Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Consolidated Securities Ltd CMP: 78 December 31, 2015 Stock Details BSE code 530067 BSE ID CNSDSEC Face value (र ) 10 No of shares (m) 5 Market cap (र m) 390 30 days avg. vol 2523 Free float (रm) 117 Dividend yield FY15 (%) Stock performance (%) Absolute Rel. to Sensex nm 1M 3M 12M 4.4% 16.4% 3.6% 5.1% 17.2% 8.9% Shareholding Pattern* (%) Promoters FIIs DIIs Others 74.79% % % 25.21% *As of September 2015 Company Overview Consolidated Securities Ltd (CSL) was incorporated on December 28, 1992. The Company is a registered NBFC and is carrying on the business of investment; buying & selling in shares, debentures, bonds and all types of securities and lending, advancing and making deposits to individuals and corporate entities. Industry Overview India s Non-Banking Financial Companies (NBFCs) have rapidly emerged as an important segment of the Indian financial systems. NBFCs assume significance in the small business segment as they primarily cater to the credit requirements of the unorganized sector such as wholesale & retail traders, small-scale industries and small borrowers at the local level. The segment is now being recognized as complementary to the banking sector due to implementation of innovative marketing strategies, introduction of tailor-made products, customer-oriented services, attractive rates of return on deposits and simplified procedures etc. Financial Performance Consolidated securities reported a drop in top line from र1,129 Relative Chart Consolidated Securities (LHS) Sensex million in FY 14 to र931.1 million in FY 15. EBITDA increased to र140 million in FY15 from र 98 million in 100 90 80 70 60 50 40 30 20 10 0 31,000 30,000 29,000 28,000 27,000 26,000 25,000 24,000 23,000 22,000 FY14. The company reported a net profit of र80m for FY15. Table1: Key Financials Source: Bloomberg (Y/e March) Sales (र m) 1,057.9 1,129.6 931.1 YoY Growth (%) -54.2% 6.8% -17.6% EBITDA (र m) 52.7 97.5 139.6 EBITDA Margin 5% 9% 15% PAT (र m) 21.6 72.0 79.9 EPS (र) 9.65 15.47 17.06 YoY Growth (%) -25% 72% 10% Source: Company, Karvy Investment Advisory 1
Background and Business Description The Company is a registered Non-Banking Financial Company (NBFC) incorporated on December 28, 1992. The Company is carrying on the business of investment; buying & selling in shares, debentures, bonds and all types of securities and also of lending, advancing and making deposits to anybody corporate, firm, person or association, with or without security. On the basis of its activities, the company s business can dividend Lending and Proprietary Investments. two major segments- Secured The Company was initially promoted by Prem Lall Gupta, Kamal Jeet Singh Bhatia, Pritam Singh Bhatia, Ravinder Kaur Bhatia, Harinder Kaur Bhatia, Sunil Kala and Dolly Bhatia. Later, it was acquired by Mr. T.S. Bhatia, Kamaljeet Singh Bhatia, Dolly Bhatia, Ravinder Kaur Bhatia, Harinder Kaur Bhatia, Surinder Kaur Bhatia, Honey Bhatia, M/s. Nikki Securities Private Limited and M/s. Growth Commercial Limited. Thereafter, M/s. Mundra Credit and Investment Private Limited entered into a Share Purchase Agreement (SPA) with the promoters of the company on 2nd July 2005 for acquisition of 17,07,650 equity shares representing 42.65% of the total paid up equity share capital of the company, consequent to which an open offer in terms of regulation 10 & 12 of SEBI (SAST) Regulations, 1997 was made. Since then, M/s. Mundra Credit and Investment Private Limited is the promoter of the Company. Key Strengths The players in the NBFC sector still have a lot of scope to cover larger market and the rural markets are still untapped. Risks & Concerns Economic Downturn: If the Economic downturn is prolonged it can reduce the financing need of people due to shrinking business opportunities. Private Banks: Private Banks are also working on the similar business model as NBFCs, thereby giving a very stiff competitions. RBI and Government restrictions: With more stringent norms governing the functioning of NBFC and certain government restrictions act as a hindrance in smooth functioning of NBFC. Board of Directors Table 2: Composition of Board Name Kapil Aggarwal Rohit Gupta Ashok Kumar kathuria Anirudha Kumar Anjna Source: Company Relation with Company Chairman Managing Director Director Director Additional Director 2
