MICROSEC: Ambitious plans

Microsec Financial Services provides investment banking, retail brokerage, wealth management and loans against shares. With most of its 240 branches in eastern India, it wishes to expand elsewhere, aiming to open 30 branches this year across regions. Its business model of integrated branches enables different financial services under one roof.
 

GROWING FAST
In Rs  crore	FY09	FY10
Sales	39.0	58.4
Ebitda	27.5	27.6
Net profit	8.7	24.5
Source: RHP

Focus is also on its financing business. Around three-fourths of issue proceeds (Rs 115 crore) will be used to expand this; it contributes two-fifth of overall profit. Microsec recently also started an institutional sales desk in Mumbai to beef its investment banking, where most of the revenue is from SME clients in East India. Margins are healthy; operating profit margin stood at 59 per cent in 2009-10. Microsec is debt-free and higher return ratios than the industry are among the positives. Yet, the industry is highly competitive, with many large players. Making a visible mark, especially in the key regions it aims to expand, as well as in the institutional segment, will be challenging. The company’s smaller size perhaps explains the relatively lower IPO pricing. At Rs 113, the issue is available at 11 times estimated 2010-11 earnings. Investors with some risk appetite may consider this IPO.