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November 2010
The Organization
Overview
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
947 FY08 FY09 FY10 H1 FY11 854 695 586 1,400
346 147
347
FY08 3
FY09
FY10
H1 FY11
Fixed Assets Investments Net Current Assets Cash & Bank Balances Total Application of Funds
Profitable
INR Mn. Revenues Total Expenditure Operating Profit Depreciation Interest Cost Extra ordinary items Profit Before Tax Tax Profit After Tax FY08* 694 547 147 34 127 573 559 90 470 FY09* 1400 454 946 32 52 863 76 787 FY10* 854 508 346 25 84 238 3 234 H1 FY11* 586 240 347 11 24 312 63 250
Group structure
Shareholding Pattern*
Public 48.42%
BOD
Mahendra Doshi - Chairman Sayanta Basu Pratik Doshi Milan Bhise Vineet Suchanti Hariharan Padmanabhan
97.7%
* As on Sep 2010
Board of Directors
Mahendra Doshi
Sayanta Basu
Pratik Doshi
Milan Bhise
Vineet Suchanti
Hariharan Padmanabhan
Executive Chairman
Director
Director
Independent Director
Independent Director
Independent Director
32 years of experience in the field of Finance, Capital Markets and Business Administration.
19 years of Financial market experience Areas of expertise: M&A, Investment management,Capital markets
7 years business experience in the field of Foreign Exchange, Stock Market and Commodity Market
14 years of experience in the field of Finance, Capital Markets and Business Administration
Most of the team has been together for the last 18-20 years, with some new key additions
Anish Unadkat
Institutional Equities
Pratik Doshi
COO
Rajesh Dixit
Research
S.Ranganathan
Corporate Affairs
S.S.Gulati
Fixed Income
Sanjay Chitalia
IT
Sriram J
Compliance
Neha Malviya
Risk Management
Anup Shah
Business Snapshot
The opportunity
Total brokerage market: 12,000 crs per annum growing at 20% per annum with the natural tailwinds of GDP and greater domestic and foreign participation. 800 brokers and 62,000 sub-brokers. Capital key to success with regulators making life difficult for weaker players. Retail pool 3 times bigger than the institutional pool Investment banking pool about INR 2000 crs, more than 100 players Consolidation of the industry a matter of time Asset management a volume game and not attractive for brokers/investment banks Risks: Pro-longed de-rating of India
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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.
FY09 Retail
FY10 Institutional
H1 FY11
1543 1059
1,368
FY09
FY10
H1 FY11
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Retail Distribution
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
No of Retail Clients
2008
2009
2010
Branches
450 385 285
2008
2009
2010
12
Insurance Products
Forayed in the sales of General and Life Insurance products in November 2007
13
Institutional Equities
Strong risk management culture, managed 2008 downside with minimal losses. Minimal proprietary trading activities
Presence in 400+ locations, 75,000 retail and high networth clients giving nationwide access
14
Fundamental Research
Pharma, Agriculture, Automobiles, Telecom, Infra, Capital Goods, Engineering, FMCG, Retail, Industrials, Fertilizers, Cement, Sugar, Oil & Gas, Shipping Theme Based Research
69 companies:
Large Cap: 11, Mid Cap: 24, Small Cap: 40
LKP Contacts
Mr. Mahendra Doshi, our research team, employees and associates have Chairman, Directors, CEO and CFOs level contacts in a host of companies
Quantitative Research
Attribution analysis for Mutual fund performance Long/Short portfolio based on quantitative strategies Global impact analysis on Indian stocks
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PS: Definitions of cap: Large Cap: > 5000 cr, Mid Cap: > 1000 cr and < 5000 cr, Small Cap: < 1000 cr
Q4 FY10
Buy Calls: 15 Hold Calls: 2 Sell Calls: 0 Buys recommended: SAIL Hero Honda Mahindra & Mahindra Titan Inds. TTK Prestige Techno Electric Bajaj Auto
Q1 FY11
Buy Calls: 23 Hold Calls: 5 Sell Calls: 2 Buys recommended: VST Tillers Chambal Fertilizers Nestle India M & M Financial TVS Motor Tata Chemicals Yes Bank
Q2 FY11
Buy Calls: 5 Hold Calls: 3 Sell Calls: 1 Buys recommended: Mahindra & Mahindra Yes Bank M & M Financial Indoco Remedies
Certificate of Deposits & Commercial Paper Corporate Bonds /PSU Bonds /Bank Bonds /Fertiliser Bonds/ Oil Bonds PTC /Securitized Papers
PF (205)
Corporates (90)
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18
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
Nature Of Activities Issue Management (IPO / Rights) Mandates Handled Managed 48 public and rights issue Getting Van Leer to acquire Paper Products Ltd Merger of Arch Pharmalabs with Merven Drugs Valuation of SourceOne Communications having operations in USA, Canada Debt swap for Intercontinental Hotel
Takeovers / M&A
Managed Delisting
Business Valuation
Creating ESOPs
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Going Forward...
Vision
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The way forward Effective utilization of balance sheet (Current NW of 225 Crores)
To use capital effectively across operating activities to generate stable ROE of 20% 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
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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 must make 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 any liability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of, the accuracy or completeness of the information or for any of the opinions contained herein or for any errors, omissions or misstatements or for any loss, howsoever arising, from the use of this Presentation. This Presentation should not be considered as the giving of investment advice by the Company or any of its shareholders, directors, officers, agents, employees or advisers. Neither the issue of this Presentation nor any part of its contents is to be taken as any form of commitment on the part of the Company to proceed with any transaction. The Company reserves the right to terminate any discussions or negotiations with any prospective investors. In no circumstances will the Company be responsible for any costs, losses or expenses incurred in connection 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 Company does not undertake or agree to any obligation to provide the recipient with access to any additional information or to update this Presentation or to correct any inaccuracies in, or omissions from, this Presentation which may become apparent.