Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q2 FY2017 Earnings Presentation
70 slides from Edelweiss Financial Services's earnings presentation, Nov 9, 2016
Slide 1: Cover letter to BSE for investor presentation
EW/Sec/2016/IR ~1 November 9, 2016 BSE Limited PJ Towers, Dalal Street, Fort, Mumbai - 400 001. Dear Sirs, Ref.:- Scrip Code:- 532922 Sub: Investor Presentation Please find enclosed the Investor presentation in respect of the Second Quarter of the Financial Year 2017. Kindly take the same on record.
Slide 2: Edelweiss Financial Services Limited Q2FY17 Investor Presentation
Edelweiss Financial Services Limited Q2FY17 Investor Presentation
Slide 3: Contents
Contents 1 OVERVIEW & BUSINESS APPROACH 2 PERFORMANCE HIGHLIGHTS 3 BUSINESS HIGHLIGHTS 4 ENTERPRISE UPDATE 5 DETAILED FINANCIALS 2
Slide 4: Overview & Business Approach
OVERVIEW & BUSINESS APPROACH
Slide 5: Our Vision
Our Vision “To be a Respected Financial Services firm with a Portfolio of High Quality Growth Businesses” 4
Slide 6: Our Business Approach
Our Business Approach Leadership Culture Culture that promotes Risk & Governance entrepreneurship and Zero tolerance policy innovation without towards Compliance & Risk compromising on institutionalization Diversification De risked model enhances sustainability Good mix of Strong Enterprise Wholesal
Slide 7: Diversification Strategy Led to a Unique Business Model
Diversification Strategy Led to a Unique Business Model… EDELWEISS Credit Non Credit Insurance WELL DIVERSIFIED Unique Model that is “Scalable, Stable and Profitable” 6
Slide 8: One of the Leading Diversified Financial Services Firms
One of the Leading Diversified Financial Services Firms CREDIT BUSINESSES Present across the spectrum of One of the top 5 Diversified Financial Wholesale Retail Services Firms • Structured Collateralized Credit • Retail Mortgage (INR Cr) • Distressed Assets • Agri & Rural Finance • Wholesale Mortgag
Slide 9: Four-year aims for diversified business model
As we stated in the FY16 investor presentation, over the next four years.. Our aim is to grow our diversified business model to achieve... • Grow PAT consistently at 25% • GNPA below 2% • Consolidated RoE to 16-18% • Capital Adequacy Ratio >16% • Ex Insurance RoE to 19-20% • Enhance long term credit
Slide 10: Q2FY17 Performance Highlights
Q2FY17 PERFORMANCE HIGHLIGHTS
Slide 11: Key Financial Highlights – Q2 FY17
Key Financial Highlights – Q2 FY17 Consolidated PAT growth of 51%; Ex Insurance PAT growth of 38% Ex Insurance PAT CAGR of 36% for last 4 years Consolidated RoE improved to 15.2%; Ex Insurance RoE improved to 19.9% Book Value/ Share: INR 48 10
Slide 12: Consolidated Q2 PAT Growth of 51% & Ex Insurance PAT Growth of 38%
Consolidated Q2 PAT Growth of 51% & Ex Insurance PAT Growth of 38% YoY (INR Cr) Q2FY17 Q2FY16 Growth FY16 FY15 PAT 144 96 51% 414 329 Consolidated PAT 38% Ex Insurance 166 120 519 381 ..... With 22% growth in Assets Balance 35,822 29,445 22% 32,145 27,072 Sheet Non Linear growth in Profitability 11
Slide 13: Key Performance Parameters (Ex Insurance)
Key Performance Parameters (Ex Insurance) (INR Cr) Q2FY17 Q1FY17 FY16 FY15 FY14 PAT 166 155 519 381 272 Net Revenue/ Average Assets 9.3% 8.6% 7.8% 8.5% 7.2% RoE 19.9% 19.4% 18.6% 15.6% 12.2% RoA 2.2% 2.0% 1.8% 1.9% 1.9% Cost to Income Ratio 57% 57% 60% 60% 59% Gross NPA 1.46% 1.4% 1.4% 1.3% 0.9% Net
