Motilal Oswal Financial Services Limited (NSE: MOTILALOFS) Q1 2026 Earnings Call dated Jul. 25, 2025
Corporate Participants:
Unidentified Speaker
Manish Kayal — Investor Relations
Navin Agarwal — Director and CEO, AMC
Ajay Menon — Chief Executive Officer – Broking and Distribution
Ashish Shanker — Head, Investment Advisory
Shalibhadra Shah — Chief Financial Officer
Motilal Gopilal Oswal — Co-Founder Managing Director & Chief Executive Officer & Director
Analysts:
Unidentified Participant
Avinash Singh — Analyst
Ashish Kumar — Analyst
Hitesh Arora — Analyst
Lalit Deo — Analyst
Dipanjan Ghosh — Analyst
Swarnabha Mukherjee — Analyst
Pooja Jain — Analyst
Rohan Advant — Analyst
Shashi Kapoor — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Motilal OSWAL Financial Services Q1 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 call, please signal an operator by pressing Star then zero on your touchstone phone. I now hand the conference over to Mr. Manish Kayal, head of Investor Relations. Thank you. And over to you sir.
Navin Agarwal — Director and CEO, AMC
Thank you. Ryu. Good afternoon everyone. I am Manish Payal, Head Investor Relations. I welcome all the participants on behalf of Motilal Oswald Financial Services Limited for you to take time out to attend our Q1 FY26 earnings conference call. We hope that you had an opportunity to go to our investor deck and press release which was uploaded yesterday on stock exchanges and on our website. We also have uploaded the Excel data book which has historical operating and financial numbers. Please note that today’s discussion may include some forward looking statements. And these forward looking statements are based on our macro assessment and actual outcomes may vary.
With that, I’ll introduce our management. Participating on this call we have Mr. Amal, Chairman of the Group. Mr. Mokidarji Oswal, Managing Director and CEO Mr. Navin Agarwal, Group Managing Director. Mr. Ajay Menon, CEO of Wealth Management Business. Mr. Pratik Agarwal, MD, CEO Asset Management Business. Mr. Ashish Shankar, CEO of Private Wealth Management. Mr. Sukesh Bhowal, CEO of Housing Finance. Mr. Salim Bhadra Shah, Chief Financial Officer and Mr. Sanchit Suneja, Group Chief Strategy Officer. We’ll start this call with an opening remark by Naveen Agarwal. And then we’ll have an Q and A session. Over to you, Naveen.
Navin Agarwal — Director and CEO, AMC
Good afternoon everyone. It is my pleasure to welcome all of you to our earnings call for the first quarter ending June 2005. As usual, I’ll start by providing a quick snapshot of the quarter at the group level and then highlight segment wise performance and finally conclude with the broader outlook of the overall group. The first quarter performance continues the momentum that we were witnessing in the past few years. It is the highest ever quarter in terms of our reported profit after tax at 1,430 crores which is up by 40% year on year. Our operating profit after tax grew by 21% on a year on year basis to 522 crore rupees.
Mainly driven by our asset and private wealth businesses. Besides the capital market business, we crossed several milestones across our Various businesses During this quarter AMC continued to gain market share both in mutual funds and alternate segments and reached a major milestone of 1.5 lakh crores of AUM equity. AUM Capital Market saw bigger deal pipeline, more deal executions, higher research coverage and the highest ever revenues. Housing finance business crossed a milestone of 5000 crores of AUM with more companies getting listed. The overall virtual cycle created by listing of these businesses is what we highlighted in our latest annual report where we explained that if all of these companies were to be listed at some point in time, that alone could add 150 trillion rupees in market cap which in turn is a very big opportunity for all our businesses.
This apart from financialization of savings is a megatrend which we think will continue to serve as a tailwind for all our businesses. Our focus in the interim continues to increase share of our fee based and trade based revenues and this will be driven by the asset management business, the private wealth business, the distribution book and the lending book growth. Turning to the broader numbers in the quarter, we’ve crossed a major milestone by servicing more than 13.6 million customers comprising 8.6 million plus unique mutual fund folios and 5 million plus unique broking accounts. Our assets under advice cost 6.5 lakh crore going by 28% year on year.
Annual recurring revenue as a percentage of net revenue now stands at 52%. During the first quarter our fee based revenue contribution to total revenues increased to 44%. Net worth increased by 28% year on year to 12,537 crores. ROE stands at 48% for the first quarter our decadal net worth has compounded at 24% after paying out dividends consistently and after doing three buybacks and our decadent average return on Equity is over 22%. Turning now to the segmental performance starting with the wealth management business which comprises of our retail broking, distribution and retail lending book nii Our broking business continues to retain its leadership as a full service broker.
