Analyst Meet April 25, 2007
Analyst Meet
April 25, 2007
2
Presentation structure
Our vision and strategy
Our business model
Financial Results
Review of core businesses
Industry perspective
3
Our Vision and Strategy
4
To become the most respected company in the financial services space
Our vision
Vision elaborated
Shareholders Growth at above industry rate with de-risking
High ROCE, ROE
General public Corporate governance
Transparency
Employees Skill development by investments in training
Empowerment and conducive work environment
Customers Cutting edge technology
High service standards
SWOT analysis- India Infoline Group
Strengths• Large retail customer base• Value-for-money proposition for customers• Strong research which ‘picks winners’• Bouquet of asset & liability products• Wide branch network across India
Opportunities• Booming financial services sector • Institutional broking• Wealth management• Leverage network for more products
Threats• Large players foraying into the space• Replicable product offering• Market dependence• Manpower retention
Weaknesses• Brand name needs further strengthening• Customer experience/ servicing• Senior-level bandwidth to drive businesses• Cross sell opportunities not tapped fully• Does not have a bank in the group
Customer strategy
Own customer relationshipsCustomer stickiness driven by quality advice and delightful experience. Underpinned by technology supporting low cost and quality service.
All asset classes – all vendorsUnique one stop experience of advised comparison shopping at no extra cost
Value-for-money to customerCost-conscious organization, driven by ‘Owner mindset’making the most of technology to minimize cost allows to deliver best Value for Money to the customer
Advisory capabilities par excellence
Research capability build over more than a decade, recognized internationally, ensure nothing less than the best
Business strategy
Asset lightAll businesses are fee-driven. Asset heavy businesses to be in separate JV/ company or securitized to ensure high ROCE
Core focusFocused on financial services. We want to remain focused on core competence which is our understanding of financial services
De-risked businessMultiple & diverse revenue streams from synergistic yet not correlated businesses, with rising stream of trail and annuity building cushion for down-cycle.
Maximize throughputMultiple products sold through widespread branch network for greater share of wallet from customers
Strategy for retail products
Aggressive expansion (locations, products/ offerings & customer baseScalable systems and processesLeveraging technology for cost-efficient high-quality serviceEffective Human Resource Development
Call Center
Branch
Relationship Manager Internet
Franchisees
Multiple customer touch-points
‘Reach’ing out across India
Wholesale products
IIL straddles the entire value-chain in Investment BankingStrong focus on the SME segmentInnovation in instrument structuringAbility to offer post-execution service of market making because of access to a huge investor base
Issuer InvestorInstrument
Well-acknowledged research acumenCapital, which was hitherto a problem is now not a constraint
People with ‘relationships’ needed to propel business to the next orbit
Institutionalbroking
Research
Capital
People
Investment Banking
Institutional broking
11
Our business model
Advisory services powered by world-class research
Execution backed by cutting edge technology and personalized service
Business description
Advisory & execution services for the entire gamut of financial services
Core competencies
Service offerings
Equitiesbroking
Commoditiesbroking
Mutual Fundsdistribution
Mortgagesdistribution
Portfolio Management
services
Research & Content
services
Life Insurance
agency
Personal Loans
distribution
Investment Bankingservices
Other Debtproducts
Business model
13
Financial Results FY 07
14
Comparison of FY07 with FY06
Consolidated Revenue up 95% to Rs 4.25Bn
EBITDA up 63% to Rs 1.38Bn
PBT up 60% to Rs 1.15Bn
PAT up 54% to Rs 756Mn
