and UHNI segments. We expect the share to continue to rise going forward. Turning to our wealth management business which includes retail broking, distribution and our retail lending book, our segmental profit after tax in this business stands at 181 crores.
It’s flat yoying. Our distribution book grew by 34% to 42,800 crores. NII income recorded 21% growth IOI supported by robust book expansion. A total loan book AUM rose 25% to reach 6630 crores. Our MTF market share is close to 7%. Our ARR book grew by 33%. Important to note that our share of broken revenues in the wealth management Segment has declined from 60% in FY21 to 37% in Q3 FY26. Led by sharp focus on growing our distribution and NII. Our brokerage revenue grew by 15% quarter on quarter. Cash volume market share was robust at 6.9%.
F&O premium market share stood at 8.4%. Blended ADTO market share stood at 7.8%. Our broking business continues to retain leadership as a full service broker. We believe we are the largest broker in the cash segment on revenue market share. Turning to the capital markets business comprising of institutional equities and investment banking business. Here the profit after tax grew by 15% year on year in the third quarter to 70 crores. The IE business continues to increase Research Coverage we Now have crossed 350 stocks under our coverage plan to increase this to 400 by the close of this year.
With this we will be the largest research house in terms of coverage of stocks with ambition to increase this number materially in the years to come. Within the investment banking business we have successfully completed 51 deals in the nine month period with cumulative issue size of 77,000 crores and our fee income delivered 9% growth on a year on year basis to 65 crores. We were ranked number one on number of QIP’s and IPOs for CY25 in the league tables. We’ve strengthened our team over the past few quarters across both businesses and continue to be positioned as a preferred banker to our clients.
Turning to the housing finance business, our disbursements stand at 364 crores after adjustments for the one time change in disbursement recognition. Excluding this adjustment, disbursement has grown by 47% to 578 crores on a year on year basis. AUM grew 24% year on year to 5379 crores. Gross NPA and net NPA stood at 1.4 and 0.9% as of December 25. We expect the housing finance business to witness strong growth over the next two to three years. Business has a strong capital adequacy ratio, low leverage giving us enough growth levers without any external capital dependencies to conclude, we recently published the 30th Wealth Creation Study which highlighted how India offers multi decade trillion dollar opportunities led by long period of sustained economic growth.
The resulting wealth effect will benefit capital market players in general and more. For integrated players like Musilal Oswal, in the past 17 years our GDP went up from 1 trillion to $4 trillion. Interesting fact is that the market cap CAGR has been higher at 1.5 times the 20 year GDP CAGR. We expect next 17 years will quadruple the GDP to $16 trillion with cumulative savings of $47 trillion during the same time frame and a multiplier effect of market cap to gdp. Financialization theme should gain further traction with increasing penetration in multiple products that Moti Al Oswal offers.
As leaders in each of our business segments indicate huge headroom to grow at high rates over the next five years, we believe that we should continue to perform far higher than the market rate of growth.
We’ll now open the floor for Q and A. Thank you.
Questions and Answers:
operator
Thank you very much sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask questions may please press Star and one on their touchtone phone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. You may please press Star and one to ask questions. The first question is from the line of Mehak from MK Global. Please go ahead.
Mahek Shah
Yeah, hi. Thank you for the opportunity. So I have two questions. So first on the distribution income for both the wealth and the private land management businesses. So Violet saw a dip particularly on account of lower transaction income booked during the quarter. Could you help us with some color on your expectations particularly for the distribution income in Q4 on a YoY basis. So that was my first question and secondly on the asset management business. So while the netflow’s market share has seen a slight of decline on a few Q2 basis after gaining consistent market share in the last few quarters. So just wanted to know your thoughts on the same.
Navin Agarwal
Sorry we don’t give quarterly distribution growth guidance but as we have highlighted that the TBR part of the revenues, the transaction based revenues will see volatility on a quarter on quarter basis, the external market conditions at a broader market level have been quite weak and that has impacted the TBR revenues of most of the players including us. The good news in the meantime is that our ARR revenues have really scaled up meaningfully and we see these revenues further scaling up as the private credit offering of the group also is launched in the fourth quarter and the revenues for which should come through in the fourth quarter of this financial year.
So I think the focus is to strongly grow the ARR revenues while opportunistically building on the TBR revenues whenever market offers an opportunity. On the AMC flows as you know the net sales flow this quarter has been 7.6% way above the AUM market share and 91% of the AUM of the firm continues to outperform the benchmarks on a three year basis. There are some interesting facts that I’d like Prateek to share about the asset management company which we give you some understanding of what we have done over the course of the last one or two years and how this will play out over the next one or two years. Over to you.
