Religare Enterprises Debt surged on 22.6% and Net Debt / EBITDA jumped on 1.5x from 7.2x to 8.6x

27-05-2016 • About Religare Enterprises ($RELIGARE) • By InTwits

Religare Enterprises reported FY2016 financial results today. Here are the key drivers of the company's long term financial model:

Religare Enterprises has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.3%. At the same time it's a lot of higher than industry average of 5.6%.
CAPEX is quite volatile: ₹5,172m in FY2016, ₹4,063m in FY2015, ₹3,727m in FY2014, ₹746m in FY2013, ₹873m in FY2012
The company has potentially unprofitable business model: ROIC is 2.4%
It operates with high leverage: Net Debt/EBITDA is 8.6x while industry average is 1.0x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue increased on 7.9%. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 5.5 pp from 3.6% to 9.1% in FY2016. During the last 5 years EBITDA Margin topped in FY2013 at 57.6% and was declining since that time.

Net Income margin decreased on 4.7 pp from 3.7% to -1.1% in FY2016.

Investments (CAPEX, working capital and M&A)

In FY2016 the company had CAPEX/Revenue of 1.1%. CAPEX/Revenue showed almost no change from FY2013 to FY2016. It's average level of CAPEX/Revenue for the last three years was 1.1%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2015 at 0.91%.

Return on investment

The company operates at low but positive ROIC (2.4%) and negative ROE (-1.3%). ROIC decreased slightly on 1.7 pp from 4.1% to 2.4% in FY2016. ROE decreased on 5.6 pp from 4.3% to -1.3% in FY2016.

Leverage (Debt)

Company's Net Debt / EBITDA is 8.6x and Debt / EBITDA is 9.4x. Net Debt / EBITDA jumped on 1.5x from 7.2x to 8.6x in FY2016. Debt jumped on 22.6% while cash jumped on 68.8%. During FY2012-FY2016 Net Debt/EBITDA bottomed in FY2013 at 6.1x and was growing since that time.

Religare Enterprises has short term refinancing risk: cash is only 20.5% of short term debt.

Management team

The company's CFO Anil Saxena has spent 13 years with the company.

Financial and operational results

Religare Enterprises ($RELIGARE) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	31,998	34,579	34,410	41,742	45,026	7.9%
EBITDA	13,817	19,925	18,508	21,628	21,415	-1.0%
Net Income	-2,128	-5,541	-693	1,538	-477	-131.0%
Balance Sheet
Cash	15,215	13,833	12,315	10,172	17,174	68.8%
Short Term Debt	80,809	63,658	74,988	78,008	83,641	7.2%
Long Term Debt	61,364	71,363	66,224	86,883	118,583	36.5%
Cash flow
Capex	595	440	379	380	513	35.1%
Ratios
Revenue growth	13.1%	8.1%	-0.5%	21.3%	7.9%
EBITDA growth	155.2%	44.2%	-7.1%	16.9%	-1.0%

EBITDA Margin	43.2%	57.6%	53.8%	51.8%	47.6%	-4.3%
Net Income Margin	-6.6%	-16.0%	-2.0%	3.7%	-1.1%	-4.7%
CAPEX, % of revenue	1.9%	1.3%	1.1%	0.9%	1.1%	0.2%

ROIC	2.0%	3.4%	2.7%	4.1%	2.4%	-1.7%
ROE	-6.7%	-16.6%	-2.5%	4.3%	-1.3%	-5.6%
Net Debt/EBITDA	9.2x	6.1x	7.0x	7.2x	8.6x	1.5x