Slide 14: Key Performance Parameters vs peers
Key Performance Parameters Edelweiss For Q2FY17 (Ex Insurance) Private Banks NBFC/ DFS PAT growth (YoY) 38% 23% 19% Credit Book Growth (YoY) 23%* 18% 19% Net Revenue/ Average Assets 9.3% 5.7% 10.1% RoA 2.2% 1.8% 2.2% RoE 19.9% 15.0% 15.6% Cost to Income Ratio 57% 45% 39% Gross NPA 1.46% 1.60% 2.71%
Slide 15: PAT growth trajectory
PAT growth trajectory Profit after Tax 166 INR Cr 154 155 133 120 140 144 111 98 103 122 89 90 106 70 69 68 72 91 96 62 83 88 51 57 78 79 46 48 35 56 58 61 46 51 46 39 40 42 29 Q3'FY12 Q4'FY12 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'
Slide 16: RoA Attribution (Ex Insurance)
RoA Attribution (Ex Insurance) Q2FY17 FY16 FY15 Net Interest Income 5.8% 5.1% 5.5% Interest 12.4% 12.8% 12.0% Treasury 2.0% 1.2% 2.2% Interest Cost -8.6% -8.8% -8.6% Non-interest income 3.5% 2.7% 2.9% Fee & commission 2.9% 2.4% 2.7% Other income 0.6% 0.3% 0.2% Expenses -5.9% -5.2% -5.7% Employee cos
Slide 17: Both credit and non-credit PAT witnessing steady growth
Both credit and non-credit PAT witnessing steady growth PAT INR Cr 144 2-year CAGR 96 80 106 38% 79 Credit 56 59 30% Non Credit 35 41 Insurance -11 -21 -24 Q2FY15 Q2FY16 Q2FY17 16
Slide 18: Business Highlights – H1 FY17
BUSINESS HIGHLIGHTS – H1 FY17
Slide 19: Diversified Mix of Businesses
Diversified Mix of Businesses CREDIT NON CREDIT INSURANCE Present across : Strong product franchise One of the fastest Wholesale serving diverse client growing life insurance needs: companies • Structured Collateralized Credit • Wealth Management • Distressed Assets • Asset Management • Wholesale Mo
Slide 20: Financial Snapshot
Financial Snapshot Profit (INR Cr) EoP Equity After Tax RoE Credit Business 2,903 203 18.0% Non Credit 987 118 23.2% Total (Ex Insurance) 3,890 321 19.6% Insurance 873 -37 - Consolidated 4,763 284 15.1% Based on Management Estimates; 19 RoE is calculated on Average Equity
Slide 21: Business Highlights – Credit
BUSINESS HIGHLIGHTS – CREDIT
Slide 22: Credit Business at a glance
Credit Business at a glance Credit Business INR (Cr) Capital Employed 24,860 Net Interest Margin 6.9% Net Interest Income 750 Cost to Income 41% Provisions 101 PAT 203 Gross NPA 1.46% Net NPA 0.47% RoE 18.0% RoA 2.1% Credit Non Credit Insurance Balance Sheet 21 Based on Management Estimates; EARC (E
Slide 23: Credit business is a mix of differentiated and scalable assets
Credit business is a mix of differentiated and scalable assets... Structured • Customized credit solutions, with high collateral Loan Against Structured Collateralized Credit cover Shares SME & Others Collateralized 2,627 1,755 Credit • Largest Asset Reconstruction Company in India, 10% 7% 7,446 Dis
Slide 24: 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 • Agri & Rural Financing • Wholesale Mortgage • Loan Against Shares • Began credit operations in 2007 • SME
Slide 25: Business Strengths
Business Strengths Client Centric Solutions • Ability to understand client needs and structure products to suit their needs • Strong client relations Proactive Risk Management • Three tier risk management approach – Business risk team supplemented by Global risk team & Global Risk Committee • Robust
Slide 26: Credit – Improving Parameters