. Prateek Agrawal,
Thanks Naveen. Good afternoon everybody. Now as Naveen was saying, our performance on a three year basis and three year is important because most distributors and digital channel focuses on senior performance. 97% of our MF active AUM is meeting the benchmark and most of our funds bring out the top position in their respective cohorts. On the alternate side 60% of our AUM beats benchmark on a three years basis. Now if we look at gross and net sales our gross sale quarter on quarter looks similar in terms of market share at over 5% on active side.
On passive side it’s been maintained at 4.6% on net sales. Similarly we are at 7.5%. Similar to last quarter passives market share may have moved up at around 6%. Yes in the near term our peak on the active side was October. After that we have seen a small dip but as yet we continue to get net inflows for this month. Also we are positive now on the people side, you know we have added to the teams very strongly over past two years. So to give you some sense in financial 24 we were 301 people. That increased to 493 in financial 25 and as we speak is 620 and this is not counting some 200 people who are outsourced for us on the investment side of this these two 620 people.
On the investment side from 29 in March 24th we moved to 36 in March 25th and as we speak we are 43. You know we have hired 11 new managers over the last two years and are significantly strengthened and diversified investment capabilities. So you know in terms of growth prospects see Like I said, people look at 3 years track record for growth. As of now we have six schemes. Two schemes are top two in the industry in terms of net flows and one is in top five for nine months of financial 26. Now we believe we have a strong Runway for growth with two more products in major categories.
So large cap and small cap would complete three plus years in financial 27 and nine products will complete three years in financial 28. So we have had a very stiff new product launch cycle and all of that will start to complete three years over the next two year period. So we believe as more and more products cross the three year hurdle, our next two gathers Aum would increase and our overall market share should then settle at a higher level. Let me happy to have more questions.
Mahek Shah
Thank you so much for the detailed answer that helped.
operator
Thank you. The next question is from the line of Nitesh from Investec. Please go ahead.
Nidhesh Jain
Thanks for the opportunity. So firstly on the operating expenses this quarter, we have seen that the OPEX across all businesses have declined on a sequential basis. So how should we think about this? Is it because top line has been bit soft so we have cut down on cost or there is a variability in opex? How should we moderate and how should we think about the trend in operating expenses?
Navin Agarwal
Yeah. Hi Nitesh. So if you look at this quarter, actually the transactional revenues across our wealth business or private wealth business and even the capital market business have been lower sequentially. So that is one of the reason where a lot of our costs are variable, especially the people cost. And that is the reason you see that the variable costs are lower this quarter. So that is the reason that our margins are intact for the quarter which flows in line with the transactional revenues.
Ashish Shanker
And just to add Nitesh, you know, we have very strongly added to our aggregate manpower in FY23, 24 and 25. That number is stable to a tad lower in the nine month period ending December 25th.
Nidhesh Jain
Yeah, because we see that the headcount is also declined, I think on a Q. On Q basis.
Ashish Shanker
Yes, as of the nine months. If you look at December over March, it’s a tad lower. Led by the contraction in the WM revenues and the headcount there. There has been very strong growth in all the other businesses.
Nidhesh Jain
Sure, sure. Second is how much of a distribution aum both in wealth management and private wealth management is coming from our own amc.
Ashish Shanker
Very small. As you know, the asset management firm has grown very strongly over a period of time and so this number has come down to just over 10%. We wish it was higher.
Nidhesh Jain
Sure. And lastly on AMC. So with the change in the top leadership at AMC, how should we. How are we planning to. To stabilize the top leadership? Are we looking for an external candidate or. And by what time we should see a new new CIO at amc.
Ashish Shanker
So as Prateek explained to you, we have significantly augmented our investment team. There are already co fund managers for those schemes, as you are aware, Nitesh. And so this will continue business as usual in terms of additions to the investment team. Pratik also highlighted that we had a very busy schedule of new product launches in the last couple of years and it’s only in FY27 and 28 will we see the benefit of many of these funds crossing three years vintage. We still have important categories that are open. As you know, the hybrid category has become a very large category in the mutual fund industry and we hardly have any AUM.
