Motilal Oswal Financial Services Ltd Management Discussions.

FY2020 was a challenging year for Indian market. NDA secured second term in the general elections and announced several economic measures to revive domestic economic growth that has slumped to lowest in decade led by weak auto sales, muted growth in personal and consumer loans and sluggish rural demand. The year saw various domestic events like default of a major housing finance company, removal of Article 370 of the Constitution of India, revival of a major private bank, merger of public sector banks etc. On global front the major events that made headlines include escalation in US China trade tensions and subsequently agreement on phase I of trade deal, sharp rate cuts by US Fed and European Central Bank (ECB) bringing it back to all-time lows, completion of BREXIT, fall in oil prices etc. However, the single biggest event of the year, which happened in last quarter, was origination and spread of corona virus pandemic. The virus that originated in China rapidly covered all major countries, especially in the month of March, 2020. Many economies implemented shutdown - partial or full and consequently economic activity was severely disrupted globally. This also resulted in a fall in most asset classes including equities, commodities and currencies. In India, to check the spread of the virus, government announced lockdown for 21 days till April 14 and later on extended it to May 31. Government first announced an economic stimulus package worth R 1.7 trillion to help millions of low income cope with lockdown and a second package of R 20 lakh crore later on to revive the countrys economy. A host of measures were taken by RBI to help liquidity conditions in the economy which included Repo rate cut by 115 bps to 4%, moratorium of three months of EMIs on all outstanding loans which was later on extended by another three months till August end, auction of targeted long term repo operations worth R 1 crore etc.

Although, International Monetary Fund slashed its FY2021 growth projection for India to 1.9% from 5.8% projected in January, India stands to benefit in this uncertain environment. Disruption in global supply chain has highlighted risk of overdependence on a single country. Many global MNCs are likely to consider diversifying their manufacturing operations from China and India could be a likely beneficiary given the low corporate tax rate, skilled population, relatively low wages and a large domestic market. Thus, once the situation stabilizes, India could see relatively stronger recovery.

Equity Markets-

Market had a roller coaster ride in FY2020. Both Sensex and Nifty closed at an all-time high of 42,273 and 12,430 respectively in the month of January. Then came corona virus and as the pandemic rampaged across the world, Sensex and Nifty ended the year with large negative returns. With India in midst of a complete lockdown, Sensex and Nifty closed at 29,469 and 8,598 levels respectively in March, 2020.

FIIs sold massively during the month of March, 2020 with net equity outflows of R 620 billion but still ended FY2020 with net inflows of R 65 billion. The size of outflow in March, 2020 was highest ever in one month and was around 0.4% of Indian market capitalization. DIIs also witnessed net inflows of R 1293 billion which was 79% higher than the previous year.

Business Streams and Outlook:

Motilal Oswal Financial Services Limited (MOFSL) is diversified financial services company with stock broking business activity. MOFSL operates in businesses such as Retail and Institutional broking, Investment banking, Asset Management, Wealth Management, Private equity and Housing finance. In each of the businesses MOFSL offers unique value proposition to its customers and creates its niche in each of the business segment and command premium position over peers. MOFSL carries its lending business by running Loan against shares book under the name of Motilal Oswal Finvest Limited and retail mortgage backed lending in affordable housing segment under the name of Motilal Oswal Home Finance Ltd.

Ratings: During the year, CRISIL Limited reaffirmed the Credit Rating of "CRISIL A1+" the Commercial Paper Programme of R 1,300 crores of the Company. CRISIL Limited assigned the Credit Rating of "CRISIL A1+" to the Commercial Paper Programme of R 2,500 crores and reaffirmed "CRISIL A1+" to the Commercial Paper Programme of R 500 crores of Motilal Oswal Finvest Limited, a subsidiary of the Company. ICRA Limited reaffirmed the credit rating of "[ICRA] AA(Stable)" rating with a stable outlook to the NCD Programme of R 350 crores of the company. India Ratings and Research reaffirmed rating of "IND A1+" to Commercial Paper Programme of R 1,300 crores of Motilal Oswal Financial Services Limited. India rating also reaffirmed rating of "IND A1+" to Commercial Paper Programme of R 1,000 crores and assigned a new rating of "IND A1+" to Commercial Paper Programme of R 2,000 crores of Motilal Oswal Finvest Limited, a subsidiary of the Company. The ratings indicate a strong degree of safety regarding timely servicing of financial obligations.

