LKP Corporate Presentation

LKP Corporate PresentationNovember 2010LKP Corporate PresentationNovember 2010

The Organization

Overview

695

1,400

854

586

Consolidated Revenues (Rs. Mn.)• LKP Finance (NBFC) is registered with RBI and listed on BSE.

• Established in 1948. The company went public in 1986.

• Key businesses include Equity broking and Distribution, Fixed

Income, Merchant Banking and Treasury.

• Large client base of ~67,500 registered customers in broking .

• Total broking turnover of Rs. 445 billion in FY 2009 and Rs. 576

billion in FY 2010.

• Fixed Income volumes in secondary market of Rs.796 billion in

FY2009 and Rs.1754 billion in FY2010

• Network of 450 outlets across 147 cities in India with 420 Sub

brokers and 40 branches.

• Current staff strength of more than 400 people and growing

147

947

346 347

FY08 FY09 FY10 H1 FY11

FY08 FY09 FY10 H1 FY11

Consolidated EBITDA (Rs. Mn.)

• LKP Finance (NBFC) is registered with RBI and listed on BSE.

• Established in 1948. The company went public in 1986.

• Key businesses include Equity broking and Distribution, Fixed

Income, Merchant Banking and Treasury.

• Large client base of ~67,500 registered customers in broking .

• Total broking turnover of Rs. 445 billion in FY 2009 and Rs. 576

billion in FY 2010.

• Fixed Income volumes in secondary market of Rs.796 billion in

FY2009 and Rs.1754 billion in FY2010

• Network of 450 outlets across 147 cities in India with 420 Sub

brokers and 40 branches.

• Current staff strength of more than 400 people and growing

3

A strong balance sheet

INR Mn. FY08* FY09* FY10*

Net Worth 605 1255 1428

Loan funds 75 589 347

Net Deferred Tax Liability 4 (26) (59)

Total Sources of Funds 684 1818 1717

Fixed Assets 198 173 165

Investments 77 526 526

Net Current Assets 130 244 446

Cash & Bank Balances 279 876 579

Total Application of Funds 684 1818 1717

4

* Consolidated Balance Sheet of LKP Finance

INR Mn. FY08* FY09* FY10* H1 FY11*

Revenues 694 1400 854 586

Total Expenditure 547 454 508 240

Operating Profit 147 946 346 347

Depreciation 34 32 25 11

Interest Cost 127 52 84 24

Extra ordinary items 573 - - -

Profitable

Extra ordinary items 573 - - -

Profit Before Tax 559 863 238 312

Tax 90 76 3 63

Profit After Tax 470 787 234 250

* Consolidated Profit & Loss of LKP Finance

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LKP Finance Limited(NBFC)

Public – 48.42%

Promoter Group – 51.58%

Shareholding Pattern*

BOD

Mahendra Doshi - ChairmanSayanta BasuPratik DoshiMilan BhiseVineet SuchantiHariharan Padmanabhan

Group structure

97.7%

LKP Securities Limited

Institutional EquitiesBroking & Distribution

Fixed IncomeInvestment Banking

LKP Finance Limited(NBFC)

Mahendra Doshi - ChairmanSayanta BasuPratik DoshiMilan BhiseVineet SuchantiHariharan Padmanabhan

6* As on Sep 2010

Mahendra Doshi Pratik DoshiSayanta Basu Milan Bhise Vineet Suchanti HariharanPadmanabhan

Executive Chairman DirectorDirector Independent Director Independent Director Independent Director

• Experienced Board of Directors with diverse areas of expertise

Board of Directors

32 years ofexperience in the

field ofFinance, Capital

Markets andBusiness

Administration.

7 years businessexperience in thefield of Foreign

Exchange, StockMarket and

Commodity Market

19 years of Financialmarket experienceAreas of expertise:M&A, Investment

management,Capitalmarkets

18 years ofexperience in thefield of Corporate

Law and LegalMatters

14 years ofexperience in thefield of Finance,

Capital Markets andBusiness

Administration

Entrepreneur ,25years of experience

in the field ofInformationTechnology

Executive Chairman DirectorDirector Independent Director Independent Director Independent Director

7

Current management team

• Most of the team has been together for the last 18-20 years, with some new key additions

Retail & Distribution Anand Agarwal & Deepak Singh Anish Unadkat

Board Sub CommitteeMahendra Doshi, Sayanta Basu , Pratik Doshi

CFO & Business Strategy

Rajesh DixitInstitutional Equities Pratik Doshi

Research S.Ranganathan

Fixed Income Sanjay Chitalia

S.S.Gulati

8

Anup Shah

Sriram J

Neha MalviyaCompliance

COO

Corporate Affairs

IT

Risk Management

Business Snapshot

• Total brokerage market: 12,000 crs perannum growing at 20% per annum with thenatural tailwinds of GDP and greaterdomestic and foreign participation.800 brokers and 62,000 sub-brokers.Capital key to success with regulatorsmaking life difficult for weaker players.Retail pool 3 times bigger than theinstitutional pool

