Downgrades

Prudent Corporate Advisory Services (Prudent) has progressed well in terms of AUM growth aided by MTM, traction in SIP and growth in MFDs. AUM/gross SIP flows/MFD count clocked CAGR of 40%/20%/19% between FY20–25 and grew 13.9% QoQ / 27.7% YoY /12.8% YoY in Q1FY26, respectively.

CDSL’s operating revenue declined 7% YoY and 19% QoQ to INR2.2b (7% miss), primarily due to a 36%/29% YoY decline in transaction revenue/online data charges. For FY25, the company’s revenue grew 33% YoY to INR10.8b.

Black & White

IIFL Finance (IIFL)’s 3QFY25 PAT declined ~85% YoY to INR817m. NII declined 22% YoY and ~8% QoQ to ~INR12.4b (~7% miss). Other income stood at ~INR1.1b (PY: INR1.1b). This was lower than our estimates because of lower assignment income and lower gain on fair value changes.

Prudent Corporate Advisory Services (Prudent) has progressed well in terms of AUM growth aided by MTM, traction in SIP and growth in MFDs. AUM/SIP book/MFD count clocked CAGRs of 31%/28%/21% between FY19–24 and grew by 11.6%/12.1%/4% on a QoQ basis in Q2FY25.

KFin Technologies (KFin) is a leading technology-driven financial services company providing comprehensive services and solutions to capital market ecosystem. We particularly note its growth potential in the emerging international segment, bolstered by strategic acquisitions while Indian MF RTA and issuer solutions provide a direct play on the surging Indian domestic capital markets and prospective AUM growth.

Prudent Corporate Advisory Services (Prudent) has progressed well in terms of AUM growth aided by MTM, traction in SIP and growth in MFDs. AUM / SIP book / MFD count clocked CAGRs of 28% / 23% / 37% between FY19-FY23. There has been a QoQ increase of 30bps in equity AUM share.

Depositories remain a structural play on India’s capital markets benefitting from higher retail participation. We believe Central Depository Services (CDSL) warrants higher valuation multiples due to its: 1) leadership (in a duopoly) in terms of the number of demat accounts

Our positive stance on Central Depository Services Ltd (CDSL) is based on the premise of its business model, positioning, and market share gains, return ratios, and free-cashflow yield. The co. has been the biggest beneficiary of the revival in capital market activities evident in 170%+ YoY in its transaction charges (35% of its revenues) and continued growth in its annual issuer charges. With tailwinds in form of GoI initiatives and efforts by CDSL at enhancing its revenue opportunities, we see drivers for strong revenue/earnings growth. However, in the backdrop of recent outperformance and need for consistency, we lower our rating to HOLD, albeit revise our TP upwards to Rs750 (valued on a two-stage dividend discount model). We have argued for valuation...

Care being the second largest full service rating Company in India, the Company's list of clients includes banks and other financial institutions, private sector companies, central public sector undertakings, sub-sovereign entities, small and medium enterprises (SMEs) and microfinance institutions, among others. Slowdown in economic growth impacted the company too. The first half of FY20, even Q3 FY20 remained disappointed because of the headwinds faced by the NBFC sector which had impacted the borrowings. And the capex related borrowings not getting the...

Care being the second largest full service rating Company in India, the Company's list of clients includes banks and other financial institutions, private sector companies, central public sector undertakings, sub-sovereign entities, small and medium enterprises (SMEs) and microfinance institutions, among others. Slowdown in economic growth impacted the company too. The...

CDSL has a diversified revenue stream, ~36% of the revenue is annuity in nature and ~42% is market-linked (Transaction, IPO/corporate action and KYC). The big opportunity related to demat of ~60K unlisted public companies is unfolding. At current run-rate, it will contribute ~7% to FY20 growth with negligible incremental cost. Transactions charges/KYC revenue will revive with better retail participation and improved market sentiments. New revenue streams like National Academic Depository (NAD) and e-warehouse receipts are future growth drivers. We have moderated our estimates for FY20/21E and now expect revenue/EBIT/PAT to grow at a CAGR of 12/5/6% over FY19-22E. We like CDSL based on its (1) Annuity revenue stream, (2) Cash-rich balance sheet (Net cash of Rs 6.50bn, ~30% of Mcap), (3) Option value and (4) Unlisted opportunity. Risks include regulatory changes, market slowdown and increase in competition. We maintain BUY on CDSL despite revenue and margin miss in 2QFY20. Annual issuer charges (+21% YoY in 6M) is driving growth led by the unlisted opportunity. We value CDSL on SoTP basis by assigning 30x to Sep-21 core profit and adding net cash to arrive at a TP of Rs 286.