Broking Business Industry Facts

The average daily traded volumes (ADTO) for the equity markets during FY2020 stood at R 14.44 lakh crores, up 45% YoY from R 9.93 lakh crores in FY2019. The overall Cash market ADTO reported growth of 11% YoY at R 39,068 crores in FY2020. Delivery saw growth of 3% YoY to R 9,140 crores v/s 8% de-growth in FY2018-19. Within derivatives, future volumes increased 0.4% YoY to R 87,950 crores while options rose 51% to R 13.17 lakh crores. Amongst cash market participants, retail constitutes 52% of total cash volume, institution constitutes 25% of total cash volume and prop constitutes 23%. The proportion of DII in the cash market was 10.1%. The increase in demat accounts during the year stood at 13% with total number of accounts as on March, 2020 at 4.08 crores. The revival in market sentiments is expected to give push to the primary market activities and overall volumes.

Even though Indian equities witnessed continued net inflows from FIIs for most of the part of the financial year, with November recording the highest since March 2019, still the total net inflows for FY2020 saw a major decline from the previous year. This was mainly due to the highest ever sell-off by FIIs in the month of March, led by coronavirus-induced jitters. Contrary to that, net inflows from DIIs in March was highest ever recorded. Despite volatilities and uncertainties, Indian households are seen to hold the interest in equity and equity products with expectations of higher returns than traditional fixed income products.

Our Broking Business

Research and advisory form the foundation of the companys broking services. Brokerage serves participants across FIIs, domestic institutions, HNIs and retail. This business comprises of two distinct units - Retail Broking & Distribution and Institutional Equities.

Retail Segment: Services offered include equities, derivatives, commodities, currency, depository services, distribution of investments products like portfolio management services, mutual funds, primary equity offerings and other investment products.

Motilal Oswal Financial Services was successful in expanding its retail client base despite market headwinds during the year. The company had more than 14,48,935 retail broking and distribution clients growing at a CAGR of 16% from FY2016-20. Client acquisition stood at ~2,42,000 during the year, +72% YoY. Reflecting on the experiences and learnings in broking business, we adopted franchisee based model few years ago. This model has yielded dividends across cycles, particularly in down-cycles. We have started with Insurance broking business this year and registered strong premium collection in first year of business, envisaging future business potential. We have tie-ups with HDFC Life, ICICI Pru Life and Bajaj Life for life insurance products. Our business focus remained to improve our scale and competitiveness through enhanced customer experience, high-quality advisory, digital initiatives, assets-based product distribution, system-driven trading products and network expansion. We have robust dedicated advisory desks for mass-retail and affluent clientele. Our focus on knowledge, advisory, and client segmentation differentiates us from the threats of discount brokers.

We are progressively developing our distribution arm to achieve linearity in the cyclical nature of broking business. The distribution revenues contribute 15%/9.3% of the gross/net total income respectively with continual traction in distribution business. Our financial product distribution AUM was R 9,034 crores as of Mar 2020, with net sales of R 924 crores in FY2020. Our leverage on our strong retail network to cross sell financial products provides room for scaling up the business. In addition, our client penetration at 16% of our total retail client base paves the way for growth scalability.

We have made several investments in our digital initiatives to improve client servicing, cost and speed. Our app portfolio includes MO Investor and MO Trader, designed to match different consumer needs and experience. Our online volumes contribute ~57% of the total retail volumes traded in March, 2020.

Institutional Broking: Our institutional broking provide offerings in the forms of cash and derivatives to domestic and foreign institutions. We continued to acquire new empanelment and maintained it with +700 institutions. We witnessed improvement in rank in several key accounts led by broad-based team servicing. We stood #1 in Overall Sales, Sales Trading & Corporate Access and #2 in Best Local Brokerage awards category at Asia Money Brokers Poll 2019. We continued to strengthen our competitive positioning through research offerings, corporate access outreach and sales and trading capabilities. Our research product portfolio in FY2020 consisted of 250+ companies covering 21 sectors. Our corporate access domain has always been a focus area with execution of successful events like Annual Global Investor Conference (AGIC) and many unique events in India. We continued our successful trend in conducting AGIC in Aug 2019 and India Financials Day in Dec 2019. We also launched our 1st edition of Virtual Conference amid lockdown period. Also, we engaged with several sectoral experts for domestic events.