Our cash broking volumes ADTO at 3179 crores in Q1 FY26 implies a cash volume market share of a robust 7.1%. Our FNO premium market share stood at 7.9%. Total ADTO market share stand at 7.5%. We believe we are the largest broker in the cash segment over a long term trend. Our broking revenue contribution to total segmented revenues declined almost half from over 60% back in FY21 to just about 34% in 1Q FY26. This happened due to greater focus on growing our distribution business reflected in net flows which increased many fold from about 3000 crores to about 3000 crores in the first quarter of this financial year.
Consequently, the distribution of crore by 34% compounded from about 11,000 crores back in March 21 to almost 38,000 crores in June 25 and the contribution to total revenues from segment increased from 12% back in FY21 to 24% in the first quarter of this year. We intend to further increase the revenue share of the distribution business within our overall wealth management business and believe that the share of broking revenues will continue to diminish as a proportion of the overall wealth management business like we’ve seen in our global counterparts over the last several years. The third part of the wealth management business is the NII which grew by 12% year on year due to improvement in spreads.
Turning to our asset and private wealth business, this comprises of three businesses, the asset management business, the private wealth management business and as well as the private equity real estate business. AMC business continued its momentum with market share gains driven by continued strong investment performance. As mentioned earlier, we crossed a milestone of 1.5 lakh crore of equity AUM coupled with increasing distribution presence gross flows in the first quarter witnessed a growth of 60% year on year to 14,568 flow crores. Our current AUM stands at 1.51 lakh crores which compares with an average AUM of 1.35 lakh crores in the first quarter and an average AUM of 1 lakh crores for the last fiscal so we stand at over 50% higher AUM as we speak compared to the average of last year.
We believe that continued strong market share both in the mutual fund and the alternate segment closing in of the product gaps should all serve as a strong driver to our profit growth in the coming quarters as well. We’ve also made inroads into the private credit segment with the appointment of leadership there. We should be launching our own private credit fund the second half of this year and we believe that over the next decade we will have many more products in the credit part of the alternate space as well. The net flows of the asset management business grew from 5,300 crores in the first quarter to 8,500 crores in the current quarter.
92% of the AUM outperformed their respective benchmarks. We added 14 lakh SIPs in the first quarter. Our SIP flows in the first quarter stand at 3,437 crores. Happy to report that our monthly run rate of SIPs for the month of June crossed 1,200 crores. Our SIP book stands at over 26,000 crores as of June 25. Alternate AUM also registered a strong growth at almost 30% to 33,810 crores. Contribution of AMC in total profits of MOFSL has risen meaningfully in the last two years and based on the current trend we believe that this year also should mark a substantial increase in that share.
Our PE business is amongst the very few domestic PE businesses. It’s strong IRR across all the four funds that we have launched ever since our inception back in 2007. We also launched our fifth private equity fund with a target size of 8,000 crores and completed our first close in a short spell of less than two months crossing 80% of the target fundraise. This is the fastest mobilization of funds done by this business. We also announced the final close of our Real Estate Series 6. So happy to share with you that we are the only product in the only player in this segment which is at series six of a real estate fund.
Private equity business currently has a fee earning AUM of 10,185 crores. A substantial amount of carry. As we have guided in the past and explained in our earnings, PPT will be realized at the fund close in the near future. With the launch of private credit vertical, we now address a higher TAM of customers for alternate funds. This will also accelerate the scale up of the business in the next five years as existing products raise larger sums of capital in every subsequent series and new product launches increase our bouquet of offerings. Private wealth business momentum also continued to be quite strong.
On top of a very strong FY25 that we had reported in the first quarter we had a top line growth of 53% with continued investments in manpower our bottom line growth was a robust 49%. Our Uhni and family office propositions position us well to emerge as a leading player in the private wealth management space over the next two to three years time. This is supported by experienced leadership as well as strong group synergies. Our current relationship manager base is at 615 and we expect improvement in the RM productivity as only 33% of our RNs have a vintage of over three years.
The share of private wealth business increased both in FY25 as well as in the first quarter. We expect this trend of faster growth led by higher RM base, more comprehensive propositions straddling UHNI as well as the HNI segments and several new offerings to continue going forward and expect the share of private wealth in our total profits to also rise in the coming quarters and years. Turning to our capital market business, this comprises of the institutional equities and the investment banking business. During the first quarter we reported the highest ever revenues for this business on the back of strong deal flows in the previous quarters and strong execution during the current quarter the IE business continues to increase research coverage as it’s fulcrum for the group.
We have a strong team of 150 plus employees in this business. The coverage of the research team is at 320 companies across 25 sectors. That means 73% of the market and we service nearly 900 domestic and overseas institutional clients. FY25 was a very strong year for the investment banking business with doubling of revenues and that momentum has continued into the first quarter. We completed 16 deals during the quarter, cumulative issue size of 30,000 crores and our fees delivered a robust 89% growth. Year on year our IB business was ranked number three in number of IPOs executed, number five in terms of the amount of IPOs value of IPOs.
