-banking boosts Motilal Oswal Fin - 11th January 2008

11th January 2008

I-banking boosts Motilal Oswal Fin

Bakul Chugan and Ramkrishna Kashelkar

MOTILAL Oswal Financial Services has recorded a robust performance for the December 2007 quarter. On a year-on-year basis, both sales and net profit more than doubled on account of growth in new businesses like investment banking and portfolio management services. Sales on a consolidated basis rose 125% to Rs 227.4 crore, whereas net profit soared 162% to Rs 53.7 crore.

New businesses have seen a near five-fold growth in the past one year. The company’s securities business, which constitutes the major share of the total revenue, has also grown with its customer base going up by more than 1-lakh mark, or 43%, in the nine months ended December 2007. The company has also seen a marked rise in other income, which comprises fund-based income and interest income on margin lending. Other income has grown from less than a crore in December 2006 to over Rs 5 crore this year. Besides working capital, IPO proceeds has been used to expand its reach. The company now has over 1,300 outlets across 426 cities.

The company intends to continue the current thrust in its business by not only expanding its current operations but also rolling out new ventures. Its asset management business is slated for a launch in 2008-09 along with a foray in distribution of insurance products. While these businesses are expected to improve its earnings, the stagnant growth of the commodities’ line of business is a concern.
Supreme Industries

SUPREME Industries showed a moderate growth in its sales and operating profit during the December 2007 quarter led by higher volumes. The momentum is expected to continue in the coming quarters given the commencement of the company’s additional production capacities. Supreme’s net sales rose 8% to Rs 288.1 crore.

Despite higher sales, the company could curb cost on account of efficient raw material management. To keep costs low, the company procures its raw materials in large size cargos and sells the excess quantity to smaller players. Thus, polymer trading has emerged as a complementary business for the company.

A weak dollar has also helped in bringing down the cost of imported inputs. As a result, operating profit grew 10.2% — faster than the growth in sales — to Rs 30.3 crore. Net profit jumped 37% to Rs 13.1 crore, aided by a Rs 2.2 crore extraordinary profit from sale of land in Haryana.

The company is investing over Rs 300 crore in setting up a mega plastic products plant at Gadegaon in Maharashtra. Spanning over 140 acres, the plant would become the largest plastic processing unit in the country once fully commissioned. Production under the first phase has begun this month. Currently, it manufactures predominantly PVC pipes and the production of other products will start gradually from February.

Over the next couple of years, the plant will be scaled up to its full capacity of 1,50,000 tonnes of polymers every year. The company plans to expand PVC fittings capacity at its Jalgaon facility within the next two to three months. Its new plant near Pune to manufacture protective packaging products is likely to commence by end January 2008.

The company has been investing in capacity additions, which are now coming on stream. In the coming quarters, the additional volumes from new capacities may drive sales growth.