1. Microsec Financial Services Ltd.
IPO Note Price Band (Rs.): 113 - 118
Retail Research
16 September 2010
Sector: Financial Services
SBICAP Securities Limited, Corporate Office: 191, Maker Towers 'F', Cuffe Parade, Mumbai 400 005
Tel.: (Board) +91 22 30273300/01 • Fax: (022) 30273420.
For a list of our branches refer to our website: www.sbicapsec.com
SBICAP Securities Limited, Corporate Office: 191, Maker Towers 'F', Cuffe Parade, Mumbai 400 005
Tel.: (Board) +91 22 30273300/01 • Fax: (022) 30273420.
For a list of our branches refer to our website: www.sbicapsec.com
MFSL is a non-banking financial company registered with the RBI
and it is engaged in the business of financing, which primarily
comprises giving loans against shares, and making investments. In
its financing and investment business, MFSL offers loans against
shares to its clients, secured by liquid and marketable securities at
appropriate margin levels. Its LAS business helps their clients
leverage their equity market positions to take increased exposure.
The company was originally incorporated as 'Satyam Fiscal Services
Private Limited' and the name was changed to 'Microsec Financial
Services Limited' on October 21, 2005. It is also the ultimate holding
company of the Microsec Group. The promoters acquired the entire
shareholding of the company from the previous shareholders. Prior
to its acquisition by the current promoters on August 1, 2005, the
company was a financial services company and was engaged in
the business of financing and investment management.
MFSL offers loans to clients, including brokerage clients of MCap
and MCL, against specified securities which fall within the
'approved list' of the Microsec Group. Only a certain percentage of
the market value of the securities is advanced as loan, and this helps
to provide for market fluctuations in the value of the security. The
client is required to deposit and maintain a appropriate margin
and is responsible for infusing additional funds in case the margin
falls below the prescribed limit, failing which MFSL has the power
to sell the securities to the extent that would be required in order to
maintain the required margin. Margin levels of exposure can be
monitored on a real-time basis as the selling price of the securities
securing the loan are usually transparent and easily accessible on a
stock exchange.
As at March 31, 2010, 27 clients of MFSL maintained a margin of
50% or more and the loan amounts outstanding in respect of such
clients aggregated to approximately Rs. 140.94 million; 44 clients
maintained a margin between 25% to 50% and the loan amounts
outstanding in respect of such clients aggregated to approximately
Rs. 155.83 million; one client maintained a margin below 25% and
the loan amounts outstanding in respect of such client aggregated
to approximately Rs. 8.35 million.
MFSL had no non-performing assets as on March 31, 2010. Until
fiscal 2009, no material amount was written off on account of bad
debts. However, MFSL paid Rs. 39.50 million as liability for early
recall of loans during the Fiscal 2009. MFSL assigned receivables of
certain loan accounts and incurred a loss of Rs. 11.27 million in
such assignment during fiscal, 2010.
ISSUE DETAILS:
Date of Opening 17th September 2010
Date of Closing 21st September 2010
Issue Size Rs. 147 cr.
No. of Share Offered 12,500,000 (1.25 Cr.)
Face Value Rs. 10
BRLM SBI Capital Markets Ltd.
Registrar Link Intime (I) Pvt. Ltd.
Bid Lot 52
Post Issue Share Capital Rs. 31.81 Cr.
Source: RHP, SSL Research
For complete information and a complete list of the risk factors,
please refer the Red Herring Prospectus.
PRE ISSUE No. of Shares %
Promoter & Promoter Group 17,427,633 90.25
Non Institutions 1,882,867 9.75
Public - -
Total 19,310,500 100.00
SHAREHOLDING PATTERN
POST ISSUE No. of Shares %
Promoter & Promoter Group 17,427,633 54.79
Non Institutions 1,882,867 5.92
Public 12,500,000 39.30
Total 31,810,500 100.00
OBJECTS OF ISSUE
Expansion of financing business of the company 113.00
Expansion of MCap's domestic operations by increasing
network of branches 8.00
Enhance MCap's existing technological capacity 7.50
General corporate purposes [•]
Total [•]

2. Microsec Financial Services Ltd. Financial Services
SBICAP Securities Limited 16 September, 2010 • 2
Key Strengths
Integrated business model:
The Microsec Group operates as an integrated group, providing various
financial products and services to its target client base. The group operates
through the company and its subsidiaries, MCap, MRPL, MTL, MIBL, MCL
and PRP. The integrated service platform allows them to leverage relationships
across lines of business and their industryand product knowledge byproviding
multi-channel delivery systems to their client base, thereby increasing their
ability to cross-sell their products services.
