July 28, 2011

CMP ` 32.4 Q1FY12 Result Update

BUY

ILFSVC has reported a mixed set of numbers for the quarter ended June 2011 as per expectations. For Q112, company has reported consolidated income of ` 517Mn v/s ` 430Mn, a 20% Y-Y growth, but a 3% Q-Q de-growth. Growth in AUM and topline is reflected in the enhanced numbers for the current quarter. However, same is not translated into growth in profits due to expenses and amortisation of the consideration paid for the Saffron amalgamation, thus the results are not strictly comparable with the corresponding quarter of last year as it was done in August 2010. Results Brief:

Staff cost as a % of sales for the current quarter has seen a rise of 23bps Y-Y to 25%, which includes 8% salary
increment

Reported PAT for Q1FY12 was at ` 172Mn as against ` 177Mn for Q1FY11 (3% Y-Y de-growth) EPS reported for the quarter ended June 2011 was ` 0.84/- as compared to ` 0.87/- for the quarter ended June
2010 Analyst Conference Call Highlights:

Operating Performance:
ILFSVC has 3 funds under deployment viz., Tara III (fully deployed, 2 investments in Q112), Real Estate II ($150Mn available) and Infrastructure Fund ($200Mn available), both of which would be fully deployed by December 2011

Net earning AUM at $2.4Bn Saffron contribution: Topline at ` 83Mn, Expenses at ` 59Mn and PAT at ` 24Mn $20Mn International Loan taken for the Saffron merger is for a period of 3 years. Company has already repayed
$3Mn effective March 2011. Going forward, the repayment + interest schedule would be $2Mn/quarter

Fund raising started from January 2011: Tara India Fund 4 ($40Mn), JV Fund with Milestone ($50Mn) and PIPE
Fund ($40-50Mn)

4 exits for Q1FY12, 3 partial exits in the Real Estate space and 1 full exit
Our Call: At CMP of ` 32.4/-, the scrip is trading at 9.7x TTM earnings of ` 3.4/- per share. We continue to have a positive outlook on the business having assured revenues with fantastic economics despite a poor performance of the stock price on account of real estate concerns. This was adequately proved by the company's successful exits and investment track record in FY11 as well as the current quarter of FY12. We believe ILFSVC can generate excellent returns for the shareholders over the long term, thereby maintaining our 'BUY' recommendation.

ILFSVC : Q1FY12 Result Update

Consolidated Quarterly Financials

Earnings Statement YE March (` Mn) Net Revenues Other Operating Income Total Income Employee Costs Sub - Advisory Fees Legal & Professional Fees Other Expenditure Total Expenditure Operating Profit Other Income EBITDA Depreciation/Amortisation EBIT Interest PBT Tax PAT Before MI Minority Interest Net Profit Equity EPS (`) Ratio Analysis Particulars OPM (%) EBITDA (%) PBIT (%) PAT (%) Operational Parameters Particulars Staff Expenses Legal & Professional Fees Other Expenses Effective Tax Rate Q112 25.1% 6.7% 10.2% 19.5% Q411 Q-Q(bps) 19.2% 8.3% 14.3% 28.2% 588.7 (160.8) (405.9) (871.7) Q111 Y-Y(bps) 24.9% 4.2% 8.8% 20.0% 22.6 247.9 142.1 (55.5) FY11 23.6% 6.6% 11.9% 23.4% FY10 Y-Y(bps) 24.3% 5.1% 9.2% 22.5% (73.7) 154.1 262.8 94.2 Q112 51.6% 54.3% 43.3% 33.3% Q411 Q-Q(bps) 58.2% 63.9% 49.8% 34.3% (663.8) (959.7) (644.0) (95.7) Q111 Y-Y(bps) 61.4% 61.7% 51.7% 41.1% (981.8) (745.0) (838.8) (782.5) FY11 57.9% 59.9% 46.7% 35.0% FY10 Y-Y(bps) 61.3% 64.4% 54.4% 42.0% (343.1) (449.2) (767.4) (698.4) Q112 499.0 18.0 517.0 129.7 33.2 34.5 52.8 250.2 266.8 13.9 280.7 56.8 223.9 9.3 214.7 41.8 172.9 0.7 172.2 411.3 0.84 Q411 517.3 15.3 532.6 102.2 0.0 44.1 76.1 222.4 310.2 30.1 340.3 75.3 265.0 9.8 255.2 71.9 183.3 0.8 182.5 411.3 0.89 Q-Q(%) -3.5% 17.5% -2.9% 26.8% -21.8% -30.5% 12.5% -14.0% -53.7% -17.5% -24.6% -15.5% -5.5% -15.9% -41.9% -5.7% -11.6% -5.6% 0.0% -5.6% Q111 410.4 19.4 429.7 106.8 3.1 18.0 37.8 165.8 263.9 1.4 265.3 43.2 222.2 222.2 44.5 177.7 0.9 176.8 406.1 0.87 Y-Y(%) 21.6% -7.0% 20.3% 21.4% 91.4% 39.7% 50.9% 1.1% 890.6% 5.8% 31.5% 0.8% -3.4% -6.1% -2.7% 0.0% -2.6% 1.3% -3.8% FY11 1,900.4 72.4 1,972.7 465.3 130.8 234.2 830.2 1,142.5 39.5 1,182.0 260.4 921.5 16.3 905.2 212.3 692.9 2.7 690.2 411.3 3.4 FY10 1,698.4 61.1 1,759.5 428.0 89.5 162.6 680.1 1,079.4 53.9 1,133.2 176.3 956.9 956.9 215.4 741.5 3.1 738.5 406.1 3.6 Y-Y(%) 11.89% 18.45% 12.12% 8.72% 46.07% 43.99% 22.07% 5.85% -26.75% 4.30% 47.71% -3.70% -5.41% -1.45% -6.56% -10.83% -6.54% 1.28% -7.72%

Disclaimer
Disclosure of Interest Statement 1. Analyst Ownership of the scrip 2. PPFAS ownership of the scrip 3. PMS ownership of the scrip IL&FS Investment Managers Ltd. YES YES YES

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