Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q2 FY2019 Earnings Presentation
58 slides from Edelweiss Financial Services's earnings presentation, March 2020
Slide 1: Edelweiss Financial Services Limited Q2FY19 Earnings Update
Edelweiss Financial Services Limited Q2FY19 Earnings Update
Slide 2: Contents
Contents 1 Quarterly Performance Highlights 2 Business Approach 3 Business Performance Highlights 4 Balance Sheet Highlights 5 ESG at Edelweiss 2
Slide 3: Quarterly Performance Highlights – Q2FY19
Quarterly Performance Highlights – Q2FY19 Numbers and ratios in this section for all periods are as per IndAS and Post MI
Slide 4: Overview of Q2FY19
Overview of Q2FY19 • Continued to finance high quality assets Credit • Maintained asset quality and adequate provisions Franchise & • Witnessed good inflows in both Wealth and Asset Management Advisory • Slowdown in Capital Markets business due to dampened market activity Insurance • One of the fast
Slide 5: Financial Snapshot – Q2FY19
Financial Snapshot – Q2FY19 INR Cr EOP Equity Profit after Tax RoA RoE Total Pre Minority 8,470 276 Credit 6,670 284 2.4% 18.0% Franchise & Advisory 166 76 Life & General Insurance 1,100 (86) BMU, Corp & Others 534 2 Minority Interest (MI) 958 4 Total Consolidated Post MI 7,512 272 1.9% 14.7% Total
Slide 6: Q2FY19 Consolidated PAT
Q2FY19 Consolidated PAT at INR 272 Cr Profit after Tax (INR Cr) Ex-Insurance PAT Consolidated PAT 322 308 311 272 234 212 222 264 272 Taper Tantrum 187 236 248 effect 154 155 166 196 209 133 103 111 120 170 89 90 98 140 144 155 70 69 62 68 72 122 46 48 51 57 91 96 106 33 27 35 78 79 83 88 58 61 33 2
Slide 7: Q2FY19 Performance Highlights
Q2FY19 Performance Highlights Consolidated PAT growth of 47% YoY Consistent growth in profits Ex-Insurance PAT growth of 56% YoY Credit business grew 54% YoY Profits Distributed across Businesses Franchise & Advisory business grew 9% YoY Consolidated RoA 1.9% Ex-Insurance RoA 2.5% Key performance Co
Slide 8: Consolidated Q2FY19 PAT Growth of 47% YoY
1 Consolidated Q2FY19 PAT Growth of 47% YoY... Y-o-Y (INR Cr) Q2FY18 Q1FY19 Q2FY19 Growth PAT 185 264 272 47% Consolidated PAT Ex-Insurance 207 311 322 56% Balance 48,102 61,785 59,433 24% Sheet 8
Slide 9: …Across Businesses…
2 …Across Businesses… Y-o-Y EOP Equity PAT (INR Cr) Q2FY18 Q1FY19 Q2FY19 Growth Q2FY19 Total Consolidated 185 264 272 47% 7,512 Credit 159 243 245 54% 6,215 Franchise & Advisory 69 81 76 9% 166 Insurance (21) (46) (50) - 619 BMU, Corp & Others (22) (14) 1 - 512 9
Slide 10: Key Performance Parameters
3 Key Performance Parameters Key Ratios Consolidated Q2FY18 Q1FY19 Q2FY19 RoA 1.7% 1.9% 1.9% RoE 15.3% 15.2% 14.7% Cost to Income Ratio 61% 61% 61% Ex-Insurance Q2FY18 Q1FY19 Q2FY19 RoA 2.1% 2.5% 2.5% RoE 18.4% 19.8% 19.1% Cost to Income Ratio 50% 49% 47% RoA is Pre Minority Interest 10
Slide 11: Business Approach
Business Approach Numbers and ratios in this section for FY19 are as per IndAS and for prior periods it is as per IGAAP
Slide 12: Our Diversified Model Reduces Volatility…
Our Diversified Model Reduces Volatility… Retail Credit • Retail Mortgage • SME and Business Loans • Loan against Securities • Agri & Rural Loans Credit Corporate Credit • Structured Collateralised Credit • Wholesale Mortgage Distressed Credit • Advisory • Broking Wealth Management • Distribution Fr
Slide 13: …And Delivers Non-Linear Growth
…And Delivers Non-Linear Growth PAT (INR Cr) Balance Sheet (INR Cr) 1,073* 59,433 55,086 890 38,667 609 32,145 27,072 414 329 16,204 220 537 13,289 14,529 178 128 FY12 FY13 FY14 FY15 FY16 FY17 FY18 H1FY19 FY12 FY13 FY14 FY15 FY16 FY17 FY18 H1FY19 Consistently across business cycles *Annualised 13