Credit – Improving Parameters At the end of H1FY17 H1FY16 FY16 FY15 Average Interest Yield 16.2% 16.0% 16.2% 15.8% Average Cost of Borrowing 10.5% 10.8% 10.7% 10.9% Interest Spread 5.7% 5.3% 5.5% 4.9% Net Interest Margin 6.9% 6.6% 6.8% 6.7% 50 cities & 44 cities & 45 cities & 36 cities & Retail Cred
Slide 27: Credit – Robust Asset Quality
Credit – Robust Asset Quality At the end of (INR Cr) H1FY17 H1FY16 FY16 FY15 Credit Book 21,349* 17,321 20,014 15,036 Pvt. Banks NBFCs Gross NPA 312 250 281 196 1.60% 2.71% Gross NPA % 1.46% 1.45% 1.40% 1.31% Net NPA % 0.47% 0.44% 0.47% 0.38% 0.71% 0.93% Total Provision Held 289 233 247 184 Total Pr
Slide 28: Wholesale Credit – Evaluation Approach
Wholesale Credit – Evaluation Approach Counter Party Collateral Cash Flows • Promoter Pedigree • Hybrid Collateral Pool • Fundamentals • Group Relationship • Ring fenced Structure • Business Performance • Execution Capability • Ease of enforcement • Underlying Asset • Group Financial Standing • Valu
Slide 29: Overview of Distressed Assets in India
Overview of Distressed Assets in India • Total outstanding Loans as of March 16 are US$ 1.1 Tn • Estimated total stressed assets of US$130 bn (12% ) • Largest stressed assets comprise infrastructure, steel, textiles and construction Stressed Assets Market Estimates 46% 43% 7% 37% 7% 9% 29% 28% 9% 8%
Slide 30: Key Success Factors for Asset Reconstruction Business
Key Success Factors for Asset Reconstruction Business ARC Platform FINANCIAL TURNAROUND CAPITAL STRUCTURING & EXPERTISE RESOLUTION • Domain knowledge and expertise to create Platform • Capital for debt purchase and last mile funding • Ability to financially and operationally turnaround stressed asse
Slide 31: Asset Reconstruction Business - Journey so far
Asset Reconstruction Business - Journey so far • Asset Reconstruction business started in 2008 • Till 2013, kept building the team and processes, buying few assets and invested in understanding the space • Created a team with diversified skill sets and experience across all major asset classes • Goo
Slide 32: Expanding Asset Reconstruction Business
Expanding Asset Reconstruction Business Asset Reconstruction Company • Currently EARC is the largest asset reconstruction company in Assets Under Management (INR Cr) India, managing assets of INR 31,000 cr., acquired from 51 banks 31,100 • Focused on delivering a long term risk adjusted returns akin
Slide 33: Partnership with CDPQ
Partnership with CDPQ – One of North America’s largest Pension Fund Managers Distressed Asset Capital Investment (INR cr) • CDPQ to target an investment of close to INR 5,000 cr over four years in India’s Stressed Assets and Specialised Credit sector, 3,511 along with EARC 2,641 • This partnership a
Slide 34: Business Highlights – Non Credit
BUSINESS HIGHLIGHTS – NON CREDIT
Slide 35: Non Credit Business at a glance
Non Credit Business at a glance Non Credit INR (Cr) Capital Employed 10,090 Net Revenue 697 Cost to Income 74% PBT 184 PAT 118 RoE 23.2% RoA 2.2% Credit Non Credit Insurance Balance Sheet 34 Numbers are Management Estimates
Slide 36: Non Credit Business Mix
Non Credit Business Mix • Multi asset class platform offering structured customized solutions • Focus on OPDO (Owner, Promoter, Director, Officer) segment Wealth Management • Present in Ultra High Net worth/ High Net worth/ Mass Affluent segment • Total AuA (INR Crs): 44,200 (UHNI: 26,300/HNI 6,900/
