IIFL Finance (IIFL) Q4 06/07 earnings summary

Executive summary

• FY2006-07 consolidated revenue rose 95.2% to Rs 4,257.3 mn; PAT increased 54.5% to Rs 756.2 mn amid rapid branch expansion and higher broking and insurance income.

• Diversification reduced equity broking’s revenue share to 54% from 65% in FY2005-06; management targeted 40% over the next three years.

• Branches expanded to 560 from 175 and headcount to 11,750 from 4,150, establishing infrastructure for further growth.

Financial highlights

• Consolidated revenue was Rs 4,257.3 mn, up 95.2%; EBITDA was Rs 1,412.3 mn, up 62.5%, with a 33.2% margin.

• PBT rose 59.6% to Rs 1,146 mn; PAT increased 54.5% to Rs 756.2 mn, with higher tax incidence moderating PAT growth.

• Consolidated EPS was Rs 16.32 versus Rs 11.51; cash profit rose 57.5% to Rs 905.4 mn.

• Net worth reached Rs 3,250.9 mn, up 67.3%; capital employed was Rs 5,067.7 mn, up 35.3%.

Outlook and guidance

• Management expected equity broking revenues to grow while reducing their contribution to 40% of revenue within three years; non-equity products were targeted to reach 60%.

• New branches represented 70% of the network but contributed 20% of FY2006-07 business; revenue was expected to scale as the expanded footprint matured.

• Mutual fund distribution was expected to rebound after fewer New Fund Offerings reduced FY2006-07 revenue by 25%.

• Investment banking and mortgage and loan distribution were identified as new businesses expected to contribute significantly in future years.