Slide 14: Our Asset Base is a Mix of Own and Customer Related Assets
Our Asset Base is a Mix of Own and Customer Related Assets As on 30th Sept’18 (rounded off to nearest 100) INR Cr YoY Growth Balance Sheet Assets 59,400 24% Customer Assets 1,88,500 32% Distressed Credit (ARC Assets) 40,300 7% Assets Under Advice (Wealth Management) 98,000 28% Funds under Management
Slide 15: Customer Assets have Helped us De-risk our Profits
Customer Assets have Helped us De-risk our Profits Customer Assets (INR Cr) RoA Ex-Insurance RoE Ex-Insurance 1,88,500 19.1% 2.5% 1.2% 7.3% 7,500 FY12 Q2FY19 FY12 Q2FY19 FY12 Q2FY19 Franchise & Advisory businesses have provided the RoE fillip through Capital Efficiency 15
Slide 16: Our Risk Governance Structure…
Our Risk Governance Structure… Oversight by Board Risk Committee Global Risk Committee Business Risk Group Risk Enterprise Risk Management Council Corporate Controller & audit • Define Organisation Business • Implementation of risk • Review “High Impact & risk framework framework Low Probability” ri
Slide 17: …Ensures Prudent Risk Management and Responsible Growth
…Ensures Prudent Risk Management and Responsible Growth Market Risk Regulatory Reputational Business Risk Credit Risk Liquidity Risk Risk Risk Physical Operational & Technology Fraud Risk Infrastructure People Risk Process Risk Risk Risk Enterprise risk management approach : 11 Risk Framework 17
Slide 18: Business Performance Highlights – Credit
Business Performance Highlights CREDIT Retail Credit – Corporate Credit – Distressed Credit
Slide 19: Credit Business is a Mix of Diversified and Scalable Assets
Credit Business is a Mix of Diversified and Scalable Assets Capital Employed % As on 30th Sept’18 (INR Cr) Share Retail Credit 20,622 42% Retail Mortgage 8,615 18% Blend of loans to home owners and home buyers SME & Business Loans 4,349 9% Underserved and highly scalable, focus area for future Loan
Slide 20: Credit Business at a Glance
Credit Business at a Glance Credit Business (INR Cr) Q1FY19 Q2FY19 Capital Employed 45,206 49,012 Average Interest Yield 16.0% 16.0% Average Cost of Borrowing 9.6% 9.5% Net Interest Margin 7.8% 7.7% Net Revenue 826 916 Cost to Income 36% 37% Provisions & Write Offs 110 133 PAT 277 284 RoA 2.6% 2.4%
Slide 21: Asset Quality at a Glance
Asset Quality at a Glance At the end of Sept 30, 2018 (INR Cr) Q1FY19 Q2FY19 Credit Book 38,666 41,722 Of which Stage 3 676 743 ECL Provision 762 829 Of which Stage 3 389 413 Specific Provision Cover 58% 56% Total Provision Cover 113% 112% Average Collateral cover on Corporate Book 2.0x 1.9x Average
Slide 22: Credit Business Performance Snapshot
Credit Business Performance Snapshot Credit Business Q2FY19 Total Y-o-Y Retail Y-o-Y Corporate Y-o-Y Distressed Y-o-Y (INR Cr) EOP Capital Employed 49,012 51% 20,622 75% 21,100 37% 7,290 36% EOP Equity 6,670 68% 2,012 87% 3,182 84% 1,476 27% Net Interest Income 916 58% 240 52% 487 48% 189 102% PAT 2
Slide 23: Our NIMs have been Stable across Interest Rate Cycles
Our NIMs have been Stable across Interest Rate Cycles Quarterly evolution of NIM of the Credit Business NIM Quarterly Avg. 10 Yr. G Sec. Yield 10% Declining interest rates Stable interest rates Rising interest rates 9% 8% 8.4% 7.7% 7.8% 7.7% 7.6% 7.5% 7% 7.3% 6.9% 6.9% 7.0% 6% 5% 4% Q1FY17 Q2FY17 Q3
Slide 24: Retail Credit Book sees Steady Growth
