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					                                                                                                       Sector Report | Comparative Analysis
LONG TERM INVESTMENT CALL


                                                                                                                                                       26th May 2010

                                India                                                      Motilal                                          Q4FY10 Results Comparative Analysis
Company                                                     Religare                                             Edelweiss
                              Infoline                                                     Oswal
CMP (INR)                                     97                        412                       166                               406     Revenue:
52 week
                                  173/68                    504/290                        196/82                         542/339
High/Low                                                                                                                                       •   India Infoline (IIFL) registered a sequential rise of 7% in revenue
Market
Cap (INR                               32695                     56170                     23296                             30040                 aided by 62% increase in the Financing & Investing business and
Mn)                                                                                                                                                45% increase in the Life Insurance business. Income from Wealth
Avg.
Quarterly                      286389                            61193                     27336                             11485                 Management increased by 87% YoY. The contribution of broking
Volumes
                                                                                                                                                   income to revenue decreased to 46% in Q4FY10 from 52% QoQ.
P/BV                                    3.15                           2.24                    5.21                                 2.57

P/E    (FY10)                           11.7                          36.79                 13.94                              13.30           •   Motilal Oswal registered a sequential rise of 5% in revenue aided by
Source: Capitaline, Unicon Research                                                                                                                95% increase in the Asset Management Fees. Income from Wealth
                                                                                                                                                   Management increased by 97% YoY. The contribution of broking
 Shareholding Pattern (%) as on 31/03/2010                                                                                                         income to revenue decreased to 62% in Q4FY10 from 69% QoQ.
               India Motilal Religare
            Infoline   Oswal               Edelweiss                                                                                           •   Religare registered 28% sequential increase in revenue aided by
Promoters     33.54     69.78       57.14      38.06                                                                                               388% increase in Financial Advisory and 116% increase in Life
FII           17.45      1.64        2.83      14.01                                                                                               Insurance segment. The income from Investment& Finance segment
FI / MF /                               21.84                   10.13                                 1.14                 3.52
Others                                                                                                                                             overtook the income from broking segment and advent of Advisory
                                                                                                                                                   makes it a truly diversified company.
Others                                  27.17                   18.45                        38.89                                  44.41
Source: Capitaline, Unicon Research                                                                                                            •   Edelweiss registered a sequential rise of 14% in revenue aided by
                                                                                                                                                   36% increase in fee and commission income because of the increase
Stock Performance (Last one year)                                                                                                                  in number of deals closed in investment banking and 45% increase in
                                                                                                                                                   interest income because of the growth in loan book.
                             India Infoline                           Motilal Oswal                        Religare
  140
                             Edelweiss                                NIFTY                                                                 EBITDA margin:
  130

  120
                                                                                                                                               •   Motilal Oswal’s EBITDA margin increased to 46% in Q4FY10 from
  110

  100
                                                                                                                                                   41% QoQ because of the 5% increase in top line and 4% decrease in
      90                                                                                                                                           expenditure.
      80

      70
                                                                                                                                               •   On the contrary EBITDA margin of IIFL decreased to 33% in Q4FY10
      60                                                                                                                                           from 39% QoQ because of 14% sequential increase in the
                                                                         Nov-09
                    Jun-09

                              Jul-09




                                                                                             Jan-10
           May-09




                                         Aug-09

                                                   Sep-09

                                                             Oct-09




                                                                                  Dec-09




                                                                                                        Feb-10

                                                                                                                 Mar-10

                                                                                                                           Apr-10




                                                                                                                                                   expenditure. The majority of the rise is contributed by direct and
Source: Capitaline, Unicon Research                                                                                                                employee costs.

                                                                                                                                               •   Religare registered 33% sequential increase in expenditure, thus
                                                                                                                                                   decreasing the EBITDA margin from 35% to 32% QoQ.
Performance (%)
                                                                                                                                               •   Edelweiss registered 20% sequential increase in expenditure thus
                                                                       1M                              3M                           12M
                                                                                                                                                   decreasing the EBITDA margin from 54% to 52% QoQ.
 India Infoline                                             -12.8%                         -10.3%                         -26.5%
 Motilal Oswal                                               2.82%                          4.68%                          5.08%            PAT:
 Religare                                                   -4.30%                         14.22%                          4.08%
                                                                                                                                               •   In Q4FY10, Religare and Motilal Oswal’s Net Profit increased by 48%
 Edelweiss                                                  -3.82%                         -1.52%                         -7.14%
 NSE Nifty                                                   -6.8%                           1.8%                          16.7%                   and 35% QoQ respectively owing to an increase in top line for
                                                                                                                                                   Religare and decrease in expenditure for Motilal Oswal.

                                                                                                                                               •   Whereas, in Q4FY10 Edelweiss and IIFL’s Net Profit decreased by
                                                                                                                                                   12% and 3% QoQ respectively because of an increase in
                                                                                                                                                   expenditure.

 Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.
 Email: wealthresearch@uniconindia.in
    Average daily traded volume (ADVT):

        •   IIFL sustained their market share at 3.9% in Q4FY10.

        •   Motilal Oswal’s market share gradually dropped to 2.83% in Q4FY10 from 4.6% in Q1FY09 because of the steady
            shift in trading volumes towards the options segment which now constitutes 44% of total trading volume.

        •   Religare’s market share decreased to 3.41% in Q4FY10 from 3.62% QoQ.

