Price band () 725-800

Face value () 5

Issue size ( mn) 6,079-6,918

The Indian financial services industry has experienced significant growth in the last few years. Strong economic growth, favorable demographics, increased geographic penetration; growth of small and medium enterprises and the increasing needs for capital among Indian corporations are expected to continue to drive India’s financial services industry. Financial services providers who offer a complete range of financial products and services will dominate the market. The growing levels of education and financial awareness and the strengthening of regulatory systems in recent years have seen the entry of sophisticated domestic and international players and investors.

ECL commenced its business in 1996 as an investment banker. At present, it is a diversified financial services company in India, providing investment banking, institutional equities, private client broking, asset management and investment advisory services, wealth management, insurance broking and wholesale financing services to corporate, institutional and high net worth individual clients. ECL has 43 offices, which primarily serve HNI clients. It also operates through its thirteen subsidiaries. The company’s presence is negligible in retail spectrum. As on June 30th, 2007, they have 843 full time employees, including 40 research professionals.

ECL has been growing at a pace, wherein revenues and profits doubling every year since the last five years. Revenue of FY07 almost doubled to 3,690mn from 1,570mn last year. In the same period, the PAT grew by 283% yoy to 1,090 mn against the previous year. Income from operations witnessed a CAGR of 94.6% and PAT CAGR of 93.7% in the last four years. ECL’s five months financials are in line, with PAT at 809mn and revenues at 2,846 mn. FY08 five months’ results has almost achieved 77.1% of its FY07 earnings.

The net proceeds of the issue will be utilized for enhancement of margin maintenance with stock exchanges by the subsidiary ( 3,000 mn), for establishment of additional offices and acquisition of office infrastructure ( 269 mn), for enhancement of existing technological capacity ( 31 mn) for prepayment of loans (1, 050 mn) and finally for Corporate and issue expenses _ mn

(Total 4,350 + _ mn)

ECL has an established name in the institutional equities segment. Over last 4 years, the company recorded a CAGR of 91.6% in its bottom line. At the price band of 725-825, the stock would be trading at P/E of 49.8X-56.6X FY07 post diluted EPS and 28X-32X FY08 E consolidated annualized earnings respectively. When compared to its peers like Motilal Oswal, India Infoline, which are trading at a 75 X FY08E earnings, the issue price of ECL is very attractive and we recommend to Subscribe to the issue.

• ECL institutional broking and investment banking business comprise 58% of revenue followed by 38% from treasury activities. Thus, there is higher dependence on the revenue flow from the capital market in general and these segments in particular.,
• ECL subsidiaries have incurred losses in the past. In FY07, its subsidiaries like ECAL Advisors Ltd, Edelweiss Capital USA LLC and EC Global Ltd, Mauritius have posted losses of 42mn, 2mn and 24mn respectively.
• Intense competition in financial services businesses may limit growth.