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Equity Research

IND IAN BROKING INDUSTRY:Poised For Growth 17th August 2009
http://www.kredent.com/mailto:[email protected]:[email protected]://www.kredent.com/


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Equity Research

Table of Contents

Process Flow Chart 03

Business Model 04

Parameter Evaluation Chart.. 05

Final Recommendations. 07

Overview of Indian Broking Sector

Introduction.. 08

Market Capitalization/GDP... 16

Value of Share Trading. 17

Turnover Velocity... 18

Household Sector Financial Savings.. 19

Valuations Comparative. 21

Outlook. 22

Motilal Oswal Financial Services Limited (MSOL)... 23

India Infoline Financial L imited. 26

Geojit BNP Paribas Limited 29Disclaimer.. 32


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Process Flow


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We analyzed the companies according to their presence in various segments represented in the graph

below and finally selected few companies which we believe are the leaders in these segments and can

gain substantial market share over a period of time.

Exhibit: Business Verticals

Broking & Distribution Wealth Management

Equities & D er ivatives Investment Advisory

Commodities PM S

Currency Private Equity

Depository Services Fixed Deposits

Research

Insurance & Mutual Fund

IPO

Financing

Inv e s tment Ba nkingInstitutional Equities

Arbitrage

Financial

Products


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The various segment found during the analysis of business models of the companies are provided in thetable below:

Companies having presence in traditional brokerage segment

Companies having prsesnce in future growth driver segment

Equities Commodity Financing Research Insurance Mutua l Fund

Motilal Oswal Y Y Y Y Y Y

Edelweiss Capital Y Y Y Y Y Y

Geojit BNP Paribus Y N Y Y Y YIndia Infoline Y Y Y Y Y Y

Religare Enterprises Y Y Y Y Y Y

Emkay Global Financial Y Y Y Y Y Y

Indiabulls Securities Y Y Y Y N Y

JM Financial Y Y Y Y N Y

LKP Finance Y Y Y Y Y Y

Alka Securities Y Y N Y N Y

CompaniesSelection Grounds

Instutional

Equities

Investment

Banking

Wealth

ManagementPMS

Private

EquityCurrency

Motilal Oswal Y Y Y Y Y Y

Edelweiss Capital Y Y Y Y N Y

Geojit BNP Paribus Y Y Y Y N Y

India Infoline Y Y Y Y N Y

Religare Enterprises Y Y Y Y Y Y

Emkay Global Financial Y Y Y Y N Y

Indiabulls Securities Y Y Y Y N Y

JM Financial Y Y Y Y Y Y

LKP Finance Y Y N Y N Y

Alka Securities Y N N N N Y

Companies

Selection Grounds


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Here we carried out the ratio analysis of the companies, based on our financial parameters. Afteranalyzing the financial parameters, we gave our recommendations on three (3) companies

Ratios which were analyzed are:

Debt Equity Ratio

Interest Coverage Ratio

Return on Capital Employed (ROCE)

Return on Equity (ROE)

P/E Ratio (TTM Basis)

P/BVPS

Other financial parameters that were considered are:

Avg. Market Capitalization/Sales (TTM Basis)

Avg. Market Capitalization/Customer Base

Avg. Market Capitalization/Total number of branches


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Equity Research

Ratio Analysis Sheet

The competition in the financial services industry space has been intensified with competition from large

brands with well capitalized balance sheets and financial parameters. The smaller players will soon face

the heat of this intensifying competition in the industry with larger players would further gain market share.

After analyzing the financial parameters, we gave our recommendations on the following three (3)

Companies.

Given the fact that because of the rise in global equity markets the prices of the mentioned stocks have

already gone up by an average of 150% in last 6 months, one can make an initial small investment and

then add on dips. The SIP form of investment with equal weight on the three stocks is also a feasible way

to invest.

Company View

Motilal Oswal Financial Services Ltd BUY

India Infoline Ltd BUY

Geojit BNP Paribas Financial Services Ltd HOLD

Motilal

Oswal

Edelweiss

Capital

Geojit BNP

Paribas

India

Infoline

Religare

Enterprises

JM

Financial

Debt/Equity Ratio 1 1 1 0 0 1

Interest Coverage Ratio 1 0 1 1 0 1

ROCE 1 1 0 1 0 0

ROE 1 0 1 0 1 0

P/E Ratio (TTM) 1 1 1 0 0 0

Price/BVPs 0 1 0 1 0 1Avg. Market Cap/Sales (TTM) 0 1 0 1 1 0

Avg. Market Cap/Total Customers 1 0 1 1 0 0

Avg. Market Cap/Branches 1 0 1 1 1 0

Financial Parameters

Companies


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IntroductionIndia is one of the oldest stock markets in the world with a strong presence of domestic and loca

intermediation. Stock markets in India surged over a decade on back of a wide range of economic

reforms, liberalization of financial markets buoyed by greater freedom and flexibility.