CDSL has a diversified revenue stream, ~33% of the revenue is annuity and ~40% is market-linked (and uncertain). Huge opportunity for demat of ~60K unlisted public companies is now bearing fruits. At current run-rate, it will contribute ~7% to growth with negligible incremental cost. Transactions charges/KYC revenue will revive with better market conditions. New revenue streams like National Academic Depository (NAD) and e-warehouse receipts will start contributing only from 2HFY20E. We like CDSL based its (1) Annuity revenue stream, (2) Cash-rich balance sheet (Net cash of Rs 6.50bn, ~32% of Mcap), (3) Option value and (4) Unlisted opportunity. We expect CDSL revenue/EBITDA/PAT to grow at a CAGR of 14/11/8% over FY19-21E. Risks include regulatory changes, market slowdown and increase in competition. We maintain BUY on CDSL post higher revenues but lower margins in 1QFY20. Annuity revenue (+23% YoY) is driving growth led by the unlisted opportunity. Our SoTP of Rs 320 is based on 30x core FY21 earnings plus net cash.

Revenue Impresses; Profitability Down Steeply On Wage Hikes Central Depository Services (CDSL) reported a robustly improved revenue performance in 1QFY20, for the second successive quarter after a poor show in 3QFY19, when revenues dipped steeply by >10% YoY and >13% QoQ. In 1QFY20, revenue rose strongly by 28.2% YoY and by 14.6% QoQ to Rs584mn, its highest-ever quarterly revenue. Depository Services revenue saw a healthy recovery after two successive quarters of YoY decline, with segment revenue up 11.4% YoY to Rs405mn. On the other hand, the Data Processing segment clocked a substantial 86.6% YoY revenue growth. CDSL's net beneficial owner (BO) accounts touched 17.9mn (17.3mn in 4QFY19),...

Revenue growth impacted due to market headwinds leading to negative operating leverage: For 3QFY19, CDSL's revenue declined 10% YoY to INR462mn. This was majorly due to reduction in IPO/ Corporate Action charges (-52% YoY) followed by Transaction charges (-25%), Online Data charges (-8%) and other charges (-8%). IPO revenue got impacted due to reduction in number of IPOs given weak market sentiment. Revenue from Transaction charges reduced due to poor delivery based volume during Q3FY19. However, we expect revenues to revive in 2HFY20E following...

We maintain our BUY rating, have assigned 30x multiple to core Dec-20 earnings and added back net cash to arrive at a TP of Rs 330 (~46% upside). CDSL posted disappointing 3QFY19, both revenue and margin performance were lower than expectations. Revenue was down 13.1% QoQ to Rs 462mn (vs est. of Rs 549mn). Drop was led by 7.4/30% QoQ drop in Transaction/Online-data-charges revenue (CVL KYC). Discontinuation of OTP based Aadhaar e-KYC has led to lower volumes from the on-line channel.

We retain BUY on CARE with revised TP at Rs1,550 (vs. Rs1,600 earlier). Q2'19 revenue / PAT were below estimates. This is even as volume of debt rated grew 32.6% YoY and points to pricing pressure. The growth in high-yielding non-BLR segment remains muted (down 3% YoY for H1'19); we foresee trends to continue in H2'19 and have thus trimmed our overall volume growth assumptions for FY19E. In the backdrop of concerns around rating downgrade / delay in rating changes, CARE has strengthened its rating standards further. We will watch for outcome therein. We like CARE for its business model, return ratios and free cash...

Reported rating revenues of the company witnessed a decline of 6.3% YoY to | 57.4 crore vs. >| 60 crore estimate. This was due to 2.1% YoY decline (after several quarters) in total volume of debt rated to | 382000 crore. Further, corporate/long term bond ratings (which are high yielding in nature) fell 43.5% YoY In Q1FY19, MTM gains on FMPs were lower vs. Q1FY18. This resulted in lower accrual of other income at | 4.2 crore vs. | 6.5 crore last year. Staff cost was higher due to Esop charge of | 3.66 crore...

We maintain our BUY rating, have assigned 33x multiple to core earnings and added back net cash to arrive at a TP of Rs 370 (39% upside from CMP). CDSL posted poor 1QFY19 with fall in revenue but margin was better than expectation. Revenue was down 12.5% QoQ to Rs 453mn (lower than our est of Rs 505mn). Drop was led by 21.3/27.3/18.2% QoQ drop in Transaction/IPO & corporate action/online data charges respectively offset by 6.7% QoQ rise in annual issuer charges. Margin fall was lower than expected, down 24bps QoQ to 56.8% vs our estimate of 55.4%. CDSL continued to gain BO market share (~47% in 1QFY19, +48bps QoQ).

Revenue In-line; Lower Other Income Reduces PAT Central Depository Services (CDSL) has reported an in-line revenue performance in 1QFY19, which rose 11.7% YoY (-12.5% QoQ) to Rs453mn (1.5% above our estimate). Key business segments grew at a subdued pace with a marked slowdown from growth recorded in the previous quarter. Transaction Charges revenue rose by 7% YoY (42% YoY in 4QFY18), IPO/ Corporate Action Charges revenue rose by 8.6% YoY (70.8% YoY in 4QFY18) and KYC/Online Data Charges rose by 11.2% YoY (59.9% YoY in 4QFY18). Segment-wise, Depository Services revenue rose by 18.5% YoY to Rs352mn. On the flip side, Data Processing revenue declined by...