This is sharp improvement from rank 12 and rank 21 respectively in the last year. We continue to top the QIT league tables for the first quarter in terms of number of issues. As you know, we were number one in FY25 as well. We’ve strengthened our team over the past few quarters across both of these businesses and continue to increase our research coverage in IE and our IBD pipeline, the most robust that we’ve seen ever. Turning to our housing finance business, we crossed the milestone of 5004 AUM up by 22% led by sales RMforce increasing from 1430 RM’s to 1430 RM’s which is up by 50% which in turn led to disbursement growth of 57% to nearly 400 crores during the quarter.
Gross and net NPS end at 1.2 and 0.6% respectively. We expect housing finance AEM to double in the next two to three years time. The business has a strong capital adequacy ratio and low leverage giving us enough growth levers without any external equity capital dependency. Turning to treasury book, our total investments including alternatives grew to 8,853 crores up by 26%. Year on year this book has delivered a robust xirr compounded return of over 20% since inception and including reinvestment of cash flows, treasury investments have grown by 43% compounded over the last decade implying it’s up by more than 30 times during the course of the last implying it’s up by more than 50 times over the course of the last decade.
We expect similar multiplied impact on the current book over the next decade given the strong ROE of the operating businesses, a clearly defined payout policy on our operating profit and expected investment IRR. To conclude, MOFSL’s net worth has grown nearly 10x between March 2015 and June 25 to 12,537 crores led by average return on equity of over 22%, average payout on operating profits of nearly 20%. We expect similar multiple over the next decade on the starting network Due to the unique twin business model which is explained once again in our earnings pct. We are strengthening all the five field technology, talent, training, trust and thinking.
Big Runway for growth is immense with strong double digit growth expected in each of our businesses. Market leaders in many of our businesses are about five to 10 times our profits in AUM. We are focused on outgrowing the markets in each of these businesses implying a strong and a big Runway for growth for the group. I will now open the floor for Q and A. Thank you.
Questions and Answers:
operator
Sure. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press Star and one on the touchtone telephone. If you wish to remove yourself from the question queue you may press star and 2. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions please press Star and one. The first question is from Avinash Singh from MK Global. Please go ahead.
Avinash Singh
Good afternoon. Thanks for the opportunity. Great set of performance. I mean across most of the segments yet I will try to focus somewhere. I mean I have kind of some bit of concern so one of course I mean your this wealth management performance is I would say good as well but there of course there has been a shift. I mean your distribution efforts are paying off and distribution has made up for any thing that was kind of a lost towards the brokerage or targets and revenue. Now here given the kind of your pivot over the last few years more towards going more towards a holistic wealth management for you know the mass excellent than really looking for transaction is this direction I mean directional shift with this transactional or booking revenue going down and distribution continue to go in chop will it continue or what I mean kind of a you know slowdown in the transactional or brokerage revenue in this quarter gone by is more a market driven phenomena.
So that’s question one second, you know, is on again housing finance. I mean in the past you have stated that your strategy going forward. But importantly again the business this quarter seems to be not on very, very strong foot in some bit of, you know, increase in credit cost and also some asset quality concerns are emerging. So what sort of are happening there and what is the kind of, I would say the strategic path ahead for that business? And thirdly, as we sort of speak based on, you know, whatever the, you know, the kind of a pipeline, how is the year looking forward for the capital market segment particularly from the deal perspective? Because that is one, I mean segment where typically, you know, a lot of revenues are kind of a transactional in nature and there is volatility. So some bit of a, that directional guidance on that deal pipeline will help us in terms of kind of estimating the numbers. Thank you.
Navin Agarwal
Yeah, hi Avinash, thank you for all your questions. Let me answer them in the reverse order. Turning to the starting with the capital markets business, we’ve seen a record performance in the last year. First quarter of this year has started on a very, very strong note. The second quarter execution in the market with Motila Loswa logos is, is quite publicly available. I think there are four IPOs closing in a space of two weeks time that we are managing the deal pipeline. On the QIP front we continue to be the leader. So given the pipeline I have no reason to believe that the coming quarters will be any weaker than the first quarter that we reported which has itself been a very robust quarter.
So that’s on the capital markets business. Come to the first question and then Ajay is online, he can probably add as well. The trend of rising distribution income is something that we called out almost over five years back and we have been sharing this metric year after year and quarter after quarter with you. The cross sell ratios continue to remain quite low and there is an annuity nature of buildup of the distribution business unlike the transaction business. So higher cross sell and we had explained and I’ll double click on that just for one minute, we now have a separate head of third party products below him.
