Financial Consultancy, Investment Banking and our "Business Insight" for Feb'10

During 2008-09 Financial Institutions and Investment Banking firms stock prices were battered across the world, because the leading US Investment Banking firms were at the helm of the financial turmoil.

The Indian Institutions too found themselves facing the wrath of the investors. The primary and secondary market both saw a dearth of Private placements, PE deals, fund raising and IPOs. However, the situation is a lot changed now. Consider for fact the figures stated below and the jump in fund raising activities by the Indian Corporates.

PE deals in India

• The total value of private equity transactions and qualified institutional placement (QIP) deals amounted to $1.24 billion in January 2010, against $309 million in the year ago period, registering an over four-fold jump.
• In January this year 29 PE and QIP transactions were posted, against 16 deals registered in same period in 2009.

Insurance

• India is the fifth largest life insurance market in the emerging insurance economies globally and the segment is growing at a healthy 32-34 per cent annually.
• According to a report by research firm RNCOS—'Booming Insurance Market in India (2008-2011)'—the total life insurance premium in India is projected to grow to US$ 259.72 billion by 2010-11.

Qualified Institutional Placements (QIPs)

• In 2009, Indian companies had raised close to US$ 7.18 billion by way of 45 QIP issuances.

Initial Public Offers (IPOs)

• In 2009, there were 21 IPOs that raised US$ 4.25 billion as compared to 36 IPOs in 2008 that raised US$ 3.68 billion

ADR/GDR's

• Funds raised by the Indian corporate sector via ADRs/ GDRs has jumped over 33 times from around US$ 101.72 million in 2008 to about US$ 3.50 billion in 2009

Mutual Funds

• The average assets under management of the mutual fund industry stood at US$ 173.16 billion for the month of December 2009, an increase of nearly 88 per cent from US$ 91.79 billion in December 2008, according to the data released by Association of Mutual Funds in India (AMFI).

The above figures clearly suggest the scope India provides for Financial Advisory, Investment Banking, Wealth Management and Brokerage Services and the situation is only going to improve further with India registering 7.5-8% GDP growth, Corporates going for further fund raising to fuel the growth.

The Business Insight for this month is quite obviously in Investment Banking and Financial Advisory services and registered more than 150% growth YOY from 2004-08. FY 2008-09 was an aberration and the company is back to registering phenomenal performance during FY 2009-10 with 36% CAGR QOQ.

The investors are most definitely oblivion to the performance of the company. I would not put forward the estimates regarding the appreciation one can expect, however I would like to mention here that a scale back to previous highs alone can make it a 17-18 bagger, and it is quite possible considering the way the company has been performing off-late.

Stock Market is a place well known for being extremely exuberant at times and extremely pessimistic at other times. Thus these over-reactions give both an opportunity to exit at unsustainable valuations while also provide exceptional buying opportunities, and a smart investor does just that.

- Ekansh Mittal, Lead Associate - HBJ Capital Services Pvt. Ltd
Email: Ekansh@hbjcapital.com