Some of the fundamental changes that fuelled rapid pace of market growth was the introduction of

electronic trading (secondary markets), allowing foreign ownership (FIIs) of shares, permitting Indian

companies to raise capital from abroad (ADRs/GDRs), expansion in the product range (equities

commodity, currency, derivatives and debt), book building process and transparency in IPO issuance, T+2

settlement cycle, dematerialization of shares and internet trading (e-broking). These changes resulted in

dramatic growth of the stock markets in India as well as the equity broking firms. The broking industry is

emerging as a rapidly growing segment in Indian finance, in terms of business growth, distribution &

network and enterprise value.

The first signs of trouble appeared in the US and Western Europe in August 2007. Indian economy kept

growing at a considerable pace till the middle of 2008. The Indian market continued to rise till January

2008 and appeared to be going through a relatively mild correction till the middle of 2008. It was in

September 2008 that Lehman filed for bankruptcy and the whole world was shaken. The credit markets

froze in the west and Indian corporate which were accessing western credit markets found their credit

drying up and therefore, wanted to borrow in India. Our markets went through a period of unusual liquiditysqueeze with its attendant impact on interest rates, foreign exchange rates, and mutual funds till liquidity

was restored through aggressive steps (stimulus package) by the Central Bank and Government.


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Market Capitalization & TurnoverThe market capitalization of BSE was up by 37.23% from Rs. 3,545,041.0 cr as on December 2007 to Rs.

4,865,044.91 cr as on May 2009. The market capitalization of NSE was up by 35.55% from Rs

3,367,350.0 cr as on December 2007 to Rs. 4,564,572.18 cr as on May 2009.

Business has been exceptionally good in primary and secondary markets, in the equities and derivatives

segments across both the national level stock exchanges. Indias combined turnover in NSE and BSE in

the equity segment which was around Rs. 2,901,471 cr in the year 2006-2007 has grown 1.33 times to Rs.

3,852,097 cr in the year 2008-2009, despite the market fallen by approximately ~50% in the same year

The derivate segment during the same period has gone up by 1.50 times to Rs. 11,010,482 cr.

Particulars 2006-2007 2007-2008 2008-2009 Apr-09 May-09

Market Capitalisation

BSE 3,545,041.00 5,138,014.13 3,086,075.17 3,586,977.71 4,865,044.91NSE 3,367,350.00 4,858,121.72 2,896,194.22 3,375,024.63 4,564,572.18

Gross Turnover

BSE 9,56,186.00 15,78,855.29 11,00,073.70 88,942.92 1,28,541.70

NSE 19,45,285.00 35,51,038.00 27,52,022.98 2,66,696.50 3,82,560.99

NSE Derivatives 7,356,271.00 13,090,478.00 11,010,482.00 56,210,317.00 48,285,515.00

Source: SEBI

Figures in CroresExhibit: Major Indicators of Stock Markets


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The contribution of retail volumes has declined from 61% in FY08 to 55% FY09; the retail contribution ratiohas been more volatile than the other two market segments while the contribution of institutional volumes,

i.e. volumes from FIIs and domestic institutional investors (DIIs) such as mutual funds, banks and

insurance companies has remained stable at 15% for FY08 and FY09. The contribution of proprietary

volumes, which include arbitrage and other proprietary volumes of stock brokers, has increased from 24%

in FY08 to 30% in FY09.

Primary Market

Primary markets too performed very robust over a period of last three years. During the period 2006-2009

capital mobilized through public issues, rights issues and qualified institutional placements (QIB) reached

Rs. 167,431 cr in 295 issues, highest being witnessed in the year 2007-2008 when Rs.112,554 cr were

mobilized from the primary markets. The same trend is likely to follow in coming years as various

companies had planned to raise capital either through initial public issue (IPO) or via QIB routes to fund

their future expansion projects.