Peers in Other Financial Services

Below we provide Religare Enterprises benchmarking against other companies in Other Financial Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Capital First ($CAPF)	-	9.9%	31.5%	35.8%	31.0%
Jm Financial ($JMFINANCIL)	-	19.3%	-3.4%	39.4%	17.6%
Credit Analysis And Research ($CARERATING)	-	13.1%	16.0%	10.6%	7.2%
Aditya Birla Money ($BIRLAMONEY)	-	-13.3%	-10.6%	49.0%	6.8%
Icra ($ICRA)	-	21.2%	12.2%	13.7%	5.9%
Median (11 companies)	21.2%	13.1%	12.2%	31.6%	5.7%
Religare Enterprises ($RELIGARE)	-	8.1%	-0.5%	21.3%	7.9%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Twentyfirst Century Management Services ($21STCENMGM)	-	-	-	91.9%	-
Tcfc Finance ($TCFCFINQ)	-	-	-	88.4%	-
Frontline Securities ($FRONTSEC)	-	-	-	87.0%	-
Shardul Securities ($SHARDUL)	-	-	-	84.6%	-
Axis Capital Markets (India) ($AXISCAP)	-	-	-	84.2%	-
Median (33 companies)	36.4%	40.9%	43.8%	33.7%	60.4%
Religare Enterprises ($RELIGARE)	43.2%	57.6%	53.8%	51.8%	47.6%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Jm Financial ($JMFINANCIL)	0.9%	0.9%	11.2%	16.9%	1.2%
Geojit Bnp Paribas Financial Services ($GEOJITBNPP)	5.7%	7.8%	3.7%	4.8%	8.3%
Credit Analysis And Research ($CARERATING)	4.6%	2.8%	1.4%	4.4%	1.0%
Multi Commodity Exchange Of India ($MCX)	3.8%	8.8%	1.7%	3.8%	8.8%
Crisil ($CRISIL)	4.4%	1.6%	1.7%	1.9%	-
Median (10 companies)	4.4%	1.7%	1.8%	1.7%	3.1%
Religare Enterprises ($RELIGARE)	1.9%	1.3%	1.1%	0.9%	1.1%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Crisil ($CRISIL)	62.5%	53.7%	46.4%	43.1%	-
Credit Analysis And Research ($CARERATING)	-	32.4%	31.4%	36.1%	44.1%
Icra ($ICRA)	20.7%	17.0%	20.9%	21.1%	20.5%
Multi Commodity Exchange Of India ($MCX)	35.4%	27.2%	9.9%	4.8%	9.7%
Indbank Merchant Banking Services ($INDBANK)	-	-	-	-	-
Median (35 companies)	13.0%	22.1%	20.9%	28.6%	15.1%
Religare Enterprises ($RELIGARE)	2.0%	3.4%	2.7%	4.1%	2.4%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Capital First ($CAPF)	7.5x	9.2x	9.1x	7.7x	9.4x
Jm Financial ($JMFINANCIL)	6.4x	6.4x	4.8x	4.8x	5.8x
Intec Capital ($INTECCAP)	5.1x	4.9x	4.6x	4.5x	0.0x
Indiabulls Securities ($IBSEC)	1.6x	2.5x	1.9x	4.0x	4.0x
Lkp Finance ($LKPFIN)	6.9x	5.8x	4.5x	3.5x	0.0x
Median (31 companies)	-0.2x	-0.1x	0.0x	0.0x	0.0x
Religare Enterprises ($RELIGARE)	9.2x	6.1x	7.0x	7.2x	8.6x

Religare Enterprises stock price chart

Religare Enterprises financials

mln.	FY2010	FY2011	FY2012

Revenue	53,025	28,299	31,998
EBITDA	5,358	5,414	13,817
Net income	969.2	-3,005.200	-2,127.650
CAPEX	1,720	2,249	595.2
Debt	58,921	120,482	142,173
Cash	2,517	11,330	15,215

About Religare Enterprises

Religare Enterprises Limited operates as a diversified financial services company worldwide. The company offers broking services, such as equity broking in cash and derivatives, and depository participant services; currency futures and options broking; commodity broking; institutional brokerage and research services to asset management companies, pension funds, insurance companies, and hedge funds; and commodity trading in physical form, as well as by way of exchange-traded contracts. It also provides various forms of credit to small and medium enterprises, including loans against property, home loans, commercial vehicle and construction equipment loans, and working capital loans, as well as capital markets financing comprising loans against securities, initial public offering financing, employee stock option scheme financing, and promoter financing. In addition, the company offers investment banking services in the areas of mergers and acquisitions advisory services, corporate restructuring advisory services, public equity offerings, convertible bond offerings, institutional placements and private placements, corporate finance, and investment banking advisory services to businesses, private equity firms, other financial institutions, and high net worth individuals. Further, it provides wealth management services, including investment solutions and services, such as mutual funds, fixed income, direct equities and commodities, portfolio management, loans, real estate, insurance, and trust and estate planning services. Additionally the company offers fund-of-fund investment solutions; direct investment funds; asset management services; and health insurance services to individuals and their families, small to medium enterprises, and corporates. The company was incorporated in 1984 and is headquartered in New Delhi, India.