Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q4 FY2020 Earnings Presentation
74 slides from Edelweiss Financial Services's earnings presentation, Jul 5, 2020
Slide 1: Cover letter to National Stock Exchange
EW/Sec/2020/128 July 4, 2020 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 Investor Presentation on Earnings Updates for the year ended March 31, 202
Slide 2: Q4FY20 & FY20 Earnings Update
Edelweiss Financial Services Limited Q4FY20 & FY20 Earnings Update
Slide 3: Contents
Contents 1 FY20 Overview 3 2 Covid Impact Management 12 - Business 13 - Liquidity 14 - Asset Quality 15 3 Key Highlights Q4FY20 16 - Conservative Impairments 18 - Wholesale Sell-down 19 - Strong Capital Adequacy 20 4 Plan Going Forward 21 5 Business Highlights 27 - ECL Finance Ltd. 28 - Wealth and A
Slide 4: FY20 Overview
FY20 Overview Gre Edelweiss Ideas create, values protect
Slide 5: FY20 Overview
FY20 Overview Net Worth Liquidity INR 8,541 Cr INR 8,150 Cr Customer Assets BVPS INR 2,07,700 Cr INR 69 4
Slide 6: Diversified Business Model Across Ten Key Entities
Diversified Business Model Across Ten Key Entities.. Edelweiss Financial Services Ltd Wealth & Asset Asset Credit Management Insurance Reconstruction (EGIA) • Edelweiss Securities Ltd • ECL Finance Ltd • Edelweiss Tokio Life Insurance Company • Edelweiss Broking Ltd Ltd • Edelweiss Retail • Edelweis
Slide 7: And Four Businesses
..And Four Businesses % share in % share in FY20 Net Revenue Headcount Credit 32% 22% Wealth & Asset 28% 31% Management Asset Reconstruction 10% 2% Insurance 30% 45% Wealth & Asset Management and ARC together use just ~1/3rd of total capital but constitute 38% of our revenues and 33% of our headcoun
Slide 8: Our Businesses Are Well Capitalized
Our Businesses Are Well Capitalized Edelweiss Financial Services Ltd Equity: INR 8,541 Cr Wealth & Asset Asset Credit Management Insurance Reconstruction (EGIA) Equity Equity Equity Equity INR 4,680 Cr INR 1,160 Cr INR 2,035 Cr INR 874 Cr CDPQ CDPQ Tokio Marine Strong partners, independent operation
Slide 9: FY20 Financial Snapshot
FY20 Financial Snapshot Consolidated (INR Cr) 9MFY20 Q4FY20 FY20 Revenue 7,637 1,966 9,603 Interest Cost 3,638 1,155 4,793 Net Revenue 3,999 811 4,810 Expenses 2,624 1,080 3,705 Impairment 1,013 2,5491 3,5621 PBT 362 (2,819) (2,457) PAT 200 (2,245) (2,045) Equity 10,163 8,541 8,541 1 Including Covid
Slide 10: Strong, Consistent Traction in Fee Income
Strong, Consistent Traction in Fee Income INR Cr Q1FY20 Q2FY20 Q3FY20 Q4FY20 FY20 Wealth And Asset Management 281 251 275 288 1,095 Fee Income ARC Fee Income 199 216 213 176 804 Total Fee Income 480 467 488 464 1,899 Maintained a run-rate of ~INR 500 Cr per quarter on fee income 9
Slide 11: Maintained Adequate Liquidity
Maintained Adequate Liquidity % of Borrowings 24% 23% 24% 17% 18% FY16 FY17 FY18 FY19 FY20 Available 4,000 5,800 10,600 10,100 8,150 liquidity (INR Cr) 10
Slide 12: More Than Adequate Capitalization Across Entities
More Than Adequate Capitalization Across Entities.. Equity Entity Metric Value (INR Cr) ECL Finance Ltd 3,518 21.0% Edelweiss Retail Finance Ltd 463 CAPAD 29.4% Edelweiss Housing Finance Ltd 769 28.6% Wealth & Asset Management 1,160 Annual Fee Income INR 1,000+ Cr Edelweiss Asset Reconstruction Comp
Slide 13: Covid Impact Management
Covid Impact Management Gre Edelweiss Ideas create, values protect
Slide 14: Covid - Impact on Business
Covid - Impact on Business Digital operating model enabled seamless BAU during lockdown in our businesses Credit Impact on liquidity, asset quality and growth; Continues to be well-capitalized Wealth & Asset Fee revenue, Net New Money and number of customers continued to grow in last Management thre
Slide 15: Covid - Impact on Liquidity
Covid - Impact on Liquidity INR Cr Covid Impact in H1FY21 4,000 Mitigated by.. LTRO 1,000 Already closed Bank Lines 1,000 Based on on-going discussions under PCG Additional 1,000 Based on on-going discussions Asset Sales Drawn from 1,000 Reserve 14
