The Board of Directors of JM Financial Limited, at its meeting held today, considered and approved the unaudited financial results for the quarter ended June 30, 2008.

Consolidated Results – Key Highlights:
FY 09 – Q1 compared to FY 08 – Q1
* Total income higher at Rs. 129.82 crore compared to Rs. 125.81 crore.
* Net profit before tax lower at Rs. 32.11 crore compared to Rs. 46.13 crore.
* Net profit after tax, minority interest and share of associates, lower at Rs. 18.34 crore compared to Rs 19.15 crore. The Earnings Per Share (EPS), on weighted average number of shares, for the quarter ended June 30, 2008 is Rs. 6.11 (not annualised).

Given the difficult market scenario and the nature of the Company’s capital market linked businesses, profit margins have come under pressure. However, despite the market turbulence and growing inflation, the employees’ share of profits and benefits as well as other overhead fixed costs continue to remain constant, thereby impacting the Company’s share of profits. In addition, to support the Company’s new business ventures, the number of employees across the Group has also increased by 25% from 800 employees in Q1 – FY 08 to more than 1000 employees in Q1 – FY 09.

Mr. Nimesh Kampani, Chairman and Managing Director, JM Financial said, “JM Financial Group is in the growth phase with its established businesses expanding and new ventures evolving steadily. Recently, we acquired the entire capital in the institutional securities business; we have expanded our presence in mutual fund, equity brokerage and private wealth management businesses, to service our clients better. We have also strengthened our talent pool by increasing the number of employees in our team. All these measures have been adopted with the objective of building long-term business, expanding our bouquet of services and solidifying our team. Such efforts require significant investments resulting in increased costs in the near term. However, we maintain a positive view on the Indian economy and the capital markets. We believe that even these adverse market conditions present several hidden opportunities and given our diverse line of businesses we will continue to identify and take advantage from these opportunities, thereby generating value for our shareholders.”

Business Update

Investment banking and securities:

The Investment Banking (IB) business outlook continues to remain strong with several mandated transactions in the pipeline. However, as of now, these transactions have been put on hold, due to the current volatility of the capital markets and weak investor sentiments.

During the quarter, income from the equity brokerage business declined owing to substantially reduced volumes in both the primary and secondary markets. However, the investment advisory and distribution business will continue to focus on growing its franchise by creating a centralised team to service its new franchisees. Once the market stablises, these investments will enable the Group to expand its business and clientele.

Further, there is also increased focus on loan syndication and debt related products.

With the Institutional Equity (IE) business now completely under the JM Financial fold, the focus is on increasing volumes and market share. To strengthen this business, the Company has invested significant capital in creating infrastructure and building a talented team of experts who will enhance our research capabilities. The IE business is still under the consolidation phase and hence is yet to contribute to the bottom line of the consolidated results of the Company.

Securities funding and fund based activities:

The securities funding business has a margin funding loan book size of over Rs 1,100 crore, which has been almost stagnant during the last quarter given the market scenario. We have not yet financed investors for any major IPO during the quarter under review. Apart from IPO and margin funding, the focus is also on developing the business of corporate funding against securities.

In the present volatile market, the NBFC subsidiary, as a cautionary measure, has slowed down its lending activity relating to margin financing as well as loan against shares. As per the provisioning policy adopted, the NBFC subsidiary has also made a provision (though not a mandatory requirement) of Rs. 2.86 crore on standard assets, which are good assets. No such provision was made for Q1 – FY 08.

The application for asset reconstruction business has been submitted to the RBI and we are awaiting necessary approvals.

Alternative Asset Management:

The combined AUM / AUA of the private equity fund, real estate fund, and special situations group stands at around Rs. 3,300 crore with around 50% of the capital committed towards investment.

Asset Management:

The focus of the mutual fund business has been on expanding its presence further by setting up new branches and by actively promoting its schemes. The AUM has stabilised at around Rs.11,000 crore due to bearish markets and lower levels of investor activity.

The asset management company has identified three institutional investors namely, Valiant Capital Partners, Blue Ridge Capital and Eton Park, who propose to participate in the equity capital of the company to the extent of 4% each in the equity, at a premium, on a fully diluted equity capital of the business. The investors would be contributing Rs. 111.7 crore giving a total post money valuation of Rs. 931 crore which works out to 7.32% of the current assets under management. The investors have signed the non-binding term sheet with the asset management company. The said transaction is subject to signing of the definitive agreements and satisfactory receipt of all the regulatory and other approvals as may be required.

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