He has a 600 plus 700, 600 to 700 members strong team with regional heads. So rather than the existing broking items cross selling third party products to now have dedicated team supplementing or supporting them. And with the advent of account aggregator, I would only like to believe that this cross sell ratio can multiply from here. There’s a lot for us to learn from the global counterparts. But suffice it to say that this is a long Runway. The other part that you must also not ignore is the NII part of the business which has also been rising and we believe that we are quite under indexed as far as the MTF book is concerned compared to our own market share in the futures and options as well as the cash market as we stand at 7.5%.
So we are focused on that part also and that is set to grow. We’ve explained that the broking business is hinged on greater retail participation which we believe still can grow 3.4x from here over the next couple of decades. And so the Runway there again is strong. So all three parts have a strong Runway. But we would like to believe that both distribution and II can outgrow the broking business in the coming years. Ajay, you talked about the first quarter strong distribution income I had highlighted during our fourth quarter phone call and I repeat that the distribution income will have seasonality.
As you know the fourth quarter is the lumpiest on the insurance side as far as the as far as some of the other line items in the distribution business is concerned. They too could be lumpy on a quarter on quarter basis. The most steady part is obviously the trail income which is, you know, which only moves along with the mark to market and the net new money that we add to the distribution book will stand at nearly 40,000 crores right now. So those are the various elements. If Ajay has any points I have request him to add as well.
Ajay Menon
I think you’re covered in detail as we know that the distribution AM is still very small in the overall scheme of things. When we look at our which we are holding in our DP we have got more than 3 lakh crore of assets, around 40,000 crores. So a huge room to grow from here. At the same time you look at our broking business, the franchise, the overall presence, we have a huge scope and we are invested onto the broking but that doesn’t stop us from building on the distribution AEM and in the last few years we have consistently seen consistent growth in the AEM business in a big way.
And as Naveen said, we are investing in a big way in terms of people, in terms of technology and in terms of building an overall trade based book which will be over and above the broking business growth which we are building onto. So that will be a continuous growth on both sides. That is how we are looking at it.
Unidentified Speaker
Yeah. Hi Vinash. On the housing finance question. So you know last few years we have built very very robust asset quality in this business. So if you look at the new book that we have built over the last few years which is almost about 70% of our the GNPA number on that book is only 0.6%. While you know overall GNPA number on a sequential basis is a bit increased. But that’s also because of the very seasonal nature of elections in quarter one of every year where you will see marginal slippage being higher. But you know our net NPA provisions coverage ratio stands pretty strong and we expect meaningful recovery of this GMP number in the coming quarter. Overall I think 1 plus 30 plus all metrics if you compare on a YOY basis all are lower. So that’s how we are looking at. The overall asset quality.
Navin Agarwal
Does this answer your question? Adina Native thank you. Thank you Avinash.
operator
Thank you. The next question is from Ashish Kumar from Amperson Capital Investment Advisors. Please go ahead.
Ashish Kumar
Yeah, thanks for taking my question. I have two questions. First is there has been a sharp increase in our employee expenses this quarter, 34% YOY and 23% QQ. So what is the reason for this and how we should look at it in the coming quarters? Second question is in the asset and private wealth management we have seen strong growth on YOY basis but on QOQ it is kind of muted. So if you can give some more color on this it would be helpful. Thanks.
Unidentified Speaker
Coming to the people cost number overall, if you look at last 18 months we have been continuously adding more senior talent across each of our business because the senior hires over last 18 months has been almost 450 plus senior talent has been added. Secondly, it also includes the impact of the increment which has happened on a YoY basis because quarter one generally reflects the full impact of the increment that we have effected from April 1st of this year. And overall given the strong performance of this quarter, the variable amount has been provided for to fully capture the growth for this quarter.
That is why you would see that there is marginal increase in the people cost to revenue ratio but our margins have been very strong and stable at a 50% profit margin. If you look at the overall last financial year and even the quarter one of this year coming to the wealth management .
Navin Agarwal
if you see There has been a very substantial ramp up in the second half and the fourth quarter of last year and so and usually also as I mentioned, the fourth quarter is seasonally the strongest quarter for certain products and so all of this has led to, you know a very strong growth last year as well. And this year again we have a robust 50% top line and bottom line growth in this business. We are seeing very strong tailwinds for this business and expect this business to continue to perform strongly in the coming quarters of the year as well.
And as I guided this business is very under indexed in terms of the headroom to grow. If you benchmark us to the market leader you will see that there is almost 8 to 10x multiplication that is possible in this business and that’s why we have been investing. I have guided in the past that almost 10% EBITDA margin sacrifices on the back of strong RM hiring where only 33% of the relationship manager base is of a vintage greater than three years. So we see all of this continuing to serve as strong tailwind the headroom as well as the investment that we are making in the RM base and the growth will continue to be strong in the coming quarters as well.