Research and knowledge based organisation:
They have adequate base of research with delivery capabilities. Their research
reports are covered by print and electronic media at pan India level. They
benchmark their research calls against relative index which provides
accountability to research. Theyhave started a research based retail distribution
channel namely "Club Kautilya" through MCap.
Brand recognition and strong relationships:
They believe that success in the financial services industry is derived from
brand recognition and client relationships. They believe that 'Microsec' is a
well-recognized brand, especially in eastern India. They also believe that their
clients associate the 'Microsec' brand with differentiated and quality services,
solutions to strategic and financial challenges and execution of their clients'
transactions. They focus on nurturing long-term relationships with their
corporate, institutional and high net-worth individual clients. Theybelieve that
these relationships provide them with an advantage in attracting deal flow
and securing transactions and enable them to offer their clients diversified
products and services and increase their revenues per client.
Strong regional base with emerging pan India presence:
Microsec Group enjoys a strong presence in eastern India. As at June 30, 2010,
they had a network of 239 branches, out of which 178 branches were located in
West Bengal. They have 26 branches in states other than eastern states and
intend to strengthen their pan-India presence, they believe their presence in
eastern India provides them with a competitive advantage and presents them
an attractive opportunity to grow their client base and revenues.
For complete information and a complete list of the risk factors, please refer the Red Herring Prospectus. • Source: RHP
~ Integrated business model
~ Research and knowledge based organisation
~ Strong regional base with emerging pan India
presence

3. Microsec Financial Services Ltd. Financial Services
SBICAP Securities Limited 16 September, 2010 • 3
Business Strategies
Geographic expansion:
They plan to expand their operations into smaller cities and towns that they
believe are under-serviced by financial services companies or where they
believe they can develop their business. They may also consider, from time to
time, growth opportunities through the inorganic route. Whilst they propose
to offer their range of products and services across their businesses through
their expanded network, they also plan to set up 200 exclusive outlets of 'Club
Kautilya' within a period of two years. They also plan to set up a network of
'Microsec Enterprises' (a network of entrepreneurs as channel partners for
distribution of financial products) and 'Microsec Network Services' (a network
of professionals, such as CAs, as channel partners for distribution of multiple
financial products) through a combination of the issuer and its subsidiaries,
throughout India.
Strengthening institutional business:
They have already set up desk through MCap for servicing the institutional
business. Theyhave filed applications for empanelment to several institutions.
Theyhave alreadybeen granted empanelment bynine institutions out of which
five have started business. Theyplan to establish and scale the broking business
with institutions. The institutional desk will also provide additional support
to their investment banking business.
Strengthen research capabilities and continue to develop client
relationships:
They believe that they have adequate research capabilities in MCap that
complement the business of Microsec Group, particularly their brokerage
business. They intend to develop their research division as a separate profit
centre to provide research services to their clients, including their brokerage
clients. They propose to enlarge their team of research analysts and advisors
and dealers to strengthen relationships with their clients. They propose to
expand their business by increasing the number of their client relationships
in the Issuer and its Subsidiaries. They believe that increased client
relationships will add stability to their business.
Expand internet based platform for financial services and products:
They are currently in the process of setting up an internet-based platform
through MCap for providing their products and services to their clients,
particularly the brokerage clients. They believe that internet based services
are cost effective, less risky and transparent. They also propose to offer wealth
management, insurance broking, financial planning and related services
through internet-based platform. They have acquired PRP Technologies
Limited, company which launched an internet-based personal resource
planning application to provide information management services to
individuals. They believe that an internet based, easily scalable product
delivery model will enable them to respond effectively to the competitive
challenges of discount equity brokerages.
For complete information and a complete list of the risk factors, please refer the Red Herring Prospectus. • Source: RHP
~ Geographic expansion
~ Strengthening institutional business
~ Strengthen research capabilities and continue to
develop client relationships

4. Microsec Financial Services Ltd. Financial Services
SBICAP Securities Limited 16 September, 2010 • 4
Risk Factors
Outstanding litigation against the company, its subsidiaries and the
group company
The company, subsidiaries and group companies are involved in disputes
with various parties arising from their operations from time to time. Their
legal proceedings are pending at different levels of adjudication before various
courts and tribunals. Should any new developments arise, such as a change
in law or rulings against the company or its subsidiaries by appellate courts
or tribunals, the company or its subsidiaries may need to make provisions in
its financial statements, which could adversely impact its business results.
Furthermore, if significant claims are determined against the company and it
is required to pay all or a portion of the disputed amounts, there could be a
material adverse effect on the company's business and profitability.
