Motilal promoters richer by nearly Rs 1,000 cr each

Shares list at 21% premium over offer price of Rs 825.

The shares of stock broking and financial services firm Motilal Oswal Financial Services was listed at Rs 999 a share on the Bombay Stock Exchange, a premium of 21 per cent over the offer price of Rs 825. This values Motilal as the third-most valuable brokerage after India Infoline and Indiabulls Financial Services.

The listing also made promoters Motilal Oswal and Raamdeo Agrawal richer by Rs 530 crore each, in their individual capacity, and another Rs 499 crore each, if their stakes in Passionate Investment Management, which holds 35.25 percent stake in the company, are taken into consideration.

The Mumbai-based brokerage house, which was up by 18.5 per cent at the close of trading at Rs 976, got a bumper listing in a market that ended 54 points in the red.

The initial public offer of Motilal Oswal had been subscribed by 28 times despite being priced in the Rs 725-825 band. "As the size of the industry expands, we are looking to expand our shop and hope to get 1/3rd of the total revenue will be non-broking fee-based revenue. We hope to maintain or improve on our net margin of 25 per cent," said Raamdeo Agrawal, managing director, Motilal Oswal Securities.

The brokerage house's listing at a premium may have raised the benchmark valuations for other brokerage houses.

Today's listing makes Motilal Oswal the third-most valuable domestic brokerage house with a market capitalisation of Rs 2,776.35 crore, behind Indiabulls Financial Services (Rs 12,364 crore) and India Infoline (Rs 3921.43 crore) as of Tuesday's prices.

"Motilal Oswal's listing should push up benchmark valuations for brokerage firms because when we priced the issue, it was priced at a premium to most brokerage houses," said Pramod Kumar, director, India, Global Investment Banking.

In fact, several broking stocks including India Infoline, Emkay Share and Stock broking and IL&FS Investsmart have gained 3 to 16 per cent in the last one week. Analysts fear the sector could be getting a tad overheated.

The interest in the broking space can be compared to that in the real estate sector, which was largely an unorganised space for a long time. However, valuations in case of real estate have come down to 'normal' and this is needed in the broking space, too, feel analysts.

"A new listing attracts some amount of buying interest, which is also backed by foreign brokerage houses picking up stakes in Indian brokerages, in this case," said Jay Prakash Sinha, head of research, Ambit Capital.

In the stock broking space, some of the other listed companies include IL&FS Investsmart (m-cap of Rs 1345.82 crore), Geojit Financial Services (m-cap of Rs 953.04 crore), Emkay Share and Stock brokers (m-cap of Rs 375.82 crore), Networth Stock Broking (m-cap of Rs 79.12 crore), JRG Securities (m-cap of Rs 72.46 crore).

Some other broking outfits expected to hit the markets this year include Religare Enterprises, promoted by the Ranbaxy family, and Edelweiss Capital