Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q4 FY2018 Earnings Presentation
63 slides from Edelweiss Financial Services's earnings presentation, May 2018
Slide 1: Q4FY18 and FY18 Earnings Update
Edelweiss Financial Services Limited Q4FY18 and FY18 Earnings Update
Slide 2: 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
Slide 3: Contents
Contents 1 Overview & Business Approach 2 Quarterly Performance Highlights 3 Annual Performance Overview 4 Business Performance Highlights 5 ESG at Edelweiss 3
Slide 4: Overview & Business Approach
Overview & Business Approach
Slide 5: Edelweiss at a Glance
Edelweiss at a Glance INR Cr PAT Consolidated Balance Sheet Assets Customer Assets 890 55,086 1,68,900 13,289 128 7,500 FY12 FY18 FY12 FY18 FY12 FY18 PAT Ex-Insurance RoE Ex-Insurance RoA Ex-Insurance 22.1% 2.6% 1,036 1.2% 7.3% 141 FY12 FY18 FY12 FY18 FY12 FY18 5
Slide 6: We are a Diversified Financial Services Company
We are a Diversified Financial Services Company Credit Bank-like business model • Retail Credit • Corporate Credit • Distressed Credit Multiple vectors of growth Franchise & Advisory Consistent growth and profitability • Wealth Management • Asset Management • Capital Markets Reduction in volatility
Slide 7: 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 31st March’18 (rounded off to nearest 100) INR Cr YoY Growth Balance Sheet Assets 55,100 42% Clients ~12 lacs Customer Assets 1,68,900 43% Distressed Credit (ARC Assets) 37,800 9% Offices Assets Under Advice (Wealth Management) 90,100
Slide 8: Generating Profits from both Spread and Fee Income
…Generating Profits from both Spread and Fee Income FY18 Pre MI PAT Business Segments % Contribution (INR Cr) Credit Business Retail Mortgage 66 6% LAS, SME, Agri and Business Loans 134 12% Structured Collateralised Credit 159 14% Wholesale Mortgage 180 16% Distressed Credit 192 17% Franchise & Advi
Slide 9: Our Assets are Increasingly Retail on the Credit Side
Our Assets are Increasingly Retail on the Credit Side… Retail Credit - Capital Employed (INR Cr) 16,188 8,952 6,031 Building Platform 4,188 2,799 2,115 1,535 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Retail credit is now 39% of the total credit book Key vectors for our growth will be SME Loans and Retail M
Slide 10: And on the Wealth Management Side
…And on the Wealth Management Side Wealth Management AUA (INR Cr) 90,100 60,300 29,500 17,700 7,000 8,900 4,800 FY12 FY13 FY14 FY15 FY16 FY17 FY18 We cater to UHNI as well as the fast-growing Affluent segments 10
Slide 11: One of the Fastest Growing Life Insurance Companies
We are one of the Fastest Growing Life Insurance Companies Collected Individual APE (INR Cr) Number of Policies in force 1,67,791 251 1,17,323 165 138 81,424 97 54,738 63 40,214 34 23,418 9 6,315 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Agency-led multi-channel distribut
Slide 12: Scale Benefits Leading to Operating Efficiencies
Scale Benefits Leading to Operating Efficiencies… Cost to income ratio (Ex-Insurance) 70% 65% 59% 59% 60% 54% 47% FY12 FY13 FY14 FY15 FY16 FY17 FY18 12
Slide 13: Aided by Technology Initiatives across Businesses
…Aided by Technology Initiatives across Businesses Retail Lending Life Insurance • Digital lending enabled • Lead management system by India Stack across channels, integrated with policy Digital Acquisition issuance systems Life Insurance Asset Mgmt Wealth Mgmt • End to end portal for • Distributor
Slide 14: We have Significantly Improved Balance Sheet Efficiency
