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


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


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%


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


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


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


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.

India Infoline Ltd. All rights reserved.Regd. Off: 75, Nirlon Complex, Off W E Highway, Goregaon (E) Mumbai-400 063. Tel.: +(91 22)6677 5900 Fax: 2685 0451.

This report is for information purposes only and does not construe to be any investment, legal or taxation advice. It is not intended as an offer or solicitation for the purchase and sale of any financial instrument. Any action taken by you on the basis of the information contained herein is your responsibility alone and India Infoline Ltd (hereinafter referred as IIL) and its subsidiaries or its employees or directors, associates will not be liable in any manner for the consequences of such action taken by you. We have exercised due diligence in checking the correctness and authenticity of the information contained herein, but do not represent that it is accurate or complete. IIL or any of its subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this publication. The recipients of this report should rely on their own investigations. IIL and/or its subsidiaries and/or directors, employees or associates may have interests or positions, financial or otherwise in the securities mentioned in this report.

analyst meet april 25, 2007 -...

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