Why Motilal Oswal is 40% Down?? checkout explaination !!!

This blog discusses the recent downfall in the stock price of Motilal Oswal, a company that had previously seen massive growth over the last five years, with a stock price increase of five times. However, the stock has fallen by 40% in the past four months.

Key points covered:

1. Was the recent drop a good buying opportunity? The blog addresses whether the current stock price dip is a chance for investors to buy at a lower price or if it's a signal to stay away.

2. Company Growth Overview:

   • Motilal Oswal, founded in 1987, initially made its name in stock broking and later expanded into wealth management, mutual funds, and other business segments.
   • The company has had remarkable growth, with revenue increasing from ₹2,358 crores in 2020 to ₹9,300 crores recently. Similarly, net profits increased from ₹190 crores in 2020 to ₹3,200 crores, a growth of over ten times.
   • This rapid growth resulted in a fivefold increase in stock prices, leading to the stock's current valuation.

3. Concerns:

   • The company's stock valuation raised questions about whether it was overvalued, especially given its growth trajectory.
   • The company's price-to-earnings (P/E) ratio was around 21 during its peak, which, considering its high growth rate, was seen as fair.

4. Treasury Investments:

   • One of the key aspects that helped the company’s profits grow was its treasury investments. Motilal Oswal invests heavily in the stock market and other securities.
   • In the past, the returns from these investments were significant, adding substantial profit to the company’s bottom line.
   • However, the stock market downturn has led to losses from these investments, impacting their financial results significantly in the most recent quarter (Dec 2024).

5. Recent Financial Impact:

• In the most recent quarter, treasury investments showed a negative return of ₹69 crores, a sharp contrast to the previous quarters when profits from these investments were much higher.
• The fall in profits due to the downturn in the market resulted in a significant drop in both revenue and profits, which has affected the company's overall valuation.
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6. Controversy Involving Kalyan Jewellers:

   • The stock price of Motilal Oswal was further affected by a controversy involving Kalyan Jewellers. There were rumors that Motilal Oswal’s fund managers were allegedly paid to buy more shares of Kalyan Jewellers. This negative PR led to a loss of investor confidence.
   • Additionally, the company faced a fine from SEBI (Securities and Exchange Board of India) for failing to report certain trading activities, which added to the downfall.

In conclusion, while Motilal Oswal has strong growth potential, the blog suggests that its reliance on treasury investments and negative publicity have contributed to its recent stock price decline. Investors need to evaluate whether the current valuation is still fair and whether the company's operational profits (excluding the treasury investment returns) should be the focus going forward.