Less than 0.5% of our AUM today is in the hybrid category versus industry having substantial AUM. So we will continue to add to our investment team, including our leadership externally like we have been doing in the past as you, I mean Pratik explained that the investment team size has more than doubled and 11 new FMs have been hired. We will need to augment this further just to support the new fund NFO launch pipeline that we have filed with SEBI which are coming up for launches. I also highlighted that a large category like the financial services, we did not have a fund there and that fund is getting launched in this GFM quarter impact in the month of January as we speak.
So yeah, augmenting overall investment team as well as leadership through internal promotions as well as external hiring is something that we have to do. Including specifically to your question about the leadership transition that we recently announced. Even there we will need to add candidate.
Nidhesh Jain
Sure. Thank you. That’s it for my side.
Ashish Shanker
Thanks Nitesh.
operator
Thank you. The next question is from the line of Lalit Deo from Equidus Securities. Please go ahead.
Lalit Deo
Yeah. Hi sir, just a question. So firstly on the network.
operator
Mr. Deo, your audio is too low, sir, can you please increase the volume a little bit?
Lalit Deo
Yeah. Is this better?
operator
Yes sir. Please proceed.
Lalit Deo
Yeah, so I have two questions. So firstly on this wealth management and the private wealth management business, so we saw some moderation in the net flow side. So however on a nine month basis it’s still strong at around more than 30% of their opening AUM. So how should we see the netflow momentum in for FY27 that was on first question and secondly on the AMC business. So in this particular quarter we recognized a carry income of around 58 crores. Now we mentioned the remarks that it will sustain in the coming three to four quarters. So what should be the steady number for that carry income like over the next 12 to 15 months? And just lastly on the lending book like we have again like on a nine months basis it has grown by more than 30% on the overall lending both in wealth management as well as private wealth management. So. So for FY27 how should we look.
Navin Agarwal
First and the third and. I’ll let Charlie come in with the second. So as far as the distribution income is concerned or the sorry net sales is concerned for the wealth management, the private wealth management business fourth quarter should also be strong as we are looking at the first hopefully the second pose also of our private credit fund that should be a very strong new addition. And both our private wealth and the wealth management businesses are distributing that product. It’s exclusive and only internal and not third party distributors. So that should come in. We continue to see there has been a slowdown in the overall markets and the overall net flows in the last quarter.
However, given the significant ramp up that we have seen in the private banking size that we have, we would expect many of those RMs to bring in the AUM also. So we would look at continued strong net sales growth in both of these businesses in FY27 over the number that we will close FY26 with. So that is the first point. The second is your third question about the lending book. We have been very underrepresented both in the MTF segment as well as the NII in the private wealth business and in las all the three segments.
And this is a focus area for the group given the strong credit rating of aa, the control gearing very strong net worth. For Your Information the December 25th net worth is 24% higher than the March 25th network. One of the highest net worth growth that you would have seen in the industry across all across our businesses. So the net worth is strong credit rating is strong borrowing capability exists at very very attractive rates. Because of the strong double A rating. We believe that you know NI will be a very important growth driver in FY27 compared to FY26.
Turning to approvals as the funds matured, only two of our funds have crossed the threshold and because of that we reported this 58 crore accrual income this quarter. We believe this is just the Beginning these numbers should at least repeat if not increase in the quarters and so you can easily multiply this by 4 for the next year and then growth from there year on year in FY28 and 29 as more vintages get into the maturity phase.
Lalit Deo
Yeah, sure sir. Thank you.
operator
Thank you. The next question is from the line of Dipanjan Ghosh from City. Please go ahead.
Dipanjan Ghosh
Hi, good morning sir. The question from my side first if you can give some color on the carrying some strategy that.
operator
Sorry to interrupt you sir, your audio is not clear, there is a background noise. I would request you to kindly use your handset sir. You may try. Please go ahead.
Dipanjan Ghosh
Yes, I was just asking that you know internal your carry in booking strategy. You know what is the PR strategy that you follow in terms of how much do you book in which quarters prior to the exit? Second question was on the wealth management side, the private wealth side, can you give some color on the RM relationship manager supply side and in terms of competition and attrition, how are the trends for the industry? And third question is in terms of the white spaces available on the ultimate side of the business for the next three to five years if you can.
Shalibhadra Shah
On the first point in terms of the additional returns accrual, the methodology followed is that for the equity growth funds, as per our policy, if the threshold of the returns is met about the hurdle, we accrue the carry in the last three years of the maturity of that plan and in the credit funds we accrue the carry in the last two years of the maturity of that fund. So this basis has been consistently followed and every quarter the NAV is trued up to recognize the incremental draw up to the returns of the fund returns that we have achieved. So to that extent it will be a recurring line item as Naveen explained, on a quarter, on quarter basis and even yoy basis. So that’s the method we follow for accruing the additional returns.
