Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — FY2020 Earnings Presentation
74 slides from Edelweiss Financial Services's earnings presentation, July 2020
Slide 1: Cover letter to BSE: Investor Presentation
EW/Sec/2020/131 July , 2020 BSE Limited P J Towers, Dalal Street, Fort, Mumbai – 400 001. Dear Sirs, Ref.:- Symbol: EDELWEISS Sub: Investor Presentation Please find enclosed the Investor Presentation in US Dollar on Earnings Updates for the year ended March 31, 2020. Kindly take the same on record.
Slide 2: Q4FY20 & FY20 Earnings Update
US $ version 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 oO Edelweiss Ideas create, values protect
Slide 5: FY20 Overview
FY20 Overview Net Worth Liquidity $ 1,133 Mn $ 1,081 Mn Customer Assets BVPS $ 27,560 Mn $ 0.92 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: $ 1,133 Mn Wealth & Asset Asset Credit Management Insurance Reconstruction (EGIA) Equity Equity Equity Equity $ 621 Mn $ 154 Mn $ 270 Mn $ 116 Mn CDPQ CDPQ Tokio Marine Strong partners, independent operations and ring-fence
Slide 9: FY20 Financial Snapshot
FY20 Financial Snapshot Consolidated 9MFY20 Q4FY20 FY20 ($ Mn) Revenue 1,013 261 1,274 Interest Cost 483 153 636 Net Revenue 530 108 638 Expenses 348 143 491 Impairment 134 3381 4731 PBT 48 (374) (326) PAT 27 (298) (271) Equity 1,348 1,133 1,133 1 Including Covid-related impairment of ~ $ 119 Mn 8 P
Slide 10: Strong, Consistent Traction in Fee Income
Strong, Consistent Traction in Fee Income $ Mn Q1FY20 Q2FY20 Q3FY20 Q4FY20 FY20 Wealth And Asset Management 37 33 36 38 145 Fee Income ARC Fee Income 26 29 28 23 107 Total Fee Income 64 62 65 62 252 Maintained a run-rate of ~$ 65 Mn 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 liquidity 531 769 1,406 1,340 1,081 ($ Mn) 10
Slide 12: More Than Adequate Capitalization Across Entities
More Than Adequate Capitalization Across Entities.. Equity Entity Metric Value ($ Mn) ECL Finance Ltd 467 21.0% Edelweiss Retail Finance Ltd 61 CAPAD 29.4% Edelweiss Housing Finance Ltd 102 28.6% Wealth & Asset Management 154 Annual Fee Income $ 133 Mn Edelweiss Asset Reconstruction Company Ltd 270
Slide 13: Covid Impact Management
Covid Impact Management oO 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 $ Mn Covid Impact in H1FY21 531 Mitigated by.. LTRO 133 Already closed Bank Lines 133 Based on on-going discussions under PCG Additional 133 Based on on-going discussions Asset Sales Drawn from 133 Reserve 14
Slide 16: Covid - Impact on Asset Quality
Covid - Impact on Asset Quality $ Mn Credit ~66 ARC ~27 Impairment ~27 on investments Total Covid Impact ~119 ~$ 119 Mn solely for Covid-related impairment taken in advance in Q4FY20 15
Slide 17: Key Highlights – Q4FY20
Key Highlights — Q4FY20 oO 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 $ Mn Estimated impairment after revision of Expected Credit Loss model ~ 159 Additional impairment taken to facilitate sell-down ~ 66 Impairment taken on account of Covid ~ 119 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 ~$ 1,460 Mn in last 12 months 20
Slide 22: Plan Going Forward
Plan Going Forward oO 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 $ 130-200 Mn 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 ~ $ 130-200 Mn in EFSL Expect to raise $ 200 - 265 Mn of total equity capita
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 oO Edelweiss Ideas create, values protect
Slide 29: ECL Finance Ltd
ECL Finance Ltd oO 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 $ 467 Mn $ 1,776 Mn Liquidity CAPAD $ 670 Mn 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 ($ Mn) ECL Finance EOP Loan Book 1,776 EOP Equity 467 Net Revenue 158 Operating Expenses 83 Credit Costs 310 Profit After Tax (188) 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 ($ Mn) 1,956 1,900 1,855 1,827 1,783 1,559 1,113 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 liquidity 756 670 610 769 670 ($ Mn) 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 (ERFL) Edelweiss Housing Finance Ltd (EHFL)
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 $ 61 Mn $ 185 Mn 29.4% Edelweiss Housing Finance Limited Net Worth Loan Book Capital Adequacy $ 102 Mn $ 574 Mn 28.6% 36
Slide 38: Business Performance Snapshot
