Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Investor Presentation (August 2016)
51 slides from Edelweiss Financial Services's investor presentation, Aug 10, 2016
Slide 1: Investor Presentation filing letter to NSE
& Edelweiss Ideas create, values protect EW/Sec/2016/145 August 10, 2016 National Stock Exchange of India Limited Exchange Plaza, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. Dear Sirs, Ref.:- Symbol - EDELWEISS Sub: Investor Presentation Please find enclosed the presentation being made to th
Slide 2: Edelweiss – Analyst & Investor Meet: Financial & Business Update
Edelweiss – Analyst & Investor Meet Financial & Business Update August 10, 2016
Slide 3: Agenda
Agenda Macro Environment Financial Services in India Edelweiss Financial & Business Update 2
Slide 4: Global woes continue…
Global woes continue… Russia: Impacted by low oil prices Brexit Italian bank NPAs Japan: Another round of QE US elections China: Huge capacities; falling demand Brazil: impacted by low commodity prices 3
Slide 5: Liquidity in Indian markets remains high
… But India Positive.. Subdued oil prices Liquidity due to quantitative easing Liquidity in Indian markets Reforms remains high Normal monsoon 4
Slide 6: Spurring markets into relatively higher valuation zones
… Spurring markets into relatively higher valuation zones Nifty 12 month Forward PE is at 15% premium to its long term averages Nifty 12 month forward PE Average 22 20 18 16 14 12 10 8 6 Jul-08 Jul-13 Sep-07 Oct-09 Sep-12 Oct-14 Aug-05 Nov-06 Apr-07 Feb-08 May-09 Mar-10 Aug-10 Nov-11 Apr-12 Feb-13 M
Slide 7: Domestic macro indicators are favorable
Domestic macro indicators are favorable Fiscal Deficit (% of GDP) Current Account Deficit (%of GDP) 0.0 5.8 -1.0 4.9 4.8 4.6 4.1 -2.0 3.9 -3.0 -4.0 -5.0 -6.0 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 6 Source - Bloomberg
Slide 8: Though sentiments remain positive; investments yet to pick up
Though sentiments remain positive; investments yet to pick up 55 54 53 52 51 Manufacturing PMI* 50 showing sequential 49 improvement 48 Mar-14 Mar-15 Mar-16 Sep-13 Dec-13 Sep-14 Dec-14 Sep-15 Dec-15 Jun-13 Jun-14 Jun-15 Jun-16 New Investment Projects 10.5 10.9 (INR Trn) 9.7 9.8 8.2 8.3 7.1 7.0 5.6 6
Slide 9: Agenda
Agenda Macro Environment Financial Services in India Edelweiss Financial & Business Update 8
Slide 10: Indian Financial Services remains largely underpenetrated
Indian Financial Services remains largely underpenetrated vis-à- vis other countries Housing Loan Life Insurance Domestic Credit to Penetration penetration Private sector (% of GDP) 7.3% 194 68% 155 3.3% 3.6% 18% 53 9% India China USA India China USA India China USA 9 Source: European Mortgage Found
Slide 11: Resulting in large addressable market opportunities
Resulting in large addressable market opportunities Insurance Market Size INR trillion 19 5 2015 2020E LAP Assets Under Management MSME Finance Demand INR trillion CAGR: 30% CAGR: 22% Potential MSME Formal Total Finance Demand Supply Finance Gap 5.0 1.7 2.3 INR INR INR 1.3 7 trillion 19 trillion 26
Slide 12: A few key trends are emerging
A few key trends are emerging 1. Government financial institutions ceding market share to private ones 2. Global financial institutions are retreating from Emerging Markets 3. Global capital, however, continues to flow into India 4. Compounding phase for India – To be a USD 5 trillion economy by 202
Slide 13: While Public sector credit growth has been sluggish
1 While Public sector credit (PSB) growth has been sluggish % Growth in Public Sector Banks credit 13% 13% 7% 4% 2012-13 2013-14 2014-15 2015-16 Recapitalization of PSBs may help the credit growth 12 Source - Edelweiss Research, RBI
Slide 14: Private sector banks, NBFCs and HFCs capturing market share
… Private sector banks, NBFCs and HFCs are taking advantage by capturing market share from public sector banks % share in incremental credit from Private Sector 50 45 59 78 50 55 41 22 2013 2014 2015 2016 Public Private Source: RBI, NHB 13 Private sector includes Private banks, NBFCs and HFCs
Slide 15: Similar story playing out in the Insurance sector