Navin Agarwal
I’ll let Ashish Shankar, CEO of Our Private wealth take the question on the private bankers.
Ashish Shanker
From perspective. Over the last three years our RM strength has gone up almost 2.5x while the competitive intensity is extremely high right now. But even at a private banker level, they are choosing platforms which are extremely stable and platforms which help them become productive faster. So given the kind of disruption that we are seeing around us, we are emerging as an employer of choice because of the strong brand institution and the capabilities that we have invested in over the last two to three years. So we continue to see good talent coming in and we have an extremely robust pipeline of private bankers who are to join in the next couple of quarters.
Navin Agarwal
So I’ll take your third question regarding the alternate business outlook. So as you know we started with two products, private equity and real estate. In the Jan month we’ve launched the third product which is private credit. Going forward we believe that there are at least 10 more categories of products that are left to be launched. And if you benchmark the leading alternates platforms globally, then almost every year or every other year you will see us launching a new strategy.
Point number one. Point number two, I explained to you that across the five fund vintages for our growth fund, our fund sizes have doubled from 62 and a half to 125, 250, $501 billion. We expect that strong growth to continue given how much difference there is between a domestic growth fund and a global growth fund right now. So that is something that we expect to continue. And the third important input is that within our funds the share of offshore raise has been rising. Fund on Fund IBF 5 with 40% of our AUM being raised from overseas compared to 35% for the previous one, 30% for the third series. We expect this to go up in the next series even further because we had substantial unfulfilled demand on the offshore side for the fifth series. So we have many vectors of growth for this business and this should be one of the fastest growing businesses in our portfolio.
Dipanjan Ghosh
Thank you, thank you.
operator
Thank you. The next question is from the line of Arvind Ravichandran from Sundaram. Alternates please go ahead.
Aravind Ravichandran
Hi team. Thank you so much for the opportunity. So this one I need to understand like you know in wealth and private wealth management, especially distribution income, why are we seeing you know such a volatility across quarters? Is it because of you know, flows volatility in like alternates business? Like how to understand this? If you can help me with that. That is my first question and second question is on like you know, opex especially in wealth and private health management, how to you know, conceive this tech. Is it going to be since we have you know hired, you know, ramped up our RM and other basis especially in the last two years, is it going to be primarily like you know, getting the you know, better business out of the existing RM sort or is it going to be a bit more balanced in terms of RM hires and other employee hires as well as you know there have been a better productivity from the existing arms. Yeah, these two questions.
Ashish Shanker
Hi, this is Ashish here. So on the flows front, see last three years, bulk of the inflows have been led by monetization events whether it is unlocking of motor stake or esop. So typically these multi flows are dependent on markets. If you see on a quarter on quarter there will be variability. However, if you see on a year on year basis, we have been steadily capturing market share. In fact, if you look at the net flow addition for the last quarter and compare it with some of our competitors, we’ve gained a lot of market share there as well. So on a quarter on quarter basis you will see some variability in flows. But on a year on year basis we are steadily gaining market share.
Aravind Ravichandran
About distribution revenues. Like, you know, why is it volatile especially in wealth and private health management across quarters.
Navin Agarwal
As Ashish explained, the TBR part of the revenues are volatile. But as far as the flows are concerned, the flow already comes out of what happens to the market and the resulting impact on the monetization and resulting deals. So that is how we see. But on a year on year basis you should continue to see reasonably strong growth. I also explained to you that sometimes we have very large captive fund closures. We had our growth capital fund closure in the first quarter of this financial year where net flows got really bumped up. Sorry. In Q2 of this financial year, in Q4, we will have the first and the second close of our private credit fund which is only captive. So when you have these very large fundraisers which are completed in a quarter, those are the times when you see spike up in the net flows as well.
Ashish Shanker
Also to add, if you look at the ARR assets in both of these businesses, ARR assets have grown in wealth at 36% annually. Y o y and in pad wealth at 31% annually. Y o wise. So if you look at that part, the ARR revenue line item moves in line with the growth in the ARR assets and, and the yields have been pretty stable there as well. So ARR revenues are very predictable on the distribution side. And as explained, the impact is only because of the transaction flows. However, even transaction revenues in both the business are up respectively 35% and 40% y o I on the distribution business. So that is the way you should look at the flows and the growth in the revenues for this business businesses.
Aravind Ravichandran
Understood, Understood. And my question on opex, if you.