Funding requirements and the deployment of the net proceeds are based
on management estimates and may be revised from time to time, which
may adversely affect the results of operations
Their funding requirements and the deployment of the net proceeds have
not been appraised by anybank, financial institution or any other independent
institution. Substantial part of the funds raised through this issue is proposed
to be used for the financing activities of the company. In fiscal 2010, the
financing activity contributed approximately 26% of their standalone
revenues, but since this activity has been commenced recently since May
2005, their results may differ substantially going forward. Further, in view of
the highly competitive nature of the industry in which they operate, they
may revise their management estimates from time to time and consequently
their funding requirements may also change. This may result in the
rescheduling of their funds deployment and a change in their proposed
expenditure for a particular object which may adversely affect their results
of operations.
Extended loans against shares, or margin loans, to the clients, and any
default by a client coupled with a downturn in the stock markets could
result in substantial loss
The company and MRPL, at times, also extend significant credit to clients at
specified interest rates for the purchase of shares. In the case of highly volatile
stock market or adverse movements in stock price, clients may not be able to
repay their loans, and the collateral securing the loans may have decreased
significantly in value, resulting in losses they may not be able to support. For
instance, in fiscal 2010 an amount aggregating to Rs. 11.27 million was written
off as loss on assignment of receivables, in the books of the company, in respect
of three clients.
Operations are significantly concentrated in the eastern and north eastern
regions, and failure to expand the operations may restrict growth and
adversely affect business
Historically, their operations have been focused on the eastern and north
eastern regions of the country. Accordingly, a very substantial part of their
revenues are generated from operations in eastern and northeastern India.
Failure to expand their operations either through branches or business
associates or otherwise may restrict their growth potential and adversely affect
their business plan. This will adversely affect business operations and growth
of business.
~ Outstanding litigation against the company, its
subsidiaries and the group company
For complete information and a complete list of the risk factors, please refer the Red Herring Prospectus. • Source: RHP
~ Funding requirements and the deployment of the
net proceeds are based on management estimates
~ Extended loans against shares

5. Microsec Financial Services Ltd. Financial Services
SBICAP Securities Limited 16 September, 2010 • 5
Financials & Valuations Snap Shot:
For complete information and a complete list of the risk factors, please refer the Red Herring Prospectus.
Microsec Financial Services Ltd. (Rs. cr.)
Pre Issue Post Issue
FY10 FY10
Lower Price Band (Rs.) Upper Price Band (Rs.)
Particulars 113.00 118.00
Net Sales 57.09 57.09 57.09
Total Income 58.47 58.47 58.47
EBIDTA 33.61 33.61 33.61
PAT 24.45 24.45 24.45
Equity Share Capital 19.31 31.81 31.81
No of Equity Shares 1.93 3.18 3.18
Face Value 10.00 10.00 10.00
EPS 12.66 7.69 7.69
CMP 118.00 113.00 118.00
Cash and Bank 19.31 19.31 19.31
Debt 4.01 4.01 4.01
Market Cap 227.87 359.46 375.36
PE(x) 9.32 14.70 15.35
Enterprise Value 212.57 344.16 360.06
Mcap/Sales (x) 3.99 6.30 6.57
EV/Sales (x) 3.72 6.03 6.31
EV/EBIDTA (x) 6.33 10.24 10.71
EBIDTA/Sales (%) 58.87 58.87 58.87
Source: RHP, SSL Research
Particulars. Edelweiss Cap. India Infoline Motil.Oswal.Fin. Microsec Financial Services Ltd.
