Motilal Oswal Financial Services Limited (MOTILALOFS.NS) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Motilal Oswal Financial Services Quarter 3 and 9 Months FY '26 Earnings Conference Call. [Operator Instructions] 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.

Thank you, Michelle. Good afternoon. I welcome and thank all the participants on behalf of Motilal Oswal Financial Services Limited to attend our Q3 FY '26 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. Raamdeoji Agrawal, Chairman of the Group; Mr. Motilalji Oswal, Managing Director and CEO; Mr. Navin Agarwal, Group Managing Director; Mr. Ajay Menon, CEO, Wealth Management; Mr. Prateek Agrawal, MD and CEO, Asset Management Business; Mr. Ashish Shanker, CEO of Private Wealth Management; Mr. Sukesh Bhowal, CEO, Housing Finance; Mr. Sanchit Suneja, Group Chief Strategy Officer; and Mr. Shalibhadra Shah, Group Chief Financial Officer. We will start this call with an opening remark by Navin, and then we will have a Q&A session. Over to you, Navin.

Thanks, Manish. Good afternoon, once again, everyone. I'll start by sharing some key highlights. Q3 FY '26 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% Y-o-Y to INR 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 2 businesses as guided in the past, to continue to rise in the quarters ahead. The current quarter profit number also includes the impact of INR 14.4 crores towards employee benefits under the new labor code. The profit growth adjusted for the labor code expense is 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 F&O 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 INR 6 per share, up by 20% versus INR 5 declared in the previous year. Once again, since our listing in 2007, we have never diluted equity while consistently paying out dividends and executing 3 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 will just once again reiterate that each of our businesses offer huge headroom to grow in the next decade. And the following 5 points will corroborate this. Savings invested in equities are at just 5% in India versus 40% in the U.S. Retail ownership of stocks and participation in broking is at just 10% versus 55% in the U.S., which augurs well for our Wealth Management business. Indian mutual fund AUM to GDP is at just 20%. This compares with 120% in the U.S., 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 5 years to reach $240 trillion or around [ $2.5 trillion ]. 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. Motilal 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-month 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 INR 11,600 crores (sic) [ INR 11,610 crores ]. Our AUM stood at INR 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 INR 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 their respective benchmarks in the past 3 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 INR 2,500 crores, 1.5x of the same quarter of previous year with highest ever market share of 5%, resulting in SIP AUM book of INR 31,800 crores plus as on December '25. We launched the consumption fund in the third quarter and raised INR 1,100 crores. Our alternates AUM grew to INR 34,284 crores. Our headcount has increased to 620 in December '25. This was 536 in March '25 and at 300 in March '24. So we have more than doubled our manpower in the last 21 months' time. Turning to the Alternate business. Our IBF Fund V has cumulatively raised close to INR 8,000 crores and expect the final close in fourth quarter with a target size of INR 8,350 crores, nearly 2x our fundraise. By context, right from our first fund when we raised $62.5 million in Fund II, we raised $125 million. Fund III was $250 million. Fund IV was $500 million and Fund V was $950 million. So we've been doubling our fund sizes for the last 17 years across the 5 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 Alternates business provides multiple opportunities that we haven't explored yet and remains a very large TAM to target for us as the wealth of the country rises over the next 10 years' time. With the above fundraises in Alternates segment, it will boost our recurring revenue base of the group. Our Private Equity business has a fee-earning AUM now of nearly INR 18,000 crores across the growth and the real estate funds. During the current quarter, we have recognized accrual income as select funds have progressed to a stage where recognition criteria are met and systematic accruals have commenced. The income is currently accruing from only 2 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 Y-o-Y 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 earnings 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 INR 1.96 lakh crores. We have 8,200-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 improve as only 34% of the RMs have a vintage of over 3 years. Our revenues at INR 816 crores for 9 months are up by 16%. We are second among listed players by revenues in this segment. Profit after tax is INR 280 crores for the 9-month period is up by 14% on a year-on-year basis. Cost-to-income ratio is improved to 53% in the 9 months FY '26. 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 INR 181 crores. It's flat Y-o-Y. Our distribution book grew by 34% to INR 42,800 crores (sic) [ INR 42,775 crores ]. NII income recorded 21% growth Y-o-Y, supported by robust book expansion. Our total loan book AUM rose 25% to reach INR 6,630 crores. Our MTF market share is close to 7%. Our ARR book grew by 33%. Important to note that our share of broking revenues in the Wealth Management segment has declined from 60% in FY '21 to 37% in Q3 FY '26, 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 INR 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'll be the largest research house in terms of coverage of stocks with the ambition to increase this number materially in the years to come. Within the Investment Banking business, we have successfully completed 51 deals in the 9-month period with cumulative issue size of INR 77,000 crores (sic) [ INR 77,150 crores ] and our fee income delivered 9% growth on a year-on-year basis to INR 65 crores. We were ranked #1 on number of QIPs and IPOs for CY '25 in the League Tables. We have 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 INR 364 crores after adjustments for the onetime change in disbursement recognition. Excluding this adjustment, disbursement has grown by 47% to INR 578 crores on a year-on-year basis. AUM grew 24% year-on-year to INR 5,379 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 2 to 3 years. Business has a strong capital adequacy ratio, low leverage, giving us enough growth levers without any external capital dependency. To conclude, we recently published the 30th wealth creation study, which highlighted how India offers multi-decadal 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 Motilal 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 1.5x 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 Motilal Oswal offers. As leaders in each of our business segments indicate huge headroom to grow at high rates over the next 5 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&A. Thank you.