Navin Agarwal
Can you repeat that please?
Aravind Ravichandran
Yeah. So like in. So in wealth and private management, you know, how should I like, you know, view the OPEX growth especially in the view of, you know, ramp up in RMS in the last few years is it primarily going to be like, you know, like, you know, productivity increase? So like it’s just going to be yearly rises for employees. Employees, not much from you know, addition of employees or is it going to be balanced in terms of, you know, OPEX growth especially from the employee expenses side?
Navin Agarwal
Sure. So we had discussed this in our earlier calls. I’ll repeat, our cost income ratio for this business peaked in FY24. FY25, was that lower than 24? We’ve seen some further benefits in the current financial year. So it’s about 100 basis points lower cost income ratio for this business. I think you should see this trend continue as the RM vintages progress to three years. Plus we have 60% of our RM days at less than three year vintage as we speak.
Aravind Ravichandran
Okay, okay, okay. So focus is going to be there. And just one last question. Like you know, especially in wealth management business, in order to improve like you know, our distribution income potential like you know, further and further, do we need to like you know, invest, invest any, any invest in any like a huge RAM or other employee base to increase Armix, especially the other distribution income, especially in wealth management.
Ashish Shanker
So on the overall distribution side we are surely hiring from the RM perspective. But at the same time also digitally. We are able to increase the overall pie on the distribution side through a lot of digital initiatives plus a lot of investments on the tech side when you look at AI and all that through cross selling. So we are looking at cross selling in a big way across our network. Which is still the penetration is comparatively. Much lower at around 13% which we feel that can increase much, much higher going forward. So to that extent the scope to grow is immense even further now.
Aravind Ravichandran
Understood, understood. Thank you. Thank you so much.
Ashish Shanker
Thank you.
operator
Thank you. The next question is from the line of Sukrit Deep Patil from Eyesight fin Trade Private Limited. Please go ahead.
Sukrit Patil
I have two forward looking questions. My first question is to Mr. Agarwal. Mr. Ramti Agarwal, given the evolving macro outlook and market volatility and ever changing client behavior across retail and institutional space, how is Motila Moswal adapting its business mix and go to market tactics to expand client engagement and wallet share across broking, wealth management and investment banking. In particular, how are you balancing growth with profitability in your initiatives such as alternate asset management and financing business while maintaining quality of service and competitive differentiation? That’s my first question. I’ll ask my second question. Thank you.
Ashish Shanker
Yeah, good afternoon. Actually this is the heart of the entire Strategy that Motor Oswal remains not only the largest capital market company across all the businesses put together and we have a very strong balance sheet because as I banking becomes more and more powerful as the market cap goes from 5 trillion to 10 trillion in next 7, 8 years you will see emergence of very large banks. And these sizes will go from a billion dollars is now becoming quite common. So it will become more like five to $10 billion single deals. So in that you need a very large banks with large balance sheet and large profitability also.
And so we are trying to make it as a talent powerhouse because ultimately the talent is going to make a difference and your net worth is going to make a difference and your profitability is going to make a difference. And we are going. We are seeing that the businesses have tailwinds in one year. Say like broking from 21 to 24 was one way, you know, kind of a massive tailwinds. And then finally regulators came and kind of gave some kind of restrictions to the F and O business. So that business will become very large, got a setback for last one year.
But other businesses, non working businesses that became very large. So that’s what if you see today this quarter we have grown this one capital market company which has grown 16% in terms of operating profit to history’s highest 611 crores for the quarter. And very high quality profit despite the fact that booking revenue has been kind of muted in this particular quarter. So I think as we as a capital market businesses become from 200 million demat accounts to more like half a billion demat accounts in next 7, 8 years and the market cap goes from 5 trillion to 10 trillion.
I think we are seeing that opportunity in every business will be so there’ll be whatever businesses and the current businesses will keep growing vertically up and horizontally. We’ll be seeing a very what you call strategically one or two businesses well chosen. Like what Naveen said in the alternate business we have started with the private credit. We’ll be looking for other opportunities in the same front where the businesses could be very large as the economy grows. So I think all in all the relevance of capital market remains center of the economy. And actually in my belief if you see my wealth creation study now the financial wealth will drive the real economy. And in that situation capital market companies emergence of capital market companies will be very very important fact in the stock market. And that’s where I think we have positioned ourselves and we have hedged our bets by putting it across in all the businesses.
