Financial markets across the world including in India continue to be cautious amid risks emanating from the coronavirus spread. This is as investors try to gauge how the virus epidemic will affect growth. Shalibhadra Shah, chief financial officer at Motilal Oswal Financial Services Ltd, spoke about the implications from the coronavirus outbreak on his business. Edited excerpts of the interaction.
Q: What has been the major business impact due to the coronavirus outbreak?
Shalibhadra Shah: We have not seen any material impact so far. Financial markets have been volatile of late, but that has not meant less business for us. There has been a bit of selling by foreign portfolio investors of late, but the retail and domestic institutional investors have both stayed put.
The equity funds flows in January were up 70%, according to data from the Association of Mutual Funds in India (AMFI). We do not foresee any significant impact of the virus epidemic on us in the current January-March quarter.
Q: How are you dealing with the virus scare? Have you told your employees to avoid business travel? Or have issued any internal advisory? How are you going about sensitising them?
Shalibhadra Shah: We have sensitised all the employees, especially the ones who are travelling outside India. We are also avoiding travelling outside India till mid-April, and in lieu of that, we are organising as much possible con-calls/video conferences, and seeing a very good response.
Motilal Oswal Financial Services CFO Shalibhadra Shah Q: How much growth are you likely to end fiscal 2019-20 with?
Shalibhadra Shah: We are likely to end the financial year 2019-20 with marginal revenue growth of 2- 3% over the last fiscal.
Net profit during the same period is expected to jump about 80%, boosted by the strong portfolio investments, lower provisioning cost in the housing finance business, and benefits on account of corporate tax cuts announced in September last year.
This is in contrast to de-growth seen in 2018-19 over the preceding fiscal.
Q: What are your growth projections for the next financial year?
Shalibhadra Shah: We don’t go on projecting numbers for the future, but we keep good focus our plans and strategy. However, we have seen equity markets becoming highly volatile in India and globally due to the coronavirus situation.
We believe some impact may come in the Apr-Jun quarter. Also, in case the issue becomes more serious than what it is today, and weighs on financial markets for long, then it can affect the industry as a whole, where we, being a part, can also get impacted.
Having said so we hope the situation will ease, and that the virus will be contained. The government is also taking adequate measures to sensitise the people.
Q: Budget 2020 has abolished Dividend Distribution Tax and made dividends taxable in the hands of investors. Has this made you rethink your investment strategy?
Shalibhadra Shah: Our strategy is of continuously re-investing our profits in the fund-based investments portfolio in our group products (like equity mutual funds, PE funds, strategic equity investments, etc), which we believe that many other players may evaluate in the industry before giving dividends, considering the change of dividend tax regime in the Budget.