• Investment banking pool about INR 2000crs, more than 100 players

• Consolidation of the industry a matter oftime

• Asset management a volume game andnot attractive for brokers/investment banks

• Risks: Pro-longed de-rating of India

The opportunity

• Total brokerage market: 12,000 crs perannum growing at 20% per annum with thenatural tailwinds of GDP and greaterdomestic and foreign participation.800 brokers and 62,000 sub-brokers.Capital key to success with regulatorsmaking life difficult for weaker players.Retail pool 3 times bigger than theinstitutional pool

• Investment banking pool about INR 2000crs, more than 100 players

• Consolidation of the industry a matter oftime

• Asset management a volume game andnot attractive for brokers/investment banks

• Risks: Pro-longed de-rating of India

10

Equities: The business today

• LKP Finance (NBFC) is registered with RBI and listed on

BSE.

• LKP Securities is registered Stock Broker with SEBI.

• Key businesses include Equity Broking and

Distribution, Fixed Income, Merchant Banking and some

Prop activity.

• Large client base of 67,500 registered customers in retail.

• Total retail and institutional broking turnover of Rs. 445

billion in FY 2009 and Rs. 576 billion in FY 2010.

• Network of 450 outlets across 147 cities in India.

Retail and Institutional Daily Turnover (Rs. Mn.)

2,571

1,485

1,973

341 334 231

FY09 FY10 H1 FY11

Retail Institutional

• LKP Finance (NBFC) is registered with RBI and listed on

BSE.

• LKP Securities is registered Stock Broker with SEBI.

• Key businesses include Equity Broking and

Distribution, Fixed Income, Merchant Banking and some

Prop activity.

• Large client base of 67,500 registered customers in retail.

• Total retail and institutional broking turnover of Rs. 445

billion in FY 2009 and Rs. 576 billion in FY 2010.

• Network of 450 outlets across 147 cities in India. Retail & Institutional Gross Daily Brokerage (Rs.In ‘000)

11

1059

15431,368

FY09 FY10 H1 FY11

Retail Distribution

39,74548,217

67,500

No of Retail Clients

• Pan India footprint with 450 branches/outlets in 147 cities

• Strong network to facilitate reach

• Large customer base of 67,500 clients

• Strong network of 420 Sub-brokers

39,745

2008 2009 2010

285385

450

2008 2009 2010

Branches

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Retail Distribution … other products

Mutual Fund Distribution

• AUM worth ~Rs.1155 cr. with Rs.155cr in Equity and

Rs.900cr in Debt

• Supported by a team of 23 personnel .

• Income generated by way of brokerage i.e., upfront

and trail

• Mutual Fund Advisory

• Servicing Direct clients , Institutions and Sub Brokers

• In-house team of fundamental and technical research

analysts

• Supported by a host of financial databases and

information packages like

Bloomberg, CRISINFAC, Capitaline etc.

• Services available to both individuals and corporates.

Portfolio Management Services

Insurance Products

• AUM worth ~Rs.1155 cr. with Rs.155cr in Equity and

Rs.900cr in Debt

• Supported by a team of 23 personnel .

• Income generated by way of brokerage i.e., upfront

and trail

• Mutual Fund Advisory

• Servicing Direct clients , Institutions and Sub Brokers

• Forayed in the sales of General and Life Insurance

products in November 2007

• Tie-up with Bajaj-Allianz for distribution of their

insurance products.

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Institutional Equities

• Long track record

• Established in 1948, taken over by Mr. Mahendra Doshi in 1982

• Strong risk management culture, managed 2008 downside with minimal losses.Minimal proprietary trading activities

• Deep relationships in India

• Presence in 400+ locations, 75,000 retail and high networth clients givingnationwide access

• Ability to access block deals stemming out of our domestic institutional contacts

• More than 50 senior level employees and 400 franchises

• Deep relationships in India

• Presence in 400+ locations, 75,000 retail and high networth clients givingnationwide access

• Ability to access block deals stemming out of our domestic institutional contacts

• More than 50 senior level employees and 400 franchises

• Strong balance sheet• Current Networth - More than Rs. 200 cr.