Source: NSE & BSE

Exhibit: Segmental Mix of total volumes (NSE & BSE combined)

FY2008

24%

11%

4%

61%

Propietary FII' s DII's Retail

FY2009

30%

10%5%

55%

Propietary FII' s DII's Retail


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Demat Accounts

The number of demat accounts in the country shows the depth of equity penetration. CDSL and NSDL

together have over 15 million active demat accounts, registering a compounded annual growth rate of

23% over a period of nine years (FY00-FY09).

E x h i b i t : D e m a n t A c c o u n t s ( C D S L & N S D L ) o v e r F Y 0 0 - F Y 0 9

S o u r ce : C D S L & N S D L

D e m a t A c c o u n t s

2.353 .5 3.85 4.04

5.84

7.31

9.1110.27

14.1715.21

0

2

4

6

8

10

12

14

16

18

F Y 0 0 F Y 01 F Y 0 2 F Y 0 3 F Y 0 4 F Y 05 F Y 0 6 F Y 0 7 F Y 08 F Y 0 9

(InMillions)

Exhibit: Funds Mobilised in the Primary Market

Particulars 2006-2007 2007-2008 2008-2009 Apr-09 May-09

Public Issue 29,796 54,511 3,582 0 0

Right Issue 3,710 32,518 12,637 0 9

QIB 4,963 25,525 189 1,621 2,657

Figures in Crores

Source: SEBI


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FIIs

FIIs were allowed to invest in India since 1991 when the economy opened up. Since, then the total FIIsinvestments in domestic equities have crossed the US$ 60 bn (till July 2009). The bull run which started

in the year 2003-2004, lasted till mid of year 2008, registered a net FIIs investment to the tune of Rs.

230,176 cr while, the year 2008-2009 reported the biggest ever FIIs sell-off for the Indian markets. FIIs

sell of Rs. 45,881 cr during the same period accounting for ~15% sell-off of the total FIIs investment

(equity + debt) since 1991. October and January were two carnage months, where US$ 3.8 bn and US$

3.2 billion, respectively, were sold.

With the economic outlook improving globally, global majors are finding a way to buck the downtrend by

investing in India. In FY2009-10 alone (as on July 2009), India has received about Rs. 44,484.30 cr of FIIs

money, accounting ~20% of total FIIs inflow into the emerging markets.

Source: SEBI, * Till July 2009

Exhibit: Trend in FIIs Investment in India

FIIs Investment

-60000

-45000

-30000

-15000

0

15000

30000

45000

60000

75000

FY1994

FY1995

FY1996

FY1997

FY1998

FY1999

FY2000

FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010*

Rs.

Crores


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Mutual Funds

Due to the overall slowdown in global economy on account of collapse of the US sub-prime mortgage

market, the liquidity squeezed from both the global and domestic financial markets. Indian economy too

was affected with withdrawal of liquidity from markets, resulting in a steep fall. Subsequently, domestic

factors like rising inflation, increasing interest rates, rising fiscal deficit (due to ever-increasing crude /

commodity prices and subsidies) and prospects of an economic slowdown took over.

The Indian stock market lost more than half its value last year and closed in the red for the first time in the

seven years, becoming one of the worst performers in Asia in 2008. As a result, fund houses faced

redemption pressure from the Indian incorporate resulting in the asset under management (AUM) to

decline by 21% y-o-y to Rs. 417,300 cr for the financial year ended FY2009.

AUM of mutual funds in India is about 6% of GDP; in other emerging countries such as Brazil, with similar

GDP size, this is about 40%, and in developed nations such as USA, it is 79%.

Year/Month Equity Debt Total

2009-2010 (April-July) 41,521.70 2,962.60 44,484.30

Apr-09 6,508.20 2,490.30 8,998.50

May-09 20,117.20 (2,711.40) 17,405.80

Jun-09 3,830.00 1,068.30 4,898.30

Jul-09 11066.3 2115.4 13,181.70

Exhibit: Investment by FIIs Figures in Crores

Source: SEBI


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With the economic outlook improving, the market is likely to perform well going forward. In FY2009 til

date, the mutual funds invested a total of Rs. 81,847.90 cr, of which Rs. 4,994.70 cr was invested in equityand Rs. 81,487.90 was invested in debt. The AUM for the month ended July 2009 improved by 65.33% to

Rs. 689,946.10 cr as compared to Rs. 417,00 cr reported for the financial year ended FY2009.

