Investment banking biz to recover in Q1FY13: Motilal Oswal

Raamdeo Agrawal, director and co founder, Motilal Oswal Financial Services expects its investment banking (IB) business, which was very bad shape last year, to perform significantly well next year.

He told CNBC-TV18 that this quarter has been very satisfactory for the broking house, but, the year was quite challenging. "Our revenues came down by about 23-24% and our profits also dropped almost in the same margin. Margin performance has been good, but sales performance has been very bad," he added. Below is the edited transcript of Agrawal’s interview with CNBC-TV18. Also watch the accompanying video. Q: Last quarter you told us that there was continued pressure on your broking business. Take us through this quarter’s performance. Where the pressure has seeped in and the outlook that you have going forward? A: Jan-Feb-March quarter turned out to be quite good compared to December quarter. We had a good growth of about 25% QoQ or 16% across the company in terms of business. Jan-Feb was unexpectedly good. So, the quarter was good. After a long time, we are seeing 5-6% year-on-year growth. This quarter has been very satisfactory and we saw some positive bounce for the quarter. But, the year 11-12 or 10-11, has been quite challenging. Our revenues came down by about 23-24% and our profits also dropped almost in the same margin. Margin performance has been good, but sales performance has been very bad. So, that was the overall performance for the year, though, we saw some signs of revival in Q4. Q: How do you see FY13 now? Is it going to be better than FY12 for the broking business? A: Yes, that is what our thinking is right now and that was a thinking even 12 months back, but we have hit some kind of a big low, from the peak it is almost 50% down. So, I hope we are almost passing through the bottom. Going by the earnings growth projection for the current year and seeing some of the businesses like IB, which were in very bad shape last year, would be hopefully performing significantly well in the next year. My sense is that broking business as a whole should be either as bad as last year or better than last year. Q: The revenues of your investment banking (IB) business have dwindled to just Rs 4 crore this time around and we have seen many quarters of downtick. What kind of trajectory do you hope to maintain and how long before we see a recovery in this particular vertical? A: We should be seeing recovery in the very first quarter, this current quarter itself. Incidentally, right through the year we had the strongest pipeline of deals, but because of high interest rates, uncertainty, a lot of legal issues, somehow at this point of time the buyers of the assets didn’t show confidence and a year before, it was the sellers who were not coming on the table. But, now it looks like both the buyers and sellers are gathering confidence and there is a sense that more deals will close in 2012-2013 than in 2011-2012. So, 2011-2012 was a complete washout for corporate deals.