Slide 37: Wealth Management – Growth Opportunity
Wealth Management – Growth Opportunity • Rising wealth in India is creating immense opportunity in wealth management space • Owner, Promoter, Director, Officer (OPDO) market is the new emerging client segment • Edelweiss wealth has unique business model that straddles all client segments across mult
Slide 38: Wealth Management AUA increased 5x in 3 years
Wealth Management AUA increased 5x in 3 years (INR Cr) Edelweiss Wealth Gaining significant traction across client segments 44,200 • Good mix of product and advisory solutions for customized needs • Differentiated Client experience – hybrid model with expert financial advisors and digital platform 2
Slide 39: Asset Management – Gaining scale
Asset Management – Gaining scale Asset Management • Two business segments: Assets Under Management (INR Cr) • Mutual fund AUM: INR 2,450 cr • Alternative Assets AUM: INR 4,450 cr 6,900 • Received approvals for acquisition of JP Morgan schemes, from Securities and Exchange Board of India (SEBI) 5,000
Slide 40: 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 • Robust fundamental research covering ~227 stocks 6,700 among 27 sectors representing ~77% of total 5,000 5,200 market cap 3,100 • Rated Best Brokerag
Slide 41: Expanding Agri Services business
Expanding Agri Services business Agri Services • One of the few organised players providing end to end business solutions in the Agri value chain Number of warehouses • 291 warehouses under management with capacity of over 11 lacs MT 291 265 • Warehousing Development and Regulatory Authority (WDRA)
Slide 42: Balance Sheet Management Unit
Balance Sheet Management Unit Balance Sheet Management Unit (INR Cr) 4,420 Key Objectives • Create liquidity cushion through investment in High Quality Liquid Assets 1,765 • Asset Liability Management 1,134 411 • Manage Treasury assets Gsecs Liquidity Fixed & Tax Others • Corporate Fixed Assets and
Slide 43: Business Highlights – Insurance
BUSINESS HIGHLIGHTS – INSURANCE
Slide 44: Key Milestones
Key Milestones H1 2017 2013 71 Branches 45 Branches 17,753 Agents 3,401 Agents 1,986 Employees 1,275 Employees 27 Products 18 Products 145 Cr Gross Premium 55 Cr Premium Started Operations July 2011 Highest startup capital INR 550 Crs 2016 71 Branches 15,490 Agents 1,943 Employees 26 Products 310 Cr
Slide 45: Insurance Strategy
Insurance Strategy defined by Products • Focused on new product development & launch of Total Secure + • Continued focus on Need Based Selling (Brand: Vijaypath) • Agency-led multi-channel distribution approach with emphasis on productivity Distribution • Focus on building direct capability specific
Slide 46: Fastest Growing Individual Annual Premium Equivalent
Fastest Growing Individual Annual Premium Equivalent Individual Annual Premium Equivalent CAGR Growth since H1 FY13 37% • Individual Annual Premium Equivalent - INR 50 Crs for H1 FY17 7% 2% Edelweiss Tokio Life Peer Set Industry Insurance Persistency (Individual & Group Business combined) 75% 71 • F
Slide 47: Customer Centric Approach – Wide Variety of Products
Customer Centric Approach – Wide Variety of Products Traditional Par, 23% Product Mix Traditional Non Par, 51% Group, 12% ULIP, 14% • Unique need based selling approach • Strong investment performance to provide superior returns to customers Customer centric • Edelweiss Tokio Funds have been rated t