Slide 16: Covid - Impact on Asset Quality
Covid - Impact on Asset Quality INR Cr Credit ~500 ARC ~200 Impairment ~200 on investments Total Covid Impact ~900 ~INR 900 Cr solely for Covid-related impairment taken in advance in Q4FY20 15
Slide 17: Key Highlights – Q4FY20
Key Highlights —- Q4FY20 Gre Edelweiss Ideas create, values protect
Slide 18: Revised Expected Credit Loss Model
Revised Expected Credit Loss Model Reviewed and revised our Expected Credit Loss model internally as announced in Q3FY20 taking into account changes in the market environment Commissioned an independent review by a reputed international consulting firm on our wholesale portfolio Revision of model ga
Slide 19: Adopted Conservative Stance On Q4 Impairments
Adopted Conservative Stance On Q4 Impairments INR Cr Estimated impairment after revision of Expected Credit Loss model ~ 1,200 Additional impairment taken to facilitate sell-down ~ 500 Impairment taken on account of Covid ~ 900 18
Slide 20: Wholesale Portfolio Scale Down Continues To Be Area Of Focus
Wholesale Portfolio Scale Down Continues To Be Area Of Focus 1 ECL Finance’s wholesale loan book has come down by 43% from peak This has been enabled by organic repayments as well as asset sell-down transactions like the RE 2 completion financing platform with Meritz 3 We have also recently finalise
Slide 21: Strong Capital Adequacy Even After Q4 Impairments
Strong Capital Adequacy Even After Q4 Impairments ECL Finance Capital Adequacy 21.0% 19.3% 16.6% 16.5% 17.2% FY16 FY17 FY18 FY19 FY20 Capital adequacy supported by reduction in Credit book of ~INR 11,000 Cr in last 12 months 20
Slide 22: Plan Going Forward
Plan Going Forward Gre Edelweiss Ideas create, values protect
Slide 23: Consolidation and Strengthening In FY21
Consolidation and Strengthening In FY21 Through.. 1 Active Covid Impact Management 2 Equity Capital Raise 3 Capital Re-allocation 4 Enhancing Productivity and Efficiencies 22
Slide 24: Covid Impact Management Will Be Key In Near Term
1 Covid Impact Management Will Be Key In Near Term Liquidity • Intensified customer connect to manage moratorium impact • Working with banks for funding under LTRO, PCG and other liquidity mechanisms Asset Quality • Focused on minimizing incremental Covid related slippage through active portfolio ma
Slide 25: Proposed Equity Capital Raise
2 Proposed Equity Capital Raise In talks to raise INR 1,000 – 1,500 Cr of equity capital in Wealth & Asset Management (EGIA) Expect to finalise in the next six to eight weeks Board approval in place to raise equity, if required, of ~INR 1,000 - 1,500 Cr in EFSL Expect to raise INR 1,500 – 2,000 Cr o
Slide 26: Capital Re-allocation
3 Capital Re-allocation Transformation to capital-light credit model will release equity progressively through FY21 and FY22 Will prioritize capital allocation, as required, to growth businesses 25
Slide 27: Focus On Productivity And Efficiency
4 Focus On Productivity And Efficiency Cost rationalization across businesses – expect to achieve efficiencies of 18-20% this year Leverage technology as businesses become more retail-oriented Simplification continues, streamlining structures and processes 26
Slide 28: Business Highlights
Business Highlights Gre Edelweiss Ideas create, values protect
Slide 29: ECL Finance Ltd
ECL Finance Ltd Gre Edelweiss Ideas create, values protect
Slide 30: ECL Finance At A Glance: FY20
ECL Finance Ltd ECL Finance At A Glance: FY20 Net Worth Loan Book INR 3,518 Cr INR 13,388 Cr Liquidity CAPAD INR 5,050 Cr 21.0% ECL Finance has ~40% of the book in retail credit assets 29
Slide 31: Business Performance Snapshot
ECL Finance Ltd Business Performance Snapshot FY20 (INR Cr) ECL Finance EOP Loan Book 13,388 EOP Equity 3,518 Net Revenue 1,191 Operating Expenses 623 Credit Costs 2,335 Profit After Tax (1,414) Net Interest Margin 5.2% GNPA 3.8% Total provision cover 143% 30