Retail Credit Book sees Steady Growth Capital Employed SME Retail Mortgage (INR Cr) Secured Unsecured HL LAP Average Yields % 13% 21% 10% 11% 20,622 Median Ticket Size (INR) ~1.8 Cr 10 lacs 15 lacs 20 lacs 18,465 RoA 1.50% - 2.00% 1.00% - 1.50% Locations (#) 107 79 11,800 • Consolidating presence in
Slide 25: Corporate Credit Calibrated Growth Q-o-Q
Corporate Credit Calibrated Growth Q-o-Q Capital Employed Structured Wholesale Collateralised Credit Mortgage (INR Cr) Average Yields % 15% - 17% 17% - 19% RoA 1.75% - 2.50% 2.50% - 3.00% 21,100 20,201 Number of Groups ~50 ~100 Typical Ticket Size INR 100 Cr – 150 Cr 15,367 • Incremental growth via
Slide 26: Agri Credit has Seasonal Drop Q-o-Q
Agri Credit has Seasonal Drop Q-o-Q Capital Employed Average Collateral Value (INR Cr) (INR Cr) Collateral Manager Stock Storage Stock 4,250 3,435 2,838 735 912 915 857 3,515 1,926 2,520 Q2FY18 Q1FY19 Q2FY19 496 438 • End to end business solutions in the Agri value chain • Network of 482 warehouses
Slide 27: Distressed Credit Business on Track
Distressed Credit Business on Track Capital Employed Top 10 industry exposure% by Acquisition price (INR Cr) Steel 7,290 Power 6,540 5,355 20% Infrastructure 21% Cement Real Estate 4% Paper 4% 12% Textiles Q2FY18 Q1FY19 Q2FY19 5% Chemicals 6% ARC Recoveries (INR Cr) 9% Ship Building 6% Ports 6% 7% S
Slide 28: Business Performance Highlights – Franchise & Advisory
Business Performance Highlights FRANCHISE & ADVISORY Wealth Management – Asset Management – Capital Markets
Slide 29: Franchise & Advisory Business Performance Snapshot
Franchise & Advisory Business Performance Snapshot Franchise & Advisory Wealth Asset Capital Total Y-o-Y Y-o-Y Y-o-Y Y-o-Y Business Q2FY19 (INR Cr) Mgmt Mgmt Mkts Net Revenue 328 9% 188 41% 62 116% 78 (43%) PAT 76 9% 43 54% 14 124% 19 (47%) Cost to Income 66% 66% 66% 65% Assets under Assets under As
Slide 30: Wealth Management AuA Remains Flat Q-o-Q
Wealth Management AuA Remains Flat Q-o-Q Assets Under Advice (INR Cr) As on Number of AUA Number of 30th Sept’18 Clients (INR Cr) RMs Ultra High Net ~1,750 74,900 172 Worth Individuals Affluent ~4,65,000 23,100 1,085 96,300 98,000 Wealth AUA Breakup 76,300 6% 11% 27% 26% 25% 23% 96,300 94% 89% 73% 7
Slide 31: Asset Management Continues to See Growth in AUM
Asset Management Continues to See Growth in AUM Alternative Assets (INR Cr) Alternative Assets AUM as on 30th Sept 2018 (INR Cr) Distressed Assets 22,100 27% 20,100 31% Structured Debt 13,500 INR 22,100 Cr Infrastructure Real Estate 12% 19% Multi Strategy Funds 11% Q2FY18 Q1FY19 Q2FY19 and PMS Mutua
Slide 32: Steady Growth in Net New Flows
Steady Growth in Net New Flows Wealth AUA Movement in Q2FY19 Asset Management AUM Movement in Q2FY19 (INR Cr) (INR Cr) 4,970 2,762 138 101,100 (3270) 98,000 35,400 96,300 32,500 Opening AUA Net New Market Closing AUA Opening Net New Currency & Closing AUM Money Movement AUM Money Market Movement Cre
Slide 33: Capital Markets had a Slow Quarter
Capital Markets had a Slow Quarter Key Equity Capital Market Transactions • Closed six capital market transactions in Q2FY19 • Key advisory mandates QIP: INR 2,775 Cr Open Offer by Wilmar Buy back: INR 166 Cr o Tata Advanced Systems BRLM Sugar Holdings Pte Ltd: Sole Manager August 2018 INR 923 Cr Ju
Slide 34: Business Performance Highlights – Life Insurance
Business Performance Highlights Life Insurance
Slide 35: Life Insurance Performance Snapshot
Life Insurance Performance Snapshot (INR Cr) Q2FY19 Net Premium Income 180 Investment Income and Other Income 16 Total Business 196 Profit After Tax (74) Minority (37) Edelweiss’ Share in PAT (38) Net Worth 982 Indian Embedded Value 1,572 Credit Franchise & Advisory Life Insurance 35
