The quarter saw net sales contract 32.44% sequentially and 34.91% year-on-year to ₹1,849.11 crores, whilst operating margins compressed to 45.61% from 62.99% in the previous quarter. The results underscore mounting pressure on the non-banking financial company's core businesses, raising questions about near-term growth trajectory despite the company's historically strong fundamentals and 23.63% average return on equity.
The company's diversified financial services portfolio—spanning institutional equities, asset management, housing finance, currency broking, private equity, wealth management, commodity broking, investment banking, loan against securities, retail broking, and distribution—faced headwinds across multiple segments during the quarter. The sharp sequential decline follows an exceptional Q1 FY26 performance, suggesting significant volatility in the company's quarterly earnings trajectory.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 1,849.11 | -32.44% | 362.42 | -68.81% | 19.69% |
| Jun'25 | 2,737.03 | +129.95% | 1,162.06 | +1,894.13% | 42.34% |
| Mar'25 | 1,190.26 | -40.29% | -64.77 | -111.47% | -5.36% |
| Dec'24 | 1,993.42 | -29.84% | 564.52 | -49.60% | 28.49% |
| Sep'24 | 2,841.06 | +22.76% | 1,120.08 | +27.01% | 39.69% |
| Jun'24 | 2,314.31 | +7.45% | 881.89 | +21.97% | 38.45% |
| Mar'24 | 2,153.84 | — | 723.05 | — | 33.94% |
Financial Performance: Margin Compression Signals Operational Stress
The quarter-on-quarter comparison reveals concerning trends across all key metrics. Net sales of ₹1,849.11 crores in Q2 FY26 represent a substantial 32.44% decline from Q1 FY26's ₹2,737.03 crores, whilst the year-on-year contraction of 34.91% from ₹2,841.06 crores highlights sustained pressure. This marks the weakest quarterly revenue performance since March 2025, when the company reported ₹1,190.26 crores in sales.
Operating profit before depreciation, interest, and tax (excluding other income) stood at ₹839.91 crores, down from ₹1,719.53 crores in the previous quarter. The operating margin compression to 45.61% from 62.99% represents a dramatic 1,738 basis points decline, signalling significant operational challenges. The company's profit before tax contracted to ₹505.51 crores from ₹1,405.59 crores sequentially, whilst the PAT margin deteriorated to 19.69% from 42.34%.
Interest costs rose marginally to ₹317.39 crores from ₹294.92 crores, whilst employee costs declined to ₹512.86 crores from ₹534.06 crores. The tax rate increased to 28.28% from 17.77% in the previous quarter, further pressuring bottom-line performance. On a half-yearly basis (H1 FY26), the company reported consolidated net profit of ₹1,524.48 crores on revenues of ₹4,586.14 crores, representing healthy performance for the six-month period despite the weak Q2 showing.
Capital Efficiency: Strong ROE Underpins Quality Despite Recent Weakness
Despite the disappointing quarterly performance, Motilal Oswal Financial Services maintains robust capital efficiency metrics that distinguish it as a quality franchise. The company's average return on equity stands at an impressive 23.63%, significantly above the typical threshold for quality financial services companies. This demonstrates management's ability to generate strong returns on shareholder capital over the long term, even as near-term volatility creates challenges.
The latest ROE of 22.58% and return on capital employed (ROCE) of 28.94% underscore the company's efficient deployment of capital across its diversified business segments. These metrics reflect the inherent strength of Motilal Oswal's business model, which combines high-margin businesses like wealth management and asset management with scale businesses such as retail broking and housing finance.
⚠ Key Monitoring Point: Quarterly Volatility Pattern
The company has exhibited significant quarterly earnings volatility over the past year, with alternating periods of exceptional strength and weakness. Q1 FY26 saw extraordinary profit of ₹1,162.06 crores, followed by Q2's sharp decline to ₹362.42 crores. This pattern—also evident in FY25 where Q4 recorded a loss of ₹64.77 crores—raises questions about earnings sustainability and the timing of deal closures, particularly in segments like investment banking and private equity that can be lumpy by nature.