Source: SEBI, * Till July 2009

Exhibit: Trend in Mutual Fund Investment in IndiaMutual Fund Investment

-20000

020000

40000

60000

80000

100000

120000

140000

160000

180000

FY1999

FY2000

FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010*

Rs.Crores

0

100000

200000

300000

400000

500000

600000

700000

800000

Total AUM

Year/M onth Equity Debt Tota l

2009-2010 (April-M ay) 4,994.70 76,493.20 81,487.90

Apr-09 38.60 26,422.50 26,461.10

M ay-09 2,291.30 10,368.00 12,659.30Jun-09 839.30 10,739.50 11,578.80

Jul-09 1825.5 28963.2 30,788.70

Exhibit : Investment by Mutual Funds Figures in Crores

Source: SEBI


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Market Capitalization/GDPIndias GDP of US$ 1,176.89 billion is just 2.15 percent of World GDP of US$ 54,583.78 billion as on

August 5th, 2009. Market cap as a percentage to GDP in India is 0.91 times despite growing above 6.0%

against US and UK which commands 0.87 and 0.97 times respectively during recessionary times and

China commanding 1.09 times despite being a communist country. With host of IPOs in pipeline and

PSUs to get listed, the market cap of India is bound to see a sharp increase in future. Market

capitalization as a percent of gross domestic product, which was about 25% in the early 2000s, now

almost equals the GDP. Several leading emerging economies enjoy a market capitalization as a multiple

of GDP.

Exhibit : Market Capitalization/GDP Figures in US$ Billion

Country GDP Market Capitalization Market Cap/GDP

Taiwan 355.46 589.408 1.66

Australia 820.97 1029.243 1.25

China 3,205.51 3480.02 1.09Canada 1,329.88 1419.052 1.07

United Kingdom 2,772.02 2690.862 0.97

South Korea 769.79 710.479 0.92

India 1,176.89 1075.633 0.91

United States 13,751.40 12023.586 0.87

Brazil 1,313.36 1051.593 0.80

Japan 4,384.26 3501.899 0.80France 2,589.84 1657.104 0.64

Germany 3,317.36 1279.015 0.39

Mexico 1,022.82 306.891 0.30

Italy 2,101.64 624.154 0.30

Source: Bloomberg


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Value of Share TradingThe value of share trading is the total number of shares traded multiplied by their respective matching

prices. Indias value of share trading (NSE + BSE) constitutes only 1.52% of world total value of share

trading despite having a large population base, well governed companies, largest democracy and second

fastest growing economy.

Exhibit: Value of Share Trading

Exchanges 2009* 2008 2007NASDAQ OMX 14,722,742.41 36,446,548.50 28,116,428.20

NYSE Euronext (US) 9,528,245.51 33,638,937.00 29,113,786.70

Shanghai SE 2,136,688.28 2,600,208.56 4,028,590.30

Tokyo SE 1,977,035.25 5,607,321.90 6,412,700.80

London SE 1,803,766.09 6,271,520.64 10,333,685.88

Shenzhen SE 1,105,019.34 1,248,721.80 2,046,013.76

NYSE Euronext (Europe) 896,320.86 4,411,248.70 5,639,760.70

Korea Exchange 750,429.70 1,432,479.94 2,005,640.78Hong Kong Exchanges 680,378.85 1,629,782.28 2,133,642.96

Taiwan SE Corp. 420,066.18 829,612.20 1,010,039.51

Borsa Italiana 419,361.50 1,499,456.52 2,311,193.98

SIX Swiss Exchange 400,361.51 1,500,366.49 1,883,261.91

NASDAQ OMX Nordic Exchange 378,752.45 1,338,181.11 1,818,207.57

Australian SE 369,151.29 1,213,239.58 1,371,744.92

National Stock Exchange India 343,249.04 725,398.65 751,333.02

Johannesburg SE 147,885.84 395,235.21 423,384.91

Bombay SE 117,137.95 301,648.28 343,775.81

Source: WFE, * Till June 2009

Figures in US$ Million


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Equity Research

Turnover VelocityThe turnover velocity is the ratio between the turnover of domestic shares and their market capitalization

Indias turnover velocity as on June 2009 was about 86.6% (NSE) which is way below when compared to

the developed markets and its Asian peers. South Korea and Taiwan commands more than double the

Indias turnover velocity despite having lesser number of businesses, population and growth.

