FINALGlobal Investment Research Challenge - 2011
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Transcript of FINALGlobal Investment Research Challenge - 2011
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Sector-wise investment Projection (INR billion)
Electricity 6,586
Road and Bridges 2,787
Telecom 3,451
Railways 2,008
Irrigation 2,462
Water Supply and 1,117
Ports 406
Airports 361
Sectorove
rview
Increase in Infrastructure investment as a %of GDP
XII five-year plan investment targets
qMore than 70% of IDFCs outstanding disbursement is towards the Energy and Transportation sectorqXIth5-year plan (FY 08 12) will see addition of 58000MW of thermal power capacity addition. XIIth plan target
is 100000MW.
q26,549 km of projects are in the process of being awarded under the NHDP . The changes suggested by the BKChaturvedi report to the Model Concession Agreement will ensure viability of PPP projects
q
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Company
Overview
Business Segments
Corporate & InvestmentBankingqCore business of IDFCq
qFocused on key sectors likeenergy, urban infrastructure,communications,transportation
qqThis division consists of:
Project Financegroup
IDFC InvestmentBanking
IDFC Securities
Mutual Fund Asset Management
qThe company is investmentmanager of the schemes ofIDFC Mutual Fund.
q
qIDFC Mutual Fund is the 12thlargest fund house in the
country with assets undermanagement of Rs. 17,348 cras on December 2010
q
qParis-based Natixis GlobalAsset Management bought a25% in IDFC AMC for Rs 275crore
qThis division consists: IDFC Private Equity IDFC Project Equity IDFC Capital IDFC Projects
q
qIDFC PE manages three funds-India Development Fund,IDFC Private Equity Fund IIand IDFC Private Equity FundIII having total capitalcommitment of INR 59.92billion.
Alternative Asset Management
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Shit inbor
rowingprofile
Shift towards bonds in borrowing profile will help maintain spreads
Q2FY10: Borrowing profile Q2FY11: Borrowing profile
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IFCStatus
AMajorPositiv
e
IFC CriteriaqThe NBFC should be a non deposit taking company.
qA minimum of 75% of its total assets should be
deployed in infrastructure loans.
qThe NBFC should have net owned funds of Rs3bn or
above.
qThe NBFC should have a minimum credit rating 'A' or
equivalent of CRISIL, FITCH, CARE, ICRA or equivalent
rating by any other accrediting rating agencies.
qThe NBFC should have a CRAR of 15% (with a
minimum Tier I capital of 10%).
ConcessionsqSingle and group exposure limits raised to 25% and
40% respectively.
qBanks exposure to IFCs has been raised to 20% of
capital funds
qRisk weights (bank lending to IFCs) linked to the
ratings. For AAA rated IFCs the risk weights will come
down to around 20%.
qAccess to ECB (External Commercial Borrowing) up to
50% of their owned funds under the automatic route.
ECBs above 50% would be considered under the
approval route.
qIFCs allowed to issue tax exempt infrastructure bonds
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valuation
Target price : Rs 214 Time Frame: 3 monthsRating: BUY
qApproximately 85% of IDFCs net worth is madeup by the infrastructure finance
IDFCs operating income
