Financial Technologies (India)

Financial Technologies (FTIL) India's leading technology solutions provider for capital, commodities and forex markets, reported 38% rise in sales to Rs 112.08 crore for the quarter ended December 2011 on standalone basis.

OPM improved by 1950bps from 38.1% to 57.6% on the back of sharp decline in employee costs as well as rent costs resulting in 108% increase in operating profits to Rs 64.59 crore. Other income excluding forex declined by 75% and higher interest costs and depreciation charges resulted in 18% fall in PBT before EO to Rs 69.12 crore crore.

However, EO which includes only forex stood at gain of Rs 41.91 crore against Rs 3.03 crore but 1224bps increase in tax rate to 21.77% saw the net profits up by 10% to Rs 86.87 crore.

The average daily turnover for the quarter ended December 31, 2011 in the group company exchanges are as under.

1. MCX - Rs 48,627 crore, an increase of 52% over FY 11 daily average. The highest daily turnover recorded was Rs 92,910 crore.
2. IEX (Day Ahead Market) - 37,973 MWh, an increase of 17% over FY 11 daily average The highest daily turnover recorded was 54,605 MWh.
3. DGCX - USD 810.59 million, an increase of 91% over FY 11 daily average. The highest daily turnover recorded was USD 1,328.58 million.
4. SMX - USD 561 million, an increase of 3,326% over FY 11 (w.e.f. Oct 1. 2010) daily average. The highest daily turnover recorded was USD 732 million.
5. JGBOT - USD 38 million, an increase of 95% over FY 11 (wet Nov 1, 2010) daily average. The highest daily turnover recorded was USD 45 million.

The Company has investments aggregating to Rs 915.65 crore and debts and other recoverables aggregating to Rs 59.84 crore as of December 30, 2011, in certain subsidiary companies and a joint venture, which presently have accumulated losses, but are expected to be recovered, and have their values unlocked in the near future since these entities are at various Stages of executing their business plans and yet to break even. On an evaluation of the business plans for these entities, a provision for other than temporary diminution of Rs 120 crore (including Rs 31 crore provided in the current quarter) is considered to be adequate.

During the quarter, the company has made additional long term investments aggregating Rs 2.81 lakh in subsidiaries and the company has redeemed long term investments in a subsidiary having carrying value of Rs 161.11 crore.

During the quarter ended June 2011, the company had raised USD 85 million (equivalent to 452.76 crore as on December 31, 2011) by way of ECB. As on December 31, 2011, USD 50.58 million (equivalent to 269.4 crore) has been mainly kept in fixed deposits with banks pending utilization.

During the quarter ended December 31, 2011, the Company has repaid Zero Coupon Convertible Bonds aggregating USD 133.16 million (equivalent to Rs. 705.1911 crore as at the date of repayment) including premium thereon (net of tax deducted at source) which is partly funded by fresh External Commercial Borrowings of USD 25 million (equivalent to Rs. 133.1650 crore as at December 31, 2011) raised during the quarter

The Board of Directors have declared third interim dividend of 100% i.e. Rs 2 per share of face value Rs 2 per share.

Quarterly Performance (Standalone)

On Y-o-Y basis, for the quarter ended December 2011, FTIL reported 38% growth in net sales to Rs 112.08 crore.

The operating margins shot up by 1950bps to 57.6%. As a percentage of sales, rent costs were down by 217bps to 2.68%, employee costs by 1306bps to 25.29% and other expenses by 455bps to 13.41% although traded goods purchase costs were up by 29bps to 1%. The resultant operating profits grew 108% to Rs 64.59 crore.

Other Income declined by 75% to Rs 13.75 crore, Interest costs were up from Rs 0.22 lakh to Rs 4.78 crore and depreciation charge increased by 65% to Rs 4.43 crore. PBT before EO for the quarter was thus down by 18% to Rs 69.12 crore. EO which includes forex stood at gain of Rs 41.91 crore against Rs 3.03 crore as a result of which PBT after EO grew 28% to Rs 111.03 crore.

Tax rate increased by 1224bps from 9.52% to 21.77% and PAT thus grew by 10% to Rs 86.87 crore. PAT before EO was down 28.89% to Rs 54.08 crore.

Nine months performance

For the nine months ended December 2011, FTIL reported net sales of Rs 303.8 crore, up 15%.