… With a similar story playing out in the Insurance sector as well % share in Individual APE – Life Insurance 37% 38% 38% 49% 52% 63% 62% 62% 51% 48% 2012 2013 2014 2015 2016 Public Private 14 Source: IRDAI
Slide 16: Global financial institutions are retreating
2 Global financial institutions are retreating… Banking business Mutual Funds Fidelity ING JP Morgan Royal Bank of Scotland ING Equities Broking Citigroup Private Wealth Standard Chartered HSBC Barclays …Creating opportunity for hiring and gaining market share 15
Slide 17: While global capital continues to flow into India
3 …While global capital continues to flow into India FDI* and FPI* flows remain relatively stable (‘000 cr) 143 134 118 104 75 67 69 64 56 26 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 16 * FDI: Foreign Direct Investment FPI: Foreign Portfolio Investment
Slide 18: India would be a USD 5 trillion economy by 2025
4 India would be a USD 5 trillion economy by 2025.. Year GDP (USD) Factors in India’s favour 2025 5 trn 1. Growth Rate – 2.5x in 11 Only major years economy growing at this rate 2014 2 trn 2. Time for which it can continue to grow 2x in 7 years 3. Size: GDP of 2 trn 2007 1 trn as base to grow from 1
Slide 19: Huge opportunities in financial services sector
4 .. Which will create huge opportunities in financial services sector USD Bn 2015 2025 Annual Financial savings 300 1,000 Market cap 1,300 4,000 Credit 1,300 5,200 Number of Ultra HNIs 1,40,000 9,00,000 18 Edelweiss Estimates
Slide 20: Agenda
Agenda Macro Environment Financial Services in India Edelweiss Financial & Business Update 19
Slide 21: Edelweiss – A Leading Diversified Financial Services Firm
Edelweiss – A Leading Diversified Financial Services Firms June 30, 2016 CREDIT BUSINESSES Present across the spectrum of Edelweiss - A Leading Diversified Financial Wholesale Retail Services Firms • Structured Collateralized Credit • Retail Mortgage • Distressed Assets Credit • Agri & Rural Finance
Slide 22: Key financial highlights
Key financial highlights 1 Consolidated PAT growth of 53%; Ex Insurance growth of 39% Financial 2 Consistent growth track record - 38% Ex Insurance CAGR over 4 years Performance & Overview 3 Consolidated RoE improved to 15.1%; Ex Insurance RoE to 19.4% 4 Steady growth in credit and non-credit PAT 5
Slide 23: Consolidated PAT Growth 53% & Ex Insurance PAT Growth 39%
1 Consolidated PAT Growth 53% & Ex Insurance PAT Growth 39% Growth over (INR Cr) Q1FY17 Q1FY16 Q1FY16 FY16 FY15 PAT 414 329 140 91 53% Consolidated PAT 39% 519 381 Ex Insurance 155 111 ..... with only 17% growth in Assets Balance 32,145 27,072 33,092 28,304 17% Sheet Non Linear growth in Profitabili
Slide 24: Consistent track record of growth
2 Consistent track record of growth Profit after Tax INR Cr 154 155 133 120 111 140 98 103 89 90 122 70 69 72 106 62 68 91 96 51 57 83 88 48 78 79 56 58 61 46 51 46 40 42 Q1'FY13 Q2'FY13 Q3'FY13 Q4'FY13 Q1'FY14 Q2'FY14 Q3'FY14 Q4'FY14 Q1'FY15 Q2'FY15 Q3'FY15 Q4'FY15 Q1'FY16 Q2'FY16 Q3'FY16 Q4'FY16 Q
Slide 25: Consolidated RoE at 15.1%
3 Consolidated RoE at 15.1% Consolidated ROE % Excluding Insurance ROE % 15.1% 19.4% 18.6% 12.9% 15.6% 11.3% 12.2% 8.2% FY14 FY15 FY16 Q1FY17 FY14 FY15 FY16 Q1FY17 24 Ex-Insurance : Excluding Insurance
Slide 26: And RoA improved to 2.0%
And RoA improved to 2.0% Ex Insurance Q1 FY17 FY16 FY15 NII 6.0% 5.1% 5.5% Interest 12.8% 12.8% 12.0% Treasury 2.0% 1.2% 2.2% Interest Cost -8.8% -8.8% -8.6% Non-interest income 2.5% 2.7% 2.9% Fee & commission 2.1% 2.4% 2.7% Other income 0.4% 0.3% 0.2% Expenses -5.5% -5.2% -5.7% Employee cost -2.6%
Slide 27: Steady growth in Credit and Non Credit PAT
4 With steady growth in Credit and Non Credit PAT PAT INR Cr Credit Non Credit Insurance 140 2-year CAGR 91 96 35% 78 65 53 47 59 26% 37 -11 -16 -20 Q1FY15 Q1FY16 Q1FY17 26
Slide 28: Credit – stable financial parameters
Credit – stable financial parameters INR Cr Q1 FY17 FY16 Capital Employed 21,129 20,014 NIM 6.9% 6.8% NII 355 1,200 Cost to Income 41% 44% Provisions 52 160 PAT 96 337 Gross NPAs 1.4% 1.4% Net NPAs 0.5% 0.5% RoE 18% 17% RoA 2.0% 2.0% Credit Non Credit Insurance 27 Numbers are Management Estimates .