[Operator Instructions] The first question is from the line of Mahek from Emkay Global.

So I have 2 questions. So first on the distribution income for both the Wealth and the Private Wealth Management businesses. So while it 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 Y-o-Y basis? So that was my first question. And secondly, on the Asset Management business. So while the net flows market share has seen a slight of decline on a Q-o-Q basis after gaining consistent market share in the last few quarters. So just wanted to know your thoughts on the same.

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 3-year basis. There are some interesting facts that I'd like Prateek to share about the asset management company, which will give you some understanding of what we have done over the course of the last 1 or 2 years and how this will play out over the next 1 or 2 years. Over to you, Prateek.

Thanks, Navin. Good afternoon, everybody. Now as Navin was saying, our performance on a 3-year basis and 3-year is important because most distributors and digital channel focuses on 3-year performance. 97% of our MF active AUM is beating the benchmark. And most of our funds bring out the top position in their respective cohorts. On the Alternates side, 60% of our AUM beats the benchmark on a 3-year 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 and 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, we have added to the teams very strongly over past 2 years. 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 these 620 people on the investment side from 29 in March '24, we moved to 36 in March '25. And as we speak, we are 43. We have hired 11 new managers over the last 2 years and have significantly strengthened and diversified investment capabilities. So in terms of growth prospects, see, like I said, people look at 3-year track record for growth. As of now, we have 6 schemes, 2 schemes are top 2 in the industry in terms of net flows and is in top 5 for 9 months of financial '26. Now we believe we have a strong runway for growth with 2 more products in major categories. So large cap and small cap would complete 3-plus years in financial '27 and 9 products will complete 3 years in financial '28. So we have had a very stiff new product launch cycle. And all of that will start to complete 3 years over the next 2-year period. So we believe as more and more products cross the 3-year hurdle, our next to gather AUM would increase and our overall market share should then settle at a higher level. Let me -- happy to have more questions.

The next question is from the line of Nidhesh from Investec.

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 the top line has been a bit soft? So we have cut down on cost or there is a variability in OpEx? How should we model it? And how should we think about the trend in operating expenses?

Nidhesh. 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 reasons where a lot of our costs are variable, especially the people cost. And that is the reason you would 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.

And just to add, Nidhesh, you know we have very strongly added to our aggregate manpower in FY '23, '24 and '25. That number is stable to a tad lower in the 9-month period ending December '25.

Yes, because we see that the headcount has also declined, I think, on a Q-on-Q basis?

Yes. As of the 9 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.

Sure, sure. Second is how much of our distribution AUM, both in Wealth Management and Private Wealth management is coming from our own AMC?

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.

Sure. And lastly, on AMC, so with the change in the top leadership at AMC, how should we -- how are we planning to stabilize the top leadership? Are we looking for an external candidate? Or -- and by what time we should see a new CIO at AMC?

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, Nidhesh. And so this is -- this will continue business as usual. In terms of additions to the investment team, Prateek also highlighted that we had a very busy schedule of new product launches in the last couple of years. And it's only in FY '27 and '28 will we see the benefit of many of these funds crossing 3 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, Prateek 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 JFM quarter, in fact, in the month of January as we speak. So yes, augmenting overall investment team as well as leadership through internal promotions as well as external hiring is something that we'll have to do, including specifically to your question about the leadership transition that we recently announced. Even there, we will need to add candidate.

The next question is from the line of Lalit Deo from Equirus Securities.

