CRISIL’s total income stands at Rs178.77 crore for March quarter

CRISIL’s consolidated total income for the first quarter ended 31 March 2011 stood at Rs178.77 crore as against Rs143.35 crore in the corresponding quarter of the previous year, an increase of 24.7%

CRISIL's consolidated total income for the first quarter ended 31 March 2011 stood at Rs178.77 crore as against Rs143.35 crore in the corresponding quarter of the previous year, an increase of 24.7%.

The net profit after tax was Rs45.98 crore, as against Rs46.15 crore in the corresponding period of the previous year. Adjusted for the one time profit on sale of assets in the corresponding quarter of the previous year, the net profit showed an increase of 32.7%. The Board of Directors have declared an interim dividend of Rs27.50 per share.

While CRISIL Ratings continued to maintain leadership positions in the bond and bank loan market, bond ratings were impacted by a slowdown in the wake of rising interest rates and tight liquidity conditions.

On Friday, CRISIL ended 1.96% down at Rs6,833.50 on the Bombay Stock Exchange, while the benchmark Sensex declined 1.57% to 19,386.82.


Tata Motors Group global wholesales at 110,785 vehicles in March 2011

Tata Motors Group global wholesales, including Jaguar Land Rover, were 110,785 in March 2011, a growth of 1% over March 2010

The Tata Motors Group global wholesales, including Jaguar Land Rover, were 110,785 in March 2011, a growth of 1% over March 2010. Cumulative sales for the fiscal (April 2010-March 2011) are 1,081,245 higher by 24% compared to the corresponding period in 2009-10.

Global sales of all commercial vehicles-Tata, Tata Daewoo and the Tata Hispano Carrocera range-were 56,814 in March 2011, a growth of 19%. Cumulative sales for the fiscal are 512,269, a growth of 24%. Global sales of all passenger vehicles were at 53,971 in March 2011. Cumulative sales for the fiscal are 568,976, a growth of 24%.

Global sales of Tata passenger vehicles and the distribution offtake in India of Fiat cars were flat at 29,870, for the month. Cumulative sales for the fiscal are 327,403, a growth of 23%.

Global sales of Jaguar Land Rover in March 2011 were 24,101 vehicles, higher by 2%. Jaguar sales for the month were 3,772, lower by 19%, while Land Rover sales were 20,329, higher by 8%. Cumulative sales of Jaguar Land Rover for the fiscal are 241,573 nos., higher by 25%. Cumulative sales of Jaguar are 52,993, higher by 12%, while cumulative sales of Land Rover are 188,580, higher by 29%.

On Friday, Tata Motors ended 1.19% down at Rs1,234.95 on the Bombay Stock Exchange, while the benchmark Sensex declined 1.57% to 19,386.82.


Private equity firms and broken-down model of broking firms—II

With the high cost of operations and a change in the business model, retail-focused stock broking companies and their smart backers are staring at a difficult future

A business newspaper front-paged a report this week that Angel Stockbroking is in talks with Citigroup to buy Sharekhan, the retail brokerage which was acquired by Citigroup in 2007. Sharekhan was planning a public issue, which would have been impossible to pull off. Angel's move may save Sharekhan, but what happens to the dozens of other broking firms that have built large overheads and nationwide chains in the hope of tapping the desire of retail investors to trade in stocks, and buy insurance, fixed deposits and other financial products?

Those that have been funded by private equity investors will have to take a decision soon -- like Citigroup is doing. There have been efforts by some brokers to survive by reducing costs and widening geographical reach; but there will have to be many more big deals like the Angel-Sharekhan to be able to make a difference to the large and fragmented broking industry. There is something fundamentally wrong with the sector and unless this is set right, private equity funds which invested in broking companies for their retail spread, face a severe challenge. They will have to get ready to slash, burn and exit.

Remember, a few months back, New Silk Route of Victor Menezes and Rajat Gupta got rid of Destimony, the broking business it foolishly acquired from Dawnay Day and gave a bunch of highly-paid bankers to run, even though they had no truck with Indian retail equity investors. As Destimoney and others have discovered, the Indian model of large nationwide broking is beset with several problems.

High overheads: The cost of running a large nationwide brokerage business is exorbitant -- and fixed. Broking companies have to bear the cost of a large back office staff, compliance, technology and high capital cost of property (or rent). These expenses have skyrocketed in India over the last few years, especially the cost of staffing. And nearly all these costs are fixed in nature -- brokers have to incur them simply to stay where they are. Any attempt to reach retail investors involves promotional costs as well. This too is killing in India. Try to run an outdoor campaign or ads in one of the business newspapers or business news channels. It would set the firm back by a few crores and may not help the bottomline.