Sukrit Patil
Thank you. My second question is to Mr. Shaha. With financial market constantly experiencing bouts of volatility and varied liquidity conditions, how are you thinking about margin, margin sustainability, capital efficiency and risk management across the key business verticals? Additionally, can you shed some light on the capital allocation framework and balance sheet priorities as you scale wealth and asset management operations alongside traditional broking and transaction based systems? Thank you.
Shalibhadra Shah
Yeah. On the capital allocation Mathias, our net worth has been very strong at 13,000 crores and as we have been guiding in the past that we continue to pay out dividends. Our last decadal average dividend payout ratio has been 20% and the residual cash continues to invest in the equity investments on our treasury investments on our balance sheet. So our capital allocation continues to see the treasury investments on the balance sheet which treasury return has actually been about 18.5% IRR and keeping sufficient cushion for for the mark to market, we ensure that our gearing at any point of time remains within the 2x limits.
So to that extent we ensure that there is sufficient cushion of margins and mark to market which can run on the balance sheet in down cycles of equity markets to ensure that our capital leverage ratios are intact. And at the same time this treasury operating capital actually becomes the base for the operating businesses to grow their profits and free cash flow. So that is where if you look at our operating ROEs are all about 25% and blended with the Treasury ROE. Our overall ROE continues to grow large decade at like 22% and even current financial year at 26% ROE.
operator
Thank you sir for answering those questions. The participant has left the queue. We’ll move on to the next question which is from the line of Dave Shah from Hai Tong Securities. Please go ahead.
Dev Shah
Yeah, hi, thanks for taking my question and congratulations on a good set of numbers. Just wanted to ask on the wealth management piece, the cash and FNO premium market share has been declining over the last couple of quarters. Just anything to read into that. And further, the revenue composition in the wealth management section from relationship managers has been steadily declining and external wealth managers has been rising. So just wanted some clarity on that. And secondly on the alternates piece, are there any further fund launches planned over the next couple of quarters and what are we thinking about SIFs as a product category? Yeah, those are my two questions. Thanks.
Shalibhadra Shah
On the market share front, our FNDO market share has actually gone up now yoy basis. It has up by 20 basis points to now 8.4% from 8.2% in the Q3 of last financial year. So, so that market share is ticked. And overall cash market shares, you know, cash volumes have been lower. If you look at, you know, yoy volumes have been lower by almost 20%. And in times when, you know market conditions are tough, we are on an advisory driven broking model. We are not discounted model and advisors typically, you know, withheld the cash for investors and to that extent there would be a marginal impact on the market share.
Also in times when market goes up, this market share is always catch up because if you look at our run rate across large four years, this market share has almost doubled. Also in the market there is a lot of mix of trading volume which has gone up versus the delivery volume to that extent also we have a healthy share on the delivery side. So marginalized. The impact of the mix has also come in our cash market share. So that is the reason. But we believe that on a medium to longer term basis our cash market share continues to rise and even our F100 market share, as I explained is up on a yoy basis.
The composition of revenues in the wealth business. So again we have both the channels. One is our direct channel which is optimistic operating through our own branches and the second channel is our external wealth management. So the mix of this, certainly you can’t control that mix because it’s a mix of business across both the channels. And we would like that both the channels continue to grow. So we don’t guide on the mix how it would span out for each of these channels. In terms of the NFOS for AMC.
Navin Agarwal
On the alternate side, as I highlighted, we launched private credit fund in January. We are quite underrepresented on the credit side. So we will be launching a few more credit products over the course of the next one and two years and we will share those details with you as and when we are ready to launch those products. I highlighted to you that over the next few years there’ll be many more categories that we will be entering as this business is in the highest nascentcy compared to all our other businesses today. And so I think as a consequence even the growth rates of this business should be higher. Luckily, all of these are ARR revenues with very strong sustainability and predictability.
Dev Shah
Got it. Got it. That’s very clear. Thank you.
Shalibhadra Shah
Thank you.
Manish Kayal
Thanks Dave.
operator
Thank you ladies and gentlemen. That was the last question for today. I would now like to hand the conference over to Mr. Shali Bhatra Shah for closing comments. Thank you. And over to you sir.
Shalibhadra Shah
On behalf of Motilal Aswal Financial Services, I would like to thank every participant for attending the Q3FY26. In case of any further queries, please do get in touch with our investor relations desk. Thank you and have a great day.
operator
Thank you, members of the management, on behalf of Motilal Oswal Financial Services, that concludes this conference. We. We thank you for joining us. And you may now disconnect your lines. Thank you.