Sir, just 2 questions. So firstly, on the net [Technical Difficulty]

Mr. Deo, your audio is too low, sir. Can you please increase the volume a little bit?

Yes. Is this better?

Yes, sir. Please proceed.

Yes. So I have 2 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 9-month basis, it's still strong at around more than 30% of their opening AUM. So how should we see the net flow momentum in -- for FY '27? That was first question. And secondly, on the AMC business. So in this particular quarter, we recognized a carry income of around INR 58 crores, now we mentioned in the remarks that it will sustain in the coming 3 to 4 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 -- like on a 9-month basis, it has grown by more than 30% on the overall lending, both in Wealth Management as well as Private Wealth Management. So for FY '27, how should we look at?

First and the third, and I'll let Shali 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 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 FY '27 over the number that we will close FY '26 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 3 segments. And this is a focus area for the group given the strong credit rating of AA+, the controlled gearing, very strong net worth. For your information, the December '25 net worth is 24% higher than the March '25 net worth, 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 AA+ rating. We believe that NII will be a very important growth driver in FY '27 compared to FY '26. Turning to accruals. As the funds mature, only 2 of our funds have crossed the threshold. And because of that, we've reported this INR 58 crore approval 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 FY '28 and '29 as more vintages get into the maturity phase.

The next question is from the line of Dipanjan Ghosh from Citi.

Two questions from my side. First, if you can give some color on the carry income strategy [Technical Difficulty].

I'm sorry to interrupt you, sir, your audio is not clear. There is a background noise. I would request you to kindly use your handset.

Yes. I was just asking that in terms of your carry income booking strategy, what is the prudent strategy that we follow in terms of how much do you book in which quarter 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 Alternates side of the business for the next 3 to 5 years, if you can give some color on that?

On the first point, in terms of the additional returns accrual, the methodology followed is that, that for the equity growth funds, we -- as per our policy, if the threshold of the returns is met above the hurdle, we accrue the carry in the last 3 years of the maturity of that fund. And in the credit funds, we accrue the carry in the last 2 years of the maturity of that fund. So this basis has been consistently followed. And every quarter, the NAV is trued up to take -- to recognize the incremental true-up to the returns of the fund returns that we have achieved. So to that extent, it will be a recurring line item, as Navin explained, on a quarter-on-quarter basis and even Y-o-Y basis. So that's the method we follow for accruing the additional return.

I'll let Ashish Shanker, CEO of our Private Wealth, take the question on the private banker.

So some perspective, over the last 3 years, our RM strength has gone up almost 2.5x. Whilst 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 2 to 3 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.

I'll take your third question regarding the Alternates business outlook. So as you know, we started with 2 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 5 fund vintages for our growth fund, our fund sizes doubled from $62.5 billion to $125 billion, $250 million, $500 million and $1 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. IBEF V, we had 40% of our AUM being raised from overseas compared to 35% for the previous fund, 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.

The next question is from the line of Aravind Ravichandran from Sundaram Alternates.

So this one, I need to understand like in Wealth and Private Wealth Management, especially distribution income, why are we seeing such a volatility across quarters? Is it because of 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 OpEx, especially in Wealth and Private Wealth Management. How to conceive this like is it going to be -- since we have hired -- ramped up our RM and other basis, especially in the last 2 years, is it going to be primarily like getting the better business out of the existing RMs? Or is it going to be bit more balanced in terms of RM hires and other employee hires as well as better productivity from the existing RMs? Yes, these 2 questions.

This is Ashish here. So on the flows front, see, last 3 years, bulk of the inflows have been led by monetization events, whether it is unlocking of promoter stake or ESOP. So typically, these 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've 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.

About distribution revenues, like why is it volatile, especially in Wealth and Private Wealth Management across quarters?

So as Ashish just explained, the TBR part of the revenues are volatile. But as far as the flows are concerned, the flow volatility comes out of what happens to the market and the resulting impact on the monetization and resulting deals. So that is how we see it. 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 fundraises, right, which are completed in a quarter, those are the times when you see spike up in the net flows as well.

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 Private Wealth at 31% annually Y-o-Y. So if you look at that part, the ARR revenue line item moves in line with the growth in the ARR assets. And as 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 businesses are up, respectively, 35% and 40% Y-o-Y on the distribution business. So that is the way you should look at the flows and the growth in the revenues for these businesses.

Understood. Understood. And my question on OpEx if you can...

Can you repeat that, please?