Slide 48: Rapidly Growing & Stable Platform
Rapidly Growing & Stable Platform Direct Business, 9% Brokers, 11% Balanced channel mix with focus on Corporate Agent, 8% agency Banca , 10% Agency, 63% Inception till date • Winner, Agency Efficiency award at India Insurance Awards, 2016 A Responsible • Winner, “Top 100 Infosec Maestros Awards” in
Slide 49: Pan India Presence
Pan India Presence At the end of H1FY17 FY16 FY15 FY14 Delhi (NCR) 6 branches Number of Personal 17,753 15,490 10,421 7,255 Financial Advisors Punjab / Himachal Pradesh 71 in 71 in 59 in 58 in Number of Branches / Uttarakhand Uttar 61 cities 61 cities 49 cities 48 cities 6 branches Pradesh 6 branche
Slide 50: Insurance
Insurance Edelweiss Tokio Life Insurance Company Limited Standalone (ETLI) (INR Cr) H1FY17 H1FY16 FY16 FY15 Gross Premium Income 145 92 310 193 Investment Income & Other Income 88 45 87 97 Total Income 233 137 397 290 Total Expenses 305 197 552 361 Profit Before Tax -72 -60 -155 -71 Profit After Tax
Slide 51: Balance Sheet
Tia ck jute teh Fetal inal eth BALANCE SHEET 2016 INDIAN OLYMPIC TEAM coo
Slide 52: Key Highlights – Balance Sheet
Key Highlights – Balance Sheet 1 On-Balance Sheet: INR~35,800 Cr; Total assets managed: INR ~118,000 Cr 2 ALM maintained Balance 3 Comfortable capital adequacy ratio at 18.1% Sheet 4 Diversified Liability mix 5 Stable business model reflected in credit ratings Credit Non Credit Insurance Balance She
Slide 53: ~ $18.0 billion of Assets
1 ~ $18.0 billion of Assets As on 30 Sep 2016 INR Cr USD bn Assets on Balance Sheet 35,800 5.4 Distressed Assets Book (ARC Assets) 31,100 4.7 Funds under Management (Asset Management) 6,900 1.0 Assets Under Advice (Wealth Management) 44,200 6.7 Total Assets 1,18,000 17.8 Credit Non Credit Insurance
Slide 54: Comfortable Asset-Liability Profile
2 Comfortable Asset-Liability Profile Sep’16: INR 35,822 Cr Assets Liabilities 100% % of Assets and Liabilities 76% 100% 56% 73% 38% 31% 53% 12% 38% 29% 12% Asset Specific 0-3 Mnth 3-6 Mnth 6-12 Mnth 1-3 years 3+ years Borrowing • Positive asset-liability matching across durations • Asset Liability
Slide 55: Strong capital position
3 Strong capital position Tier I Networth (INR Cr) Liability Structure, Sep’16 (INR Cr) 4,655 4,192 Tier I 4,655 3,434 Tier II 1,159 Total Capital 5,814 Risk Weighted Assets 32,161 FY15 FY16 H1FY17 • Steady growth in Net worth over the last several years • Sub Debt issued to improve Tier II Capital
Slide 56: Diversified Sources of Borrowings
4 Diversified Sources of Borrowings FY11 H1FY17 Others* 5% 5% Retail 5% 15% Asset Specific Borrowing 14% 14% Bank 26% 31% Mutual Funds 50% 35% Total Borrowings INR 7,858 Cr INR 30,974 Cr • Steady diversification in sources of borrowings • Lower dependence on debt market borrowings • Exploring altern
Slide 57: Share of Long Term funds increasing
Share of Long Term funds increasing Long Term Liabilities INR (Cr) Long Term Liabilities Breakup 16,948 Sub-debt 14,475 10% 11,473 6,641 Term Loan NCD 30% 60% FY14 FY15 FY16 H1FY17 Long Term as % of Total 41% 43% 45% 47% Average Tenure (years) 3.4 Liabilities • Long Term Liabilities growing in line
Slide 58: Liquidity Cushion at ~INR 3300 Cr is 9% of Balance Sheet
