Indiabulls Securities: Flat revenue grwoth due to lower retail interest

MUMBAI: Lower retail interest in stock markets has led to a flat revenue growth of Indiabulls Securities in the quarter ending June 2012. This is fifth consecutive quarter of flat sales for the company.

To counter the declining volumes, the company has been pruning its operating costs over the last one year. This includes a sharp reduction in employee benefits and administrative expense. On a y-o-y basis, its employee costs have reduced by 27% in June 2012 quarter. As a result of this cost cutting measure, the company in June 2012 quarter, was able to report a profit of Rs 9.8 crore as against a loss of Rs 19 crore last year same quarter. Although the company has been able to report profits for the third consecutive quarter, its future growth would depend on the revival of retail participation in the stock markets.

At current market price of Rs 7.95, the stock is trading at a P/BV of 0.8. However, its larger sized peers like Edelwiess and Reliance Capital are trading at a P/BV of 0.85 and 0.7 respectively. Since the industry is a high volume low margin business, a relatively smaller player like Indiabulls may be a laggard when the industry outlook improves.