We have Significantly Improved Balance Sheet Efficiency… RoE RoA 22.1% 2.6% 20.7% 2.4% 18.6% 15.6% 1.9% 1.9% 1.8% 17.1% 1.7% 2.0% 12.2% 15.5% 11.3% 1.7% 12.9% 1.2% 1.5% 11.3% 1.4% 7.3% 1.3% 1.2% 1.2% 7.6% 8.2% 6.0% FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Ex-Insurance Ro
Slide 15: Ensuring Our Diversified Model Delivers Consistent Growth
…Ensuring Our Diversified Model Delivers Consistent Growth PAT (INR Cr) Balance Sheet (INR Cr) 55,086 890 38,667 609 32,145 414 27,072 329 220 16,204 13,289 14,529 178 128 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY12 FY13 FY14 FY15 FY16 FY17 FY18 27% growth in balance sheet assets supported a 38% growth
Slide 16: Consolidated PAT CAGR was 38% Over Quarters
Consolidated PAT CAGR was 38% Over 28 Quarters Profit after Tax (INR Cr) Ex-Insurance PAT Consolidated PAT 308 272 234 212 222 248 187 236 166 209 154 155 196 133 170 111 120 89 90 140 98 103 144 155 70 69 62 68 72 122 46 48 51 57 88 91 96 106 33 27 35 78 79 83 58 61 39 40 42 46 51 56 46 33 26 29 Q1
Slide 17: Aspirations for 2020: Our Report Card
Aspirations for 2020 : Our Report Card FY17 FY18 1 Consistently grow our PAT at 25% - 35% annually 47% 46% 2 Achieve a Consolidated RoE% of at least 18% 15.5% 17.1% 3 Achieve an Ex-Insurance RoE of at least 22% 20.7% 22.1% 4 Bring down Ex-Insurance Cost to Income Ratio to below 50% 54% 47% 5 Increas
Slide 18: Quarterly Performance Highlights – Q4FY18
Quarterly Performance Highlights – Q4FY18
Slide 19: Q4FY18 Performance Highlights
Q4FY18 Performance Highlights Consistent growth in profits… 1 • Consolidated PAT growth of 46% YoY • Ex-Insurance PAT growth of 45% YoY …Distributed across businesses 2 • Credit business grew 50% YoY • Franchise & Advisory business grew 28% YoY Key performance parameters • Consolidated RoE 15.3% Ex-
Slide 20: Consolidated Q4FY18 PAT Growth of 46%
1 Consolidated Q4FY18 PAT Growth of 46% Y-o-Y (INR Cr) Q4FY17 Q3FY18 Q4FY18 Growth PAT 170 236 248 46% Consolidated PAT Ex-Insurance 212 272 308 45% Balance 38,667 48,796 55,086 42% Sheet 20
Slide 21: Profit Growth Across Businesses
2 Profit Growth Across Businesses Y-o-Y 2 Year (INR Cr) Q4FY17 Q3FY18 Q4FY18 FY16 FY17 FY18 Growth CAGR PAT 170 236 248 46% 414 609 890 47% Credit 128 167 192 50% 337 447 645 38% Franchise & Advisory 78 79 99 28% 72 193 308 106% Insurance (42) (35) (60) - (104) (110) (146) - BMU, Corp & Others 7 25
Slide 22: Key Performance Parameters
3 Key Performance Parameters Key Ratios Consolidated Q4FY17 Q3FY18 Q4FY18 FY17 FY18 RoE 16.1% 17.4% 15.3% 15.5% 17.1% RoA 1.7% 2.0% 1.8% 1.7% 2.0% Cost to Income Ratio 67% 59% 62% 67% 60% Ex-Insurance Q4FY17 Q3FY18 Q4FY18 FY17 FY18 RoE 22.2% 22.5% 21.6% 20.7% 22.1% RoA 2.7% 2.6% 2.8% 2.4% 2.6% Cost
Slide 23: Annual Performance Overview - FY18
Annual Performance Overview - FY18
Slide 24: Financial Snapshot – FY18
Financial Snapshot – FY18 INR Cr EOP Equity Profit after Tax RoE RoA Pre Minority Credit 5,624 731 18.1% 2.2% Franchise & Advisory 225 308 BMU, Corp & Others 618 83 9.7% 1.0% Life & General Insurance 1,296 (260) (-) Minority 1,089 (28) Total Consolidated 6,673 890 17.1% 2.0% Total Ex-Insurance 5,944
Slide 25: Credit Business Performance Snapshot
Credit Business Performance Snapshot Credit Business FY18 Total Y-o-Y Retail Y-o-Y Corporate Y-o-Y Distressed Y-o-Y (INR Cr) EOP Capital Employed 42,010 52% 16,188 81% 19,525 41% 6,297 32% EOP Equity 5,624 49% 1,574 68% 2,873 36% 1,177 61% Net Interest Income 2,608 54% 661 54% 1,462 37% 485 141% PAT