ERFL/EHFL Business Performance Snapshot FY20 ($ Mn) ERFL EHFL EOP Loan Book 185 574 EOP Equity 61 102 Net Revenue 15 25 Operating Expenses 5 20 Credit Costs 10 5 Profit After Tax 0.1 0.3 Net Interest Margin 7.0% 3.8% GNPA 2.4% 1.7% Total Provision Cover 129% 54% Cover provided by provisions and coll
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: $ 6,740 Mn AuA : $ 15,090 Mn Private Credit AUM: $ 2,880 Mn • Managed Products • Fixed Income & Equities • Alternative Asset Management • Advisory & Issuer Services • Mut
Slide 41: Wealth & Asset Management – At A Glance
EGIA Wealth & Asset Management – At A Glance FY20 NET WORTH GROSS REVENUE Profit After Tax $ 154 Mn $ 200 Mn $ 25 Mn 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 ($ Mn) ✓ Consistent fee-based revenue of ✓ ~$ 36 Mn Cr every quarter in FY20 Cost to income for FY20: 76% 38 37 36 33 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) ($ Mn) WM AUA AM AUM 21,830 ~2,425 Ultra High Net Worth Individuals 6,740 19x ~5,75,000 Affluent Individuals 15,090 6x 2,810 360 ~3,31,500 2,450 Retail & HNI MF folios FY15 FY20 Customer Asset growt
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 ($ Mn) Total Management Management EOP Equity 154 131 23 Gross Revenues 200 158 41 Net Revenues 154 114 40 Operating costs 117 80 37 Profit before tax 37 34 3 Profit after tax 25 21 3 RoE 23% 26% 14% Assets under AUA Customer Assets Management 15,
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 ($ Mn) 32.5% Equity 270 25.6% 21.2% 19.8% General Borrowings 376 Asset Specific Borrowings 204 (repayment linked to recoveries) Cash & Bank 86 FY17 FY18 FY19 FY20 Consistent market leade
Slide 49: Steady Fee Income Anchors Profitability
EARC Steady Fee Income Anchors Profitability $ Mn FY18 FY19 FY20 Management Fee Income 104 115 107 Incentive and Gain on SRs (5) 59 38 Interest & Other Income 4 7 10 Total Income 102 181 155 Management Fee/ Total Income 102% 63% 69% Management Fee as a % of AUM 1.9% 1.9% 1.8% Sizeable management fee
Slide 50: Recoveries of $2,766 Mn in 3 Years
EARC Recoveries of $ 2,766 Mn in 3 Years $ Mn No. of Accounts Total recovery with recovery FY 18 341 227 FY 19 931 232 FY 20 1,493 191 Recoveries are robust and contributed by a large number of accounts 49
Slide 51: Business Performance Snapshot
EARC Business Performance Snapshot $ Mn FY20 AUM 5,729 EOP Capital Employed 717 EOP Equity 270 Total Revenue 156 Net Revenue 57 Operating Costs 11 PAT (pre MI) 41 PAT (post MI) 25 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 ($ Mn) 43 Gross Premium ($ Mn) 139 18 41 FY16 FY20 FY16 FY20 AUM ($ Mn) 359 VNB Margin 38% 24% 68 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 $ 177 M
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 ($ Mn) 85 87 21 14 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 Solvency ra
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 ($ Mn) H1FY21 H2FY21 Opening Available Liquidity (A) 1,081 836 Inflows Contractual Inflows 730 597 Covid-related impact (531) (133) Fresh Borrowings 451 199 Asset Sell downs 292 133 Total Inflows (B) 942 796 Outflows Repayments 875 597 Reduction in ESO
Slide 62: Assets in each Tenor Range Adequately Cover Liabilities
Assets in each Tenor Range Adequately Cover Liabilities ($ Mn) Assets Liabilities Gap Upto 1 year 2,229 2,016 212 1-3 years 1,685 1,671 13 3 years+ 2,374 1,645 730 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 $ 4,477 Mn $ 4,477 Mn 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 oO 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 $ 2 Mn* $ 3 Mn* $ 5 Mn* $ 13 Mn 1,200 acres of irrigated land ~18 lakh Children supported More than 1.5 lakh com
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 oO Edelweiss Ideas create, values protect
Slide 72: Wealth & Asset Management Pro Forma Financials
Wealth & Asset Management Pro Forma Financials FY20 ($ Mn) EGIA Reported EGIA Proforma Gross Revenues 200 272 Net Revenues 154 181 Fee-based revenues 109 145 Operating costs 117 133 Profit before tax 37 47 Profit after tax 25 33 • Reported financials for the Wealth Management division in EGIA entity
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 $ 138 Cr, Kora Management of $ 23 Mn and Sanaka Capital of $ 16 Mn Slide 4 : Customer Assets are rounded off to nearest 10 Slide 5 : O
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