Investment Banking Industry Facts

The year witnessed a lull period for IPO/ECM deals owing to the lack of confidence in the emerging markets. The financial year saw 38 IPOs as compared to 42 in FY2019. The amount of funds raised through IPOs in FY2020 was ~R 27,336 crores vs ~R 36,405 crores in FY2019. Some of the successful IPOs in FY2020 were IRCTC, CSB Bank, Polycab India, Metropolis Healthcare, Spandana Sphoorthy etc. The number of QIPs remained at stagnant at 13 in FY2020. The amount of funds raised through QIPs in FY2020 was R 51,216 crores, vs R 10,489 crores in the previous year.

Our Investment Banking Business

FY2020 has been a year under pressure, the primary reason being volatile market sentiments which led many companies to put their capital raising plans on hold. We follow an expertise-led approach focusing on specific sub-segments of strength, where we have relationships and track record. Sectoral focus on BFSI, Auto, Consumer, Healthcare and Industrials will yield benefits in the medium to long term. We continue to have rich pipeline, and are constantly engaging on a wide cross-section of mandated transactions across capital markets and advisory. As the markets recover, we expect a number of these transactions to conclude successfully.

Asset Management Industry Facts

Overall mutual fund industry AUM was R 22.26 lakh crores in FY2020. On the front of equity mutual fund (excluding arbitrage and including balanced and ELSS), AUM stood at R 8.13 lakh crores contributing 37% of the total AUM. Despite higher gross flows, the net inflows stood lower at R 0.6 lakh crore vs R 1.2 lakh crores in FY2019. The total flows to equity funds were impacted due to higher redemptions with net outflows in Q4FY2020. The highlight of FY2020 includes rising SIP accounts and flows. The total SIP accounts stood at 3.1 crores while the SIP contribution increased 8% from R 92,693 crores in FY2019 to R 1,00,084 crores in FY2020. During the year, the asset management companies were exposed to various regulatory changes like slab wise TER on AUM (from April 1, 2019), increase in ticket size in PMS from R 25 lakhs to R 50 lakhs, ban on set-up fees and upfront commission in PMS, Direct PMS scheme option. The rationale behind the regulatory change is to act in favour on investors which bodes well for the industry in the long term.

Our Asset Management Business

Motilal Oswal Asset Management (MOAMC) operates PMS, AIF and Mutual Fund (MF) in the public equities space. MOAMC has crafted its niche with majority of AUM in equities. Our public market AUM was R 29,691 crores as of March, 2020 after achieving its peak in January 2020 at R 41,100 crores. As of March, 2020, our Mutual Fund AUM stood at R 15,980 crores, PMS AUM was at R 11,628 crores and AIF AUM was at R 1,891 crores. The effect of industry wide impact on net sales was also seen in our AMCs net sales which stood at R 38 crores in FY2020. We firmly believe in our QGLP philosophy which has rewarded us over the years in terms of performance and will continue to hold and improvise it. Our AMC business has always been the promoter of trail based model and hence, the ban on upfront fee structure has been in our favour. Slab wise TER on AUM has triggered higher redemption in 1st quarter of the year resulting in negative net flows for the quarter. However, improvement in performance of most the schemes and effort of right communication to customers resulted in positive net flows for the remaining quarters of FY2020. The impact of TER change has been shared with distributors in same proportion of commission sharing, so net impact to us is lower. On a blended basis, our net yields stand at 0.84% in FY2020. As of Mar 2020, ~19% of our non-MF AUM was performance-fee-linked, within which AIF was entirely performance-based. We aim to push more performance-linked AUM in both PMS and AIF, as it should help push net yields. Our rank in Equity AUM was 15 whereas we continued to remain market leader in PMS industry. Our ~1.9% market share in Equity MF AUM is expected to improve as we scale up further. We have significantly invested in branding and advertising in past few years and the same has started realizing benefits in terms of brand-recall in the long term. While our business has built a strong positioning across the domestic institution segment, it is now in process of tapping global pools of capital with offshore initiatives. We are expecting traction in our offshore assets, going forward.

Private Equity Industry Facts

2019 emerged as a favourable year for PE investments in India touching $37 bn, according to data from Venture Intelligence. 74 PE investments were pegged at and above $100 mn accounting for 74% of the total investments which included five investments worth $1 bn. The infrastructure industry took the large share of the pie with 40% of the investments attracting $14.7 billion with 74 deals. Meanwhile, the energy industry led by Brookfields $1.9 bn investment in Reliance Pipeline Infra also saw a growth in investments taking the share to $4.9 bn. The RIL-Brookfield partnership further extended into telecom, with the Canadian investor agreeing to push about $3.7 bn in an SPV that will acquire a controlling stake in Jios tower infrastructure company. IT companies also saw an appreciation in investments with PayTM raking $1 bn by US-based T Rowe Price. The industry received 32% of the total PE investments in the year passing by as 9 new unicorn companies were raised, which include Delhivery, Dream11, BigBasket, Rivigo, Druva Software, Icertis, Citius Tech, Ola Electric, and Lenskart. In the past few years, the government was successful in implementing friendly regulations like removal of initial public offering (IPO) lock up for AIF investors, banks being allowed to invest in AIF 1 and 2 domestically, and clarification on the characterisation of tax for AIF and blanket exemption from angel tax for all start-ups. This put together is expected to bode well for the private markets in the long term.