Slide 26: 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 FY18 (INR Cr) Mgmt Mgmt Mkts Net Revenue 1,330 25% 580 28% 130 151% 620 12% PAT 308 60% 130 83% 32 354% 146 28% Cost to Income 65% 67% 63% 64% Assets under Assets under
Slide 27: Life Insurance Performance Snapshot
Life Insurance Performance Snapshot (INR Cr) FY18 Y-o-Y Net Premium Income 619 45% Investment & Other Income 163 8% Total Business 782 36% Profit After Tax (233) - Minority (114) - Edelweiss’ share in PAT (119) - Net Worth 1,156 58% Equity infusion in Q3FY18 from Edelweiss and JV partner Tokio Marin
Slide 28: Business Update: Credit
Business Update CREDIT Retail Credit – Corporate Credit – Distressed Credit
Slide 29: Credit Business is a Mix of Diversified and Scalable Assets
Credit Business is a Mix of Diversified and Scalable Assets Capital Employed % As on 31st March ’18 (INR Cr) Share Retail Credit 16,188 39% Retail Mortgage 6,672 16% Blend of loans to home owners and home buyers SME & Business Loans 3,677 9% Underserved and highly scalable, focus area for future Loa
Slide 30: Credit Business at a Glance
Credit Business at a Glance Credit Business FY17 FY18 (INR Cr) Capital Employed 27,608 42,010 Average Interest Yield 16.2% 16.3% Average Cost of Borrowing 10.3% 9.8% Net Interest Margin 7.2% 7.7% Net Revenue 1,695 2,608 Cost to Income 36% 34% Provisions & Write Offs 319 616 PAT 447 645 RoE 18.2% 18.
Slide 31: Asset Quality at a Glance
Asset Quality at a Glance At the end of FY17 FY18 Gross NPA (INR Cr) 362 624 Gross NPA % 1.59% 1.75% Net NPA % 0.60% 0.70% Outstanding Provision Held (INR Cr) 314 507 Total Provision Cover 87% 81% Average Collateral cover on Corporate book 2.3X 2.1X Average Loan-To-Value on Retail book ~45% ~45% Cre
Slide 32: Retail Credit Expanding Footprint
Retail Credit Expanding Footprint Capital Employed Business Highlights (INR Cr) SME • Originations up 76% on Y-o-Y basis 16,188 16,188 • Digital journey (Phygital) begun - Enhanced efficiency and client experience 14,200 • 88 locations live up from 17 locations as on March’17 8,952 8,952 Retail Mort
Slide 33: Calibrated Growth in Corporate Credit
Calibrated Growth in Corporate Credit Capital Employed Business Highlights (INR Cr) • Risk-management centered approach to collateralized lending 19,525 19,525 • In house team of experts for carrying out detailed evaluations 16,372 − Counterparty, Collateral and Cash flows 13,875 13,875 • Ring fence
Slide 34: Agri Credit Expected to Scale Up
Agri Credit Expected to Scale Up Collateral Value (INR Cr) Agri Credit Book Size (INR Cr) Collateral Manager Stock Storage Stock 885 3,492 2,589 745 463 1,681 828 262 735 2,747 1,761 946 FY16 FY17 FY18 FY16 FY17 FY18 Business Highlights • One of the few organized players providing end to end busines
Slide 35: Distressed Credit Performance on Track
Distressed Credit Performance on Track… Business Highlights Capital Employed (INR Cr) • Focus on large operating and EBITDA earning assets that need 6,297 6,297 financial restructuring 5,543 • Strong focus on resolutions aided by changes in Insolvency 4,781 4,781 and Bankruptcy Code norms • Actively
Slide 36: With Improvement in Recoveries
…With Improvement in Recoveries Top 10 industry exposure% by Acquisition price ARC Recoveries (INR Cr) 2,574 Steel Power 12% 7% Cement 18% 8% Real Estate Infrastructure 7% 1,082 Paper 7% Textiles 677 22% Chemicals 6% 5% Ship Building 4% 4% Ports FY16 FY17 FY18 Others Credit Franchise & Advisory Life
Slide 37: Business Update: Franchise & Advisory
Business Update FRANCHISE & ADVISORY Wealth Management – Asset Management – Capital Markets