The balance sheet remains robust with shareholder funds of ₹11,079.33 crores as of March 2025, up from ₹8,731.77 crores in the previous year. The company maintains zero long-term debt, though its net debt-to-equity ratio averages 1.33 when considering short-term borrowings and working capital facilities. Current assets stood at ₹13,746.99 crores against current liabilities of ₹23,675.98 crores, reflecting the nature of financial services operations where customer deposits and payables form a significant portion of the liability structure.
Industry Context: Capital Markets Segment Navigates Volatile Environment
The capital markets industry has faced a challenging environment during the September 2025 quarter, with reduced trading volumes and subdued primary market activity impacting broking and investment banking revenues across the sector. Market volatility, whilst beneficial for certain trading-oriented businesses, has dampened investor sentiment and reduced transaction volumes in wealth management and distribution segments.
Motilal Oswal's diversified business model—spanning institutional equities, retail broking, asset management (through Motilal Oswal Asset Management Company), housing finance (through Motilal Oswal Home Finance), and private wealth management—provides natural hedges against segment-specific headwinds. However, when multiple segments face simultaneous pressure, as appears to have occurred in Q2 FY26, the impact on consolidated results becomes pronounced.
The company's five-year sales growth of 27.45% and EBIT growth of 41.32% demonstrate its ability to capitalise on India's expanding financial services opportunity over the long term. The domestic capital markets industry continues to benefit from structural tailwinds including rising retail participation, growing assets under management, increasing financialisation of household savings, and expanding credit penetration in housing and consumption.
Long-Term Growth Trajectory Remains Intact
Despite Q2's disappointing performance, Motilal Oswal's annual results for FY25 showed net sales of ₹8,339.00 crores (up 17.40% year-on-year) and profit after tax of ₹2,508.00 crores. The company's operating margin (excluding other income) for the full year stood at a healthy 54.50%, whilst PAT margin reached 30.10%. These full-year metrics underscore the quality of the underlying business franchise and its ability to generate strong returns over complete economic cycles.
Peer Comparison: Competitive Positioning in Capital Markets
Motilal Oswal Financial Services operates in the competitive capital markets segment alongside established players including HDFC Asset Management Company, Nippon Life India Asset Management, Multi Commodity Exchange, 360 ONE, and CRISIL. A comparison of key valuation and profitability metrics reveals Motilal Oswal's positioning within this peer group.
| Company | P/E (TTM) | P/BV | ROE (%) | Div Yield (%) | Market Cap (₹ Cr) |
|---|---|---|---|---|---|
| Motilal Oswal | 22.13 | 5.56 | 23.63 | 0.49 | 58,682 |
| HDFC AMC | 42.04 | 1.49 | 21.20 | 1.67 | — |
| Nippon Life India | 41.06 | 13.16 | 24.45 | 2.06 | — |
| Multi Commodity Exc. | 71.20 | 24.65 | 14.36 | 0.33 | — |
| 360 ONE | 40.18 | 6.40 | 18.36 | 1.06 | — |
| CRISIL | 48.35 | 14.12 | 29.95 | 1.49 | — |
Motilal Oswal trades at a P/E multiple of 22.13 times trailing twelve-month earnings, representing a significant discount to peers such as HDFC AMC (42.04x), Nippon Life India (41.06x), and Multi Commodity Exchange (71.20x). The company's price-to-book value of 5.56 times similarly sits below the peer average of approximately 12.0 times, suggesting the market assigns a more conservative valuation despite comparable or superior ROE metrics.
The company's ROE of 23.63% compares favourably with HDFC AMC (21.20%), 360 ONE (18.36%), and Multi Commodity Exchange (14.36%), though it trails CRISIL's exceptional 29.95% and Nippon Life India's 24.45%. This strong ROE performance, combined with the valuation discount, suggests the market may be pricing in concerns about near-term earnings volatility or business mix challenges.
