1

SYNOPSIS

Future Capital is a provider of

financial services across consumer

and wholesale businesses, with

aspirations to grow into a significant

financial conglomerate.

During the quarter, the robust

growth of Net Profit is increased by

21.43% to Rs. 266.84 million.

Future Capital Holdings Ltd has

assigned 'CARE AA-' (Double A

Minus) rating to the Company's NCD

programmed for an enhanced limit of

Rs. 1050 Crore.

Future Capital Holdings Ltd has

recommended dividend of Rs. 1.50/-

per equity share of Rs. 10/- each

(15%),

Net Sales and PAT of the company

are expected to grow at a CAGR of

42% and 55% over 2011 to 2014E

respectively.

Years Net sales EBITDA Net Profit EPS P/E

FY 12 7401.46 5547.77 1058.30 16.41 9.35

FY 13E 9029.78 6799.09 1444.42 22.39 6.85

FY 14E 10564.84 7957.40 1843.80 28.59 5.37

Stock Data:

Sector: Financial Services

Face Value Rs. 10.00

52 wk. High/Low (Rs.) 199.00/101.60

Volume (2 wk. Avg.) 51000.00

BSE Code 532938

Market Cap (Rs.in mn) 9894.14

Share Holding Pattern

1 Year Comparative Graph

BSE SENSEX FUTURE HOLDING

C.M.P: Rs. 153.40 Target Price: Rs. 173.00 Date: July 07th 2012 BUY

Future Capital Holdings Ltd Result Update: Q4 FY 12

2

Peer Group Comparison

Name of the company CMP(Rs.) Market Cap. (Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Future Capital 153.40 9894.14 16.41 9.35 1.19 15.00

Ratnabali Capital Markets 109.05 567.40 11.40 9.57 0.65 30.00

India Infoline 61.35 17735.20 2.95 20.80 1.63 150.00

IndiaBulls Financial 239.45 74705.80 23.20 10.32 1.75 650.00

Investment Highlights

Q4 FY12 Results Update

Future Capital Holdings reported a phenomenal rise in consolidated net profit for

the quarter ended March 2012. During the quarter, the profit of the company rose

21.43% to Rs 266.84 million from Rs 219.74 million in the same quarter previous

year. Net sales for the quarter surged 55.88% to Rs.2258.58 million from

Rs.1448.95 million as compared to same quarter last year. Total income surged by

31.30% to Rs 2262.01 million for the quarter ended. The EPS of the company is

stood at Rs.4.14 for the quarter ended March 2012.

Quarterly Results - Consolidated (Rs in mn)

As At Mar-12 Mar -11 %change

Net sales 2258.58 1448.95 55.88

PAT 266.84 219.74 21.43

Basic EPS 4.14 3.39 21.97

3

� Breakup of Expenditure

� Recommended Dividend

Future Capital Holdings Ltd has recommended dividend of Rs. 1.50/- per equity

share of Rs. 10/- each (15%), to the equity shareholders of the Company for the

Financial Year 2011-12.

As per recommendation of the Compensation and Nomination Committee, the

Company has approved the introduction of a new Employee Stock Option Scheme -

2012 ("ESOS 2012") for grant of 25,00,000 (Twenty Five Lakh) Stock options

representing equal number of equity shares of face value Rs. 10/- (Rupees Ten

Only) each of the Company to the Eligible Employees, subject to shareholder's

approval.

� Credit Rating

Future Capital Holdings Ltd has assigned 'CARE AA-' (Double A Minus) rating to

the Company's NCD programmed for an enhanced limit of Rs. 1050 Crore

(enhanced from Rs. 600 Crore).

4

� Open Offer

Kotak Mahindra Capital Company Ltd has acquired of upto 17,788,266 Equity

Shares of Rs 10/- each at a price of Rs 162/- (Rupees One Hundred and Sixty Two

only) per fully paid shares of the Future Capital Holdings Ltd ("Target Company")

constituting 26% of the diluted voting share capital of the Target Company by

Coverdell Investment Ltd ("Acquirer") along with Warburg Pincus Private Equity XI,

L.P., Warburg Pincus XI Partners, L.P., Warburg Pincus Private Equity Xl-B, L.P,

WP XI Partners, L.P. and Warburg Pincus Private Equity Xl-C, L.P.