Comparison of Q4FY07 with Q4FY06
Consolidated Revenue up 67.5% to Rs 1.43Bn
EBITDA up 40% to Rs 459Mn
PBT up 44% to Rs 368Mn
PAT up 49% to Rs 246Mn
Financial Highlights : y-y
15
Comparison of Q4FY07 with Q3FY07
Consolidated Revenue up 25% to Rs 1.43Bn
EBITDA up 35% to Rs 459Mn
PBT up 37% to Rs 368Mn
PAT up 36% to Rs 246Mn
Financial Highlights : sequential
16
Results
Rs Million Q4 07 Q4 06 Y-Y FY 07 FY 06 Y-Y
Income from operations 1409.7 841.4 67.6% 4160.9 2134.1 95.0%
Equities brokerage & related income 640.9 542.1 18.2% 2313.5 1427.1 62.1%
Mutual funds etc distribution 43.4 76.7 -43.5% 150.1 199.9 -24.9%
Commodities brokerage 37.2 16.9 120.3% 120.3 41.3 191.1%
Life insurance commission 239.9 100.5 138.7% 592.9 215.9 174.7%
Online & other media income 341.7 88.8 284.9% 645.1 200.6 221.5%
Financing income 85.6 14.4 496.6% 281.8 46.9 500.4%
Mortgages and loans distribution 11.0 2.1 437.4% 28.9 2.4 1091.0%
Merchant Banking income 10.0 0.0 28.2 0.0
Other income 26.0 15.7 65.6% 96.4 46.4 107.9%
Total Income 1435.8 857.1 67.5% 4257.3 2180.5 95.2%
17
Results
Rs Million Q4 07 Q4 06 Y-Y FY 07 FY 06 Y-YTotal ExpenditureA Direct Cost 330.9 212.5 55.7% 917.8 562.7 63.1%B Employee Cost 378.7 155.9 143.0% 1063.1 366.0 190.4%C Administration Expenses 267.2 162.0 64.9% 864.0 382.8 125.7%
EBITDA 459.0 326.7 40.5% 1412.3 868.9 62.5%Interest 44.9 30.3 48.5% 117.1 65.1 79.9%Depreciation & Amortisation 45.8 41.1 11.3% 149.2 85.8 74.0%Profit / (Loss) Before Tax 368.2 255.3 44.2% 1146.0 718.1 59.6%Provision for Taxation- Current 124.7 95.6 30.5% 367.0 227.8 61.1%- Fringe Benefit Tax 6.3 3.7 68.9% 19.0 9.1 109.0%- Deferred Tax -8.9 -9.5 -6.0% 3.8 -8.1 -147.3%Minority Interest in Loss 0.2 -100.0% -1.2Pre - acquision Loss -1.5Profit / (Loss) After Tax 246.1 165.3 48.9% 756.2 491.9 53.7%
18
Profitability
Network expansion contributes to improved revenues
EBITDA margins improve in Q4
Strong platform established for continued growth
Revenue EBITDA PAT
100
400
700
1,000
1,300
Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07
Rs
Mn
110152
175236
404
559560
0
100
200
300
400
500
600
700
Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07
No of business locations
Revenues, EBIDTA and PAT Expansive branch network
19
Revenue Split Sequential Trend
Share of equities and financing declines from 63% to 51%
Increased diversity in revenue streams
63% 63% 63%
53%45%
17%
24%
6%
3%3%
0%
20%
40%
60%
80%
100%
Mar-06 Jun-06 Sep-06 Dec-06 Mar-07
Equities Insurance Media Income
Financing Income Commodities Distribution Home Loan CommissionMerchant banking income
20
Review of core business
21
Equities broking
Market share on NSE up to 2.4% in FY 07 compared to 1.7% in FY06
New branches have started generating revenues
343
542568
499
606641
0
100
200
300
400
500
600
700
Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-070
2000
4000
6000
8000
10000
12000Equities Brokerage Rs Mn (LHS)
Brokerage Av. Daily Vol (Rs.Mn)
1.3%
1.7%
2.0%
2.4%
2.7%
Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07
NSE Market Share
Equity broking NSE market share
22
Life insurance and Mutual funds
Life insurance WAPI triples every year for last 6 years
Near doubling of market share in overall ICICI Prudential business
Mutual Fund income up 31% q-q due to greater focus on this segment
Expanded branch network resulted in the higher revenues
40
77
47
26
33
43
0
10
20
30
40
50
60
70
80
90
Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Distribution Commission Rs Mn (LHS)
Distribution Mobilisation (Rs Bn)
61
10186
108
160
240
0
50
100
150
200
250
300
Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07
0
200
400
600
800
1000
1200
1400
1600
1800Life Insurance Commission Rs Mn (LHS)
Issuanaces (Rs Mn)
Life Insurance – issuances & commission Mutual Funds - mobilization & commissions
23
Commodities broking
Average daily trading volumes triples in FY07
Steady sequential growth in revenues every quarter
13
17
26 25
32
37
0
5
10
15
20
25
30
35
40
Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07
0
200
400
600
800
1000
1200
1400
1600