Exchange Jun-09 2008 2007NASDAQ OMX 1242.6% 1026.5% 625.2%

Shenzhen SE 334.0% 235.9% 389.2%

Korea Exchange 248.8% 196.3% 192.6%

NYSE Euronext (US) 228.4% 240.2% 166.9%

Shanghai SE 170.6% 118.2% 211.0%

Borsa Italiana 166.6% 182.3% 204.1%

BME Spanish Exchanges 164.5% 171.4% 191.9%

Taiwan SE Corp. 162.5% 145.5% 153.3%

Tokyo SE 145.9% 151.2% 138.4%

London SE 137.9% 152.7% 154.2%

NASDAQ OMX Nordic Exchange 134.1% 138.0% 137.0%

NYSE Euronext (Europe) 120.6% 141.8% 136.9%

SIX Swiss Exchange 116.0% 121.8% 133.9%

TSX Group 111.8% 103.8% 83.7%

Australian SE 103.5% 113.0% 101.6%

Hong Kong Exchanges 88.6% 86.0% 94.1%

National Stock Exchange India 86.6% 75.7% 67.7%

Exhibit : Turnover Velocity

Source: WFE


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Equity Research

Household Sector Financial SavingsIndians presence in equity markets including government securities, units of mutual funds and other

securities is just ~8.0% compared to more than 60% in US, speaking out loud on the prospects on the

equity penetration in this country.

Favorable demography and income age would drive consumption in the coming years. The working age

population is expected to grow from 62.9% in year 2006 to 68.3% in year 2025 with total Indias population

is expected to be 138 cr by year 2025 (Source: NCAER). The India per capita income in US$ terms is

expected to grow by ~30 times in the next 40 years, with maximum of population would be in the age

bracket of 15-64 years.

(In Percent)

Financial Asset FY2004 (P) FY2005 (P) FY2006 (P) FY2007 (P) FY2008 (#)

Currency 11.20 8.50 8.90 8.60 10.90

Fixed Investment Investments 81.60 85.40 83.70 84.50 80.50

Deposits 38.80 37.00 47.00 55.30 56.50

Insurance/Provident/Pension Funds 27.30 28.90 24.50 24.10 25.70

Small Savings 15.50 19.50 12.20 5.10 (1.70)

Securities Market 7.50 6.00 7.40 6.90 8.50

Mutual Funds 1.20 0.40 3.80 5.20 7.70

Government Securities 7.50 4.90 2.40 0.20 (2.00)

Other Securities (1.20) 0.70 1.20 1.50 2.80

Exhibit : Savings of Household Sector in Financial Assets

Source: RBI, (P): Provisional, (#): Preliminary Estimates


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Equity Research

The Capgemini report on Asia-Pacific Wealth 2008 highlights India and China as key investmentdestinations for high net worth individuals (HNWIs) worldwide. It mentions that in CY07, the standout

markets in the Asia-Pacific region were China and India, with the number of wealthy individuals, and their

overall level of wealth growing at a faster rate than the global averages. In CY07, the Indian market

experienced the largest increases in HNWI wealth and population size in the region. The Emerging-HNWI,

HNWI and Ultra-HNWI populations in India increased to 167,000 - a 23% increase from the previous year.

Compared with other investors in the Asia- Pacific, HNWIs in India (36%) allocated the highest percentage

to equities (after Australia - 38%).

Exhibit :Growth of HNWI's in various countries (Asia-Pacific Region)

Source: Data for 2007 from Capgemini Lorenz curve analysis, 2008

Growth of HNWI's

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Vietn

am

In

dia

Ch

ina

So

uth

Ko

rea

Indonesia

Singap

ore

Hong

Kong

Taiw

an

Austr

alia

Japan


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Valuations Comparative

Current 2009E 2010E Current 2009E 2010E

Brazil 56,038.07 2,419.61 3,864.69 4,976.74 23.16 14.50 11.26

Nikkei 10,252.53 - 220.67 432.41 - 46.46 23.71

China 3,598.98 96.28 138.26 167.39 37.38 26.03 21.50Hong Kong 20,494.77 993.93 1,151.39 1,377.34 20.62 17.80 14.88

India (Sensex) 15,903.83 840.14 845.50 1,011.69 18.93 18.81 15.72

Korea 1,559.47 47.26 111.55 149.95 33.00 13.98 10.40

Malaysia 1,179.49 57.34 67.94 77.96 20.57 17.36 15.13

Mexico 2,786.92 161.28 175.17 202.98 17.28 15.91 13.73

Taiwan 6,848.24 79.06 284.40 428.28 86.62 24.08 15.99Thailand 640.16 28.13 53.57 61.44 22.76 11.95 10.42