Research - The Expensive junk: In 1999, DSP Merrill Lynch published a research report that promoted Pentafour Software as a 'buy' when the price was at around Rs800. The stock is junk today. It was junk at that time too; the researcher who was being paid a princely sum to write the report was either ignorant, or was compromised. This is not an exception. The Moneylife Foundation library has a collection of research reports from the last three bull markets (1994, 2000 and 2007) that make for hilarious reading. That is not so hilarious to the customers who trusted them and have suffered a large hole in their wallets. The core of what passes for stock research is usually a clerical effort with the numbers. The tone of the report is guided by companies and investment banks. But for some strange reason, stock brokers pay through their nose to hire people to do this. The high cost of maintaining a research team that would churn out 'buy' recommendations irrespective of the market climate, based on financial projections that rarely come true, severely skews the cost structure of any decent sized broker.

Revenues: Brokerage revenues are worth nearly Rs15,000 crore in commissions each year, but the business is growing erratically. Geojit BNP Paribas reported an 8% decline in revenues for the March quarter. The others may do better, with slightly different business models, but essentially there is no growth in this business. This is due to the changed structure of the market. Volumes in the cash market-which is more lucrative for brokerages-are declining, while trading in option contracts is increasing. In the case of option contracts, the broking commission is charged only on the option premium, which is miniscule. On the National Stock Exchange, some 3.04 crore contracts of index and stocks options were traded in 2006-07. This exploded to 68.31 crore in 2010-11. But the cash market volumes have hardly budged in this period. The cash market was Rs7,812 crore in 2006-07 and jumped to Rs14,148 crore in the next year and that's where it has remained for the last three years.

So, the model of the nationwide chain of retail broking that private equity investors jumped into, was always flawed. Frankly, investors are not falling over each other to invest in equities, despite the long bull market. And a nationwide chain increases costs without increasing revenues commensurately. Firms like India Infoline may have understood that early, as it transitioned from an online broking firm to a full-service broking firm, and to a distributor of all financial products. Some time in 2007, it also added the institutional brokerage business at a very high cost. But this too has not worked well. Horrendous mis-selling of life insurance products has driven away customers and stirred regulatory action. Other brokers have moved from the institutional brokerage business into retail business (Edelweiss) or into selling non-equity products (Bonanza). But these moves have not been rewarding. The reason: customers have been treated shoddily by the stock market system comprising of broking firms and the market regulator. Retail investors have voted with their feet after 2006-07, after being bled by poor advice, frequent churning, massive losses in portfolio management and initial public offerings. They are not desperate to come back. Private equity firms who funded the broking business are staring at a retail business without retail participation. We will examine that paradox in the third part of this series.

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6 years ago

Continue the good work you both are doing.. God Bless

Anil Agashe

6 years ago

I have always wondered why broking houses shares are traded at high prices.The IPO prices of most of these companies was atrocious. i have seen these firms hiring fresh MBAs at astronomical pay packages. What they put out as research is a joke as you rightly point out.


6 years ago

I have always quoted stock markets as CASINOS in my previous comments-even casinos can be called better because man entering in casino very well knows that he can loose all his money-but in case of stock exchanges the participant(client) is lured by huge money gaining claims -these claims are made by highly paid white collor wealth managers(damagers to be read actually),these huge claims are shown with smart paper work and manipulated data and juggelary of all combinations-the investor thinks he is investing(i repeat INVESTING)for his future-but the poor guy never knows he is making investments for FUTURE of promoters and operators who will make future of their own and ditch the actual investor-stock markets have been same since its inception-only change has been that it has become operational now globally-and local casinos have turned to global level casinos and with bigger and bigger volumes-it is nice that people have become SMART now by avoiding stock marker route-this all has happened in india because of promoters who raely think of share holders and other culprit is SEBI the regulator which has allowed all kind of cheatings of retail investors.

Pankaj Mohta

6 years ago

In every bull run this market makes a lot of people to love the market but consequence after the fading of euphoria makes much more to make misery of themselves. The stock market actually works here on operator and no fundamental or technical works here.

A very good write up on the broking Industry- It seems to die but will not die because it makes life meserable of others- So misery here also

v subrmanian

6 years ago

It is very difficult for a retail investor to make money in share trading. This has now been understood by many investors. The losses made in IPOs has compounded the problem. There is virtually no trading by the retail investors.

Vipin Arora

6 years ago

Very well written.

The biggest culprit here has been the omnipotent regulator SEBI, which allowed and is still allowing IPOs to be priced blatantly. SEBI allows a Rs 90 IPO to be traded at 80-180 on listing and at Rs 45 after two months. No wonder retail investors are horrified and wary of stock markets.

An IPO is an instrument, if priced judiciously, can still bring back hordes of retail investors into the stock markets. If somebody is listening...

Jayesh Savla

6 years ago

Perfect writeup. I wonder what would happen to those brokerages having retail participation without any Preivate Equity partner.

Tapas Chakraborty

6 years ago

This is what happens in Bull markets. The PE Guys are not much better than the retail people in deciding where to put there money into.

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