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We hosted ABNL among other companies at the RBS China India Access meet in London.
Following are the key highlights of the same.
Birla Sunlife Insurance (BSLI)
The company has not disclosed its NBAP margin/EV for FY11. However, management
indicated that its NBAP margin remained stable yoy (22.5% in FY10). The embedded
value (EV) last disclosed by the company was Rs38.2bn as of March 2010.
The capital base remained unchanged yoy at Rs24.5bn as of March 2011. The
management does not expect capital infusion in FY12 as new business growth is
expected to be moderate and the contribution of renewal premium in total premium is
rising.
Aditya Birla Finance (NBFC)
The management plans to aggressively grow this business. The company received
capital infusion of Rs 2.25bn in FY11 taking the net worth to Rs 5bn as of March 2011.
The management stated that the strategy is to grow in financing of SME businesses by
leveraging the ABG (Aditya Birla group) ecosystem.
Manufacturing businesses
Carbon Black segment: The management stated that Aditya Birla Group (ABG) has
entered into an agreement to acquire Columbian Chemicals. According to management,
post the proposed acquisition, ABG will become the world's largest carbon black player.
The management states that the proposed acquisition has no direct financial impact on
ABNL. However, indirect benefits may accrue in the form of efficiencies in raw material
procurement for the carbon black business segment of ABNL.
Garments segment: Revenues grew by 45% yoy and EBITDA margin was 7.6% in FY11.
The management expects the revenue growth to moderate in FY12 due to increase in
apparel prices. However, the company plans to add 200 new stores in FY12 (895
exclusive brand outlets as of March 2011) which should enable it to maintain the long term
growth momentum
The standalone ROACE in the manufacturing businesses (ex garments) is about 25-26%,
despite the recent pressure in input costs. Going forward, the management expects to largely
maintain this level of ROACEs.
IDEA Cellular (IDEA IN)
According to management, IDEA had a market share of 13% of revenues in 3QFY11.
However, as a proportion of incremental revenues the market share was about 20%, which
gives management the confidence that IDEA will emerge as a strong player relative to
competition
Aditya Birla Minacs (IT-ITeS)
According to management, Minacs sold total contract value (TCV) of more than $775mn
during FY11 and won 21 new logos.
The company's revenue increased 11% yoy to about Rs 17bn and EBITDA was up 75% yoy
to Rs 1.8bn. EBITDA margins improved 400 bps yoy to about 11% in FY11
Valuation
Our SOTP-based target price consists of: 1) the BSLI stake (27% of our TP), financial services
(insurance, asset management and the listed AB Money Ltd) (8% of our TP); 2) the telecom
business (25.4% stake in IDEA, 35% of our TP); and 3) the manufacturing businesses (30% of
our TP)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We hosted ABNL among other companies at the RBS China India Access meet in London.
Following are the key highlights of the same.
Birla Sunlife Insurance (BSLI)
The company has not disclosed its NBAP margin/EV for FY11. However, management
indicated that its NBAP margin remained stable yoy (22.5% in FY10). The embedded
value (EV) last disclosed by the company was Rs38.2bn as of March 2010.
The capital base remained unchanged yoy at Rs24.5bn as of March 2011. The
management does not expect capital infusion in FY12 as new business growth is
expected to be moderate and the contribution of renewal premium in total premium is
rising.
Aditya Birla Finance (NBFC)
The management plans to aggressively grow this business. The company received
capital infusion of Rs 2.25bn in FY11 taking the net worth to Rs 5bn as of March 2011.
The management stated that the strategy is to grow in financing of SME businesses by
leveraging the ABG (Aditya Birla group) ecosystem.
Manufacturing businesses
Carbon Black segment: The management stated that Aditya Birla Group (ABG) has
entered into an agreement to acquire Columbian Chemicals. According to management,
post the proposed acquisition, ABG will become the world's largest carbon black player.
The management states that the proposed acquisition has no direct financial impact on
ABNL. However, indirect benefits may accrue in the form of efficiencies in raw material
procurement for the carbon black business segment of ABNL.
Garments segment: Revenues grew by 45% yoy and EBITDA margin was 7.6% in FY11.
The management expects the revenue growth to moderate in FY12 due to increase in
apparel prices. However, the company plans to add 200 new stores in FY12 (895
exclusive brand outlets as of March 2011) which should enable it to maintain the long term
growth momentum
The standalone ROACE in the manufacturing businesses (ex garments) is about 25-26%,
despite the recent pressure in input costs. Going forward, the management expects to largely
maintain this level of ROACEs.
IDEA Cellular (IDEA IN)
According to management, IDEA had a market share of 13% of revenues in 3QFY11.
However, as a proportion of incremental revenues the market share was about 20%, which
gives management the confidence that IDEA will emerge as a strong player relative to
competition
Aditya Birla Minacs (IT-ITeS)
According to management, Minacs sold total contract value (TCV) of more than $775mn
during FY11 and won 21 new logos.
The company's revenue increased 11% yoy to about Rs 17bn and EBITDA was up 75% yoy
to Rs 1.8bn. EBITDA margins improved 400 bps yoy to about 11% in FY11
Valuation
Our SOTP-based target price consists of: 1) the BSLI stake (27% of our TP), financial services
(insurance, asset management and the listed AB Money Ltd) (8% of our TP); 2) the telecom
business (25.4% stake in IDEA, 35% of our TP); and 3) the manufacturing businesses (30% of
our TP)
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