How Indian investment banks and brokerage firms performed on stock market during financial crisis

Amid the stock market crash lets look at how the Indian investment and brokerage firms fared. Below is the list of main companies in this category along with their one year high and low prices. The Price column shown the current market price (as on 17 January 2009).

	52Week High	52Week Low	Price
Apollo Sindhoori	77	25	52
Centrum Capital	1,839	722	1,625
Edelweiss Capital	1,508	234	239
Emkay Global	401	24	32
Future Capital	1,190	125	157
Geojit Fin Serv	132	20	24
IL & FS Investmart	227	58	65
India Infoline	344	34	46
Indiabulls Securities	300	17	19
JM Financial	137	17	21
Motilal Oswal	379	48	63
Religare Enterprises Limited	650	275	321

The table below shows an estimate of variation between their year high and low prices. We have presented the percentage of fall in share price occurring when the prices fell from year high to reach the year low price.

	Variation
Religare Enterprises Limited	-58%
Centrum Capital	-61%
Apollo Sindhoori	-68%
IL & FS Investmart	-74%
Edelweiss Capital	-84%
Geojit Fin Serv	-85%
Motilal Oswal	-87%
JM Financial	-88%
Future Capital	-89%
India Infoline	-90%
Emkay Global	-94%
Indiabulls Securities	-94%

Finally, lets look at how much these stocks have fallen from their highs to current levels and what percentage have they risen from their

	Fall from highs	Rise from lows
Centrum Capital	-12%	125%
Apollo Sindhoori	-32%	108%
Religare Enterprises Limited	-51%	17%
IL & FS Investmart	-71%	12%
Geojit Fin Serv	-82%	20%
Motilal Oswal	-83%	31%
Edelweiss Capital	-84%	2%
JM Financial	-85%	24%
India Infoline	-87%	35%
Future Capital	-87%	26%
Emkay Global	-92%	33%
Indiabulls Securities	-94%	12%

With an exception of Centrum Capital and Apollo the entire sector has seen huge decline in its market value. Most of the stocks have fallen by more than 80% from their year highs.

Performance of Indian investment banks and brokerage firms

This article in continuation to the previous post on Top Investment banks, brokerage companies of India. Here we have looked at few fundamentals of these companies mainly their revenues and profits. It should be noted that the comparison is not perfect because many of these firms have multiple business whereas others are just into investment banking or brokerage. In terms of ttm (trailing twelve months) revenues the standings are:

	Mkt Cap.	Sales
India Infoline	13.1	7.95
Indiabulls Securities	4.8	6.26
Edelweiss Capital	17.9	2.29
Geojit Fin Serv	4.9	1.79
Emkay Global	0.8	1.34
Apollo Sindhoori	2.9	1.14
Future Capital	9.9	1.00
Motilal Oswal	9.0	0.72
JM Financial	15.8	0.52
Centrum Capital	11.1	0.46
IL & FS Investmart	4.6	0.31
Religare Enterprises Limited	24.5	0.29

The table below shows the same companies in order of their ttm earnings.

	Sales	Profit	Margin
Indiabulls Securities	6.26	2.23	36%
India Infoline	7.95	1.85	23%
Motilal Oswal	0.72	0.44	60%
Edelweiss Capital	2.29	0.26	11%
Geojit Fin Serv	1.79	0.25	14%
JM Financial	0.52	0.25	48%
Apollo Sindhoori	1.14	0.15	13%
Emkay Global	1.34	0.13	10%
Centrum Capital	0.46	0.12	27%
IL & FS Investmart	0.31	0.07	23%
Religare Enterprises Limited	0.29	-0.05	-16%
Future Capital	1.00	-0.06	-6%

In comparison to their market value how these company fare is shown below.

	Price	EPS Rs.	P/E
Indiabulls Securities	19	8.8	2.2
India Infoline	46	6.5	7.1
Motilal Oswal	63	3.1	20.5
Edelweiss Capital	239	3.4	69.8
Geojit Fin Serv	24	1.2	19.8
JM Financial	21	0.3	0.0
Apollo Sindhoori	52	2.7	19.1
Emkay Global	32	5.5	5.8
Centrum Capital	1,625	17.9	91.1
IL & FS Investmart	65	1.0	62.7
Religare Enterprises Limited	321	loss
Future Capital	157	loss

It is interesting to note that the highest valued firm in this category, Religare, has the least revenues of them and has reported loss in last quarter. However, being promoted by a well established group it is expected to grow fast and gain market share. This may be one reason why it is trading at high multiples.

Top Investment banks, brokerage companies of India

We have looked at the exchange listed investment and or brokerage companies: companies which either are directly into investment banking companies or provide brokerage services to retail and corporate investors. Based on the market value of these companies, as on Jan 17 2009, we have listed the top in this field along with their market capitalization.

	Market Cap (Rs. Billion)
Religare Enterprises Limited	24.5
Edelweiss Capital	17.9
JM Financial	15.8
India Infoline	13.1
Centrum Capital	11.1
Future Capital	9.9
Motilal Oswal	9.0
Geojit Fin Services	4.9
Indiabulls Securities	4.8
IL & FS Investmart	4.6
Apollo Sindhoori	2.9

Below is some information about these companies as provided on their websites.

Religare Enterprises Limited (REL) is an integrated financial services groups. It offers a diverse services ranging from investment in equities & commodities, wealth management, portfolio management services, personal financial services, insurance broking, investment banking and institutional broking services. The Investment Banking business is offered through Religare Capital Markets Limited (RCML), a wholly owned subsidiary of the Religare Enterprises Limited. It deals in merchant banking, transaction advisory and corporate finance servicing the Corporate, Entrepreneurs and Investors.