Motilal Oswal's dividend yield of 0.49% lags peers significantly, with the company having declared a dividend of ₹5.00 per share with an ex-dividend date of January 31, 2025. The relatively modest dividend payout reflects management's preference for reinvesting capital in growth opportunities across its expanding business segments rather than distributing higher proportions to shareholders.
Valuation Analysis: Premium Justified by Quality, But Near-Term Concerns Weigh
At the current market price of ₹978.45, Motilal Oswal Financial Services commands a market capitalisation of ₹58,756.83 crores. The stock trades at a P/E ratio of 22.13 times trailing earnings, marginally below the capital markets industry average of 23 times. However, the company's valuation grade has fluctuated between "Expensive" and "Very Expensive" over recent months, with the current assessment standing at "Very Expensive" as of October 31, 2025.
The price-to-book value multiple of 5.56 times reflects a premium to book value that is justified by the company's superior return on equity of 23.63%. Financial theory suggests that companies earning returns above their cost of capital deserve premium valuations, and Motilal Oswal's ROE significantly exceeds typical equity costs of 12-15%. The EV/EBITDA multiple of 13.51 times and EV/Sales ratio of 7.52 times indicate investors are willing to pay for the company's quality franchise and growth potential.
The stock has experienced significant volatility over the past year, trading between a 52-week low of ₹487.85 and a high of ₹1,097.00. At the current price of ₹978.45, the stock sits 10.81% below its 52-week high but 100.56% above its 52-week low, suggesting it remains closer to the upper end of its trading range despite recent weakness. The valuation grade history shows frequent oscillations between "Expensive" and "Very Expensive" classifications, reflecting the market's struggle to assign a stable valuation amidst quarterly earnings volatility.
Shareholding Pattern: Stable Promoter Base, Rising FII Interest
The shareholding structure of Motilal Oswal Financial Services reflects a strong promoter commitment alongside gradually increasing institutional participation. Promoter holding stood at 67.69% as of September 2025, marginally lower from 67.80% in June 2025 and 68.86% in September 2024. The Motilal Oswal Family Trust holds the largest stake at 23.68%, followed by co-founder Raamdeo Ramgopal Agrawal at 21.17%.
| Shareholder Category | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter Holding | 67.69% | 67.80% | 68.44% | -0.11% |
| FII Holding | 7.52% | 7.29% | 6.01% | +0.23% |
| Mutual Fund Holding | 5.12% | 4.79% | 5.12% | +0.33% |
| Insurance Holdings | 0.23% | 0.23% | 0.32% | 0.00% |
| Other DII Holdings | 0.48% | 0.42% | 0.27% | +0.06% |
| Non-Institutional | 18.95% | 19.47% | 19.83% | -0.52% |
Foreign institutional investors have steadily increased their stake from 6.01% in March 2025 to 7.52% in September 2025, representing a cumulative addition of 151 basis points over two quarters. This rising FII interest, with 251 foreign institutional investors now holding stakes, signals growing international confidence in the company's long-term prospects despite near-term earnings volatility. Mutual fund holdings recovered to 5.12% from 4.79%, with 30 domestic mutual funds maintaining positions.
The gradual decline in promoter holding from 68.86% to 67.69% over the past year appears measured and does not signal any loss of confidence, particularly given the absence of any pledged shares. The stable promoter base, combined with increasing institutional participation, provides a solid foundation for long-term value creation. Non-institutional holdings declined marginally to 18.95% from 19.47%, suggesting some retail profit-booking following the stock's strong multi-year performance.