Slide 32: Reducing Wholesale Assets
ECL Finance Ltd Reducing Wholesale Assets ECL Finance Wholesale Loan Book (INR Cr) 14,748 14,320 13,982 13,445 13,772 11,753 8,393 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 31
Slide 33: Improved Capital Adequacy Even After Q4 Impairments
ECL Finance Ltd Improved Capital Adequacy Even After Q4 Impairments ECL Finance Capital Adequacy 21.0% 19.3% 16.6% 16.5% 17.2% FY16 FY17 FY18 FY19 FY20 32
Slide 34: Adequate Liquidity Maintained Throughout FY20
ECL Finance Ltd Adequate Liquidity Maintained Throughout FY20 % of Borrowings 30% 28% 26% 23% 22% Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Available 5,700 5,050 4,600 5,800 5,050 liquidity (INR Cr) 33
Slide 35: FY21 Priorities
ECL Finance Ltd FY21 Priorities Capital Light Model • Prioritizing existing customers and helping them navigate the post Covid scenario Retail Retail Credit • Use lockdown experience to improve cost efficiencies and productivity Credit • Focus on completing buildout of tech & analytics led platform
Slide 36: Edelweiss Retail Finance Ltd and Edelweiss Housing Finance Ltd
Edelweiss Retail Finance Ltd (ERFL) Edelweiss Housing Finance Ltd (EHFL)
Slide 37: FY20 At A Glance
ERFL/EHFL FY20 At A Glance Edelweiss Retail Finance Limited Net Worth Loan Book Capital Adequacy INR 463 Cr INR 1,391 Cr 29.4% Edelweiss Housing Finance Limited Net Worth Loan Book Capital Adequacy INR 769 Cr INR 4,326 Cr 28.6% 36
Slide 38: Business Performance Snapshot
ERFL/EHFL Business Performance Snapshot FY20 (INR Cr) ERFL EHFL EOP Loan Book 1,391 4,326 EOP Equity 463 769 Net Revenue 115 188 Operating Expenses 38 149 Credit Costs 73 41 Profit After Tax 1 2 Net Interest Margin 7.0% 3.8% GNPA 2.4% 1.7% Total Provision Cover 129% 54% Cover provided by provisions
Slide 39: Wealth & Asset Management (EGIA)
Wealth & Asset Management (EGIA)
Slide 40: Wealth & Asset Management Overview
EGIA Wealth & Asset Management Overview Edelweiss Global Investment Advisors (EGIA) Wealth Management Asset Management Total AUM: INR 50,800 Cr AuA : INR 1,13,700 Cr Private Credit AUM: INR 21,700 Cr • Managed Products • Fixed Income & Equities • Alternative Asset Management • Advisory & Issuer Serv
Slide 41: Wealth & Asset Management – At A Glance
EGIA Wealth & Asset Management – At A Glance FY20 NET WORTH GROSS REVENUE Profit After Tax INR 1,160 Cr INR 1,507 Cr INR 185 Cr Edelweiss Mobile Trader App rating # of Wealth Clients # of Wealth RMs and downloads ~5,75,000+ 835 4.6 & 1M+ downloads A highly profitable and scalable business model 40
Slide 42: Strong Fee-Based Revenue Stream
EGIA Strong Fee-Based Revenue Stream Fee-Based revenues trend last 4 quarters (INR Cr) ✓ Consistent fee-based revenue of ✓ ~INR 275 Cr every quarter in FY20 Cost to income for FY20: 76% 281 288 275 251 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Our business enjoys a high operating leverage 41
Slide 43: Scale Established Across Segments In The Last Five Years
EGIA Scale Established Across Segments In The Last Five Years Customer Assets No. of clients (Mar 20) (INR Cr) WM AUA AM AUM 164,500 ~2,425 Ultra High Net Worth Individuals 50,800 19x ~5,75,000 Affluent Individuals 1,13,700 6x 21,200 2,700 ~3,31,500 18,500 Retail & HNI MF folios FY15 FY20 Customer A
Slide 44: Strong Improvement In Market Position
EGIA Strong Improvement In Market Position FY15 FY20 Wealth Management Industry Rank # 10 #2 Alternative Assets Industry Rank N/A #1 AMC Industry Rank # 36 # 17 Institutional Equities Market Share 4.6% 5.3% 43
Slide 45: Business Performance Snapshot
EGIA Business Performance Snapshot Wealth Asset FY20 (INR Cr) Total Management Management EOP Equity 1,160 987 173 Gross Revenues 1,507 1,194 312 Net Revenues 1,158 861 298 Operating costs 882 606 276 Profit before tax 276 254 22 Profit after tax 185 162 22 RoE 23% 26% 14% Assets under AUA Customer
Slide 46: FY21 Priorities for EGIA