Industry Overview India s financial services sector has been an important contributor to the country s gross domestic product (GDP) accounting for nearly 6% in 2014-15. It consists of the capital markets, insurance sector and non-banking financial companies (NBFCs). The Government of India has taken various steps to deepen reforms in the capital markets, including simplification of the Initial Public Offer (IPO) process which allows qualified foreign investors (QFIs) to access the Indian bond markets. India s Non-Banking Financial Companies (NBFCs) have rapidly emerged as an important segment of the Indian financial systems. NBFC has increased from 10.7% of banking assets in 2009 to 14.3% of banking assets in 2014. Further, NBFCs also often take lead role in providing innovative financial services to Micro, Small, and Medium Enterprises (MSME) most suitable to their business requirements. Moreover, it plays a critical part in filling the many gaps left by the banking sector. The performance of the NBFCs has been particularly impressive in areas that are national priorities, like infrastructure finance, SME finance, housing finance, micro finance and financial inclusion. In order to meet with the fund requirements, NBFCs borrow from the markets directly at much higher rates than the banks. Consequently, the rates at which they lend are also higher. As a result, higher interest outgo caps margins of the borrowers from the NBFCs and also deters their growth. Tight regulations over the NBFC sector reveals that more effort and energy is being expended on curbing the growth of NBFCs by adding to their regulatory burden than on furthering their potential to be a transformative force for financial inclusion. Recent years have witnessed significant increase in financial intermediation by the NBFCs. But as far as the current status of the NBFCs is concerned, these are trapped in a cycle of high costs of funds leading to high rate of interest for borrowers. Business Profile of NBFCs: Business Profile Asset Finance (AFC) Loan Company Infra Finance (IFC) Core Investment Company (CIC) Micro - Finance Factoring Infra Debt Fund (IDF) Housing Finance (HFC) RBI NHB Competition analysis The financial services industry is exposed to intense completion. Below is the comparison of Consolidated Securities Ltd to few of its peers. Company CMP ( ) Mcap ( m) Rev ( m) OPM (%) EPS ( ) PE (x) Consolidated Securities 78.0 390 937 14.4% 17.06 4.6x Comfort Fincap Ltd. 12.2 132.9 39.8 87.0% 17.1 8.4x Shreenath Investment 10.9 36.9 15.2 3.4% 0.1-38.8x 3
Source: BSE Financial Analysis Consolidated Sec. reported a drop in top line to र931m in FY 15 from र1129m in FY 14. Return of equity and return on capital employed was at 9.4% and 16.3% respectively. The liquidity ratios were at the very comfortable levels with current ratio at 18.0x. Year end March Income statement ( million) Revenue 1,057.9 1,129.6 931.1 % growth -54.2% 6.8% -17.6% EBITDA 52.7 97.5 139.6 % EBITDA margin 5% 9% 15% Depreciation and amortisation 0.8 0.7 1.0 EBIT 51.9 96.8 138.7 Interest 12.3 10.7 11.8 PBT 39.2 99.9 122.6 Tax 17.6 27.9 42.7 Net profit 21.6 72.0 79.9 % growth net profit -47% 233% 11% Balance sheet (रmillion) Shareholder fund 699.0 773.4 853.1 Long term liab 1.2 1.0 0.7 Current liab 130.8 59.0 46.7 Fixed assets 187.3 247.4 4.8 Current assets 635.4 569.6 838.4 Cash & cash equi 8.3 16.4 17.4 Cash flow statement Cash flow operations -42.1 58.5-34.0 Cash flow from investing -55.0 37.6 69.9 Cash flow from financing 104.9-88.0-34.9 Per share data EPS (र) 9.65 15.47 17.06 CEPS (र) (8.40) 11.68 (6.80) DPS (र) na na na BVPS (र) 139.6 154.5 170.4 Financial Ratios % ROE 3.1% 9.3% 9.4% ROCE 7.4% 12.5% 16.3% Interest coverage ratio 4.2 9.1 11.7 Current ratio 4.9 9.7 18.0 Cash ratio 0.1 0.3 0.4 Source: Company, Karvy Investment Advisory 4
Financial Snapshot Revenue growth (%) EBITDA margin (%) 1,20 1,00 80 60 40 20 1% % -1% -2% -3% -4% -5% -6% 15 10 5 2% 15.0% 1% 5.0% % Revenue ( m) % growth EBITDA ( m) % EBITDA margin 20 15 BVS & EPS 2 15.0 2 Liquidity ratios 0.4 10 1 15.0 0.3 5 5.0 1 0.2 Book value per share ( ) 5.0 0.1 EPS diluted ( ) Current ratio Cash ratio 10 8 6 4 2 Net Profit Margin (%) 1% 8.0% 6.0% 4.0% 2.0% % 2% 15.0% 1% 5.0% % Profitability Ratios Net Profit ( m) % net profit margin ROCE ROE Source: Karvy Investment Advisory 5
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