Dow Jones 9,230.19 688.82 625.35 736.06 13.40 14.76 12.54

S&P 500 1,005.65 57.50 59.97 74.60 17.49 16.77 13.48

Nasdaq 2,011.31 59.49 80.71 112.99 33.81 24.92 17.80

FTSE 4,686.08 87.36 341.55 412.14 53.64 13.72 11.37

CAC 3,498.01 278.50 279.84 324.19 12.56 12.50 10.79DAX 5,420.51 134.30 339.42 451.33 40.36 15.97 12.01

Exhibit: Valuation Matrix

Source: Bloomberg, As on August 5th, 2009

P/E (X)Index Value

Earning Per Share (EPS)


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Equity Research

OutlookEquity brokerage industry in India is going to experience a rapid growth in coming years, following the fact

that it is no more a brokerage business to offer. Over a period of years the broking companies has

diversified their business from brokerage offerings to a wide range of financial services, offering a range of

financial products and services, focused on wealth creation for their customers. A large distribution

network, uses of modern technology and wide range of product portfolio argues well for the established

players in the industry to gain market share both in the domestic as well as global markets.

India remains the second fastest growing economy in Asia and as per a report by Goldman Sachs could

become the fourth largest economy by 2025 and the third largest by 2050, behind only United States and

China. We expect markets to move up once it gets more visibility and confidence in FY10 earnings, which

will make the markets attractive with a medium term perspective. This should lead to improved FIIs

liquidity especially as India, despite the slow-down, is expected to be the second-fastest growing economy

with largest democracy, largest growing middle class and lowest per capita consumption across

commodities and services in the world argues well scope for future growth.


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Equity Research

Motilal Oswal Financial Services Limited

BSE : 532892NSE : MOTILALOFSBloomberg : MOFS INCMP : 145.85Sector : Financial ServicesView : BUY

Key MetricsListing NSE/BSE

Current Price 145.85

Market Cap (Rs Crores) 2,071.43

Free Float (%) 29.63

52-WeeK High (Rs) 189.7

52-Week Low (Rs) 43.6

BETA 1.38

P/B (x) 2.62

Current P/E (x) 21.29

Face Value 1.00

PEG Ratio NA

Dividend Yield (%) 0.53

Price Performance (%)

Time Period Stock Nifty 50

1 Month -2.39 7.94

3 Month 24.79 23.50

1 Year 36.45 0.16

Shareholding Pattern (%)Promoter 70.37

Pledged 17.67

FII"s 3.28

DII's 7.57

Public 6.29Others 12.49

Company Background:

MOSL is a well-diversified, financial services company offering arange of financial products and services such as wealthmanagement, broking & distribution, commodity broking, portfoliomanagement services, institutional equities, private equity,investment banking services and principal strategies.

Investment Rationale:

The company has 486,751 retail clients as on June 30

th

, 2009and is also empanelled with more than 300 institutionalclients, including ~200 FIIs clients, which endeavours theirstrong brand presence.

MOSL key strength is its vast distribution reach with pan IndiaPresence. The company has a network of 1,308 businesslocations, spread across 555 cities and towns and has a totalclient base of more than 5,57,373 customers.

MOSL offers wide range of financial services. This creates an

integrated platform to sell financial services which therebyenables to cross sell the products.

ROE is likely to improve significantly as business growthstarts gaining momentum, with company has beenconsistently lowering its debt to equity ratio.

Key Risks:

Downturns or disruptions in securities market could reduce

transaction volumes, causing a decline in business.Revenues from operations arise largely during bullish phasein equity market which is not a consistent phenomenon.

Though MOSL is increasingly diversifying its revenue profile,it will continue to significantly depend on retail broking andmargin finance businesses for growth and earnings.


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Equity Research

Source: Company

Exhibit: Trend in retail Clients

Retail Equity Broking Clients

3100060000

159091

238421

396388

471062 486571

0

100000

200000

300000

400000

500000

600000

FY04 FY05 FY06 FY07 FY08 FY09 Q1FY10

Source: Company

Exhibit: PMS AUM

Asset Under Management

522

1821

5200 5089

7981

4767

6807

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

FY04 FY05 FY06 FY07 FY08 FY09 Q1FY10

I nM

i lli

o n

MOSL has registered a72.32% CAGR in its retailclient base over a period of 5years (FY04-FY09), owing to

its strong brand and largestdistribution network.