1800Commodities Brokerage Rs Mn (LHS)
Commodities Av Daily Vol (RsM)
Commodities broking on an upswing
24
Mortgages and loans
Steady growth continues in this business
Higher interest rates may pose some challenge
Huge untapped market remains
Mortgages and Loans (Rs Mn)
0
2
4
6
8
10
12
Mar-06 Jun-06 Sep-06 Dec-06 Mar-07
Mortgages and Loans
25
Industry perspective
26
Macro environment
FIIs & MFs Inflows
India among fastest growing free market democracies, expected to grow at 9%
FII inflow crosses USD 7 Bn in Nov 2006 and MF assets are at USD 73 Bn
Strong economic growth, increase in affluence and rising risk awareness leading to rising investor confidence
High GDP growth rate
FIIs Mutual Funds
Rs Bn
-100
-80
-60
-40
-20
0
20
40
60
80
100
Apr-06
May-06
Jun-06
Jul-06 Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
2839
6377
117
169
224
0
200
400
600
800
1000
1200
2000 2001 2002 2003 2004 2005 20060
50
100
150
200
250
Number of FIIs (LHS) Number of MF schemes (RHS)
FIIs and MF schemes
(%)
2005 2006 2007(E)
0
2
4
6
8
10
12
Chi
na
Indi
a
Sin
gapo
re
Mal
aysi
a
Indo
nesi
a
Phi
lippi
nes
Thai
land
Uni
ted
Sta
tes
Aus
tralia
Can
ada
Bel
gium
Japa
n
Uni
ted
Kin
gdom
Ger
man
y
New
Zea
land
27
Demographic transformation Young India
Favorable demographics
By 2009-10, over 500 Mn Indians are expected to have household income of over $10,000 pa, compared to 350 Mm at present
Demographic profile favours higher retail off take – 54% of population is in 15-35 years of age
Ranked 2nd by AT Kearney in a Global Retail Development Index of 30 developing countries, India is seen as a potential gold mine.
Rich (above $1,15,000) High Income ($57,000-$1,15,000) Consuming Class ($23,000-$57,000)
Working Class($10,200-$23,000) Needy (below $10,200)
2001-02 2005-06 2009-10(E)2
9
48
221
726
9
17
74
285
710
20
33
120
404
613
Mn Population Years
0
5
10
15
20
25
30
35
40
45
50
India China USA Japan
Median Age
28
Online equity trading in India
Equity investment to total financial savings still low at 4.9% of financial savings
Services sector contributing more than 50% to GDP with financial services growing rapidly at 10-12%
Online trading growing at CAGR of 112% as against offline at 20%
0
5
10
15
20
25
30
35
Indi
a
Spa
in
Finl
and
Italy
Net
herla
nds
Ger
man
y
New
Zeal
and
Can
ada
Japa
n
Aus
tralia
(%)
05101520253035404550
Financial assets to Total assets Equity to Financial assets
Source: World Bank, 2000
Huge untapped potential Equity as % of Gross Financial Savings
(%)
0
2
4
6
8
10
12
14
16
18
2003-04 2004-05 2005-06
Gross Financial Savings Equity
Huge untapped potential
Online trading
Other trading Online trading
97% 93% 88% 84%
3% 7% 12% 16%
0%
20%
40%
60%
80%
100%
2003-04 2004-05 2005-06(9M) 2006-07(E)
29
Insurance at grass root levels
Per capita life insurance premium in India in 2004 was $16 as compared to the world average of $292
Although number of players increased from 1 in 2000 to 15 at present, penetration levels much lower than world averages at 2.6%
Life Insurance premiums have clocked an impressive 28% CAGR over the last three years.
Life premium/GDP (%)
Low penetration levels Life Insurance premiums
0
50
100
150
200
250
300
350
400
2003 2004 2005 2006
New business premiums
28% CAGR
0 2 4 6 8 10 12
Taiwan
HongKong
Singapore
South Korea
Asia
Europe
USA
Malaysia
India
China
Indonesia
(%)
30
Changing landscape
Industry rapidly consolidating
Share of Top ‘10’ brokers grown by 58.4% since 2003-04
Customer demands changing from plain vanilla execution to advice & service
Multiple relationships across asset classes consolidating into a single relationship
StricterCompliance
Researchis expensive
Technologyrequires
scale
Working capitalintensive business
Factorsdriving
consolidation
Reasons for consolidation
Top 5
Next 5
Next 15
Next 25
Next 50
Consolidating broking industry
% share (NSE)
0
10
20
30
40
50
60
70
80
98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 Nov-06
Thank you
Published in April 2007. © India Infoline Ltd 2006-07.
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