Our Private Equity Business

Our PE arm manages three growth capital funds and four real estate funds. The QGLP philosophy is extended in private equity business too. The growth funds focus on themes that may benefit from structural changes like domestic consumption, domestic savings, infrastructure, etc. MOPE Funds have been successful in gaining investors confidence with stellar returns over the years. IBEF I has delivered a portfolio XIRR of 27.9%. Fund II has committed 100% across 11 investments so far after raising commitments from marquee institutions and exits from fund will contribute, going forward. Strong performance and positioning has enabled MOPE to raise Fund III ("IBEF-III") in very quick succession to Fund II. Fund III was launched in FY2018, which, after exhausting its green-shoe option, stands fully raised at ~R 2,300 crores. IBEF III has already deployed around ~R 980 crores across 6 investments and, the Fund is extensively evaluating opportunities across its preferred sectors.

The encouraging performance is not limited to growth funds but real estate funds too. IREF I has fully exited from all 7 investments, translating into ~118% capital returned to investors. IREF II is fully deployed across 14 investments. The Fund has secured 10 complete exits and 1 structured exit and has returned money equaling 125.4% of the Fund Corpus back to the investors. Average IRR on exited investments is 21.4%. IREF III has deployed R 1,354 crores including reinvestments across 24 investments. The Fund has secured 6 full exits and has returned money equaling 26.4% representing income earned & distributed to its investors. Average IRR on exited investments is 22.4%. IREF IV, launched in the third quarter of 2018 achieved its final close in February 2020 at R 1,148 crores. The fund has deployed R 530 crores across 9 investments. Going forward, our focus will be on opportune on growth stories in private space and provide best returns through our existing and future funds.

Wealth Management Industry Facts

As per latest Karvy Wealth Report, Indias individual wealth stands at R 430 lakh crores as of FY2019 which has grown at 10% on YoY basis. More-over the proportion of financial assets in the total wealth has grown to 61% in FY2019 from 58% in FY2017. The financial assets grew at 11% YoY to R 262 lakh crores. The year witnessed an increase in share of cash, provident fund and mutual funds. The proportion of equity and equity products in the financial asset mix declined from 21% in 2018 to 20% in 2019. The composition of equities in overall assets is still very less in India, as compared to the world. In the last 5 years, HNI population in India has grown by 64% to reach 2.56 lakhs in 2018 from 1.56 lakhs in 2014. It is estimated that individual wealth in India will grow at a CAGR of 13.2% over next 5 years which is more than the global average.

Our Wealth Management Business

Our wealth AUM stood at R 15,624 crores during FY2020. We implemented conservative approach in Relationship Manager (RM) additions in this volatile year and rather focused more on training and knowledge development. We follow philosophy of home grown talent which involves lower-cost junior RMs to assist the senior RMs to expand their books, while getting mentored to take a bigger role in the future. The rise in RM vintage and play of operating leverage will lead to scaling up of margins. The client acquisition too saw an encouraging growth with number of families under our business increasing 13% YoY to 4,186. This traction was largely a result of our RM base and our advisory capabilities. Our product mix contains ~61% of the equity products which helps in garnering higher yields. Also, inclination towards trail based model since inception has kept the business immune from any regulatory changes. Our trail revenues, which account for 70% of total revenues, now cover 80% of fixed costs. This will provide cushion to margins in downturn.