Yes. So like -- so in Wealth and Private Wealth Management, how should I view the OpEx growth, especially in the view of our ramp-up in RMs in the last few years? Is it primarily going to be productivity increase? So like it's just going to be yearly rises for employees, not much from addition of employees? Or is it going to be balanced in terms of OpEx growth, especially from the employee expenses side?

Sure. So we had discussed this in our earlier calls, I'll repeat. Our cost-to-income ratio for this business peaked in FY '24. FY '25 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-to-income ratio for this business. I think you should see this trend continue as the RM vintages progress to 3 years. We have 60% of our RMs days at less than 3-year vintage as we speak.

Okay. Okay. So focus is going to be there. And just one last question, like especially in Wealth Management business, in order to improve our distribution income potential like further and further, do we need to invest in any like a huge RM or other employee base to increase ARR mix, especially other distribution income, especially in Wealth Management?

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.

The next question is from the line of Sucrit D Patil from Eyesight Fintrade Private Limited.

I have 2 forward-looking questions. My first question is to Mr. Agrawal, Mr. Raamdeo Agrawal. Given the evolving macro outlook and market volatility and ever-changing client behavior across retail and institutional space, how is Motilal Oswal 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 after this.

Yes. Actually, this is the heart of the entire strategy that Motilal 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 we -- as ibanking becomes more and more powerful, as the market cap goes from INR 5 trillion to INR 10 trillion in the next 7, 8 years, you'll see emergence of very large banks. And the deal sizes will go from $1 billion is now becoming quite common. So it will become more like $5 billion to $10 billion single deal. 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 to -- we are seeing that the businesses have tailwinds in 1 year, say, like broking from '21 to '24 was one way kind of a massive tailwind. And then finally, regulators came and kind of gave some kind of restrictions to the F&O business. So that business will become very large, got a setback for last 1 year. But other businesses, non-broking businesses, that became very large. So that's what if you see today in this quarter, we have grown this one capital market company, which has grown 16% in terms of operating profit to history's highest INR 611 crores for the quarter and very high-quality profit despite the fact that broking revenue has been kind of muted in this particular quarter. So I think as we move forward, as the capital market businesses become from 200 million [ demat ] accounts to more like 0.5 billion demat accounts in the next 7, 8 years and the market cap goes from INR 5 trillion to INR 10 trillion, I think we are seeing that opportunity in every business will be -- so there will be whatever businesses in the current businesses, we'll keep growing vertically up and horizontally, we'll be seeing a very vertical strategically 1 or 2 businesses well chosen, like what Navin said, in the Alternate business, we have started with the private credit. We'll be looking for other opportunities in the sales 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 a 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.

My second question is to Mr. Shah. With financial markets constantly appearing -- experiencing bouts of volatility and varied liquidity conditions. How are you thinking about margins 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?

Yes. On the capital allocation, methodology , our net worth has been very strong at INR 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 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 -- the 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 last decade at 22% and even current financial year at 26% ROE.

We'll move on to the next question, which is from the line of Dev Shah from Haitong Securities.

Congratulations on a good set of numbers. Just wanted to ask on the wealth management piece. The cash and F&O 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 I 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 SIPs as a product category? Yes, those are my 2 questions.

Yes. On the market share front, our F&O market share has actually gone up now Y-o-Y basis. It is up by 20 basis points to now 8.4% from 8.2% in the Q3 of last financial year. So that market share has picked. And overall cash market shares, we -- cash volumes have been lower, if you look at Y-o-Y volumes have been lower by almost 20%. And in times when market conditions are tough, we are on an advisory-driven broking model. We are not discounted model. And advisers typically withheld the cash for investing. 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 catched a bit because if you look at our run rate across the last 4 years, this market share has almost doubled, right? Also in the market, there is a lot of mix of trading volume, which has gone up versus the delivery volume. So to that extent also, we have a healthy share on the delivery side. So marginally, 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 F&O market share, as I explained, is up on a Y-o-Y basis. The composition of revenues in the Wealth business, so again, we have both the channels. One is our direct channel, which is 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, I'll ask Prateek to guide that.

On the Alternates side, as I highlighted, we launched a 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 1 and 2 years. And we will share those details with you as and when we are ready to launch those products. I highlight to you that over the next few years, there will be many more categories that we will be entering as this business is in the highest nascency 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.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Shalibhadra Shah for closing comments. Thank you, and over to you, sir.

On behalf of Motilal Oswal Financial Services, I would like to thank every participant for attending the Q3 FY '26 con call. In case of any further queries, please do get in touch with our Investor Relations. Thank you, and have a great day.

Thank you, members of the management. On behalf of Motilal Oswal Financial Services, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.