Company Profile

Future Capital is a provider of financial services across consumer and wholesale

businesses, with aspirations to grow into a significant financial conglomerate. Future

Capital Holdings Limited was incorporated in 2005 & headquartered in Mumbai,

India. It was formerly known as KB In fin Limited and changed its name to Future

Capital Holdings Limited in 2006. Future Capital Holdings Limited is a subsidiary of

Pantaloon Retail (India) Limited. This non banking financial company is part of Future

Group.

Future Capital Holdings Limited operates in investment advisory and asset

management, and retail financial services businesses in India. It acts as an advisor to

investment managers of private equity and real estate funds. The company also

manages the Kshitij Venture Capital Fund, a domestic real estate fund that focuses on

developing retail malls in India. In addition, the company also advises or manages

investments in real estate assets in the retail/ mixed use sector, including convention

centers, three or four star hotels, serviced apartments, commercial offices, residential

apartments, community centers, and various forms of retail space. Further, it provides

financial products and services at present and future malls, stores, and retail outlets,

which are owned, controlled or managed by Pantaloon Retail (India) Limited and its

subsidiaries.

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Financial Business

The company’s retail financial services products include consumption loans, which are

loans to finance the purchase of durables, furniture, and other consumer goods; and

personal loans, which are unsecured credit lines to individual customers.

This area logged into two criteria in Future Capital Holdings Limited: Personal and

Corporate

Personal

• Borrow

� Durable Loans

� Loan against Gold

� Loan against Property

� Auto Loans

� Two Wheeler Loans

� Home Loans

• Protect

� Life Insurance

� General Insurance

� Human Life Value

� Married Women’s’ Property Act

• Invest

� Property Services

� Broking Services

� Mutual Funds

� Portfolio Management Services

� Real Estate Funds

� Private Equity Funds

� Fixed Income Instruments

� Creation of Private Trust

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• Plan

� Portfolio Analysis

� Financial Planning

Corporate

� Wholesale Credit

� Wholesale debt syndication

Retail Business

It primarily focuses on advising on investments in high growth companies in

consumption-led sectors, such as fast-moving consumer goods, media, entertainment,

food and beverages, fashion, healthcare, and consumer-led infrastructure.

Conceptualized around a unique positioning of a financial services business,

integrated with a retail chain, Future Capital has established financial superstores

within the Retail stores of Future Group with ultimate brands Big Bazaar, E-zone and

Home Town to create India’s first ‘consumer-centric’ retailer of financial products and

services.

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Financial Results

12 Months Ended Profit & Loss Account (Consolidated)

Value(Rs.in.mn) FY11 FY12 FY13E FY14E

Description 12m 12m 12m 12m

Net Sales 3728.20 7401.46 9029.78 10564.84

Other Income 286.95 35.98 40.30 44.33

Total Income 4015.15 7437.44 9070.08 10609.17

Expenditure -1333.17 -1889.67 -2270.99 -2651.78

Operating Profit 2681.98 5547.77 6799.09 7957.40

Interest -1800.84 -3976.98 -4732.61 -5347.85

Gross profit 881.14 1570.79 2066.48 2609.55

Depreciation -42.56 -54.86 -60.35 -66.38

Profit Before Tax 838.58 1515.93 2006.14 2543.17

Tax -347.36 -457.63 -561.72 -699.37

Profit After Tax 491.22 1058.30 1444.42 1843.80

Equity capital 647.84 644.99 644.99 644.99

Reserves 6228.90 7670.73 9115.15 10958.95

Face value 10.00 10.00 10.00 10.00

EPS 7.58 16.41 22.39 28.59

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Quarterly Ended Profit & Loss Account (Consolidated)

