BrokerageHouses-ComparativeAnalysis

8/8/2019 BrokerageHouses-ComparativeAnalysis

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Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.Email: [email protected]

Average daily traded volume (ADVT):

IIFL sustained their market share at 3.9% in Q4FY10.

Motilal Oswals market share gradually dropped to 2.83% in Q4FY10 from 4.6% in Q1FY09 because of the steady

shift in trading volumes towards the options segment which now constitutes 44% of total trading volume.

Religares market share decreased to 3.41% in Q4FY10 from 3.62% QoQ.

Edelweisss market share dropped slightly to 4.5% for this quarter.

Number of Branches:

Motilal Oswal slightly increased their presence from 1289 business locations in FY09 to 1397 in FY10.

IIFL has aggressively increased its presence to 2300 business locations in FY10 from 1361 YoY, of which only 500

of them are company owned.

Religare increased their presence to 2092 business location in FY10 from 1853 YoY, of which less than 20% (413)

are company owned.

Edelweiss presence along with Anagram now covers over 220 offices.

Broking Yields:

The change in accounting practice of IIFL to account brokerage income as net of service tax rather than treating

service tax as an expense, has given a true picture of the yields which decreased to 6.7 bps in Q4FY10.

For Religare, the yields decreased marginally from 4.77 bps in Q3FY10 to 4.7 bps in Q4FY10.

Edelweisss broking yields dropped to 5.5 bps in FY10 from 6.3 bps YoY.

On the other hand the broking yields for Motilal Oswal increased to 6.2 bps in FY10 from 5.2 bps YoY because of

their minimal exposure in the options segment.

Concerns:

Motilal Oswal: Motilal Oswals market share is gradually decreasing because of the shift in trading volume towards

options. This with decreasing broking yields may hit Motilal Oswals top line in the coming years.

India Infoline: Expenditure increased by 14% QoQ, thus reducing the EBITDA margin to 33% in Q4FY10. EBITDA

margin for Edelweiss and Motilal Oswal is at 52% and 45% respectively. Hence they need to control their

expenditure to boost their margins.

Religare: In Q4FY10 the interest expense was at INR 936.5 Mn up from INR 732.9 Mn the previous quarter. TheirNet Profit Margin is as low as 6%, whereas, it is around 17% for India Infoline and 31% for Motilal Oswal. Since the

interest rates are spiralling up they need to have a look at their interest costs.

Edelweiss: Continuous decline in the market share from 7.4% in Q1FY09 to 4.5% in Q4FY10 and decline in broking

yields from 7.5bps in FY08 to 5.5 bps in FY10 is taking its toll on broking revenue.


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Figures in Mn

Motilal Oswal Religare

Q4FY10 Q4FY09 Q3FY10 Y-o-Y% Q-o-Q% Q4FY10 Q4FY09 Q3FY10 Y-o-Y% Q-o-Q%

Total Revenue 1666 910 1583 83 5 5283 2458 4136 115 28

Expenditure 941 603 977 56 -4 3788 2564 2857 48 33

EBITDA 761 369 643 106 18 1698 66 1443 2461 18

EBITDA (%) 46 41 41 513 bps 506 bps 32 3 35 2945 bps -276 bps

Interest expense -12 13 50 -186 -123 937 415 733 126 28

PBT 737 294 556 151 33 558 -520 546 -207 2

PAT 515 195 380 164 35 317 -633 215 -150 48

Net Profit (%) 31 18 23 1302 bps 772 bps 6 -26 5 3173 bps 81 bps

EPS(INR) 3.6 1.2 2.6 212 40 3.1 -8.3 2.7 -138 16

IIFL Edelweiss

Q4FY10 Q4FY09 Q3FY10 Y-o-Y% Q-o-Q% Q4FY10 Q4FY09 Q3FY10 Y-o-Y% Q-o-Q%

Total Revenue 3098 1681 2898 84 7 2624 1834 2302 43 14

Expenditure 2188 1368 1919 60 14 1268 881 1058 44 20

EBITDA 1029 437 1129 136 -9 1356 953 1245 42 9

EBITDA (%) 33 26 39 725 bps -575 bps 52 52 54 -29 bps -239 bps

Interest expense 118 23 10 419 1038 569 216 464 163 23

PBT 792 291 969 172 -18 747 680 754 10 -1

PAT 522 253 595 106 -12 563 443 579 27 -3

Net Profit (%) 17 15 21 181 bps -368 bps 21 24 25 -269 bps -370 bps

EPS(INR) 1.8 0.9 2.1 107 -12 7.0 5.5 7.1 27 -3

Outlook:

The industry outlook is very buoyant with the return in the equity trading volumes. Industry is changing from a

transaction based income to advisory based income. Wealth Management is one area which saw huge growth in the

last year. The ideal business model for a broking house should be a one stop shop financial services firm and having

a diverse source of revenue. Industry may see a consolidation phase with companies having good business model

and huge cash reserve trying to acquire smaller players to fill the gaps in their business model. Edelweiss acquired

Anagram capital to further diversify their revenue and expand their presence in retail broking sector. Tight control on

costs will also be other parameter which one should consider before making any investments decision.


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BrokerageHouses-ComparativeAnalysis

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