Housing Finance Industry Facts

As per ICRAs report, the total outstanding housing credit as on December 2019 stood at R 20.7 lakh crores. Out of the total outstanding credit, Housing Finance Companies (HFCs) and Non-Banking Financial Corporations (NBFCs) contributed around R 7 lakh crores. The share of HFCs in the credit portfolio remained consistent at 34% even after slower growth in disbursements. The dip in growth was due to lower disbursements because of continued funding constraints for the sector. Also, the HFCs resorted to higher activity in securitization of assets/portfolio sale outs to maintain the liquidity balance. The stagnant growth in HFCs was opportune by banks which led to overall market growth of ~13% till December 2019. The share of CP borrowings remained at 5% of the overall borrowings of HFCs as on December 2019. The CP borrowings have largely been refinanced by bank borrowings, the share of which increased to 26% as on December 2019 from 24% as on March 31, 2019, and by securitization, the share of which increased to 14% of the overall borrowing mix from 12% during the same period. The Covid-19 induced slowdown is likely to impact the performance of HFCs. Although various initiatives have been taken by the Government and the RBI to bolster the segment, the business growth and key performance parameters are expected to weaken over the next 1-2 quarters. As per ICRA, the housing credit growth is expected in the range of 7%-10% in FY2021. The growth is estimated to be slower in H1 FY2021 while recovery in H2 FY2021 would depend on the overall economic turnaround.

Our Housing Finance Business

We cater to pure-retail affordable housing space through Motilal Oswal Home Finance (previously known as Aspire Home Finance Corporation). During the year, we concentrated our efforts in re-building our home finance business in terms of processes, system, manpower and structure to strengthen our business. As a result, we followed a conservative approach in our disbursements which

stood at R 192 crores in FY2020. The loan book stood at R 3,667 crores across 47,900+ families as of Mar 2020. Our average ticket-size at sourcing stood at R 8.8 lakhs in FY2020. We have put in place a vertical organization structure comprising sales, credit, collection and technical team. The implementation of cluster level credit layer along with 4 layer credit approval system based on loan ticket sizes and differentiated pricing methodology for loans based on risk type should likely result in improve underwriting, going forward. MOHFL has sold NPA book of R 424 cr at ~50% haircut this has resulted in multiple benefits including lower NPAs. We have received credit rating upgrade from CRISIL to AA-/Stable from earlier A+/Stable. This rating upgrade was on account of corrective measures taken with visible positive developments on new management team, strengthening collections and recovery teams, enhanced credit appraisal and risk monitoring and strong capital position. This also represents the conviction we have over our efforts to revive this business. Our gearing declined to 3.4x as of Mar 2020. Our liability profile remains diversified with ~51% of the borrowings from the capital markets in the form of NCDs and ~49% from banks. MOHFL had credit lines from 22 banks as of Mar 2020. We have limited borrowing repayments for next 1 year, strong undrawn borrowing lines and ALM places us in comfortable liquidity situation.

We have invested significantly in technology to reduce operational costs and turnaround-times. Also, the mobile apps for sales and credit teams coupled with newly framed processes are expected to deliver much better outcomes in future. FY2020 loan portfolio consisted of salaried and self-employed in the ratio of 55:45. However, going forward, our focus would be more on self-employed segment which will enhance our yields.

Fund based activities focusing on skin in the game approach and enhancing Return on Equity

In line with the long term strategy to grow RoE sustainably, MOFSL had made strategic allocation of capital to long term RoE enhancing opportunities like Motilal Oswal Home Finance Ltd, and sponsor commitments to our mutual fund and private equity funds. As of Mar 2020, our total quoted equity investments stood at R 1,220 crores. Unrealized gain on all investments was ~R 172 crores. These unrealized gains on investments have been reported in the P/L account for the year. The reported ROE was 6.6% for the year and will grow followed by exits in private equity funds, as and when they reach their exit-stage.

Key Ratios

The ROE during the year FY2020 stood at 6.6% vs 10.8% in FY2019. Drop in ROE was primarily on account of MTM based loss. EBITDA and Net profit margins stood at 37% and 9% respectively in FY2020 (after intercompany adjustments). Debt to Equity ratio stood at 1.5x.

Opportunities and Threats Opportunities

• Long-term economic outlook positive, will lead to opportunity for financial services

• Growing Financial Services industrys share of wallet for disposable income.

• Regulatory reforms would aid greater participation by all class of investors

• Leveraging technology to enable best practices and processes

• Corporates looking at consolidation/acquisitions/restructuring opens out opportunities for the corporate advisory business


• Execution risk

• Short term economic slowdown impacting investor sentiments and business activities

• Slowdown in global liquidity flows

• Increased intensity of competition from local and global players

• Market trends making other assets relatively attractive as investment avenues


• Strong Brand name

Motilal Oswal is a well-established brand among retail and institutional investors in India. MOFSL believes that its brand is associated with high quality research and advice as well as corporate values like integrity and excellence in execution. The company has been able to leverage its brand awareness to grow its businesses, build relationships and attract and retain talented individuals.

