MOHFL a strategic Sell-off?

13 May 2025

Motilal Oswal Financial Services (MOFSL) is looking to sell its housing finance unit, Motilal Oswal Home Finance Ltd (MOHFL). MOFSL holds a 97.49% stake in MOHFL, which includes shares held directly and through its fully owned subsidiaries. The investment bank Avendus Capital will help find potential buyers, according to a report by Mint.

This move comes amid heightened transaction activity in the affordable housing finance space, where both private equity funds and capital markets have shown increased interest. The sector has witnessed renewed investor appetite, driven by structural growth drivers, government push for affordable housing, and relatively stable long-term asset quality in well-managed portfolios.

From a valuation standpoint, MOHFL may fetch a price benchmarked to its listed peers, such as Aadhar Housing Finance, Aavas Financiers, Aptus Value Housing Finance, and Home First Finance, which are currently trading at 2.8x–3.9x trailing book value. With MOHFL reporting a standalone net worth of ₹1,290 crore as of March 31, 2024 (Annual report), peer-based valuation suggests a potential transaction range of ₹3,612 crore to ₹5,031 crore, implying a P/B multiple of 3.0x – 4.1x at a per share price of ₹6 - 8.3.

However, it is noteworthy that in the unlisted market, the company has been reportedly trading at a significantly higher P/B of 7.5x with a market capitalisation of ~₹9,000 crore and share price trading between ₹14 to ₹15, a premium that appears difficult to justify given its historical performance and current risk profile. This supports the cautious view previously expressed by Planify regarding elevated valuation expectations.

MOHFL, which commenced operations in 2014 as Aspire Home Finance and rebranded in 2019, had a loan book of ₹4,098 crore as of June 30, 2024, marginally up from ₹4,048 crore in March 2024. The business had earlier faced asset quality stress, with gross NPA’s peaking at 9.2% in FY19. Since then, the company has implemented turnaround initiatives, including capital infusion, improved governance, and operational tightening. The gross NPA’s have come down to 0.9% with net NPA’s of 0.4% by FY24.

Given the divergence between peer-based valuation and current unlisted market pricing, investors should adopt a prudent stance and closely track deal contours and implied valuation multiples.

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Note*: However, Motilal Oswal Home Finance had denied reports of a potential sale, states the Mint report. A company spokesperson, cited in the report, has noted that there was no development regarding the sale of the business.

Note**: Planify could not independently verify the report.
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