Hi,
Have a 5-15% allocation to the stock and bought at various points from 25-65 levels. So have a highly biased view and wanting some negative views. Highly illiquid . Its just for discussion.
Market Cap.: ₹ 175.97 Cr. Current Price: ₹ 72.00 Book Value: ₹ 45.77 Stock P/E: 10.10 Dividend Yield: 0.00% Face Value: ₹ 10.00 Listed on BSE and NSECompany Website 52 Week High/Low: ₹ 74.90 / ₹ 48.10 Debt to equity: 0.19 Debt: ₹ 20.62 Cr. Debtor days: 137.31
Positive Reasons for the Company
1) The erroneous trade costed them 35-40 cr of loss but did not affect the business in last 3 years. This indicates client relationships are strong.
2) More than 50-60% of the business comes from institutional broking where it has 200-250 clients. Also investment banking/pms operations slowly picking up.
3) They got back cash from the settlement in the erroneous trade and now are a net cash co with around 50-75 cr cash. ( A concern is why 42 cr of trade receivables)
4) High Promoter Shareholding and management has been focused mainly on the institutional broking. Although people consider Broking as a sad business but Institutional Broking is an interesting space where competition has reduced and in last decade it has become based on performance of the research/corporate access then relationships. Every MF has a detailed grading system. Emkay Global has inched up in the last few years in the grading.
5) Last two qtr consol PAT is 10 cr approx and current market cap is 170-180 cr. Can do 20-25 cr PAT possibly in current scenario is my bet and better in good times for the market. In that case its at a P-E of 7-9 times.
6) There are not many big players in the Domestic Institutional Brokers and the competition is reducing whereas flows into equity is increasing. Also to create a 200-250 client in institutional broking is tough. ( A good check is how many new institutional brokers have come up in last decade. There are more that have closed. )
7) My bet is insti broking / Investment Banking business for the company can grow big time if we have a bull market in next 3-5 years if not the current valuations are not expensive. Also some part of the belief in the biz is as am a consultant to another Institutional Broking Outfit for last 4 years.
8) There will be consolidation/takeovers though i doubt Emkay would be on the block but some other broker getting crazy valuation can be a lucky play. ( Antique , Fortune etc have been bought by a marquee name )
Negative Reasons
1) No Pricing Power. SEBI decided max a domestic fund can pay is .12% . There could be further regulations. No regulations for Foreign money.
2) Broking is a sad business especially the Retail Part. All major brokers are shifting more towards NBFCs and AMCs ( Edelweiss, India Infoline and Motilal Oswal)
3) If they lost money on an erroneous trade why can it not happen again. ( although instances are negligible. )
4) If markets were to correct and fall the business takes a hit.
Conclusion
If one believes Indian Equity Markets are to grow over the next few years – Emkay Global will be a direct beneficiary as its mainly institutional broking and investment banking. The stock is not expensive and the balance sheet is much cleaner today after 2-3 years.
Disclosure – Do not take this as a buy/sell recommendation. Do hold shares personally and vested interests. I am known to change my mind often with my positions so can sell or buy more on a whim 
also.
Would like to invite views on the risks involved in the company. Also what could be the better bets to go for in the same sector.
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