CAGR of 40% in period 2006-10During FY10, it grew by 11%Relative Valuation for Core BusinessComparable companies taken for core business are
Power Finance Corporation limitedRural Electrification Corporation Limited.Relative Valuation for IDFC SSKI
Motilal OswalEdelweissSOTP Valuation
:V a lu a tio n o f A sse t M a n a g e m e n t B u sin e ss .R ece n t d ea ls in A M C w ere con sid ered W e b e liev e th at rece n t va lu ation of ID FC b y
.N atixis is o n h ig h e r sid e W e h av e va lu e d ID FC. % .A M C a t 3 5 o f A U M
V a lu a tio n o f S ta k e in N S E ,B ased on de alin N ov 20 10 by Fina ncial
.Te ch n olog ie s .W e value stake of ID FC in N SE at R s 13 50 0
.m illio n /V alu ation of P rivate P roject Eq u ity %W e h ave d one valuation for ran ge o f 5 to
% .20 of A U M and com e u p w ith targe t price
Methodology Peers Multiple used Contribution per share Conservative
Moderate
Optimistics
IDFC Standalone P/BV PFC,REC P/BV 180.7 2.7 2.75 2.80
IDFC SSKI 15 p/e M o tila l,O sw al
E d e lw e is
s
p/e 7.3 14 15 16
IDFC Private Equity 10 %AUM
3.7
IDFC Project Equity 10%AUM
2.7
IDFC MF 3.4%AUM
3.5
Value of IDFC stake in NSE 8.20% Comparable 7.5
Value of all Other Investments andsubisiaries
.8 2
Total Value 213.6
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Detailsof
valuation
AMC valuation
Recent Deals % of AUM Weightage
T Rowe Price acquiring a 26% stake in UTI Asset Management Co Ltd for Rs 650crore
3.2 25% 0.80
Nomura Asset Management Co. Ltd picked up a 35% stake in LIC Mutual Fund
Asset Management Co. Ltd
2.4 25% 0.60
Religare took over Lotus MF 2 25% 0.50L&T Finance acquired the asset management business of Cholamandalam DBSFinance Ltd
1.5 0% 0.00
In December 2007, Reliance Capital sold about 5% of its fund unit for Rs 500crore
13 0% 0.00
IDFC Divests 25% In AMC To French Fund Manager Natixis 6 25% 1.50
3.40
NSE Stake Valuation
% stake of IDFC in NSE 8.20%
Value of NSE based on last deal by FT in 2010 135000
Value of IDFC stake 11070
No of Equity Shares 1467
Contribution per share 7.55
IDFC SSKI Relative Valuation
Comparable companies1. Edelweiss Capital P/E 13.96a. Investment banking b. InstitutionalEquities
c. Asset Management d. Private clientbrokerage
2. Motilal Oswal P/E 14.05
a.Institutional broking b. Wealth managementc. Asset management
a.
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Investme
ntsummary
IDFC has chosen to maintain tier-I capital of 14%& tier-II capital of 1% in order to maintain highcredit rating.
High credit rating results in lower risk weights toIFC. Thus high credit rating will help raise funds at
lower cost.
Profit booking Access to global investors to IDFC AMC.
This will enable IDFC AMC to raise cheapfunds abroad to invest in India.
Diversified business into asset management,private equity, project equity, investment bankingetc.
Fee based income grew 18% YoYLoan related fees increased 2.8x YoYYoY growth in broking fees 25%YoY growth IB fees 26%
Interest rate riskPolicy decisions of central & state governmentsdirectly impacts IDFCs business. A good exampleof this are concessions granted due to IFC statusand initiatives to increase private investment ininfrastructure sector.
Diversified Business
C red it R atin g
T w in B e n e fits o f N a tix is D e a l
Risks
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THANK YOU