Edelweis is one of the leading investment bank of India. It ranked first in Mid-market Private Equity placements 2007 and IPOs in Mid-market segment in 2008. Edelweiss’ operations are broadly divided into Agency and Capital business lines. The Agency business line includes Investment Banking, Broking - both Institutional and HNI, Asset Management and Investment advisory services. The Capital business line includes Lending and Treasury Operations.

JM Financial is an integrated financial services group, offering a wide range of services. It offers research-based investment advisory and equity broking services to corporates, high net-worth individuals and retail investors across a wide range of financial products.

India Infoline Investment Banking offers service rangeing from Merchant Banking and Mergers & Acquisition transactions to Private Equity and High Yield Debt Syndication for both public and private companies.

Centrum is a financial services company in India with a network of over 75 branches operating in India. It has provides debt and equity services to some esteemed corporates.

It offers investment advisory services with domain expertise in private equity and real estate. It claims to be in capital management business which is beyond the traditional banking and brokerage businesses.

Motilal Oswal Financial Services Ltd(MOFSL) is an Indian Investment Banking firm with wide network of brokerage facility. It services include equity broking, commodity broking, distribution of third party products, investment banking and venture capital management. With over 1500 offices and franchisees in about 500 cities it is a well established brand among retail and institutional investors in India.

Geojit is a leading retail broking house of India. It has a network of over 450 branches in India and abroad. It also provides automated online trading services.

Indiabulls Securities Limited is one of the premier capital markets company and has a strong client base. Its brokerage house was assigned the highest rating BQ – 1 by CRISIL.

IL&FS Investsmart Limited is one of the top financial services organizations providing individuals and corporates with customised financial management solutions.

It is a financial services company promoted by Apollo Hospitals Group. It provides Trading facility in Equity and Derivative segment, commodity segment, IPOs, and MFs. It has 700 offices across the country.

Merrill Lynch faces huge loss due to bad mortgage write-downs

Last time when I wrote about Merrill Lynch posting record losses in its 93 years of existence, I knew some more pain was left, what the results exceeded all imaginations. Merrill Lynch reported fourth quarter loss of 8.6 billion USD from continuing operations. This is huge considering the profits it earned in 2006 - $7.5 billion. Total write-downs for this year so far have been around $16.5 billion. The breakup of the write-downs is like:
$9.9 billion - collateralized debt obligations (CDO),
$1.6 billion - sub-prime mortgages
$3.1 billion - bond insurance
$0.9 billion - residential mortgages
$0.2 billion - real estate investment

This is the second biggest write-down so far. Earlier Citigroup has written-down more than 23 billion dollars and reported close to 10 billion dollar loss in fourth quarter. Both these firms have been on a look-out for capital raising since last quarter and have successfully raised billions of dollars. But with the sub-prime crisis not coming to end these investment banks are poised to have a very tough time ahead.

Merrill had earlier replaced Stan O' Neal from the chief executive position following the sub-prime crisis. The new CEO of Merrill, Mr John A. Thain, has a lot of responsibility in bringing back Merrill to its original status. According to a report on Merrill Lynch's website, Mr. Thain said:

"While the firm's earnings performance for the year is clearly unacceptable, over the last few weeks we have substantially strengthened the firm's liquidity and balance sheet,.. In addition, a great majority of Merrill Lynch's key businesses delivered record results in 2007, and as I look ahead to 2008, the firm is intensely focused on continuing this momentum and delivering growth and increased profitability for our shareholders and employees."

With the declaration of results on 17 January Merrill's stock price fell by more than 10% in a single day. The stock has been falling since 2007 from a highs of around 100 to current price of 49.45 per share.

Goldman Sachs & Merrill Lynch comment on recession of US economy

According to a report from Merrill Lynch, US economy is already in recession. It refers to the employment report as an confirmation of recession. The unemployment rate of 5% in December was supportive of this view. The housing market is already falling and consumer spending is also lower.

While Goldman Sachs declined the recession in the US economy, it predicted that recession is very close and US economy may see it in 2008.

Goldman Sachs beleives that the slowdown in the US economy will affect the interest rates, since Fed bank may choose the option of lowering rates from 4.25% to about 2.5%

Goldman Sachs cautioned the investors to stay away from banking and finacial sector and increase their holdings of healthcare and consumer-related stocks.

Bear Stearns CEO steps down

James E. Cayne stepped down as chief executive officer of Bear Stearns. Though retiring from the firm he will remain on the the board of directors as chairman. Alan D. Schwartz, president of Bear Stearns, will be taking over the responsibility of the chief executive officer of the fifth largest investment bank in US.

Alan D. Schwartz joined Bear Stearns in 1976. He became executive vice president and head of the Investment Banking Division in 1985, president and co-chief operating officer in June 2001 and sole president in August of 2007.

This step is looked as an aftermath of the sub-prime crisis of which Bear Stearns was also lost over billion dollars in bad debts. Since the announcement of write-offs there has been reshuffling of major positions at the affected investments banks including Citigroup, Merrill Lynch, Morgan Stanley etc.

"Founded in 1923, The Bear Stearns Companies Inc. is a leading financial services firm serving governments, corporations, institutions and individuals worldwide. The Company's core business lines include institutional equities, fixed income, investment banking, global clearing services, asset management, and private client services. Headquartered in New York City, the Company has approximately 14,000 employees worldwide."

For additional information about Bear Stearns, please visit the firm's website at www.bearstearns.com.