EGIA FY21 Priorities for EGIA Focus on creating a clear leadership position in Wealth Management • Continue to invest in building a strong affluent distribution platform Wealth Retail Credit • Pursue dominance by using technology aggressively Management • Continue to align organization to client seg
Slide 47: Edelweiss Asset Reconstruction Company Ltd (EARC)
Edelweiss Asset Reconstruction Company Ltd (EARC)
Slide 48: Strong, well capitalized Balance Sheet
EARC Strong, well capitalized Balance Sheet EARC Capital Structure as on 31st March, 2020 Strong Capital Adequacy (INR Cr) 32.5% Equity 2,035 25.6% 21.2% 19.8% General Borrowings 2,836 Asset Specific Borrowings 1,539 (repayment linked to recoveries) Cash & Bank 647 FY17 FY18 FY19 FY20 Consistent mar
Slide 49: Steady Fee Income Anchors Profitability
EARC Steady Fee Income Anchors Profitability INR Cr FY18 FY19 FY20 Management Fee Income 781 867 804 Incentive and Gain on SRs (41) 445 287 Interest & Other Income 29 55 75 Total Income 769 1,367 1,166 Management Fee/ Total Income 102% 63% 69% Management Fee as a % of AUM 1.9% 1.9% 1.8% Sizeable man
Slide 50: Recoveries of INR 20,850 Cr in 3 Years
EARC Recoveries of INR 20,850 Cr in 3 Years INR Cr No. of Accounts Total recovery with recovery FY 18 2,574 227 FY 19 7,019 232 FY 20 11,257 191 Recoveries are robust and contributed by a large number of accounts 49
Slide 51: Business Performance Snapshot
EARC Business Performance Snapshot INR Cr FY20 AUM 43,188 EOP Capital Employed 5,407 EOP Equity 2,035 Total Revenue 1,174 Net Revenue 433 Operating Costs 80 PAT (pre MI) 306 PAT (post MI) 185 RoA 5.1% RoE 16.5% High RoA business; Growth potential driven by a strong pipeline 50
Slide 52: Edelweiss Tokio Life Insurance Company Ltd (ETLI)
Edelweiss Tokio Life Insurance Company Ltd (ETLI)
Slide 53: Business Snapshot
ETLI Business Snapshot APE (INR Cr) Gross Premium (INR Cr) 323 1,048 138 310 FY16 FY20 FY16 FY20 AUM (INR Cr) 2,707 VNB Margin 38% 24% 511 FY16 FY20 FY16 FY20 • Scale & Reach Focus Areas for Long Term Value Creation • High Quality Franchise • Digital sales model 52
Slide 54: Long Term Value Creation – Scale and Reach
ETLI Long Term Value Creation – Scale and Reach 3.7 51,723 1.2 15,490 FY16 FY20 FY16 FY20 No of Customers Agents Banca Partners (in lacs) 121 71 Strong distribution network of 2,000+ FY16 point of sale FY20 Distribution Branches Partners 53
Slide 55: Long Term Value Creation – High Quality Franchise
ETLI Long Term Value Creation – High Quality Franchise Product Mix - FY20 Traditional Non Par 23% Solvency FY20 42% ULIP 14% Group 232% 22% Traditional Par Channel Mix – FY20 13th Month Persistency FY20 7% Agency Banca & Corp Agent 78% 28% 48% Broker 7% Direct 11% Edelweiss Embedded Value at INR 1,3
Slide 56: Among the Fastest Growing in the Industry
ETLI Among the Fastest Growing in the Industry APE CAGR FY16-20 vs Industry Covid19: Outlier during lockdown vs Industry Collected Individual APE Collected Individual APE : Apr and May’20 26% 24% 14% 14% -15% -30% Edelweiss Tokio Peer Set Industry Edelweiss Tokio Peer Set Industry Life Insurance Lif
Slide 57: Edelweiss General Insurance Company Ltd (EGIC)
Edelweiss General Insurance Company Ltd (EGIC)
Slide 58: Business Snapshot
EGIC Business Snapshot No of Policies in ‘000s No of Customers in ‘000s GWP (INR Cr) 85 87 159 104 41 38 FY19 FY20 FY19 FY20 FY19 FY20 Focus Areas for Long Term Value Creation : • Digital-First new-age company • Innovative products catering to unmet customer needs • Onboard strategic partner Solvenc
Slide 59: Focused on Profitable Segments and Diversified Distribution
EGIC Focused on Profitable Segments and Diversified Distribution Focus on Developing Retail Diversified Distribution Mix – FY20 Contribution of Private Car & Health higher than Broker Industry Average in FY20 22% Individual Agents 52% 48% Corporate Agents 44% 25% Direct Business 1% Web Aggregator &
Slide 60: Balance Sheet. Organisation. Governance.