Y e a r M ar 06 M ar 07 M ar 08 M ar 09 M ar 10 ( )M ar 1 1 E M ar 12 M ar 13
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Income
statement(Inr
incr.)
Y e a r M ar 06 M ar 07 M ar 08 M ar 09 M ar 10 ( )M ar 1 1 E M ar 12( )E
M ar 13( )EO p e ra tin g In c o m e , .1 0 3 6 3 , .1 5 6 6 1 , .2 7 9 5 1 , .3 6 2 7 1 , .4 0 3 3 5 , .5 3 5 2 9 , .6 9 5 8 8 , .8 6 9 8 5
O th e r In co m e .9 5 .5 2 1 .6 2 7 .1 5 8 .2 6 6 .3 8 9 .5 0 6 .6 3 3 T o ta l In c o m e , .1 0 4 5 8 , .1 6 1 8 1 , .2 8 5 7 8 , .3 6 4 2 9 , .4 0 6 0 2 , .5 3 9 1 8 , .7 0 0 9 4 , .8 7 6 1 7 :E X P E N D IT U R E
&O p eratin g A d m in istration Ex p en ses .1 5 3 .2 4 4 .6 1 5 .1 5 3 2 .1 7 9 2 .2 7 5 1 .2 7 5 0 .3 0 9 2
M iscellan eo us Ex pe nses .5 1 7 .5 7 9 .1 0 7 3 .1 7 1 5 .1 5 1 0 .2 0 0 0 .2 0 0 0 .2 0 0 0
+In te re s t e x p e n s e p ro v is io n s .5 0 0 8 .8 5 5 5 , .1 5 1 3 6 , .2 0 8 1 2 , .1 9 5 3 5 , .2 6 5 2 1 , .3 5 9 0 4 , .4 5 7 2 6Em ployee E xpen se .3 1 5 .4 8 0 .1 6 7 7 .1 7 7 3 .3 0 7 2 .4 3 1 3 .5 6 0 8 .7 0 0 9
To tal Exp en d itu re includ ingp rov ison s .5 9 9 3 .9 8 5 7 , .1 8 5 0 2 , .2 5 8 3 2 , .2 5 9 0 9 , .3 5 5 8 6 , .4 6 2 6 2 , .5 7 8 2 7 G ross P rofit .4 4 6 5 .6 3 2 5 , .1 0 0 7 7 , .1 0 5 9 7 , .1 4 6 9 3 , .1 8 3 3 2 , .2 3 8 3 2 , .2 9 7 9 0D e p re cia tio n .3 9 .4 4 .7 3 .2 3 8 .4 0 6 .5 0 0 .5 0 0 .5 5 0
Profit B efo re Ta x .4 4 2 6 .6 2 8 0 , .1 0 0 0 4 , .1 0 3 5 9 , .1 4 2 8 7 , .1 7 8 3 2 , .2 3 3 3 2 , .2 9 2 4 0
T a x .6 4 0 .1 2 9 3 .2 4 8 5 .3 2 0 6 .4 0 0 0 .4 9 9 3 .6 5 3 3 .8 1 8 7
D eferred Ta x - .13 1 - .6 3 - .11 3 - .45 1 - .33 4 .0 0 .0 0 .0 0
N e t P ro fit .3 9 0 9 .5 0 3 9 .7 5 2 3 .7 5 7 7 , .1 0 6 2 2 , .1 2 8 3 9 , .1 6 7 9 9 , .2 1 0 5 3 ( )M in o rity In te rest a fte r ta x .0 2 .0 0 .1 1 3 .4 2 .0 1 .0 0 .0 0 .0 0
/Profit Loss of A ssociate C om p an y .0 0 .0 0 .1 1 - .3 7 .0 2 .0 0 .0 0 .0 0
N et P rofit after M ino rity Interest& / . .P L of A ssoc Co
.3 9 0 8 .5 0 3 9 .7 4 2 2 .7 4 9 8 , .1 0 6 2 3 , .1 2 8 3 9 , .1 6 7 9 9 , .2 1 0 5 3
E xtra o rd in a ry Ite m s .0 1 .0 0 .0 7 .1 3 .8 6 .0 0 .0 0 .0 0
A djusted N et P rofit .3 9 0 7 .5 0 4 0 .7 4 1 4 .7 4 8 6 , .1 0 5 3 7 , .1 2 8 3 9 , .1 6 7 9 9 , .2 1 0 5 3D ivid e n d .1 1 2 5 .1 1 2 9 .1 5 5 6 .1 5 5 5 .1 9 5 1 .2 1 8 7 .2 2 6 2 .2 2 6 2
P R E , .1 0 6 5 2 , .1 4 5 3 7 , .1 8 7 9 1EPS .5 8 .8 1 .8 8 .1 1 1 .1 4 0
EPS grow th %4 0 %9 %2 7 %2 5
/D ivide nd Sh are .1 5 0 .1 5 0 .1 5 0 .1 5 0
Y e a r M a r 0 6 M a r 0 7 M a r 0 8 M a r 0 9 M a r 1 0 ( )M a r 1 1 E ( )M ar 1 2 E ( )M a r 1 3 E
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Balance
sheet(Inrincr.)
Y e a r M a r 0 6 M a r 0 7 M a r 0 8 M a r 0 9 M a r 1 0 ( )M a r 1 1 E ( )M ar 1 2 E ( )M a r 1 3 E
:S O U R C E S O F F U N D S S h are C ap ital , .1 1 2 2 5 , .1 1 2 5 9 , .1 2 9 4 3 , .1 2 9 5 3 , .1 3 0 0 6 , .1 4 5 8 0 , .1 5 0 8 0 , .1 5 0 8 0
R eserves To tal , .1 4 4 6 0 , .1 8 2 1 7 , .4 2 9 9 0 , .4 8 8 0 6 , .5 7 0 9 5 , .6 7 7 4 7 , .8 2 2 8 4 , .1 0 1 0 7 4
E S O P S .0 0 .0 0 .0 0 .0 0 .0 0 .2 0 0 .2 4 0 .2 8 0
E q u ity A p p lica tio n M on e y .0 0 .0 0 .0 0 .0 1 .0 3 .0 0 .0 0 .0 0
T o ta l S h a re h o ld e rs F u n d s , .2 5 6 8 5 , .2 9 4 7 6 , .5 5 9 3 3 , .6 1 7 5 9 , .7 0 1 0 3 , .8 2 5 2 7 , .9 7 6 0 4 , .1 1 6 4 3 4M in o rity In tere st .0 3 .0 0 .2 4 1 .2 8 1 .6 3 .0 0 .0 0 .0 0
Secured Loans.