Unidentified Speaker
Also on the question of the revenue to the AUM on our asset and private well business quarter four included the carry income also and that is one of the reason where you will see that quarter one will not have that impact. So the revenue increase in comparison with the will be lesser in quarter one because of the impact of the carry income included in quarter four in that asset and triad will business both.
Ashish Kumar
Thanks. Just on the employee expense. If you can give some guidance for full year in terms of either the percentage of sales or growth it would be helpful.
Navin Agarwal
As far as the percentage of the sales is concerned you should assume that it will be at a similar level as the last year for FY20.
Ashish Kumar
Okay, thanks. Thanks, that’s helpful. That’s all from my side.
operator
Thank you. The next question is from Hitesh Arora from Abacus Asset Managers. Please go ahead.
Hitesh Arora
Thank you. I had a just want to get. A better understanding on the PWM business. So we’ve talked about the relationship vintage. Is very expensive etc but just on the client side if you could just elaborate what is happening. How many relationships have we expanded, matured, things like that or any, you know some interesting transactions that maybe we may be working on like we executed last year. If you could just elaborate a bit on that so that just to improve our understanding of the business of the PWM side.
Ashish Shanker
Hi, this is Ashish Sir. So from PWM side last year same time if you see we had about 14,000 families onboarded, 13,400 to be precise and today we have about 16,600 families.
So we’ve seen strong growth in terms of addition of families. And this is across the board whether it is HNI families as well as ultra H9 family offices. And like Naveen mentioned earlier, we are still quite under penetrated across the board. So in the HNI business it’s more about coverage adding talent across the country. Similarly in the ultra HNI family office business we are very very underpenetrated in terms of our share of wallet. So there is a lot of headroom for growth in both businesses within private wealth as far as the products are concerned, we are seeing increasing interest and offtake of alternate products in the ultra HNI and family office segment.
Similarly in the HNI segment we are seeing a lot of interest in solutions and I mean we currently have our Delphi set of products which is essentially a fund of funds and fee based solutions for HNIs. So in both areas we are continuing to see interest and in the alternatives we are also seeing a lot of interest in unlisted transactions and there is a steady flow now.
Hitesh Arora
Understood. Thank you.
operator
Thank you. Next question is from Lalit Deo from Equalist Securities. Please go ahead.
Lalit Deo
I said two, three questions. One, picking the distribution income both in the wealth management as well as on the private wealth management side. So there seems to be a sequential uptick in the transactional revenues. Transactional distribution revenues. So just wanted to understand what would have drive those revenues in this way and could you also give us a rough breakup like how much would be coming from which. Which are the key drivers for the same second was on the AMC business. So in this particular quarter there was a this close on the PE and RE segments were 300 crores.
But in the presentation it’s mentioned that in July we have closed the fund. So how should one look at the overall net sales in the. In the alternative side of the AMC business for the full year and lastly on the broking side. So in the FNO side like the wall, it seems like that the gross brokerage levels have were muted in this particular quarter on a sequential basis. So what would have led to those reasons and how are you seeing the trend recent trends in in the coming in the month of June and July.
Shalibhadra Shah
Yes. Coming to the first question on the distribution revenues. So distribution revenues across our wealth management business as well as size wealth business in quarter one includes also revenues on account of secondary market transactions on the private securities as well as alternatives. So it’s a function of those revenues which in fact over the last few quarters that there is a lot of focus and alternative space including co investment as well as secondary transactions is upticking. And that is one of the reason where you would see the impact of those steps that we took to increase the revenues in quarter one as well.
Coming to the second question on the flows or alternative flows. So while quarter one includes 300 crores of net flows, but you would have seen the announcement that we already made that our fifth growth fund on our private equity side which is India Excellence India Business excellence fund number five with a target size of 8,000 crores. So we have done the first closing at 80% of the target size. So you will see the impact of the flows coming in the quarter two of this financial year. And also we have closed our series six of our real estate fund the flows of which would also get affected in the quarter two of this year.
So you would see two new closings as well as Naveen guided that on the private credit side we will have in H2 of this financial year will be the first closing of our private credit fund. So that is how we will read the flows of current financial year.
Navin Agarwal
Lalit just to summarize versus the 11,000 for opening AUM for this business, you will see nearly all of the 8004 Series 5 private equity funds getting added. You will see a part of the 2004 Series 6 Real Estate Fund getting added and you will also see a part of the private trade funded. So this should be one of the strongest years of growth both in AUM as well as recurring fee income for this business. You should see nearly a doubling of AUM in the current financial year.