Slide 38: Franchise & Advisory Business at a Glance
Franchise & Advisory Business at a Glance Franchise & Advisory FY17 FY18 (INR Cr) Net Revenue 1,060 1,330 Cost to Income 73% 65% PAT 193 308 Credit Franchise & Advisory Life Insurance 38
Slide 39: Wealth Management AUA Continues to Scale Up
Wealth Management AUA Continues to Scale Up… Assets Under Advice (INR Cr) Business Highlights • Over 50% CAGR growth in AUA in the last 5 years • Maintained yields of ~70-80 bps on AUA 90,100 90,100 84,700 • Added 63 RMs in the UHNI business, bringing the total strength to 172 60,300 60,300 As on Nu
Slide 40: Driving Efficiency and Productivity
…Driving Efficiency and Productivity… Cost to Income Ratio INR AUA per Rupee of Total Cost 232 90% 88% 76% 175 67% 138 126 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 … through digitization of core and front end technology platform Credit Franchise & Advisory Life Insurance 40
Slide 41: Wealth Management Business Overview
Wealth Management Business Overview Wealth AUA Breakup INR Cr Wealth AUA Movement in FY18 Distribution Assets Advisory Assets 14,700 6% 11% 27% 26% 15,100 90,100 94% 89% 73% 74% 60,300 FY15 FY16 FY17 FY18 Opening Net New Market Closing AUA AUA Money Movement Credit Franchise & Advisory Life Insuranc
Slide 42: Asset Management has Healthy Growth in AUM
Asset Management has Healthy Growth in AUM Alternative Assets (INR Cr) Business Highlights Alternative Assets 15,200 17,700 17,700 11,400 11,400 • Raised INR 1,530 Cr in first closure of Edelweiss Infra Yield Fund • Deployed ~INR 1,000 Cr across real estate and stressed funds Q4 Q3 Q4 FY17 FY18 in Q
Slide 43: Present Across Asset Classes in Private Debt Space
Present Across Asset Classes in Private Debt Space INR Cr Alternative Assets AUM Asset Management AUM Movement in FY18 Distressed 400 Assets 28% 10,600 32% Structured Debt INR 17,700 Cr 29,200 Infrastructure 18,200 15% 16% Real Estate 9% Opening Net New Market and Closing AUM Multi Strategy AUM Mone
Slide 44: Capital Markets Strong Performance Continues
Capital Markets Strong Performance Continues Key Equity Capital Market Transactions Business Highlights Equity Capital Markets • Closed five capital market transactions during the quarter IPO INR 2,000 Cr QIP INR 1,000 Cr IPO INR 937 Cr BRLM BRLM BRLM • Increased block market share during the year f
Slide 45: Business Update: Life Insurance
Business Update Life Insurance
Slide 46: Life Insurance – Long Term Value Creation
Life Insurance – Long Term Value Creation Product Mix Distribution New Business Premium FY18 • Agency-led multi-channel distribution approach with emphasis on productivity 22% 16% • 121 branches and ~31,000 PFAs across 93 locations in 31% India 31% Investments Capability Traditional Par Traditional
Slide 47: One of the Fastest Growing in Individual Annual Premium Equivalent
One of the Fastest Growing in Individual Annual Premium Equivalent Collected Individual Annual Premium Equivalent Number of Policies Issued CAGR growth since FY15 (Individual Business ) (In '000) 37% 31 22 15% 16% 15 Edelweiss Tokio Peer Set Industry Q4 FY17 Q3 FY18 Q4 FY18 Life Insurance Business H
Slide 48: Life Insurance – Key Financials
Life Insurance – Key Financials Edelweiss Tokio Life Insurance Company Limited (ETLI) (INR Cr) FY17 FY18 Net Premium Income 426 619 Investment Income and Other Income 151 163 Total Business 577 782 Profit After Tax (216) (233) Minority (106) (114) Edelweiss’ Share in PAT (110) (119) Net Worth 732 1,
Slide 49: Balance Sheet