MOSL has registered a55.64% CAGR in its assetunder management over aperiod of 5 years (FY04-FY09). This indicates thecompany strongrelationship with HNIs andhigh credibility, resulting in

cross selling of products.


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Equity Research

The company total income has declined during FY2009 as compared to FY2008, mainly on account ofdecline in the equity broking income which reported a fall of 40.0% y-o-y to Rs. 351.74 cr.

The company endeavor to diversify their revenue streams resulted in 30% of our revenue coming fromnon-broking businesses for the financial year ended FY2009 as compared to 20% reported in previousyear.

The company has negligible debt to equity ratio for the period ended FY09, indicating company able tomeet its working capital requirement through internal accruals.

The interest coverage ratio has significantly decline over years, though it is still at comfortable levels.

Exhibit : Financial Analysis

Particulars FY2009 FY2008 FY2007

Total Income 459.41 688.49 365.39

EBIDTA 173.98 258.53 134.56

EBIT 153.71 243.68 123.56

PBT 142.58 239.83 121.80

Reported PAT 89.60 170.62 68.44

Earning Per Share 6.31 11.51 6.43

EBIDTA (%) 37.87 37.55 36.83

EBIT (%) 33.46 35.39 33.82

NPM (%) 19.50 24.78 18.73

ROE (%) 11.29 24.06 20.54

ROCE (%) 19.26 28.21 36.59

Interest Coverage Ratio 8.61 16.35 31.36

Debt To Equity Ratio 0.00 0.20 0.00

Current Ratio 2.09 1.89 1.33

Source: Company

Figures in Crores


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Equity Research

India Infoline Limited Company Background:

India Infoline is a well-diversified financial services company withpan India presence. The company has a network of 1,616business locations spread over 445 cities and towns, and hasmore than 676,107 customers with international presence inDubai, New York and Singapore.


India Infoline has de-risked its revenue model by diversifyingits core business of equity broking to bouquet of financialservices. The company has a little over 55 percent of the totalrevenues coming from the equity brokerage business, theleast among listed broking companies

The company recently tie up with Interactive Brokers, LLC(USA) to provide its clients direct market access to over 80global exchanges in 18 countries. This will provide clients todiversify their portfolios with having exposure in globalmarkets.

Opportunity to scale up non fund based business, ascompany has re-commenced its mortgage business withbook size of Rs. 922 cr at the end of June 2009.

The company doesnt have much debt on its books. The debtequity ratio is a negligible at 0.03. It has repaid a substantialamount of debt in the last two years and has interestcoverage of 7.60 which shows that the company has strongfundamentals and can raise further debt to expand its

business

Key Risks:

An increasing number of players in the financial servicessector could lead to stiff competition, making customerretention and business growth a challenge.

BSE : 532636NSE : INDIAINFOBloomberg : IIFL INCMP : 127.00Sector : Financial ServicesView : BUY


Current Price 127.00

Market Cap (Rs Crores) 3,599.18




BETA 2.09

P/B (x) 2.33


Face Value 2.00

PEG Ratio NA




1 Month 2.49 7.94

3 Month 40.29 23.50

1 Year -17.32 0.16

Shareholding Pattern (%)Promote 33.72

Pledged 0.16

FII"s 22.22

DII's 10.59



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Equity Research

Source: Company

Exhibit : Trend in retail Clients

Retail Equity Broking Clients

5500

75000

150000

438864

596056

676107

0

100000

200000

300000

400000

500000

600000

700000

800000

FY05 FY06 FY07 FY08 FY09 Q1FY10

India Infoline hasregistered a robust222.65% CAGR in its retailclient base over a period of4 years (FY04-FY09),owing to its diversified

business model and a panIndia presence.

Source: Company

Exhibit : IIL Market Share

NSE Market Share

3.63

3.03

0

2

4

6

Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

%

India Infoline has gainedNSE Market Share from3.03% reported in June2007, to 3.63% in June2009, an increase of 60basis points in a matter of

just 2 years. The companyis further going to gainNSE market share owing

to its high credibility andstrong business network.


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Equity Research

The company total income has reported a CAGR of 159.54% over a period of four years (FY05-FY09),while the net profit witnessed a CAGR of 69.66% over the same period.

The company has been consistently lowering its debt to equity ratio, with maintaining current debt toequity ratio at negligible level.

