Jan/15 Feb/15 Mar/15 Apr/15 May/15 Jun/15 Jul/15 Aug/15 Sep/15 Oct/15 Nov/15 Dec/15 SPS Finquest Ltd CMP: 84.60 January 13, 2015 Stock Details BSE code 538402 BSE ID SPS Face value ( ) 10 No of shares (m) 4.5 52 week H/L 88.00/78.00 Market cap ( m) 381.1 30 days avg vol (No) 907 Free float ( m) 221.1 Stock performance (%) 1M 3M 12M Absolute 0.7% 0.8% 0.7% Rel. to Sensex 1.5% 8.3% 10.1% Shareholding Pattern* (%) Promoters FIIs DIIs Others 42.6% 2.7% 54.6% *As of September 2015 Relative Chart 90 88 SPS Finquest Sensex 30,000 29,000 Company Overview SPS Finquest Ltd is a non-banking financial company, which is engaged in the business of advancing loans for investing/trading in securities. Industry Overview Financial Services are fundamental to economic growth and development. India s diversified financial services sector is witnessing swift expansion. Banking savings and investments in insurance and debt and equity financing help private citizens save money, guard against uncertainty and build credit, while enabling businesses to start up, expand, increase efficiency and compete in local and international market. According to the India Brand Equity Foundation it s been noticed that the country s gross domestic savings (GDS) as a percentage of Gross Domestic Product (GDP) has remained above 30 per cent since 2004 and it is expected to reach $1,272 billion by 2019. The NBFCs play a very critical role among these financial institutions. Financial Performance SPS Finquest Ltd revenues for FY 15 declined 31.5% to 52.0 million compared to 75.9 million in the previous year. The company has reported a net loss of 0.8 million in FY 15, opposed to a net profit of 6.9 million reported in FY 14. On a half yearly basis SPS Finquest revenues fell 29.8% to 21.3 million in H2 16 than that of 30.4 million in H2 15. 86 84 82 80 78 76 74 72 28,000 27,000 26,000 25,000 24,000 23,000 22,000 Table1: Key Financials (Y/e March) 2H FY15 2H FY 16 Sales ( m) 78.7 75.9 52.0 30.4 21.3 YoY Growth (%) 3.9% -3.5% -31.5% NA -29.8% EBITDA ( m) 75.7 73.2 26.5 26.6 14.6 EBITDA Margin 96.2% 96.3% 50.9% 87.5% 68.4% PAT ( m) 3.6 6.9 (0.8) 8.4 9.0 EPS ( ) 3.11 5.98 (0.18) NA NA Source: Bloomberg YoY Growth (%) -88.7% 92.3% -103.0% NA NM Source: Company, Karvy Investment Advisory 1
Background and Business Description SPS Finquest Ltd is promoted by Mr.Pramod P. Shah and was originally incorporated in Mumbai as Ceenik Holding Pvt. Ltd on March 12, 1996 under the provisions of the Companies Act, 1956. Later the Company converted into a public limited company and consequently, the name of the Company was changed to SPS Finquest Limited and a fresh certificate of incorporation reflecting the new name was issued by the Registrar of Companies, Mumbai on April 5, 2013. The company holds NBFC license from RBI and is engaged in the financing business in IPO, Stocks and Securities. Key Strengths Offering diversified services Risks & Concerns Credit risk Market risk Interest rate risk Board of s Table 2: Composition of Board Name Mr. Pramod P. Shah Mr. Sandeep P. Shah Mr. Hitesh S. Shah Ms. Ankita M. Shah Mr. Priyesh Jhaveri Mr. Girish T. Jajoo Source: Company Relation with Company Chairman Managing 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 per cent share in 2014-15. It consists of the capital markets, insurance sector and non-banking financial companies (NBFCs). As per a joint report by KPMG-CII, the country is projected to become the fifth largest banking sector globally by 2020. The Government of India has implemented several reforms to liberalize, regulate and enhance this industry. The Government and the Reserve Bank of India (RBI) have taken various measures to facilitate easy access to finance for micro, small and medium enterprises (MSMEs). These measures include launching credit guarantee fund scheme for micro and small enterprises, issuing