Value(Rs.in.mn) 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12E

Description 3m 3m 3m 3m

Net sales 1698.11 1811.17 2258.58 2439.27

Other income 24.6 10.31 3.43 3.16

Total Income 1722.71 1821.48 2262.01 2442.42

Expenditure -427.45 -451.15 -553.86 -634.21

Operating profit 1295.26 1370.33 1708.15 1808.21

Interest -870.76 -978.35 -1319.52 -1372.30

Gross profit 424.5 391.98 388.63 435.91

Depreciation -13.39 -5.12 -19.05 -21.34

Profit Before Tax 411.11 386.86 369.58 414.58

Tax -127.38 -97.73 -102.74 -116.08

Profit After Tax 283.73 289.13 266.84 298.49

Equity capital 647.99 647.99 644.99 644.99

Face value 10.00 10.00 10.00 10.00

EPS 4.38 4.46 4.14 4.63

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Key Ratios

Particulars FY11 FY12 FY13E FY14E

No. of Shares(in mn) 64.78 64.50 64.50 64.499

EBITDA Margin (%) 71.94% 74.96% 75.30% 75.32%

PBT Margin (%) 22.49% 20.48% 22.22% 24.07%

PAT Margin (%) 13.18% 14.30% 16.00% 17.45%

P/E Ratio (x) 20.23 9.35 6.85 5.37

ROE (%) 7.14% 12.73% 14.80% 15.89%

ROCE (%) 8.38% 15.90% 18.04% 19.44%

Debt Equity Ratio 3.73 3.24 2.90 2.56

EV/EBITDA (x) 3.71 1.78 1.46 1.24

Book Value (Rs.) 106.15 128.93 151.32 179.91

P/BV 1.45 1.19 1.01 0.85

Charts:

Net sales & PAT Ratio

10

P/E Ratio

Debt Equity Ratio

11

EV/EBITDA Ratio

P/BV Ratio

12

Outlook and Conclusion

At the current market price of Rs.153.40, the stock is trading at 6.85 x FY13E

and 5.37 x FY14E respectively.

Earning per share (EPS) of the company for the earnings for FY13E and FY14E

is seen at Rs.22.39 and Rs.28.59 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 42% and

55% over 2011 to 2014E respectively.

On the basis of EV/EBITDA, the stock trades at 1.46 x for FY13E and 1.24 x for

FY14E.

Price to Book Value of the stock is expected to be at 1.01 x and 0.85 x

respectively for FY13E and FY14E.

We expect that the company will keep its growth story in the coming quarters

also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.173.00 for Medium to Long term investment.

Industry Overview

The Indian financial services industry has a lot of scope for further penetration, and

thus has immense scope and potential to grow exponentially. The online genre, mobile

explosion, emergence of social media platforms, technologies like cloud computing and

increasing pace of convergence and interconnectivity of devices are intensely driving

the growth of this industry. These are playing pivotal roles in transforming the way

financial services are delivered to the end-consumer. Further, financial institutions are

revamping their operational infrastructure and business delivery models.

Financial services industry mainly comprises the BFSI industry, that is, banking,

financial services (such as mutual funds) and insurance. Key developments and

performance pointers pertaining to each of these sub-segments are discussed in this

overview.

13

Insurance Sector

There are 24 life insurers in India with about Rs 15 trillion (US$ 292.5 billion) in

assets.

According to data released by the Insurance Regulatory and Development Authority

(IRDA), the life insurance industry collected Rs 89,655.83 crore (US$ 17.5 billion)

during April 2011-February 2012 by writing new policies while the insurers sold about

35.12 million policies collectively. Private players sold seven million policies.

The general insurance industry continued with its growth trajectory as the gross

written premium grew 24.03 per cent during 2011-12 against the year-ago period.

Banking Services

According to the world's largest rating agency, Standard & Poor (S&P)'s Ratings

Services, India's banking system has a high level of stable, core customer deposits

supported by the system's good franchise, extensive branch networks, and large, yet

growing, domestic savings.

• According to the Reserve Bank of India (RBI)'s 'Quarterly Statistics on Deposits

and Credit of Scheduled Commercial Banks', September 2011, Nationalised

Banks, as a group, accounted for 52.2 per cent of the aggregate deposits, while

State Bank of India (SBI) and its associates accounted for 21.8 per cent. The

share of new private sector banks, Old private sector banks, foreign banks and

Regional Rural banks in aggregate deposits was 13.7 per cent, 4.8 per cent, 4.6

per cent and 2.9 per cent, respectively.

• With respect to gross bank credit also, nationalized banks hold the highest

share of 51.6 per cent in the total bank credit, with SBI and its associates at

22.1 per cent and New Private sector banks at 13.8 per cent. Foreign banks,

Old private sector banks and Regional Rural banks held relatively lower shares

in the total bank credit with 5.2 per cent, 4.8 per cent and 2.5 per cent,

respectively.

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• Another statement released by the RBI stated that bank deposits grew 13.4 per

cent to Rs 60.72 trillion (US$ 1.18 trillion) in the fiscal 2011-12 (the year to

March 23, 2011) while loans and advances grew 17.08 percent to Rs 47.54

trillion (US$ 927.16 billion).