The operating margins surged 1230bps to 57.5%. As a % of sales (net of stock adjustment) purchase of traded goods was down 6bps to 0.93%, staff cost 760bps to 26.44%, rent 300bps to 2.3% and other expenditure decreased 161bps to 12.83%. The resultant operating profits were thus up 46% to Rs 174.68 crore.

Other income declined 44% to Rs 63.82 crore, which includes dividend income, up 25.56% at Rs 40.95 crore and others were up 72% to Rs 22.88 crore. The interest cost increased from Rs 0.47 crore to Rs 10.45 crore and depreciation charge increased 79% to Rs 12.07 crore. PBT before EO was down 4% to Rs 215.97 crore. EO which includes forex stood at gain of Rs 15.97 crore against Rs 2.61 crore as a result of which PBT after EO grew 2% to Rs 231.94 crore.

Tax provision including current tax, FBT, deferred tax and wealth tax was up 89% to Rs 36.64 crore Tax rate increased from by 728bps to 15.8%. PAT was thus down 6% to Rs 195.3 crore.

PAT before EO was down 11.81% to Rs 181.85 crore.

For the year ended March 2011, FTIL reported net sales of Rs 357.69 crore, up 7%.

The operating margins fell by 490bps to 45.5%. As a % of sales, staff cost increased 522bps to 32.26%, other expenditure increased 170bps to 16.5% whereas rent decreased 162bps to 4.75% and purchase of traded goods was down 40bps to 1%. The resultant operating profits fell 3% to Rs 162.74 crore.

Other income decreased 67% to Rs 103.79 crore, which includes loss of Rs 31.6 crore of diminution in value of investments as against loss of Rs 1.4 crore in the corresponding quarter previous year, decline in profit on sale of investments by 72.45% to Rs 69.35 crore, other gains were down 20.1% to Rs 21.17 crore but dividend income was up 21.27% to Rs 44.87 crore. The interest cost was minimal at Rs 70 lakh against Rs 2 lakh (low impact due to small base effect) and depreciation charge increased 88% to Rs 11.1 crore. PBT before EO was thus down 46% to Rs 254.74 crore.

During the year ended March 2010, the company had sold 7.19 crore equity shares of Rs 1 each in MCX-SX for an aggregate consideration of Rs 251.56 crore to a financial institution (purchaser). The said sale was subject to a price reset and interest. During the last quarter of the year, the purchaser exercised its right and the company accordingly paid an amount of Rs 179.69 crore as price reset and Rs 29.48 crore as interest which is treated as EO. Consequently tax provision of Rs 71.09 is written back.

EO increased significantly from Rs 28.54 crore to Rs 203 crore which includes forex gain of Rs 6.17 crore as against forex loss of Rs 28.54 crore as a result of which PBT after EO was down by 88% to Rs 51.74 crore.

Tax credit of Rs 40.19 crore against tax expense of Rs 102.81 crore in the previous year reduced the decline in PAT to 73% to Rs 91.93 crore.

Management Comments

Mr. Dewang Neralla, Whole Time Director,

We have been growing at a steady pace. Total income from operations was up by 15% year on year to Rs. 3,038 million for the nine months ended December 31, 2011. Net profit excluding profit on sale of shares and diminution in long term investments for the same period was up by 48% year on year to Rs.2,263 million.

During this quarter, we repaid ZCCBs aggregating USD 133.16 million including premium thereon. This demonstrates our commitment to the investors.

This quarter too, we continued with our leadership position across asset classes we serve. MCX had 87%, IEX had 92% and NSEL had over 99% market share in their respective asset classes. On the international exchanges front, SMX witnessed average daily turnover of USD 561 million and GBOT's average daily turnover was USD 39 million. BFX commenced live trading of its conventional trading segment on the 23rd November 2011.

Our ecosystem businesses are focused on broadening the customer base and reaching out to the end users.

Shareholding Pattern

As of December 31, 2011, Promoters hold 45.69% (45.69% at the end of sequential quarter), FII's hold 22.54% (23.68% at the end of sequential quarter), DII's hold 8.79% (8.38% at the end of sequential quarter), and others hold 22.98% (22.24% at the end of sequential quarter). None of the shares of promoter/promoters group shares are pledged.

The shares of FTIL were trading at Rs 763.55 on BSE (1/2/2012), at 16.3 times Q3FY12 annualized EPS.

Financial Technologies (India) : Standalone Results