0 0.
4 9 8 0.
1 6 4 9.
0 0.
0 0.
0 0.
0 0.
0 0
U nsecured Loans , .9 3 8 0 2 , .1 4 4 0 4 8 , .2 2 1 3 8 6 , .2 3 5 4 8 1 , .2 6 5 4 3 9 , .4 0 4 1 0 1 , .5 3 5 0 1 2 , .6 7 4 3 3 5
TotalLoan Fun ds , .9 3 8 0 2 , .1 4 9 0 2 9 , .2 2 3 0 3 5 , .2 3 5 4 8 1 , .2 6 5 4 3 9 , .4 0 4 1 0 1 , .5 3 5 0 1 2 , .6 7 4 3 3 5
T o tal Lia b ilitie s , .1 1 9 4 8 9 , .1 7 8 5 0 5 , .2 7 9 2 1 0 , .2 9 7 5 2 1 , .3 3 5 6 0 5 , .4 8 6 6 2 8 , .6 3 2 6 1 6 , .7 9 0 7 7 0 :A P P LIC A T IO N O F F U N D S In fra Lo a n s , .1 0 0 8 7 1 , .1 3 9 1 8 4 , .1 9 9 0 5 1 , .2 0 5 9 6 2 , .2 5 0 3 1 1 , .3 9 5 4 9 1 , .5 4 1 8 2 2 , .6 9 3 5 3 3
Fixe d A ssets
G ross B loc k .7 7 0 .1 7 6 3 .3 8 0 2 , .1 5 9 0 1 , .1 6 8 7 9 , .1 7 6 4 0 , .1 8 6 4 0 , .1 9 6 4 0
FA .5 1 1 0 .5 2 3 0 .6 0 0 0 .7 0 0 0 .8 0 0 0
G o o d w ill , .1 0 7 9 0 , .1 1 6 4 0 , .1 1 6 4 0 , .1 1 6 4 0 , .1 1 6 4 0 :Less A ccu m u lated D ep reciation .2 6 3 .3 0 5 .3 6 7 .6 1 3 .9 0 7 .1 2 0 0 .1 5 0 0 .1 8 5 0
N et B lock .5 0 8 .1 4 5 9 .3 4 3 5 , .1 5 2 8 9 , .1 5 9 7 1 , .1 6 4 4 0 , .1 7 1 4 0 , .1 7 7 9 0
C ap ital W o rk in Prog re ss .0 0 .0 0 .3 3 5 9 .4 4 .1 3 8 .0 0 .0 0 .0 0
Inve stm ents , .1 2 9 2 8 , .2 3 9 0 3 , .5 2 2 5 7 , .6 5 0 0 0 , .4 6 4 1 8 , .5 0 1 4 5 , .6 4 5 8 0 , .6 9 7 7 0, &C urrent Assets Loans A dvan ces
Sundry D ebtors .2 5 3 .1 7 7 .3 7 9 .3 3 2 .8 5 9 .3 5 0 .3 5 0 .3 5 0
C ash and B ank Ba lance .3 5 3 0 , .1 0 8 0 0 , .1 8 0 8 1 .8 2 5 5 .2 7 1 5 .7 6 2 9 .5 2 2 3 .9 7 0 3L o a n s a n d A d v a n c e s .4 0 9 5 .7 4 6 0 , .1 1 6 0 1 , .1 0 6 9 4 , .2 9 9 2 2 , .2 9 9 2 2 , .2 0 0 0 0 , .2 0 0 0 0
To tal C urren t A ssets .7 8 7 7 , .1 8 4 3 7 , .3 0 0 6 1 , .1 9 2 8 1 , .3 3 4 9 6 , .3 7 9 0 1 , .2 5 5 7 3 , .3 0 0 5 3
: . &Less C urren t Liab Provision s
C u rre n t L ia b ilitie s .2 1 8 1 .3 9 9 2 .8 0 5 3 .7 6 6 4 , .1 0 1 8 6 , .1 2 2 2 3 , .1 5 0 3 4 , .1 8 7 9 3
Prov isio n s .1 3 0 7 .1 3 4 3 .1 8 7 2 .1 8 1 3 .2 2 9 7 .3 3 8 1 .4 4 7 0 .5 5 8 8
&To tal C u rren t Liab ilite s P rov ision s .3 4 8 8 .5 3 3 5 .9 9 2 5 .9 4 7 6 , .1 2 4 8 3 , .1 5 6 0 4 , .1 9 5 0 5 , .2 4 3 8 1N e t C urren t A ssets .4 3 8 9 , .1 3 1 0 2 , .2 0 1 3 6 .9 8 0 4 , .2 1 0 1 3 , .2 2 2 9 7 .6 0 6 8 .5 6 7 2D eferred Ta x A ssets .8 1 8 .8 8 5 .1 0 6 9 .1 5 5 6 .1 9 6 5 .2 4 6 5 .3 2 1 5 .4 2 1 5