• Negligible Debt

• Cash and cash equivalents – More than Rs. 50 cr

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Research focus areas

• Fundamental Research

38 companies covered:Large Cap: 23, Mid Cap: 39, Small Cap: 28

• Strong performance of model portfolio

• Pharma, Agriculture, Automobiles, Telecom, Infra, CapitalGoods, Engineering, FMCG, Retail, Industrials, Fertilizers, Cement, Sugar, Oil &Gas, Shipping

•Theme Based Research

69 companies:Large Cap: 11, Mid Cap: 24, Small Cap: 40

• Mr. Mahendra Doshi, our research team, employees and associates haveChairman, Directors, CEO and CFO’s level contacts in a host of companies

• LKP Contacts

69 companies:Large Cap: 11, Mid Cap: 24, Small Cap: 40

• Mr. Mahendra Doshi, our research team, employees and associates haveChairman, Directors, CEO and CFO’s level contacts in a host of companies

• Quantitative Research

PS: Definitions of cap: Large Cap: > 5000 cr, Mid Cap: > 1000 cr and < 5000 cr, Small Cap: < 1000 cr

• Technical analysis based on price and volume

New products:

• Attribution analysis for Mutual fund performance• Long/Short portfolio based on quantitative strategies• Global impact analysis on Indian stocks

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Fundamental Research Performance

Buy Calls: 10Hold Calls: 3Sell Calls: 0

Buys recommended:

• Bank of Baroda

• ACC

• TTK Prestige

• Indoco Remedies

• BGR Energy

• Aries Agro

• Federal Bank

Buy Calls: 15Hold Calls: 2Sell Calls: 0

Buys recommended:

• SAIL

• Hero Honda

• Mahindra & Mahindra

• Titan Inds.

• TTK Prestige

• Techno Electric

• Bajaj Auto

Buy Calls: 23Hold Calls: 5Sell Calls: 2

Buys recommended:

• VST Tillers

• Chambal Fertilizers

• Nestle India

• M & M Financial

• TVS Motor

• Tata Chemicals

• Yes Bank

Q3 FY10 Q4 FY10 Q1 FY11

Buy Calls: 5Hold Calls: 3Sell Calls: 1

Buys recommended:

• Mahindra & Mahindra

• Yes Bank

• M & M Financial

• Indoco Remedies

Q2 FY11

16

Buys recommended:

• Bank of Baroda

• ACC

• TTK Prestige

• Indoco Remedies

• BGR Energy

• Aries Agro

• Federal Bank

Return on ModelPortfolio: 25.2%(Benchmark: 5.1%)

Buys recommended:

• SAIL

• Hero Honda

• Mahindra & Mahindra

• Titan Inds.

• TTK Prestige

• Techno Electric

• Bajaj Auto

Return on ModelPortfolio: 8.9%(Benchmark: 8.2%)

Buys recommended:

• VST Tillers

• Chambal Fertilizers

• Nestle India

• M & M Financial

• TVS Motor

• Tata Chemicals

• Yes Bank

Return on ModelPortfolio: 9.4%(Benchmark: 4.3%)

Buys recommended:

• Mahindra & Mahindra

• Yes Bank

• M & M Financial

• Indoco Remedies

Return on ModelPortfolio: 8.6%(Benchmark: 2.3%)

Fixed Income: Business today

• Member of NSE and BSE WDM segment• Empanelled with major banks, insurance companies, mutual funds, Corporates and domestic institutions• Network – Hotline with treasuries of all major banks, mutual funds and primary dealers• Ranked in the top 3 WDM brokers in India.• Supported by a team of 40 personnel.• Fixed Income volumes in secondary market of Rs.796 billion in FY2009 and Rs.1754 billion in FY2010

Products and Services

Government Securities and Treasury Bills Nationalized, Foreign, Private, Co-operative Banks(87)

Nature Of Clients

Certificate of Deposits & Commercial Paper

Corporate Bonds /PSU Bonds /Bank Bonds /FertiliserBonds/ Oil Bonds

PTC /Securitized Papers

Insurance Companies (35)

Mutual Funds (33)

Primary Dealers (11)

PF (205)

Corporates (90)

Institutions (9) & FII (6)

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• Ranked No.2 Arranger for CP & Short Term Debts

and Prime League Table

• Placed Fertiliser bonds worth Rs.55 bn. for various

Fertiliser companies in FY09.

• Primary placement of CPs, NCDs and CD’s of

~Rs.480 bn & Rs.980 bn in FY09 and FY10

respectively. Achieved turnover of ~Rs. 800 bn in

secondary debt market in FY09 and Rs 1748 bn in

FY 10

• Acted as an Arranger for private placement of long

term bond issues aggregating to Rs. 123 bn in FY09

& of Rs 236 bn during FY10

Fixed Income: Deals and Placements

Primary Market Debt Raised (Rs. Bn)

317 346418

152

FY08 FY09 FY10 H1FY11

• Ranked No.2 Arranger for CP & Short Term Debts

and Prime League Table

• Placed Fertiliser bonds worth Rs.55 bn. for various

Fertiliser companies in FY09.