Balance Sheet. Organisation. Governance.
Slide 61: Liquidity & Cash Flow Plan for FY21
Liquidity & Cash Flow Plan for FY21 Particulars (INR Cr) H1FY21 H2FY21 Opening Available Liquidity (A) 8,150 6,300 Inflows Contractual Inflows 5,500 4,500 Covid-related impact (4,000) (1,000) Fresh Borrowings 3,400 1,500 Asset Sell downs 2,200 1,000 Total Inflows (B) 7,100 6,000 Outflows Repayments
Slide 62: Assets in each Tenor Range Adequately Cover Liabilities
Assets in each Tenor Range Adequately Cover Liabilities (INR Cr) Assets Liabilities Gap Upto 1 year 16,800 15,200 1,600 1-3 years 12,700 12,600 100 3 years+ 17,900 12,400 5,500 Total gap represents our equity base 61
Slide 63: Borrowing Profile
Borrowing Profile Borrowing Profile by Instruments Borrowing profile by Source 1% 22% 37% 39% 11% 62% 28% Banks NCDs CPs Banks Retail MF PF,Insurance & FIs INR 33,754 Cr INR 33,754 Cr Well diversified borrowings across multiple sources Borrowing from CP is negligible 62
Slide 64: Our Group Risk Governance Structure
Our Group Risk Governance Structure… Oversight by Board Risk Committee Global Risk Committee Business Risk Group Risk & Assurance Enterprise Risk Management Council • Implementation of risk • Risk aggregation and • Define Organization risk framework for specific monitoring framework & appetite busin
Slide 65: 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 Technology Operational & Infrastructure People Risk Fraud Risk Risk Process Risk Risk Enterprise risk management approach: 11 Risk Framework 64
Slide 66: 13 Member Board Comprises Majority of Independent Directors
13 Member Board Comprises Majority of Independent Directors Dr. Ashima Goyal Ms. Anita M George Independent Director Non- Executive, Non-Independent Director • Professor at Indira Gandhi Institute of Development • Executive Vice President, Strategic Partnership- Growth Markets, Research CDPQ India •
Slide 67: Significant Institutional Ownership
Significant Institutional Ownership Shareholding Pattern as on 31st March, 2020 Key Shareholders above 1% Percent 1 BIH SA 5.0% Employee 2 Pabrai Investment Funds 4.1% Trust 3 Wellington Management 3.7% DIIs, Non 4.8% Promoter Group Institutions 4 TIAA CREF funds 3.2% & Others 5 LIC 2.2% 22.1% 32.9%
Slide 68: ESG at Edelweiss
ESG at Edelweiss Gre Edelweiss Ideas create, values protect
Slide 69: Edelweiss Wins National CSR Award
Edelweiss Wins National CSR Award EdelGive Foundation’s commitment to Achieving the SDGs (Cumulative till date) 109 Districts across 14 States Quality Gender No Poverty Education Equality INR 18 Cr* INR 21 Cr* INR 36 Cr* INR 101 Cr 1,200 acres of irrigated land ~18 lakh Children supported More than
Slide 70: EdelGive Funding Partners & Networks
EdelGive Funding Partners & Networks We have partnered with some of the largest Foundations, Corporates and HNIs through our innovative models focused on collaboration 69
Slide 71: Annexure
Annexure Gre Edelweiss Ideas create, values protect
Slide 72: Wealth & Asset Management Pro Forma Financials
Wealth & Asset Management Pro Forma Financials FY20 (INR Cr) EGIA Reported EGIA Proforma Gross Revenues 1,507 2,054 Net Revenues 1,158 1,362 Fee-based revenues 823 1,095 Operating costs 882 1,005 Profit before tax 276 357 Profit after tax 185 246 • Reported financials for the Wealth Management divis
Slide 73: Safe Harbour
Safe Harbour DISCLAIMER : 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
Slide 74: Safe Harbour
Safe Harbour NOTES: Slide 4,7, 11 : Net worth/Equity & PAT numbers are including MI; Net worth/Equity Includes investment in equity convertible instrument by CDPQ of INR 1,040 Cr, Kora Management of INR 177 Cr and Sanaka Capital of INR 117 Cr Slide 4 : Customer Assets are rounded off to nearest 100
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