D e fe rre d T a x Lia b ility .2 3 .2 8 .9 7 .1 3 5 .2 1 0 .2 1 0 .2 1 0 .2 1 0
N et D eferred Ta x
.7 9 4
.8 5 7
.9 7 2
.1 4 2 1
.1 7 5 5
.2 2 5 5
.3 0 0 5
.4 0 0 5
To tal A ssets , .1 1 9 4 8 9 , .1 7 8 5 0 5 , .2 7 9 2 1 0 , .2 9 7 5 2 1 , .3 3 5 6 0 5 , .4 8 6 6 2 8 , .6 3 2 6 1 6 , .7 9 0 7 7 0C o n tin g e n t L ia b ility .8 7 6 1 , .1 0 2 6 3 , .1 3 3 2 5 .4 3 3 3 .4 2 2 2
M ar 10 ( )M a r 1 1 E ( )M ar 1 2 E ( )M a r 1 3 E
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Cashflo
wstatement
(inrincr.)
M ar 10 ( )M a r 1 1 E ( )M ar 1 2 E ( )M a r 1 3 E
O p eratin g A ctivities
PB T , .1 4 2 8 7 , .1 7 8 3 2 , .2 3 3 3 2 , .2 9 2 4 0
: &A D D D ep rec iation A m ortisation .4 0 6 .5 0 0 .5 0 0 .5 5 0
:Less C han ge in W C .3 0 0 0 - .363 0 - .450 0 - .487 6
:Less C ha ng e in Infra Lo an s - , .4 434 8 - , .14 518 0 - , .14 633 2 - , .15 171 0
:L e ss T a x e s - .340 0 - .499 3 - .653 3 - .818 7:Less Profit on sale of in ve stm en ts - .428 0 .4 0 0 .7 0 0 .8 0 0
O th e r Prov isio n s .1 1 5 0 .1 8 5 0 .1 1 5 0 .1 1 5 0
C a sh From O pe ra tin g a ctivitie s - , .3 318 5 - , .13 322 1 - , .13 168 3 - , .13 303 4
In ve stin g A ctivitie s
Pu rcha se of inv estm en ts- , .101 758 0
- , .122 109 6
- , .146 531 5
- , .175 837 8
Sa le o f In ve stm en ts , .1 0 1 8 7 1 0 , .1 2 2 2 4 5 2 , .1 4 6 6 9 4 2 , .1 7 6 0 3 3 1
C ha n ge in Fixed A ssets - .14 0 - .77 0 - .100 0 - .100 0
G o o d w illo n A cq u isitio n - .90 4 .0 0 .0 0 .0 0
C a sh From in ve stin g a ctivitie s .8 6 .5 8 6 .6 2 7 .9 5 3
F in a n cin g A ctivitie s
E q u ity Issue d .5 3 .1 5 7 4 .5 0 0 .0 0
C F from Loan s , .2 9 9 5 8 , .1 3 8 6 6 2 , .1 3 0 9 1 1 , .1 3 9 3 2 3
:LES S D ivide nd Pa id - .195 1 - .218 7 - .226 2 - .226 2
O th e rs - .50 0 - .50 0 - .50 0 - .50 0
C ash From Fin an cin g a ctivities , .2 7 5 6 0 , .1 3 7 5 4 9 , .1 2 8 6 4 9 , .1 3 6 5 6 1
To tal C ash G ene rated du ring the pe riod - .554 0 .4 9 1 4 - .240 6 .4 4 8 0
C ash at the be ginn ing of the pe riod .8 2 5 5 .2 7 1 5 .7 6 2 9 .5 2 2 3