Slide 36: Life Insurance – Long Term Value Creation
Life Insurance – Long Term Value Creation Product Mix Investments Capability (5 Year CAGR%) New Business Premium Q2FY19 15% Fund Benchmark 20% 14% 23% 11% 10% 9% 8% 30% 28% Traditional Par Traditional Non Par ULIP Group Equity Large Cap Bond Fund Managed Fund Fund Channel Mix Individual New • Multi-
Slide 37: One of the Fastest Growing Life Insurers in Individual APE
One of the Fastest Growing Life Insurers in Individual Annual Premium Equivalent Collected Individual Annual Premium Equivalent CAGR growth since Q2FY16 • Robust growth during the quarter 42% • Collected Individual Annual Premium 27% 24% Equivalent (APE) - INR 75 Cr grew 74% YoY • Total Premium – IN
Slide 38: Balance Sheet Highlights
Balance Sheet Highlights Ge E Edelweiss s protect
Slide 39: Key Highlights – Balance Sheet
Key Highlights – Balance Sheet 1 Liquidity cushion at 11% of Borrowings 2 Diversified Borrowings mix 3 Matched Asset-Liability profile 4 Comfortable capital adequacy ratio at 16.01% and D/E of 5.2x 5 Stable business model reflected in credit ratings 39
Slide 40: Liquidity Cushion – Consistently a Clear Focus Area
1 Liquidity Cushion – Consistently a Clear Focus Area Liquidity Cushion • A well diversified liquidity cushion INR Cr 5,400 comprising: 5,200 o Banking Lines: INR 2,100 Cr 4,050 2,100 2,450 o Fixed Deposits and bank 2,900 1,350 balance: INR 500 Cr 1,700 1,630 o Government Securities, Mutual 3,300 92
Slide 41: Diversified Borrowing Profile By Instruments…
2 Diversified Borrowing Profile By Instruments… Total Borrowings 23,540 27,773 33,379 47,323 50,963 (INR Cr) 9% 11% 7% 12% 15% 24% 30% 38% 36% 39% 22% 20% 25% 32% 29% 27% 22% 25% 14% 17% 17% 18% 5% 7% 1% FY15 FY16 FY17 FY18 Q2FY19 CBLO CPs Term Loans NCD Others 41
Slide 42: And By Source
2 And By Source Total Borrowings 23,540 27,773 33,379 47,323 50,963 (INR Cr) 4% 5% 7% 11% 13% 14% 14% 15% 11% 17% 17% 5% 7% 17% 1% 31% 27% 30% 41% 37% 38% 42% 34% 30% 32% FY15 FY16 FY17 FY18 Q2FY19 Mutual Funds Banks Asset Specific Borrowings Retail Others Half of the Mutual Fund borrowings are long
Slide 43: Increasing Percentage of Long Term Borrowings…
2 Increasing Percentage of Long Term Borrowings… % of Total Borrowings 58% 59% 51% 34% 36% FY15 FY16 FY17 FY18 Q2FY19 NCD public issue of INR 2,000 Cr in Q2FY19 has enhanced share of long term borrowing 43
Slide 44: …Leading to Positively Matched ALM Profile
3 …Leading to Positively Matched ALM Profile Assets Liabilities 100% 100% % of Assets and Liabilities 70% 46% 68% 38% 26% 40% 1% 16% 20% 1% Asset Specific 0-3 Mnth 3-6 Mnth 6-12 Mnth 1-3 years 3+ years Borrowing • Positive asset-liability matching across durations • BMU manages ALM under the aegis o
Slide 45: Comfortable Capital Adequacy Ratio
4 Comfortable Capital Adequacy Ratio Capital Structure as on 30th Sept 2018 (INR Cr) Core Equity Tier I 8,076 12.8% Additional Tier I 345 0.5% Capital Adequacy Ratio Tier II 1,703 2.7% 16.01% Total Capital 10,124 Risk Weighted 92% of gross assets of INR 63,233 68,709 Cr Assets 45 Capital Adequacy Ra
Slide 46: Debt to Equity Ratio Remains Stable
4 Debt to Equity Ratio Remains Stable Capital Structure as on 30th Sept 2018 (INR Cr) Total Balance Sheet 59,433 Less: Equity 8,470 Less: Cash & Liquid Assets 6,946 Debt 44,017 Equity 8,470 D/E ratio (Ex-Cash & Liquid Assets) 5.2 Cash & Liquid Assets include voluntary holding of G-Secs and other hig
Slide 47: Stable Business Model Reflected in Credit Ratings