Shalibhadra Shah
On the third question on the margin for the quarter, our profit margin for the quarter is at 49% which you know if you look at sequentially it will look like dip of 200 basis points. But however as earlier explained in the call, we look at largely margins of almost the last financial year to be maintained in the current financial year as well. And this is mainly because of the people cost which I explained earlier in the call in terms of the increase in the revenues and the corresponding increase in the cost thereof on the FN2 side of the business.
The if you look at our focus has been on the cash side of the business. Our cash the F and P of the business is less than 40% in our overall mix and our cash volumes growth has happened in the market as well. Our market share has gone up so bulk of the brokerage growth has come actually from the cash brokerage. For us because of the increased focus on the cash side of the business over the last many years. On the Asimo side, the increase has happened in the market share as well as in terms of the revenue, but that is marginally lower than the overall cash mix because of our advisory driven business on the cash side.
Ajay Menon
Just to add to that, on the FNO side, we had the full quarter impact of the expiries being reduced. So on the overall market also the volumes have come down because of the overall number of expiries coming down. So that. Exactly.
Shalibhadra Shah
That’s right.
Navin Agarwal
Okay, thank you. Thanks.
operator
Thank you. Next question is from Deepanjan Ghosh from Citigroup. Please go ahead.
Dipanjan Ghosh
Hi. Good morning, sir. So a few questions from my side going back to this employee expense number and if I were to just kind of take out two of your businesses, which is private wealth and capital markets, it seems that the growth in employee expense on a sequential basis has been highest in these two segments. And obviously when we look at the market competitiveness in terms of new talent acquisition or talent coaching that is going on in the industry, it probably seems that it is also highest in these two segments, coincidentally. So I just wanted to get a more medium long term picture in terms of how do you see the competitive pressure shaping up in this segment.
Obviously a lot of your players are coming up, capital back players are coming up. So is talent acquisition or talent retention going to put a significant pressure on the employee expense for let’s say a foreseeable future out there? The second question is going to be on the transactional revenue part. Now obviously you mentioned that there are a lot of unlisted market deals that are happening. Obviously your numbers have also stacked up well over the last few quarters, especially this quarter. Also I just want to get idea of two things. One is what would be your product sort of rejection rate or how do you really source the product and kind of vet the product before really pitching it to the customer.
And second is in terms of the pipeline of the product side or lumpy deals out there, can you give some color specific to your company? And last question is on the, on the, on the capital markets business, any color on the quantum of pipeline that you have, let’s say it’s 100% of that to certify over the next let’s say one to two years, what sort of uptick in revenues can we expect on the fee income side of the capital markets business?
Navin Agarwal
So basically as far as the employee cost pressures, the talent war in the private wealth in the capital markets business? Panjan, you’re absolutely right. At Mudra we have been very sensible about benchmarking them to how we pay to the current workforce also. And so yeah. But yes, the offers that we have made in the last 12 months have been at a much higher level compared to what we have done in the past. And I don’t see this abating because the size of the opportunity itself is expanding very rapidly in both of these businesses. And so as you see, our overall margins are at, I would say the industry best in terms of the composition of the businesses that we have.
If you compare us with the industry, this is at 49% margins. You rarely find anybody at that kind of. So basically margins are very robust and we try to sensibly participate in terms of growing the team sizes across both of these businesses. So that is the first point. As far as the visibility of the, as far as the pipeline is concerned, I articulated that the pipeline, the deal pipeline visibility of the capital markets business is very robust. That the second quarter at least should be at least as good as the first quarter. But making any long term projections for this business is very difficult because it all depends.
Execution is entirely a function of the markets. And if markets were to remain reasonable or robust, then the pipeline at least is in place to continue to have robust execution in 3Q as well as 4Q. And that book to bill ratio for this business is in excess of two to three times based on the revenues that we reported last year. And that’s why you’re seeing near doubling of revenues in the first quarter and continued strong growth in the second quarter as well. As far as the underwriting is concerned, see, the group has a very strong history of underwriting both in public markets as well as private markets.
The vintage of our asset management company is over two decades and vintage of the private market practice is just a tad under two decades. And both the businesses have delivered a stellar track record of mid 20s or early 20s kind of a return over this long period of nearly two decades. So that is innate to the group and rejection ratios are obviously as a consequence quite high pipeline. Again, this is quite strong and so the coming quarters should continue to be reasonably strong. We don’t call out any numbers of pipeline for this, but I think the visibility of continued strong growth in the rest of the year is also reasonable.
Dipanjan Ghosh
Squeezing one small question on the private wealth or maybe a little bit on the floats from the PMS and AIF on the other real estate on the SS margin side also, I just want to get some color on this customer, especially in the PWM X of let’s say your private client group which you used to have more focus on the hni. You know, would this be more of generational wealth sort of personnel or this would be more tilted towards, let’s say professionals or business people? I mean, I mean, just wanted to get some sense of, you know, how, how is the sensitivity of primary market for monetization events to incremental flows versus let’s say how much of it this more organic client tapping or new plant acquisition.