The current ratio is above the industry peers while the ROCE and ROE has declined over years, owing to

the expansion taken over years and declined in the business on account of global slowdown



Total Income 962.43 1023.5 425.72

EBIDTA 291.59 402.13 141.23

EBIT 251.99 373.93 126.31

PBT 219.47 282.75 114.6

Reported PAT 144.82 159.87 75.61

Earning Per Share 4.76 5 2.99EBIDTA (%) 30.30 39.29 33.17

EBIT (%) 26.18 36.53 29.67

NPM (%) 15.05 15.62 17.76

ROE (%) 9.38 10.74 23.26

ROCE (%) 13.20 15.28 24.92

Interest Coverage Ratio 7.60 4.09 10.79


Current Ratio 2.37 2.53 2.38

Source: Company

Figures in Crores


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Equity Research

Geojit BNP Paribas Limited

Company Background:

Geojit BNP Paribas is a leading retail financial services companyin India. In the year 2007, Global banking major BNP Paribas tooka stake and thus become the single largest shareholder in thecompany.


The company has 22 years of in-depth broking experience inthe Indian Capital Maret with pan India presence. The

company currently has more than 4.8 lakh clients and overRs. 8,400 cr (as of 30th, June 09) in Assets underManagement reflect the client trust in company expertise.

The company has formed strategic joint ventures andbusiness partnerships in the Middle East, which will furtherextend its services to the growing population of non-residentIndians. The company is also well positioned to furtherexpand its reach in 85 countries.

The company has also forayed into the property brokeragebusiness to meet the requirement for its clients and act as atrusted intermediary between customers and builders. Thusthe offering will help company to cross sell its products ascompany is backed by broking experience with credentialclient base.

The company is almost a debt free, which going forward willhelp them to raise funds at a cheaper rate to expandbusiness and meet working capital requirements.

Key Risks:

The company closed its commodities business andsurrendered its membership in the various commodityexchanges Thus; the revenue going forward will be impactedas company presently dont have any intention to start upcommodity brokerage business.

BSE : 532285NSE : GEOJITBNPPBloomberg : GSEC INCMP : 39.50Sector : Financial ServicesView : HOLD


Current Price 39.50Market Cap (Rs Crores) 882.48




BETA 1.25

P/B (x) 2.88


Face Value 1.00

PEG Ratio NA




1 Month 2.73 7.94

3 Month 40.57 23.50

1 Year -12.80 0.16

Shareholding Pattern (%)Promoter 63.69

Pledged 0.00

FII"s 2.34

DII's 0.00



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Equity Research

The company total income for the financial year ended FY09, reported a decline of 24.8% y-o-y to Rs.169.91 cr, mainly because of discontinuation of its commodities broking business. As a result thecompany reported a negative EBIT, while compensation of Rs. 40 cr received from BNP Paribas for thesame included as exceptional gain resulting in reporting a positive PAT for the year ended FY09.

The company is almost a debt free, which going forward will help them to raise funds at a cheaper rate toexpand business and meet working capital requirements.

ROE has kept on deteriorating and has gone done very low. The main reason for this is that assets havekept on increasing tremendously.

ROCE has come down to a negative of 5.2% in 2009. The decline in ROCE is mainly attributable to adiscontinuation of its commodity business which computed a major chunk to the net income in theprevious years



Total Income 169.91 225.77 131.22

EBIDTA 2.88 77.7 40.64

EBIT -8.83 70.82 35.45

PBT 12.18 82.75 37.79

Reported PAT 40.19 58.66 25.21

Earning Per Share 1.83 2.69 1.63

EBIDTA (%) 1.70 34.42 30.97

EBIT (%) -5.20 31.37 27.02

NPM (%) 23.65 25.98 19.21

ROE (%) 12.16 22.36 11.43

ROCE (%) -5.23 60.63 22.73

Interest Coverage Ratio -19.20 116.10 154.13


Current Ratio 1.62 1.40 1.84Source: Company

Figures in Crores


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Equity Research

Source: Company

E xhibit : T rend in retai l Clients

270756

436300465108 478598

0

100000

200000

300000

400000

500000

600000

FY07 FY08 FY09 Q1FY1

R et ail Equity Broking Clients

Geojit BNP Paribas hasregistered a robust114.42% CAGR in its retailclient base over a period of2 years (FY07-FY09),owing to its collaboration

with BNP Paribas and apan India presence.


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Equity Research

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