Stock Performance: Multi-Year Outperformance Despite Recent Volatility
Motilal Oswal Financial Services has delivered exceptional long-term returns despite recent near-term weakness. The stock has generated a remarkable 1,087.62% return over the past decade, vastly outperforming the Sensex's 216.86% gain and delivering alpha of 870.76 percentage points. Over five years, the stock has returned 594.49% against the Sensex's 113.22%, whilst the three-year return stands at 471.19% versus the index's 39.05%.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Day | -4.57% | +0.07% | -4.64% |
| 1 Week | -5.55% | +0.30% | -5.85% |
| 1 Month | +8.77% | +4.30% | +4.47% |
| 3 Months | +7.39% | +4.04% | +3.35% |
| 6 Months | +49.98% | +5.26% | +44.72% |
| Year-to-Date | +2.41% | +8.10% | -5.69% |
| 1 Year | +4.28% | +6.39% | -2.11% |
| 3 Years | +471.19% | +39.05% | +432.14% |
| 5 Years | +594.49% | +113.22% | +481.27% |
| 10 Years | +1,087.62% | +216.86% | +870.76% |
However, recent performance has been mixed. The stock is down 4.57% over the past day and 5.55% over the past week, reflecting the market's negative reaction to Q2 FY26 results. The one-year return of 4.28% underperforms both the Sensex (6.39%) and the capital markets sector average (19.05%), with the stock delivering negative alpha of 2.11% and underperforming its sector by 14.77 percentage points.
The six-month return of 49.98% demonstrates the stock's strong momentum prior to the recent results, with the price rallying from approximately ₹650 levels in April 2025 to touch ₹1,097.00 in October before the recent correction. The stock's beta of 1.20 indicates it is 20% more volatile than the broader market, classified as a "High Beta" stock with volatility of 46.24% versus the Sensex's 12.50%. This high volatility profile makes the stock suitable primarily for investors with higher risk tolerance and longer investment horizons.
Investment Thesis: Quality Franchise Facing Near-Term Headwinds
The investment case for Motilal Oswal Financial Services rests on several pillars. The company demonstrates strong long-term fundamental strength with an average ROE of 23.63%, significantly above the threshold for quality financial services companies. The diversified business model spanning capital markets, wealth management, asset management, and housing finance provides multiple growth engines and natural hedges against segment-specific challenges.
The company's five-year operating profit CAGR of 41.32% showcases its ability to scale operations and capture market share in India's rapidly expanding financial services sector. Long-term structural tailwinds including rising retail participation in equities, growing assets under management, increasing financialisation of savings, and expanding credit penetration support the bull case for sustained growth over the coming decade.
However, significant concerns temper the bullish outlook. The current financial trend is classified as "Negative" following Q2 FY26's sharp profit decline of 67.64% year-on-year. The quarterly earnings volatility pattern—with alternating periods of exceptional strength and weakness—raises questions about sustainability and visibility. The company's valuation at 22.13 times trailing earnings and 5.56 times book value appears stretched given near-term earnings uncertainty, earning a "Very Expensive" valuation grade.
The proprietary Mojo score of 57 out of 100 results in a "HOLD" rating, reflecting the balanced assessment of strong long-term fundamentals against near-term operational challenges. The score considers the company's good quality grade, negative financial trend, bullish technical setup, and expensive valuation to arrive at a neutral stance. The rating suggests the stock is not recommended for fresh purchases at current levels, though existing holders can maintain positions given the quality of the underlying franchise.
Key Strengths & Risk Factors
✓ Key Strengths
- Exceptional ROE: Average return on equity of 23.63% demonstrates superior capital efficiency and management quality, well above industry standards.
- Diversified Revenue Streams: Multiple business segments including broking, wealth management, asset management, housing finance, and investment banking provide natural hedges.
- Strong Long-Term Growth: Five-year EBIT CAGR of 41.32% and sales CAGR of 27.45% showcase ability to scale and gain market share.
- Robust Balance Sheet: Zero long-term debt and shareholder funds of ₹11,079.33 crores provide financial flexibility for growth investments.
- Promoter Commitment: Stable 67.69% promoter holding with no pledging demonstrates confidence in long-term value creation.
- Rising Institutional Interest: FII stake increased from 6.01% to 7.52% over two quarters, signalling growing international confidence.
- Market Leadership: Established brand in retail broking, wealth management, and institutional equities with strong distribution network.
⚠ Key Concerns
- Severe Quarterly Decline: Q2 FY26 profit fell 67.64% YoY to ₹362.42 crores, raising concerns about near-term earnings trajectory.