• Primary placement of CPs, NCDs and CD’s of

~Rs.480 bn & Rs.980 bn in FY09 and FY10

respectively. Achieved turnover of ~Rs. 800 bn in

secondary debt market in FY09 and Rs 1748 bn in

FY 10

• Acted as an Arranger for private placement of long

term bond issues aggregating to Rs. 123 bn in FY09

& of Rs 236 bn during FY10

Primary Market – Nature of Funds

(Rs. Bn) FY08 FY09 FY10 H1FY11

Long Term 2 66 24 14

Short Term 315 280 394 138

18

• We have strong relationships with over 475 Institutions & Corporates.

Fixed Income: Relationships with Institutions &Corporates

LKP has successfully executed deals for the above Clients

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Nature Of Activities

Issue Management (IPO / Rights)

Takeovers / M&A

Managed 48 public and rights issue

Getting Van Leer to acquirePaper Products Ltd

Mandates Handled

Merchant Banking

Overview

• Presence in the Primary market – involved in marketing activities for IPOs.• Network – Dedicated network of sub-brokers catering to primary market activities• SEBI registered category 1 Merchant Banker – Capability to carry out all regulated investment banking activities• FY09 - Ranking by Amount Procurement : 19th with 1.05% Market Share & Ranking by Application Procurement: 17th

Sale of listed companies

Managed Delisting

Business Valuation

Merger of Arch Pharmalabs with Merven Drugs

Valuation of SourceOne Communications having operationsin USA, Canada

Debt swap for Intercontinental Hotel

Managed 20 takeovers under SEBI codeCreating ESOP’s

Advice on all SEBI related matters

Raising Debt for Hemavathy Power

Delisting of Bharti Telecom and Siporex India

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Going Forward...

Vision

By 2014 LKP aims to become:

• One of the top 5 players in retail brokerage and distribution

• One of the top 10 players in the institutional business:

• Sales Trading & Investment Banking (focus midcap sector)

• Fixed Income

growing through a combination of organic and inorganic strategy

22

By 2014 LKP aims to become:

• One of the top 5 players in retail brokerage and distribution

• One of the top 10 players in the institutional business:

• Sales Trading & Investment Banking (focus midcap sector)

• Fixed Income

growing through a combination of organic and inorganic strategy

The way forward

• Effective utilization of balance sheet (Current NW of 225Crores)

• To use capital effectively across operating activities to generate stable ROE of20% in next 3-5 years

• Use of the chairman, employee and affiliate network effectively

• People• Increase productivity: Recruit young but trained and experienced personnel• Culture: Professional and performance driven organization with clear objectives

and regular reviews• Well defined incentive plans and ESOPs• Transparency: Open communication across the organization

• Operational Excellence• Use of Technology• Strong focus on risk management and liquidity

• Effective utilization of balance sheet (Current NW of 225Crores)

• To use capital effectively across operating activities to generate stable ROE of20% in next 3-5 years

• Use of the chairman, employee and affiliate network effectively

• People• Increase productivity: Recruit young but trained and experienced personnel• Culture: Professional and performance driven organization with clear objectives

and regular reviews• Well defined incentive plans and ESOPs• Transparency: Open communication across the organization

• Operational Excellence• Use of Technology• Strong focus on risk management and liquidity

23

Disclaimer

LKP Finance Limited (the Company) has prepared the information contained in this Presentation.

While the information contained in the Presentation has been prepared in good faith, each party to whom this Presentation is made available mustmake its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary.Neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers take any responsibility for, or will accept anyliability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of, the accuracy or completeness of theinformation or for any of the opinions contained herein or for any errors, omissions or misstatements or for any loss, howsoever arising, from the useof this Presentation.

This Presentation should not be considered as the giving of investment advice by the Company or any of itsshareholders, directors, officers, agents, employees or advisers. Neither the issue of this Presentation nor any part of its contents is to be taken asany form of commitment on the part of the Company to proceed with any transaction. The Company reserves the right to terminate any discussionsor negotiations with any prospective investors. In no circumstances will the Company be responsible for any costs, losses or expenses incurred inconnection with any appraisal or investigation of the Company.

The information contained in this Presentation is subject to updation, revision and further amendment. In furnishing this Presentation, the Companydoes not undertake or agree to any obligation to provide the recipient with access to any additional information or to update this Presentation or tocorrect any inaccuracies in, or omissions from, this Presentation which may become apparent.