Slide 29: Credit Portfolio is a Mix of Differentiated and Scalable Assets
Credit Portfolio is a Mix of Differentiated and Scalable Assets Structured • Customized credit solutions, with high collateral Loan Against Collateralized Credit cover Shares 1,191 Structured Distressed Assets • Largest Asset Reconstruction Company in India, Agri & Rural 6% SME & Others Collateraliz
Slide 30: Present across Retail, SME and Wholesale segments
Present across Retail, SME and Wholesale segments Wholesale Credit Retail & SME Credit • Comprises of • Comprises of • Collateralized Lending to Corporate • Retail Mortgage • Distressed Assets Credit • Agri & Rural Financing • Wholesale Mortgage • Loan Against Shares • Began credit operations in 200
Slide 31: Credit: Robust Asset Quality
Credit: Robust Asset Quality At the end of (INR Cr) Q1FY17 FY16 Total Credit Book 21,129 20,014 Gross NPA 300 281 Gross NPA % 1.4% 1.4% Net NPA % 0.5% 0.5% Total Provision Held* 268 247 Total Provision Cover* 89% 88% Average Collateral Cover on Wholesale book 2.2X 2.1x Average Loan-To-Value on Retai
Slide 32: Non Credit – improvement in profitability
Non Credit – improvement in profitability INR Cr Q1 FY17 FY16 Capital Employed 11,048 11,192 Net Revenue 332 1,107 Cost to Income 74% 76% PBT 88 265 PAT 59 182 RoE 22% 22% RoA 2.1% 1.5% Credit Non Credit Insurance 31 Numbers are Management Estimates
Slide 33: Non Credit Business Mix
Non Credit Business Mix Wealth Management • Multi asset class platform offering structured customized solutions • Equity focus: Mutual Fund, Portfolio Management Service and Alternative Asset Management Investment Fund • Credit focus: Asset Reconstruction Company, Special Opportunities fund • Entire
Slide 34: Wealth and Asset Management – Rapidly gaining market share
Wealth and Asset Management – Rapidly gaining market share Wealth Management Assets Under Advice (INR Cr) • Servicing ~ 300 Ultra High-Net Worth & more than 1,100 High Net Worth Families 29,500 31,100 • Good mix of product and advisory solutions for 17,750 21,400 customized needs 8,900 • Best Privat
Slide 35: Expanding Asset Reconstruction and Agri Services businesses
Expanding Asset Reconstruction and Agri Services businesses Asset Reconstruction Company Assets Under Management (INR Cr) • Opportunity to tap the potential 4 lakh crore of stressed loans and revive them 27,100 29,300 • Started operations in 2009. Largest Asset Reconstruction Company in 20,000 20,30
Slide 36: Capital Markets: Leadership position in the market
Capital Markets: Leadership position in the market Broking Average Daily Volume (INR Cr) • One of the largest domestic institutional broking company 6,000 • Robust fundamental research covering ~227 5,000 5,200 5,000 stocks among 27 sectors representing ~77% of total market cap 3,100 • Rated Best Br
Slide 37: Balance Sheet Management Unit
Balance Sheet Management Unit Balance Sheet Management Unit (INR Cr) KEY OBJECTIVES 4,266 • Liquidity management 2,070 1,097 • Asset Liability Management 337 • Manage Treasury assets Gsecs Liquidity Fixed & Tax Others • Corporate Fixed Assets and Investments cushion* Assets Balance Sheet Management
Slide 38: Our Insurance Business – Based on pillars of
Our Insurance Business – Based on pillars of Products • Boutique of products meeting variety of customer needs with superior features • Continued focus on Need Based Selling (Brand: Vijaypath) • Agency-led multi-channel distribution approach with emphasis on productivity Distribution • Focus on buil