Ashish Shanker
Yes. So within the private wealth segment your question was X of pcg. I mean essentially the color of clients is either in the HNI segment professionals or in the ultra HNI to family office. It’s basically business promoters. So right from SMEs MSMEs all the way going up to large listed company promoters, that would be the primary target segment in terms of what drives growth. I mean there is obviously a lot of organic growth because these clients keep adding to their wealth every year and the current portfolio also keeps growing. But as far as the larger growth in the ultra H and I family office segment is concerned, yes, monetization plays a very large role and the intensity there has only been increasing as you can see from all these IPOs plus private equity transactions.
Sellout. And I’m just alluding to what Naveen said. If the market remains stable or robust, I think we continue to see very, very high growth in that segment. So there is an organic growth of maybe 20, 25%. But the extra growth and our ambition to, you know, get to the leadership position will get determined by the kind of share that we can get in the incremental monetization events. I hope that that’s fair.
Dipanjan Ghosh
Thank you everyone and all the best.
operator
Thank you. The next question is from Swarna Mukherjee from B and K securities. Please go ahead.
Swarnabha Mukherjee
Yeah, sir, thank you for the opportunity and congrats on a good set of numbers. Couple of questions from my side actually wanted to understand a little bit more on the product strategy in wealth and private wealth. So observations like say for example in the wealth business I see that the working income has come back very strongly. While vis a vis that is in private wealth, I think that pace of recovery is lower. So I just wanted to understand, you know, what would be a differentiated strategy between the two segments in a period when the market was recovering.
How do you address that? That is the first question. And second is in terms of the distribution income for the quarter, of course I believe that there is an impact because of, you know, seasonalities from insurance business. But if you could give Some a breakup in the revenue growth from what comes from Ms. Or other, you know, non seasonal channels and what comes from other segments will help us to understand this better. Yes sir, that’s from my side.
Navin Agarwal
We don’t break down this. There’s already so many layers of breakdown across all our businesses that we are publishing. And as I mentioned to you, this could be you know, side on a quarter, on quarter basis but on an annual basis we see these trends to be improving. But as far as the difference in the trend of broking business across our wealth management and private wealth management, as you know broking is the primary product or the largest product for the wealth management business. There’s also a lot more MTF that is supported there which has probably less salience to market volatility or basically the continuity of that income is greater use of that is far less in our private wealth business and it’s also not a primary product. But we believe that these could be lead lags that may last for a quarter or two but eventually both the businesses largely move in a similar direction like we’ve seen in the past few years.
Swarnabha Mukherjee
Right sir, understood. I appreciate the fact that you don’t want to give further cuts into the distribution income, but just wanted to understand between say last year to this year, the growth say between say 1Q25 and 1Q36, the growth has been phenomenal over this period. So I just wanted to understand that as such the non seasonal bucket also, I mean has the growth been equally stronger or better? Some, some color would be helpful, would be helpful to get for us to forecast maybe some ballpark.
Navin Agarwal
Actually I’d explained this in great detail last quarter also but I’ll repeat, the only new kid on the block really is secondaries in bonds as well as equities. That is something that we were under indexed on fixed income and under indexed on secondaries. I think both of those have seen an improvement over the course of the last three quarters. And so if you see second half of last year and first quarter of this year, you’ve seen improvement. My guess is we are still under index on both and so the trend could continue to be strong in that part of the distribution income.
Swarnabha Mukherjee
Okay sir, understood. Very helpful. Thank you so much and all the best.
Navin Agarwal
Thank you.
operator
Thank you. The next question is from Pooja Jain from Trinetra Asset Managers. Please go ahead.
Pooja Jain
Hello. Hi. Thank you for the opportunity. I just wanted to know a little on the technological side. What progress have you made on digital translation in both broking as well as well are you looking for any AI based advisory or any hyper personalization? And I also wanted to know the percentage of account openings and transactions are now happening through your mobile apps versus assisted channels. What is the percentage?
Motilal Gopilal Oswal
Yeah, hi Motilal here. So you know, a huge amount of focus on technology is happening and that’s why our online transaction must be about 75 to 80% overall. Although we must be the only unique player who have both the model, which is the digital model, therefore the advisory assisted model. So the advisor can advise the transition still can happen online or offline based on the client’s convenience. So we have, I think the next version of the Rise app, which is also live Account aggregator is live. We have live. Lot of tools being done through AI.
I think next couple of quarters you will see a lot of new tools where the advisory actually voice and text combination will happen and the clients will have the choice. Any data points other than that, what you said?