        •   Edelweiss’s market share dropped slightly to 4.5% for this quarter.

    Number of Branches:

        •   Motilal Oswal slightly increased their presence from 1289 business locations in FY09 to 1397 in FY10.

        •   IIFL has aggressively increased its presence to 2300 business locations in FY10 from 1361 YoY, of which only 500
            of them are company owned.

        •   Religare increased their presence to 2092 business location in FY10 from 1853 YoY, of which less than 20% (413)
            are company owned.

        •   Edelweiss’ presence along with Anagram now covers over 220 offices.

    Broking Yields:

        •   The change in accounting practice of IIFL to account brokerage income as net of service tax rather than treating
            service tax as an expense, has given a true picture of the yields which decreased to 6.7 bps in Q4FY10.

        •   For Religare, the yields decreased marginally from 4.77 bps in Q3FY10 to 4.7 bps in Q4FY10.

        •   Edelweiss’s broking yields dropped to 5.5 bps in FY10 from 6.3 bps YoY.

        •   On the other hand the broking yields for Motilal Oswal increased to 6.2 bps in FY10 from 5.2 bps YoY because of
            their minimal exposure in the options segment.

    Concerns:

        •   Motilal Oswal: Motilal Oswal’s market share is gradually decreasing because of the shift in trading volume towards
            options. This with decreasing broking yields may hit Motilal Oswal’s top line in the coming years.

        •   India Infoline: Expenditure increased by 14% QoQ, thus reducing the EBITDA margin to 33% in Q4FY10. EBITDA
            margin for Edelweiss and Motilal Oswal is at 52% and 45% respectively. Hence they need to control their
            expenditure to boost their margins.

        •   Religare: In Q4FY10 the interest expense was at INR 936.5 Mn up from INR 732.9 Mn the previous quarter. Their
            Net Profit Margin is as low as 6%, whereas, it is around 17% for India Infoline and 31% for Motilal Oswal. Since the
            interest rates are spiralling up they need to have a look at their interest costs.

        •   Edelweiss: Continuous decline in the market share from 7.4% in Q1FY09 to 4.5% in Q4FY10 and decline in broking
            yields from 7.5bps in FY08 to 5.5 bps in FY10 is taking its toll on broking revenue.




Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.
Email: wealthresearch@uniconindia.in
              Outlook:

              The industry outlook is very buoyant with the return in the equity trading volumes. Industry is changing from a
              transaction based income to advisory based income. Wealth Management is one area which saw huge growth in the
              last year. The ideal business model for a broking house should be a one stop shop financial services firm and having
              a diverse source of revenue. Industry may see a consolidation phase with companies having good business model
              and huge cash reserve trying to acquire smaller players to fill the gaps in their business model. Edelweiss acquired
              Anagram capital to further diversify their revenue and expand their presence in retail broking sector. Tight control on
              costs will also be other parameter which one should consider before making any investments decision.




                                                                                                                             Figures in Mn

                                              Motilal Oswal                                             Religare
                         Q4FY10     Q4FY09      Q3FY10 Y-o-Y%          Q-o-Q%     Q4FY10     Q4FY09     Q3FY10 Y-o-Y%           Q-o-Q%
     Total Revenue         1666        910          1583         83          5      5283       2458       4136        115             28
     Expenditure            941        603           977         56         -4      3788       2564       2857         48             33
     EBITDA                 761        369           643        106         18      1698           66     1443      2461              18
     EBITDA (%)               46         41            41   513 bps    506 bps         32           3         35 2945 bps       -276 bps
     Interest expense        -12         13            50      -186       -123       937         415        733       126             28
     PBT                    737        294           556        151         33       558        -520        546      -207              2
     PAT                    515        195           380        164         35       317        -633        215      -150             48
     Net Profit (%)           31         18            23 1302 bps     772 bps          6         -26          5 3173 bps         81 bps
     EPS(INR)                3.6        1.2           2.6       212         40        3.1        -8.3        2.7     -138             16


                                                  IIFL                                                  Edelweiss
                          Q4FY10     Q4FY09      Q3FY10      Y-o-Y%    Q-o-Q%     Q4FY10     Q4FY09      Q3FY10 Y-o-Y%         Q-o-Q%
      Total Revenue         3098       1681         2898          84          7     2624       1834        2302        43            14
      Expenditure           2188       1368         1919          60         14     1268        881        1058        44            20
      EBITDA                1029        437         1129         136         -9     1356        953        1245        42             9
      EBITDA (%)               33         26           39    725 bps   -575 bps        52         52          54  -29 bps      -239 bps
      Interest expense       118          23           10        419      1038       569        216         464       163            23
      PBT                    792        291          969         172        -18      747        680         754        10            -1
      PAT                    522        253          595         106        -12      563        443         579        27            -3
      Net Profit (%)           17         15           21    181 bps   -368 bps        21         24          25 -269 bps      -370 bps
      EPS(INR)                1.8        0.9          2.1        107        -12       7.0        5.5         7.1       27            -3




Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.
Email: wealthresearch@uniconindia.in
                                                         Unicon Investment Ranking Methodology

                            Rating                Buy             Accumulate                Hold                Reduce                Sell

                        Return Range            >= 20%            10% to 20%           -10% to 10%           -10% to -20%          <= -20%



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Email: wealthresearch@uniconindia.in

				
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