Slide 39: Key Milestones of Insurance Business
Key Milestones of Insurance Business 2016 71 Branches 15,490 Agents 1,943 Employees 26 Products 310 Cr Gross Premium Started Operations July 2011 Highest startup capital INR 550 Crs 2013 Q1 2017 45 Branches 71 Branches 3,401 Agents 16,303 Agents 1,275 Employees 1,985 Employees 18 Products 26 Product
Slide 40: Fastest Growing Individual Annual Premium Equivalent
Fastest Growing Individual Annual Premium Equivalent Individual Annual Premium Equivalent CAGR Growth since FY13 42% • Individual Annual Premium Equivalent - INR 13% 18.9 Crs for Q1 FY17 7% Edelweiss Tokio Peer Set Industry Life Insurance Persistency (Individual & Group Business combined) • Best 13t
Slide 41: Key balance sheet highlights
Key balance sheet highlights 1 Consolidated PAT growth of 53%; Ex Insurance growth of 39% Financial 2 Consistent growth track record - 38% Ex Insurance CAGR over 4 years Performance & Overview 3 Consolidated RoE improved to 15.1%; Ex Insurance RoE to 19.4% 4 Steady growth in credit and non-credit PA
Slide 42: Calibrated growth in balance sheet
5 Calibrated growth in balance sheet Balance Sheet Size (INR cr) 33,092 32,145 28,304 Q1 FY16 Q4 FY16 Q1 FY17 41
Slide 43: Total assets have grown faster than balance sheet
6 Total assets have grown faster than balance sheet YoY INR cr Q1 2017 Q1 2016 Growth Assets on Balance Sheet 33,100 28,300 17% Assets Under Management (AUM) 35,000 25,100 40% Assets Under Advice (AUA) 31,100 21,400 45% Total Assets 99,200 70,700 40% 42
Slide 44: Long term liabilities have increased
7 Long term liabilities have increased Long Term Liabilities (LTL) 14,999 14,475 INR cr • Maiden public issue 11,473 of 500 Cr by Edelweiss Housing 6,641 Finance Limited: 4,811 • Oversubscribed to Rs 844 Cr on day one FY13 FY14 FY15 FY16 Q1 FY17 • Significant LTL as % of Total portion of the Liabili
Slide 45: ALM maintained
ALM maintained Jun’16 - INR 33,092 Cr Assets Liabilities 100% % of Assets and Liabilities 100% 76% 57% 73% 38% 55% 33% 37% 12% 32% 12% Asset Specific 0-3 Mnth 3-6 Mnth 6-12 Mnth 1-3 years 3+ years Borrowing 44
Slide 46: Liquidity cushion increased to 3,000 Cr
8 Liquidity cushion increased to 3,000 Cr Liquidity cushion Including off balance sheet credit lines 3,000 INR Cr 2,000 500 Q1 FY15 Q1 FY16 Q1 FY17 45
Slide 47: Comfortable capital adequacy ratio
9 Comfortable capital adequacy ratio Liability Structure, Jun’16 INR Cr Capital Adequacy Ratio Tier I 4,379 18.1 % Tier II 1,028 Total Capital 5,407 D/E (excluding Treasury Assets) Risk Weighted 4.9 29,854 Assets 79% of gross assets 46 Based on RBI norms for NBFCs
Slide 48: In Conclusion..
In Conclusion.. (*) 47
Slide 49: India's Compounding Growth Story..
India’s Compounding Growth Story.. Size Growth Rate Time 48
Slide 50: …In conjunction with our Diversification Strategy…
…In conjunction with our Diversification Strategy… EDELWEISS Credit Non Credit Insurance WELL DIVERSIFIED Unique Model that is “Scalable, Stable and Profitable” 49
Slide 51: …Will help us achieve our targets
…Will help us achieve our targets as articulated in our FY16 presentation • Grow PAT consistently at 25% • NPA below 2% • Consolidated RoE to 16-18% • Capital Adequacy Ratio >16% • Ex Insurance RoE to 19-20% • Enhance long term credit rating to AAA • Ex Insurance RoA to 2.3-2.5% • Ex Insurance Cost
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