Mutual Funds Industry in India

The Rs 6.70 trillion (US$ 130.66 billion) Indian mutual funds (MF) industry has 44

asset management companies (AMCs). Recent data released by the Association of

Mutual Funds in India (AMFI) indicated that average assets under management (AUM)

reported by these fund houses amounted to Rs 6,68,824 crore (US$ 130.33 billion) in

2011-12.

HDFC Mutual Fund maintained its top position as the country's biggest MF with an

average AUM of Rs 89,879 crore (US$ 17.51 billion), followed by Reliance MF (Rs

78,112 crore [US$ 15.22 billion]), ICICI Prudential MF (Rs 68,718 crore [US$ 13.39

billion]), Birla Sun life MF (Rs 61,143 crore [US$ 11.92 billion]) and UTI MF (Rs 58,922

crore [US$ 11.48 billion]).

Private Equity (PE) and Mergers & Acquisitions (M&A) in India

India Inc witnessed 202 merger and acquisition (M&A) deals worth US$ 9.4 billion

during the first quarter of 2012. According to Ernst & Young (E&Y)'s latest

transactions quarterly report, deals in January-March 2012 were 22 per cent higher

than those of October-December 2011 quarter in terms of volume and 4.5 times higher

in terms of value. Domestic deals dominated the M&A space as they accounted for 63

per cent of the total number of deals and contributed 88.4 per cent of the total

disclosed deal value for the quarter.

According to experts, M&A landscape is likely to experience intense activity in the

coming months, owing to improving stock markets and better availability of finance

options.

Private equity (PE) and venture capital (VC) investors infused a capital of US$ 1.88

billion across 90 deals during the reported period.

15

Foreign Institutional Investors in India

According to the data released by Securities and Exchange Board of India (SEBI), net

investment in equities made by foreign institutional investors (FIIs) stood at Rs 47,935

crore (US$ 9.34 billion) during the financial year ended March 31, 2012. During the

reported fiscal, foreign fund houses injected Rs 49,053 crore (US$ 9.56 billion) in the

debt market taking the collective net investments by FIIs in stocks and bonds to Rs

93,725 crore (US$ 18.26 billion).

Recent Developments

• India has launched the country's first domestic payment card network, RuPay,

to compete with multinational Visa Inc. and MasterCard Inc. The new

development will not only help banks reduce cost of issuing a debit card but

will also lead to expansion of payment network in rural areas. National

Payments Corp of India Ltd (NPCI), the nodal agency to manage and promote

RuPay, has stated that 200,000 RuPay cards have already been issued and the

target is to have 10 million debit cards under the brand by March 2013.

• Stating India as 'extraordinarily attractive investment destination', PE firm Bain

Capital LLC has announced that it will infuse about US$ 800 million in

appropriate proposals across four investment deals during 2012-16.

• L&T Finance has decided to buy Fidelity Worldwide Investment's Indian mutual

fund business. The deal would boost L&T's assets to Rs 13,500 crore (US$ 2.63

billion), making it the 13th biggest fund house and the 10th largest on the basis

of equity.

Government Initiatives

In its Budget for 2012-13, the Government has earmarked a capital of Rs 15,888 crore

(US$ 3.11 billion) to be infused in public sector banks, regional rural banks and other

financial institutions. Apart from this, the Government is also planning to set up a

financial holding company that will raise funds for public sector banks.

16

Furthermore, the RBI has liberalized regulations pertaining to FCAs to provide

operational flexibility to Indian entities making overseas direct investments. After

satisfying stipulated requirements and conditions, Indian entities can open, hold and

maintain FCAs abroad that would simplify the process of making overseas direct

investments.

Road Ahead

According to a report by the Boston Consulting Group (BCG) India, prepared in

association with a leading industry organization and Indian Banks Associations (IBA),

Indian banking industry would be the world's third largest in asset size by 2025 and

mobile banking would become the second largest banking mode after ATMs.

Furthermore, owing to the positive eco-system of the industry and regulatory and

Government initiatives, mobile banking is anticipated to enhance from 0.1 per cent of

transactions in a 45 per cent financial inclusion base in 2010 to 34 per cent of the

transactions with 80 per cent rural inclusion base by 2020, as per the report.

While the Indian Government projects that qualified foreign investors (QFIs) would

invest US$ 50-75 billion in India's equity and bond markets, G Chokkalingam,

Executive director and CIO, Centrum Wealth Management, believes that Indian

markets would witness record inflows, probably to the extent of US$ 30 billion, by FIIs

in 2012.

________________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates 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 report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

17

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