About Client
A Mumbai-based brokerage firm with a wealth management and advisory business with 40+ years of experience in the Indian capital markets reached out to ValueAdd for equity research support. The firm offers brokerage services, wealth management, financial planning, equity, derivatives, portfolio management and depository services. With Assets under Management of more than USD 200mn, the firm caters to the investment needs of institutional investors, corporates, high networth individuals, NRIs, as well as other financial institutions. The firm operates under licenses with Stock Exchanges: BSE & NSE for equity and derivatives; and MCX & NCDEX for commodities and has an investor client base of 70,000+ investors who are serviced through both its online platforms and physical presence spread over 250+ locations across India. The firm has strong expertise and proven track record in combining fundamental research with technical and quantitative analysis to identify assets poised for long-term wealth creation.
Business Problem
The Client was seeking an outsourced research solution for its Institutional research platform to initiate and maintain their research coverage across multiple sectors. The objective was for the firm to focus more towards the revenue through equity sales and marketing of research ideas, maintaining relationships with corporates, and servicing the buy side and build fund manager relationships.
The brokerage firm was facing a bandwidth constraint for increasing their equity research idea origination and coverage. The Client was looking for a reliable outsourced research partner for initiation and regular coverage maintenance of stocks trading on the Indian stock exchanges with no extra overhead costs of inhouse research team; and hiring and admin hassles.
The Scope
The objective was to initiate coverage of 125+ stocks across multiple sectors such technology, pharma, auto, cement, capital goods, and BFSI. The institutional research was highly demanding and required rigorous research and staying on top of the stock market developments. The operational challenge was to slowly scale up coverage along side maintaining regular track of existing stocks and fully engage with the Client on various trading calls, fund manager meetings, participate in analyst conference calls and other investment roadshows as required.
The Solution
- ValueAdd staffed a dedicated team of equity research analysts that helped scale up research coverage quickly and initiate new investment opportunities.
- ValueAdd’s equity research team smoothly transitioned some of the existing coverage (models, research notes) from the client analysts for the maintenance.
- ValueAdd team suggested and implemented various research product ideas such as daily morning notes, Intra-day stock alerts, detailed sector dashboards, sector earnings preview/review, thematic research products, and periodic sector and stock investment ideas.
- Regular and timely research updates were provided through models updates and notes for quarterly earnings releases, corporate events/actions, Target price / Rating changes, and other material daily news releases through event update reports.
- The analysts actively handled fund manager calls by presenting their investment ideas
Initiation of 125 actionable research reports:
- ValueAdd team Initiated coverage with detailed valuation models with 10 year historical and 5 year (with 8 quarters) independent projections with suitable valuation approaches such as Discounted Cash Flows (DCF), Sum-of-the-Parts (SOTP) and Peer Valuation methodologies such as P/Earnings, EV/EBITDA and P/Book etc.
- ValueAdd team delivered 40+ pager initiating coverage reports (ICRs) or/and a 20+ pager Sales notes for each stock, along with investment recommendation of Buy/Sell/Hold along with a target price.
Efficient model updates and maintenance:
- Publish daily morning meeting notes at 8.15am IST
- Maintained financial models updated for quarterly results, corporate actions, and corporate news
- Regular updates for earnings, corporate actions, and news releases. Publications including Sector earning preview reports, Quick earning blurb after earnings release, Do an earning conference call summary and detailed earnings review note
Stock Ideas and Sector screens:
- ValueAdd equity research team regularly came up with new stock ideas by closely monitoring sector developments and stock valuation trends
- The team had developed screens based on quantitative parameters to funnel new ideas and developed Proof-of-Concept for the investment idea
- Regular meetings were conducted with the Client’s Investment Committee team along with Head of Research and Head of Equity Sales/Trading to deliberate on the investment ideas
Benefits Delivered
ValueAdd offered the required equity research support with detailed research reports analysing the investment case, key valuation levers, detailed peer analysis, and identified key industry trends. The research reports were delivered in ready to publish format and was distributed across various platforms in a timely manner which helped increase the trading/sales activity.
- Client could accelerate their stocks coverage across multiple sectors to 125+ companies within a year with no addition of inhouse analysts.
- Saved huge fixed cost and admin hassles of hiring, mentoring, training inhouse research team through offshoring solution
- Client’s Head of Research and the Senior analysts teamed up with Sales team for more roadshows
- Client’s bandwidth released for more value-added initiatives such as fund manager relationship building, corporate management connections, and other investor-facing initiatives.
- ValueAdd timely investment idea generation backed with insightful research and analysis made a meaningful impact on Client’s business and helped the Client offer a more comprehensive research coverage of various sectors and effectively sell new stock ideas
- The captive offshore setup with ValueAdd helped release significant Client bandwidth to scale up their business and trading activities.
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