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Motilal Oswal Financial Services (MOFS IN)

<ul><li><a href="https://www.smartkarma.com/entities/2023" target="_blank" data-smartkarma-citation="entities:2023:1">Motilal Oswal Financial Services Limited (MOFS IN)</a>’s affordable housing finance business reports a spike in NPAs from 0.6% as of FY17 to 4.6% as of 3QFY18.</li><li>The home loan book is unseasoned with more than 50% of the loans less than 2 years old. We think more bad news will emerge as the book ages and the company will have to provision far more than it has set aside till date.</li><li>Its funding strategy is aggressive with market borrowings making up 100% of its liabilities.</li><li>Business growth has reduced to a crawl, costs are increasing and profitability has been wiped out.</li><li>RBI’s recent report on Affordable Housing finance market noted that the segment is growing much faster than the overall home loan market and the segment has many-fold higher NPAs than the higher ticket segments.</li><li>We think the party could end badly for players like Aspire Home Finance who chase growth indiscriminately employing aggressively funding strategies while compromising on their underwriting process.</li></ul>

Motilal Oswal Financial Services Limited (MOFS IN)’s affordable housing finance business reports a spike in NPAs from 0.6% as of FY17 to 4.6% as of 3QFY18.The home loan book is unseasoned with more than 50% of the loans less than 2 years old. We think more bad news will emerge as the book ages and the company will have to provision far more than it has set aside till date.Its funding strategy is aggressive with market borrowings making up 100% of its liabilities.Business growth has reduced to a crawl, costs are increasing and profitability has been wiped out.RBI’s recent report on Affordable Housing finance market noted that the segment is growing much faster than the overall home loan market and the segment has many-fold higher NPAs than the higher ticket segments.We think the party could end badly for players like Aspire Home Finance who chase growth indiscriminately employing aggressively funding strategies while compromising on their underwriting process.

Howler from Motilal's Affordable Housing Finance Business Shows This Is No Cakewalk