Liquidity Cushion at ~INR 3300 Cr is 9% of Balance Sheet Including off Balance sheet lines INR (Cr) 3,300 • A well diversified liquidity cushion comprising of: 2,900 • Banking Lines • Fixed Deposits 1,700 • Government Securities, Mutual Funds etc • Steady growth in liquidity cushion to provide for 4
Slide 59: Stable Business Model Reflected in Credit Ratings
5 Stable Business Model Reflected in Credit Ratings Rating agency Purpose (debt programme) Rating Short term CRISIL A1+ Short term CARE A1+ Short term [ICRA] A1+ Long term BWR AA+ Long term CARE AA Long term [ICRA] AA Credit Non Credit Insurance Balance Sheet 58
Slide 60: Enterprise Update
ENTERPRISE UPDATE Edelweiss — 2016 INDIAN OLYMPIC TEAM [R@{@,9)
Slide 61: Awards
Awards Marketing campaign of the Year 2016 - CMO Asia #iAmTeamIndia Olympics campaign wins Marketing campaign of the year 2016 Best Corporate Governance - India At CFI.co Corporate Governance Awards 2016 Best Equity Capital Markets House and Best Broker Award at the Finance Asia Country Awards 2016
Slide 62: Awards and Recognition
Awards and Recognition Edelweiss Structured Products awarded the India House of the Year Edelweiss Financial Services awarded Best Leading Diversified Financial Award at the Asia Risk Awards 2016, Singapore Services – India at the Wealth&Finance 2016 Business Awards. Edelgive Foundation awarded best
Slide 63: Edelweiss Social Media Campaigns
Edelweiss Social Media Campaigns: #YourKnowledgeQuotient #DebunkFinanceMyth WishingtheParalympics2016 62
Slide 64: EdelGive Foundation - Key Highlights
EdelGive Foundation - Key Highlights Impacted over 300,000 lives in 13 states Supported 85 Non-Governmental Organizations. Brought INR 67 cr into philanthropy Education Livelihood Women Empowerment Empowering children through Water and soil conservation, skill Promoting safety, gender justice, holis
Slide 65: Shareholding Pattern
Shareholding Pattern Employee TOP INSTITUTIONAL SHAREHOLDERS ABOVE 1%* Trust (AS ON SEP 30, 2016) Non 5.4% Institutions Name Percent 17.5% 1 Carlyle 8.2% Promoters 2 BIH SA 5.3% 44.8% & Employees 3 Fidelity 4.9% 4 SAIF Advisors 3.1% 32.3% Foreign 5 Amansa Investments 1.4% Institutions 6 Ashoka PTE 1
Slide 66: Detailed Financials
DETAILED FINANCIALS
Slide 67: Consolidated Results
Consolidated Results (INR Cr) FY17 FY17 FY16 FY17 FY16 FY16 Q2 Q1 Q2 H1 H1 Annual Fee and Commission Income 240 171 148 411 311 697 Fund based Income 1,232 1,221 1,026 2,453 1,982 4,218 Premium from Life Insurance Business 85 53 57 138 88 300 Other Operating Income 40 27 16 67 30 87 Other Income 4 7
Slide 68: Consolidated Results ex-Insurance
Consolidated Results ex-Insurance INR in million FY17 FY17 FY16 FY17 FY16 FY16 Q2 Q1 Q2 H1 H1 Annual Fee and Commission Income 240 171 148 411 311 697 Fund based Income 1,185 1,180 1,008 2,365 1,939 4,132 Other Operating Income 40 27 16 67 30 86 Other Income 4 7 - 11 4 13 Total Revenue 1,469 1,385 1
Slide 69: Consolidated Financials – Balance Sheet
Consolidated Financials – Balance Sheet (INR Cr) Sep 16 Mar 16 Sep 15 Mar 15 Equity and Liabilities Shareholders’ Funds 4,093 3,760 3,391 3,246 Equity 4,008 3,675 3,306 3,161 Preference 85 85 85 85 Minority Interest 755 612 365 286 Borrowings 30,974 27,773 25,688 23,540 Total 35,822 32,145 29,445 27
Slide 70: Safe Harbor
Safe Harbor 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 (“Ede
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