>JM FINANCIAL LIMITED (CRISIL)

The JM Financial Group is one of the leading players in the financial services field with business interests in investment banking, equity broking, wealth management, securities-based funding, asset management and alternative asset management. JM Financial Ltd (JM Financial) is the holding company for the operating entities in the group

FUNDAMENTAL GRADE
CRISIL's Fundamental Grade represents an overall assessment of the fundamentals of the company graded in relation to other listed equity securities in India. The grade facilitates easy comparison of fundamentals between companies, irrespective of the size or the industry they operate in. The grading factors in the following:

• Business Prospects: Business prospects factors in Industry prospects and company's future financial performance
• Management Evaluation: Factors such as track record of the management, strategy are taken into consideration
• Corporate Governance: Assessment of adequacy of corporate governance structure and disclosure norms

■ Leading player in investment banking space
JM Financial has established a strong market position in the investment banking segment, which includes capital raising and mergers and acquisition advisory. The company has been a lead manager in around 30% of the total equity capital raised in the last 3 years. The strong relationships built with clients over the years and a robust track record has enabled the company to maintain its market position. Its revenues in the investment banking segment declined sharply by 60% in FY09, reflecting the subdued environment in the capital markets. Going forward, with reviving economic growth, we expect revenues from this segment to increase at a healthy pace.

■ Expanding footprint in the broking business
In the retail broking and wealth management businesses, the company has been keen on expanding its reach and client base through the franchisee route. On the institutional equities front, the company is still building up scale post its split from Morgan Stanley. JM Financial is currently focused on expanding its research capabilities across sectors and companies and strengthening its derivatives desk. While the broking revenues witnessed a slump in 2008-09 on account of adverse market conditions, they are likely to regain momentum with an expected recovery in the market.

■ Securities funding business linked to capital market activities
In the securities funding business, the company provides loan against securities, IPO financing, and sponsor funding. In FY09, the company entered the asset reconstruction business in association with public sector banks. As of March 2009, this business had a book size of around Rs 9 bn. We believe that the company’s comfortable gearing and strong net worth provides it the leeway to expand and sustain during bouts of volatility in the capital market.

■ Uncertainties inherent in capital markets
Fortunes of JM Financial’s businesses are inextricably linked to the capital markets. While the company’s diversified product profile and healthy market position would provide some succour to revenues, its earnings remain vulnerable to volatility in capital market related businesses.

■ Revenues growth to be buoyant
CRISIL Equities expects JM Financial’s turnover to register at a CAGR of 37% between FY09 and FY12. Growth across all its major business segments is expected to remain
ealthy, provided economic conditions continue to improve. Adjusted EPS is projected to grow at a CAGR of 43%. JM Financial’s balance sheet strength – net worth of Rs 16 bn as of March 2009 – gives it the ability to withstand market volatility.

To read the full report: JM FINANCIAL LIMITED