CMP (Rs) 52.50 99.15 163.75 113.00 118.00
TTM Sales (Rs Cr) 1,025.70 1,247.78 606.87 57.09 57.09
M.cap (Rs Cr) 3,942.75 2,884.27 2,361.28 359.46 375.36
P / E (x) 16.97 13.55 13.68 14.70 15.35
EV / Sales (x) 4.83 2.88 3.36 6.03 6.31
EV / EBIDTA (x) 8.41 7.99 8.02 10.24 10.71
M.cap / Sales (x) 3.84 2.31 3.89 6.30 6.57
OPM (%) 57.47 36.08 41.86 58.87 58.87
NPM (%) 22.65 17.06 28.44 42.83 42.83
Relative Valuations
Source: RHP, Capitaline, SSL Research

6. Microsec Financial Services Ltd. Financial Services
SBICAP Securities Limited 16 September, 2010 • 6
DISCLAIMER:
SBI Capital Markets Limited (SBICAP) is a full-service, integrated Investment Banking company and its wholly owned subsidiary SBICAP Securities Ltd is a Stock Broking Company having memberships on BSE and
NSE. SBICAP is also an underwriter of securities. ("SBICAP and SBICAP Securities Ltd. are collectively referred to as SBICAP Group") SBICAP has Investment Banking, Advisory and other business relationships with
a significant percentage of the companies covered by our Research Group. Our research professionals provide important inputs into our Investment Banking and other business selection processes. Recipients of this
report should assume that SBICAP Group is seeking or may seek or will seek Investment Banking, advisory, project finance or other businesses and may receive commission, brokerage, fees or other compensation from
the company or companies that are the subject of this material/ report. SBICAP group and its officers, directors and employees, including the analysts and others involved in the preparation or issuance of this material
and their dependants, may on the date of this report or from, time to time have "long" or "short" positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Our
sales people, dealers, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinion that are contrary to the opinions expressed herein, and our
proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. SBICAP Group may have earlier issued or may issue in future reports on
the companies covered herein with recommendations/ information inconsistent or different from those made in this report. In reviewing this document, you should be aware that any or all of the foregoing, among other
things, might give rise to potential conflicts of interest. SBICAP Group may rely on information barriers, such as "Chinese Walls" to control the flow of information contained in one or more areas within SBICAP Group
into other areas, units, groups or affiliates of SBICAP Group.
This report is for information purposes only and this document/material should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither this document
nor anything contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. This document does not solicit any action based on the material contained herein. It
is for the general information of the clients of SBICAP Group. Though disseminated to clients simultaneously, not all clients may receive this report at the same time. SBICAP Group will not treat recipients as clients by
virtue of their receiving this report. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Similarly, this document
does not have regard to the specific investment objectives, financial situation/circumstances and the particular needs of any specific person who ma y receive this document. The securities discussed in this report may
not be suitable for all the investors. The securities described herein may not be eligible for sale in all jurisdictions or to all categories of investors. The countries in which the companies mentioned in this report are
organized may have restrictions on investments, voting rights or dealings in securities by nationals of other countries. The appropriateness of a particular investment or strategy will depend on an investor's individual
circumstances and objectives. Persons who may receive this document should consider and independently evaluate whether it is suitable for his/ her/their particular circumstances and, if necessary, seek professional/
financial advice. Any such person shall be responsible for conducting his/her/their own investigation and analysis of the information contained or referred to in this document and of evaluating the merits and risks
involved in the securities forming the subject matter of this document. The price and value of the investments referred to in this document/material and the income from them may go down as well as up, and investors
may realize losses on any investments. Past performance is not a guide for future performance. Future returns are not guaranteed and a loss of original capital may occur. Actual results may differ materially from those
set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. SBICAP Group does not provide tax advises to its clients, and all investors are strongly advised to
consult regarding any potential investment. SBICAP Group and its affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Foreign currency denominated securities are
subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which are
influenced by foreign currencies effectively assume currency risk. Certain transactions including those involving futures, options, and other derivatives as well as non-investment grade securities give rise to substantial
risk and are not suitable for all investors. Please ensure that you have read and understood the current risk disclosure documents before entering into any derivative transactions.
This report/document has been prepared by the SBICAP Group based upon information available to the public and sources, believed to be reliable. Though utmost care has been taken to ensure its accuracy, no
representation or warranty, express or implied is made that it is accurate or complete. SBICAP Group has reviewed the report and, in so far as it includes current or historical information, it is believed to be reliable,
although its accuracy and completeness cannot be guaranteed. SBICAP Group endeavors to update on a reasonable basis the information discussed in this document/material, but regulatory, compliance or other reasons
may prevent us from doing so. The opinions expressed in this document/material are subject to change without notice and have no obligation to tell the clients when opinions or information in this report change.
This report or recommendations or information contained herein do/does not constitute or purport to constitute investment advice in publicly accessible media and should not be reproduced, transmitted or published
by the recipient. The report is for the use and consumption of the recipient only. This publication may not be distributed to the public used by the public media without the express written consent of SBICAP Group. This
report or any portion hereof may not be printed, sold or distributed without the written consent of SBICAP Group. Neither this document nor any copy of it may be taken or transmitted into the United State (to
U.S.Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in Japan or to any resident thereof. Law may restrict the distribution of this document
in other jurisdictions, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Neither SBICAP Group nor its directors, employees, agents or
representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
Corporate Office: SBICAP Securities Limited,191, Maker Towers 'F', Cuffe Parade, Mumbai 400 005
Tel.: 91-22-30273300 (Board) • Fax: (022) 30273420
For any information contact us:
Toll free: 1-800-223345 • Tel.: (022) 2436 4059 / (022) 2436 8629 Or E-mail: helpdesk@sbicapsec.com