guideline to banks regarding collateral requirements and setting up a Micro Units Development and Refinance Agency (MUDRA). The combined support from both government and private sector is paving the way for India to prevail as one of the world's most vibrant capital markets. It is also widely believed that the vision of the new NDA government in the centre would boost the securities market more particularly the primary market. NBFCs in India have recorded significant growth in recent years. After their existence, they found useful and successful for the evolution of a vibrant, competitive and dynamic financial system in the Indian money market. The factors that contribute to NBFC s success in business include ability to contain risk, adapt to changes and tap demand in markets that are likely to be avoided by the bigger players. From large infrastructure financing to small microfinance, the sector has innovated over time and found ways to address the debt requirements of every segment of the economy. Over time, the sector has evolved from being fragmented and informally governed to being well regulated and adopted best practices in technology, innovation and risk management as well as governance. The segment has witnessed considerable growth and importance in the recent years and it is now being recognized as a complementary to the banking sector due to implementation of innovative marketing strategies, introduction of tailor-made products, customer-oriented services and attractive rates of return on deposits and simplified procedures, etc. According to Care ratings the share of NBFC has steadily grown from 10.7% of banking assets in 2009 to 14.3% in 2014. Competition analysis Company CMP ( ) Mcap ( m) Rev ( m) OPM (%) EPS ( ) PE (x) SPS Finquest Ltd 84.6 381.1 52.0 50.9% -0.18 NM Shreenath Industrial Investment Company Ltd 10.2 34.6 15.2 3.4% 8 NM Saumya Consultants Ltd 13.1 90.6 29.4 105.7% 3.54 1.7 Source: BSE 3
Financial Analysis For the period ending 31 March, 2015, SPS Finquest Ltd reported revenues of 52.0 million, representing a fall of 31.5% when compared to the revenues in FY 14. The company s EBITDA declined from 73.2 million in FY 14 to 26.5 million in FY 15 due to reduced revenues. Year end March Income statement ( million) Revenue 78.7 75.9 52.0 % growth 3.9% -3.5% -31.5% EBITDA 75.7 73.2 26.5 % EBITDA margin 96.2% 96.3% 50.9% Depreciation and amortisation 3 3 5 EBIT 75.7 73.1 26.4 Interest 71.3 63.0 19.7 PBT 4.4 10.1 6.7 Tax 0.8 3.2 7.5 Net profit 3.6 6.9 (0.8) % growth net profit -66.1% 92.1% -111.5% Balance sheet ( million) Shareholder fund 22.1 29.0 279.1 Long term liabilities 571.5 479.4 Current liabilities 22.4 4.3 29.2 Fixed assets 0.1 0.1 Current assets 339.7 381.2 124.2 Cash & cash equivalents 102.9 89.5 51.2 Cash flow statement Cash flow operations 166.3 173.6 147.6 Cash flow from investing -58.1-15.4 62.2 Cash flow from financing -9.5-171.6-248.2 Per share data EPS ( ) 3.11 5.98-0.18 CEPS ( ) NA NA NA DPS ( ) - - - BVPS ( ) 19.02 25.02 63.00 Financial Ratios % ROE 17.8% 27.1% -0.5% ROCE 12.4% 14.4% 9.5% Debt/Equity 2661.9% 1651.8% Interest coverage ratio 1.1 1.2 1.3 Current ratio 15.2 88.3 4.3 Cash ratio 4.60 20.72 1.76 Source: Company, Karvy Investment Advisory 4
Financial Snapshot Revenue growth (%) EBITDA margin (%) 10 1 8 10 8 6 4 2-1 -2-3 6 4 2 8 6 4 2-4 Revenue ( m) % growth EBITDA ( m) % EBITDA margin 8.0 6.0 4.0 2.0-2.0 Net Profit Margin (%) 1 8.0% 6.0% 4.0% 2.0% -2.0% -4.0% 70 60 50 40 30 20 10 0 BVS & EPS 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0-1.00 Net Profit ( m) % net profit margin Book value per share ( ) EPS diluted ( ) 10 8 6 Liquidity ratios 25.00 20 15.00 3 25.0% 2 Profitability ratios 4 2 10 5.00 15.0% 1 5.0% 0-5.0% Current ratio Cash ratio ROE ROCE Source: Karvy Investment Advisory 5
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