5 Stable Business Model Reflected in Credit Ratings Purpose (Debt Programme) Rating agency Rating Short term CRISIL A1+ Short term CARE A1+ Short term ICRA A1+ Long term BWR AA+ CARE revised its Long term outlook Long term CARE AA from ‘Stable’ to ‘Positive’ Long term CRISIL AA Long term ICRA AA Lon
Slide 48: Significant Institutional Ownership
Significant Institutional Ownership Key Shareholders above 1% (As on 30th Sept 2018) Shareholding Pattern Name Percent Employee 1 BIH SA 4.1% Trust 2 HDFC Mutual Fund 2.6% DIIs, Non 4.8% Promoters Institutions 3 Steadview Capital Management 2.0% & Employees & Others 4 Goldman Sachs Funds 1.9% 24.2%
Slide 49: Detailed Financials
Detailed Financials Ge Edelweiss Ideas create, values protect
Slide 50: Consolidated Financials – P&L
Consolidated Financials – P&L (INR Cr) Q2FY18 Q2FY19 Total revenue from operations 2,017 2,650 Other income 13 23 Total Income 2,030 2,673 Expenses (a) Finance costs 950 1,179 (b) Employee benefits expense 326 391 (c) Depreciation and amortisation expense 23 31 (d) Change in insurance policy liabili
Slide 51: Consolidated Financials – Balance Sheet
Consolidated Financials – Balance Sheet (INR Cr) Q2FY18 Q2FY19 Equity and Liabilities Shareholders’ Funds 4,990 7,512 Minority Interest 777 958 Borrowings 42,335 50,963 Total 48,102 59,433 Assets Credit Book Assets 32,523 49,012 FDs and Cash & Bank Balances 3,887 4,198 Government Bonds 5,547 2,711 O
Slide 52: Bridge to Reported Financials
Bridge to Reported Financials Profit Before Tax (INR Cr) Profit After Tax (INR Cr) YoY YoY Pre MI Q2FY18 Q2FY19 Pre MI Q2FY18 Q2FY19 Growth Growth Consolidated 315 458 45% Consolidated 181 276 53% Ex-Insurance 353 544 54% Ex-Insurance 218 363 66% YoY YoY Post MI Q2FY18 Q2FY19 Post MI Q2FY18 Q2FY19 G
Slide 53: ESG at Edelweiss
ESG at Edelweiss oO Edelweiss Ideas create, values protect
Slide 54: Our ESG Framework is based on the UN Sustainable Development Goals
Our ESG Framework is based on the United Nations Sustainable Development Goals People Focused Goals No Poverty, Zero Hunger & Economic Growth Quality Education Gender Equality Planet Focused Goals Affordable & Clean Energy Responsible Consumption Climate Support 54
Slide 55: EdelGive Foundation - Unique Philanthropic Platform
EdelGive Foundation - Unique Philanthropic Platform PARTNERSHIPS CAPACITY BUILDING IMPACT Non-Financial Support Foundations Build Stronger Organizations Organizational Capacity Towards a high impact social sector EdelGive platforms EdelGive Non-Profit Corporates Foundation Organization Enhanced Soci
Slide 56: EdelGive Foundation - Key Metrics
EdelGive Foundation - Key Metrics Employee Engagement Employee Engagement % More than 85% engaged in financial and non financial giving Man Hours spent till date 30,000 hrs Field Visits till date 80 Capacity Building – Non financial support Employees provided skills and time pro bono in over 60 proj
Slide 57: Strong and Diverse Board of Directors with Rich Experience
Strong and Diverse Board of Directors with Rich Experience 6 out of 11 directors are independent Mr. P N Venkatachalam Mr. K Chinniah • Banking sector expert and former • Served as Managing Director & Global member of the Interim Pension Fund Head Infrastructure, Portfolio, Strategy Regulatory Autho
Slide 58: Safe Harbour
Safe Harbour DISCLAIMERS: This presentation and the discussion may contain certain words or phrases that are forward - looking statements, which are tentative, based on current expectations of the management of Edelweiss Financial Services Ltd. or any of its subsidiaries and associate companies (“Ed
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