- Revenue Contraction: Net sales declined 34.91% YoY to ₹1,849.11 crores, indicating weakness across multiple business segments.
- Margin Compression: Operating margin contracted 1,738 bps QoQ to 45.61%, signalling operational stress and pricing pressure.
- Earnings Volatility: Significant quarter-to-quarter swings in profitability reduce earnings visibility and complicate valuation.
- Premium Valuation: "Very Expensive" valuation grade at 22.13x P/E and 5.56x P/BV limits upside potential from current levels.
- Sector Underperformance: One-year return of 4.28% lags capital markets sector by 14.77%, indicating relative weakness.
- High Volatility: Beta of 1.20 and volatility of 46.24% make the stock unsuitable for conservative investors seeking stability.
Outlook: Monitoring Points for Future Direction
The outlook for Motilal Oswal Financial Services depends critically on several factors that will determine whether Q2 FY26's weakness represents a temporary blip or signals more structural challenges. Investors should closely monitor quarterly revenue and profit trends over the next two quarters to assess whether the company can return to growth trajectory or if the current weakness persists.
Positive Catalysts
- Market Recovery: Revival in trading volumes and primary market activity would boost broking and investment banking revenues.
- AUM Growth: Continued expansion in assets under management across mutual funds and wealth management segments.
- Margin Stabilisation: Recovery in operating margins towards historical 55-60% levels would significantly improve profitability.
- Housing Finance Scale: Continued growth in housing finance business providing stable, annuity-like income streams.
Red Flags to Watch
- Sustained Revenue Decline: If Q3 FY26 shows continued revenue weakness, it would suggest deeper structural issues.
- Further Margin Pressure: Operating margins falling below 40% would indicate severe competitive or cost pressures.
- Asset Quality Concerns: Any deterioration in loan book quality in housing finance segment.
- Promoter Stake Reduction: Accelerated decline in promoter holding beyond normal levels would be concerning.
The technical trend remains "Bullish" since October 9, 2025, with the stock trading above its 50-day, 100-day, and 200-day moving averages. However, the recent 4.57% decline suggests near-term consolidation may be warranted. Key support exists at the ₹950 level (near 50-day moving average of ₹946.84), whilst resistance emerges at the recent high of ₹1,097.00.
"Motilal Oswal's Q2 stumble tests investor conviction in a quality franchise facing temporary headwinds—the next two quarters will determine whether this represents a buying opportunity or a trend reversal."
For the investment thesis to strengthen meaningfully, the company needs to demonstrate revenue stabilisation and margin recovery in Q3 FY26. Management commentary on segment-wise performance, deal pipeline in investment banking, AUM trends in asset management, and loan growth in housing finance will be critical indicators. The company's ability to maintain its historical ROE above 20% whilst navigating current challenges will ultimately determine long-term value creation.
The Verdict: Hold for Quality, Avoid Fresh Entry at Premium Valuation
Score: 57/100
For Fresh Investors: Avoid initiating positions at current levels. The stock trades at premium valuation (22.13x P/E, 5.56x P/BV) despite significant earnings uncertainty following Q2's 68% profit decline. Wait for evidence of earnings stabilisation over the next two quarters and margin recovery towards historical 55-60% levels before considering entry. A more attractive entry point would emerge around ₹850-900 levels, representing 13-20% downside from current price.
For Existing Holders: Maintain positions given the company's strong long-term fundamentals (23.63% ROE, 41.32% EBIT CAGR) and quality franchise across diversified financial services segments. The current weakness appears operational rather than structural, with India's financial services sector offering robust long-term tailwinds. However, set a stop-loss at ₹900 (8% below current levels) to protect against further deterioration. Monitor Q3 FY26 results closely for signs of recovery.
Fair Value Estimate: ₹1,050-1,100 (7-12% upside from current levels), assuming earnings normalisation and margin recovery to 50%+ levels over the next two quarters. This implies a target P/E of 24-25x on normalised FY26 earnings, justified by superior ROE and long-term growth prospects.