Shalibhadra Shah
Yeah, so. So our tech spends, you know, are also, you know, rising year and year. And overall if you look at tech spend, they are almost about 4.5 to 5% of our revenues. And even this financial year we have a very healthy budget of almost about 250 crores to be spent on the entire tech. So that’s how we continue to expand our digital initiatives and especially on data science as the AI side, we are investing in a lot of tools across, across our advisory business as well as our trading.
Pooja Jain
Okay, thank you. Just one more question. What’s the current status and strategy for international fund products?
Navin Agarwal
We’ve already run out of capacity. A few years back we were the market leader. We were the first pioneers to launch Nasdaq S&P 500, bringing them to India. But given the FX reserves which have been falling, I think nearly two years back, two and a half years back, this product stopped seeing any fresh inflows because we capped out our limit that has been set by the regulator. Having said that, some of our products are now available on Gift City and it’s only been a quarter and we’ve seen very strong traction there. And we think that is one area that can.
So basically global funds flowing into India through Gibson is something that, you know, may happen on the private wealth side. Also we’re trying to use a similar route for deployment of funds globally. But this is not a major mover for us. Currently all of this put together is, you know, incrementally from a delta perspective, tending to zero for us.
Pooja Jain
Okay, okay. That’s all from my side. Thank you.
Navin Agarwal
Thank you.
operator
Thank you. The next question is from Rohan Advant from Pratt Capital. Please go ahead.
Rohan Advant
Yeah, thanks for the opportunity. Most of my questions have been answered. So just on the NII front, if I look at quarter on quarter our NII has been been lower and even on a Y O I basis the growth seems to be lower. And I thought you would benefit also from the drop in interest rates on your niis. So was our average book maybe lower than the closing book and what is the reason for this and how would you guide for the rest of the. Year on this front?
Shalibhadra Shah
Yeah, so I believe you are talking about the MTF book on the wealth management business overall. So I think yoy the book has been lower BY almost about 9 10% and that is one of the reasons you would see that the NI’s are lower. However, the spreads have marginally bettered Y because our cost of funds have also come down. So cost of funds have actually fallen by 40 basis on a QoQ front and it basis on a YOY front. So you will see the impact of the spread benefit also coming over next few quarters. However, sequentially the book has grown sequentially if you look at the book is up almost 20% in line with the growth in the cash volumes and our market share growth as well.
And you will see the sequential uptick of the NI coming in the coming quarters for the full impact of the growth which has happened in the quarter one of the same.
Rohan Advant
Understood. So. So what you are saying is that the closing book has grown but the average book has not grown. Because when I see NII this quarter. Versus last quarter it is a lower number even under wealth management.
Shalibhadra Shah
Yeah, that’s right. Because bulk of the book growth has started from the month of June. And that is why you see that the average impact of that is yet to fully come in the nih.
Rohan Advant
That clarifies it. Thank you.
Shalibhadra Shah
Thank you.
operator
Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. Next question is from Sashi Kapoor from Dauladar Capital. Please go ahead.
Shashi Kapoor
Yeah, the question is, you know as you mentioned that we are on uptrend or the liquidity is doing fine in markets and markets are also how we are set for the next two, three years. What we are doing to ensure that profits or you know, we don’t get much impacted as we have got impacted historically due to market corrections.
Navin Agarwal
So Shashi, as you may have noticed, the annuity and the trail bearing part of the revenues systematically has been rising to now a majority of the overall revenues. On the other hand, you’ve also seen that within the broking business, the volatility of which you are alluding to that part of the business is also now down within the retail broking business to a third of the overall revenues.
Correct. The share of third party distribution and nii, the share of asset management, private wealth and alternates private equity, real estate business have all risen materially. So all of this we believe and our market shares in all our businesses in the last three years and last five years have gone up. I explained to you that across in my opening remarks that across all the businesses that we are in the Runway to just catch up with the leader is five to seven times and each of those businesses are growing at very strong double digit rates. So we believe that, you know, this whole mega trend of financialization of savings, the huge gap between us and the market leader and our focused execution to close in that gap, increase the trail revenues, increase the annuity share of revenues, increase the salience of asset management private wealth businesses.
I think all of this give us the confidence that the 10 year compounded profit growth of 30% that we’ve reported all the for the future are no different from the last decade. Does that answer your question?
Shashi Kapoor
Thanks a lot.
Navin Agarwal
Thanks Shashi.
operator
Thank you very much. Due to time constraints we’ll take that as the last question. I would now like to hand the conference over to Mr. Shali Badra Shah for closing comments.
Shalibhadra Shah
On behalf of Muthiral Aswal Financial Services, I would like to thank every participant for attending the Q1 FY26 con call. In case. If you have any further queries, please do get in touch with our investor relations desk. Thank you and have a good day.
operator
Thank you very much on behalf of Motilal Oswal Financial Services. That concludes the conference. Thank you for joining us ladies and gentlemen. You may now disconnect your lines.