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India Infoline (IIFL)
Banks/Financial Institutions
A strong quarter. India Infoline reported PAT of Rs671 mn up 13% yoy, 24% qoq and
6% above estimates. Good performance across business - broking, investment banking,
insurance distribution and NBFCs has driven strong earnings growth. Over the last few
weeks, the company has bought back 12.9 mn shares at about Rs80/share which will
shrink its fully diluted equity base by about 4%. While the quarter was strong, declining
volumes in equity markets over the last few weeks is a cause of concern.
Higher market share, lower commission yield in broking
India Infoline (IIFL) reported market share of 4.2% in 3QFY11, up from 3.9% in 2QFY11. The
commission yield (as per our estimate) was down to about 4.1 bps from 5.1 bps in 2QFY11. The
trend is broadly in line with peers - notably, most brokerages have reported a flat qoq revenue in
broking during 3QFY11. Higher share of options trading in the F&O segment was the likely reason
for subdued broking income even as cash market volumes were up 8% qoq.
Income from investment banking has supported earnings during the quarter. The company
concluded QIP of three mid-sized companies including Money Matters Financial Services.
Insurance distributing income remains strong
IIFL reported almost stable income from insurance distribution despite the implementation of new
IRDA guidelines. Income from distribution (primarily insurance business) was Rs471 mn as
compared to Rs507 mn in 2QFY11 and Rs417 mn in 1QFY11. APE collections were up 7% yoy and
almost stable for last three quarters. In the past, management had guided for stable revenues from
insurance distribution due to higher business volumes despite lower commission rates in the new
regime. The income is stable qoq (as per management’s guidance) but so have been the volumes.
As such, reason for stable commission income is not very clear.
Finance income boosted earnings
IIFL reported loan book of Rs30 bn, up from Rs25 bn in 2QFY11 and about Rs12 bn in 3QFY10.
Average loan book for the quarter was up 23% qoq while net interest income was up 40% qoq.
Higher income on liquid investments in a higher interest rate environment and income from IPO
financing has likely driven higher net interest income.
Lower operating cost ratio buoyed net income
IIFL reported operating cost ratio of 52% in 3QFY11, down from 60% in 2QFY11 and 65% in
3QFY10. Higher share of finance income (and more specifically episodic income like IPO financing)
has likely pulled down the operating cost ratio.
Buyback will reduce fully diluted equity base by 4%
IIFL has concluded its buyback program. The company has bought back 12.99 mn shares
(about 4% of diluted equity base) at average price of Rs80/ share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Infoline (IIFL)
Banks/Financial Institutions
A strong quarter. India Infoline reported PAT of Rs671 mn up 13% yoy, 24% qoq and
6% above estimates. Good performance across business - broking, investment banking,
insurance distribution and NBFCs has driven strong earnings growth. Over the last few
weeks, the company has bought back 12.9 mn shares at about Rs80/share which will
shrink its fully diluted equity base by about 4%. While the quarter was strong, declining
volumes in equity markets over the last few weeks is a cause of concern.
Higher market share, lower commission yield in broking
India Infoline (IIFL) reported market share of 4.2% in 3QFY11, up from 3.9% in 2QFY11. The
commission yield (as per our estimate) was down to about 4.1 bps from 5.1 bps in 2QFY11. The
trend is broadly in line with peers - notably, most brokerages have reported a flat qoq revenue in
broking during 3QFY11. Higher share of options trading in the F&O segment was the likely reason
for subdued broking income even as cash market volumes were up 8% qoq.
Income from investment banking has supported earnings during the quarter. The company
concluded QIP of three mid-sized companies including Money Matters Financial Services.
Insurance distributing income remains strong
IIFL reported almost stable income from insurance distribution despite the implementation of new
IRDA guidelines. Income from distribution (primarily insurance business) was Rs471 mn as
compared to Rs507 mn in 2QFY11 and Rs417 mn in 1QFY11. APE collections were up 7% yoy and
almost stable for last three quarters. In the past, management had guided for stable revenues from
insurance distribution due to higher business volumes despite lower commission rates in the new
regime. The income is stable qoq (as per management’s guidance) but so have been the volumes.
As such, reason for stable commission income is not very clear.
Finance income boosted earnings
IIFL reported loan book of Rs30 bn, up from Rs25 bn in 2QFY11 and about Rs12 bn in 3QFY10.
Average loan book for the quarter was up 23% qoq while net interest income was up 40% qoq.
Higher income on liquid investments in a higher interest rate environment and income from IPO
financing has likely driven higher net interest income.
Lower operating cost ratio buoyed net income
IIFL reported operating cost ratio of 52% in 3QFY11, down from 60% in 2QFY11 and 65% in
3QFY10. Higher share of finance income (and more specifically episodic income like IPO financing)
has likely pulled down the operating cost ratio.
Buyback will reduce fully diluted equity base by 4%
IIFL has concluded its buyback program. The company has bought back 12.99 mn shares
(about 4% of diluted equity base) at average price of Rs80/ share.
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