• Experienced top management

The promoters, Mr Motilal Oswal and Mr Raamdeo Agrawal are qualified chartered accountants with over three decades of experience each in the financial services industry. The top management team comprises qualified and experienced professionals, with a successful track record. The company believes that its managements entrepreneurial spirit, strong technical expertise, leadership skills, insight into the market and customer needs provide it with a competitive strength, which will help to implement its business strategies.

• Integrated financial services provider

The broad range of offerings under Broking and Distribution, Institutional Equities, Asset Management, Wealth Management, Investment Banking, Private Equity and Housing Finance business, helps to foresee client requirements and provide full-fledged services under single platform. The production and distribution of all financial products and services helps the companys advisors and clients to attain clients financial objectives with best in class services.

• Independent and insightful research

MOFSL believes that its understanding of equity as an asset class and business fundamentals drives the quality of its research and differentiates it from its competitors. The research team is focused on equities, derivatives and commodities.

• One of largest distribution network - 2,500+ outlets across 600 cities

MOFSLs financial products and services are distributed through a pan-India network. The business has grown from a single location to a nationwide network spread across 2,500+ business locations operated by business associates or directly through own branches in 600 cities. This extensive network provides opportunities to cross sell products and services, particularly as the company diversifies into new business streams. In addition to the geographical spread, MOFSL also offers an online channel to service customers.

• Established leadership in Franchisee business

One of the key strengths has been the successful establishment of the franchisee business. The companys relationship with the franchisees has become stronger as they grew. MOFSL has multiple business partner models in franchising and is strongly committed to enhance growth and profitability of each of its franchisee.

• Strong risk management

Risk exposure is monitored and controlled through a variety of separate but complementary financial, credit, operational, compliance and legal reporting systems. Risk management department analyses this data in conjunction with the companys risk management policies and takes appropriate action where necessary to minimize risk.

• State of art infrastructure

MOFSL has consolidated its businesses under one Corporate Office - Motilal Oswal Towers. The integration of multiple MOFSL businesses provides a great opportunity to present a holistic solution to client needs and facilitates the "One Firm" philosophy. The infrastructure has been extensively leveraged upon to build deeper connect with our customers, business partners and corporates.

• Financial prudence

MOFSLs operating margins continue to remain stable despite the fluctuations in market volumes and revenues. This is a result of creating a robust business model that can withstand the cyclical fluctuations in business volumes and simultaneously capture the opportunities provided by the structural growth of India. During the year, CRISIL Limited reaffirmed the Credit Rating of "CRISIL A1+" the Commercial Paper Programme of R 1,300 crores of the Company. CRISIL Limited assigned the Credit Rating of "CRISIL A1+" to the Commercial Paper Programme of R 2,500 crores and reaffirmed "CRISIL A1+" to the Commercial Paper Programme of R 500 crores of Motilal Oswal Finvest Limited, a subsidiary of the Company. ICRA Limited reaffirmed the credit rating of "[ICRA] AA(Stable)" rating with a stable outlook to the NCD Programme of R 350 crores of the company. India Ratings and Research reaffirmed rating of "IND A1+" to Commercial Paper Programme of R 1,300 crores of Motilal Oswal Financial Services Limited. India rating also reaffirmed rating of "IND A1+" to Commercial Paper Programme of R 1,000 crores and assigned a new rating of "IND A1+" to Commercial Paper Programme of R 2,000 crores of Motilal Oswal Finvest Limited, a subsidiary of the Company. The ratings indicate a strong degree of safety regarding timely servicing of financial obligations.

Risks and concerns

The company is primarily exposed to credit risk, interest rate risk, liquidity risk and operational risks. Internally, it has constituted the Asset Liability Management Committee to manage these risks. This team identifies, assesses and monitors all principal risks in accordance with defined policies and procedures. The committee is headed by the Chairman & Managing Director.

The Board Level Committees viz. Audit Committee and Risk Management Committee oversee risk management policies and procedures. It reviews credit and operational risks while the Asset Liability Management Committee reviews policies in relation to investment strategy and other risks like interest rate risk and liquidity risk.

Internal control systems and their adequacy

The companys internal control systems are adequate and provide, among other things, reasonable assurance of recording transactions of operations in all material respects and of providing protection against significant misuse or loss of company assets.

Internal audit is conducted by Aneja and Associates, to assess the adequacy of the internal controls procedures and processes, and their reports are reviewed by the Audit Committee of the Board. Policy and process corrections are undertaken based on inputs from the internal auditors.