Balance Sheet oO Edelweiss Ideas create, values protect
Slide 50: Key Highlights – Balance Sheet
Key Highlights – Balance Sheet 1 Matched Asset-Liability profile 2 Comfortable capital adequacy ratio at 17.04% 3 Diversified borrowings mix 4 Liquidity cushion at 9% of Balance Sheet 5 Stable business model reflected in credit ratings 50
Slide 51: Matched Asset - Liability Profile
1 Matched Asset - Liability Profile As on 31st March ‘18: INR 55,086 Cr Assets Liabilities 100% 100% % of Assets and Liabilities 65% 44% 65% 35% 24% 36% 6% 23% 20% 6% Asset Specific 0-3 Mnth 3-6 Mnth 6-12 Mnth 1-3 years 3+ years Borrowing • Positive asset-liability matching across durations • BMU ma
Slide 52: Comfortable Capital Adequacy Ratio
2 Comfortable Capital Adequacy Ratio Capital Structure as on 31st March 2018 (INR Cr) Tier I 7,934 Capital Adequacy Ratio Tier II 1,594 17.04% Total Capital 9,528 Debt/Equity : 4.9 (excluding Treasury assets ) Risk Weighted 55,904 Assets 88% of gross assets of INR 63,514 Cr 52
Slide 53: Diversified Sources of Borrowing
3 Diversified Sources of Borrowing Sources of Borrowings As on 31st March’18 Others 11% Retail 30% Mutual Funds 11% Asset Specific 7% Total Borrowings Borrowing INR 47,323 Cr 41% Banks 53
Slide 54: Liquidity Cushion at 9% of Balance Sheet
4 Liquidity Cushion at 9% of Balance Sheet Liquidity Cushion • A well diversified liquidity INR Cr cushion comprising: 5,200 − Banking Lines 4,050 − Fixed Deposits 2,450 − Government Securities, 2,900 1,350 Mutual Funds etc 1,700 1,630 • Steady growth in liquidity 920 2,700 2,750 cushion to provide
Slide 55: 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+ Long term CARE AA Long term CRISIL AA Long term ICRA AA Long term SMERA AA+ 55
Slide 56: Significant Institutional Ownership
Significant Institutional Ownership Key Shareholders above 1% (As on 31st March’18) Shareholding Pattern Name Percent Employee 1 BIH SA 4.20% Trust 2 HDFC Mutual Fund 2.31% DIIs, Non 4.9% Promoters Institutions & Employees 3 Goldman Sachs Funds 1.93% & Others 4 Steadview Capital Management 1.58% 22.
Slide 57: ESG at Edelweiss
ESG at Edelweiss Ge Edelweiss Ideas create, values protect
Slide 58: 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 & Partnerships Economic Growth Quality Education Gender Equality Planet Focused Goals Affordable & Clean Energy Responsible Consumption Climate Support 58
Slide 59: 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 60: 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 29,500 hrs Field Visits till date 78 Capacity Building – Non financial support Employees provided skills and time pro bono in over 60 proj
Slide 61: Creating Continuous Talent and Leadership Pipeline
Creating Continuous Talent and Leadership Pipeline • Institutionalized the ethos that in the workplace leaders create leaders • Our leadership programmes are focused towards identifying and grooming leaders at every level o Manco leadership team – 49 o Senior Leaders – 181 o Business and Emerging Le
Slide 62: Board Comprises Majority of Independent Directors
Board Comprises Majority of Independent Directors 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 Authority of I
Slide 63: Awards and Recognition
Awards and Recognition Wealth Creators Super 50 Fastest Growing Housing Finance Company Dalal Street Journal 2018 Golden Globe Tigers Awards 2018 Best Private Bank - India Best Housing Finance Company (mid & small) Asiamoney Best Bank Awards 2018 ET Now BFSI Awards 2017 Best Product Innovation - Wea
Edelweiss Financial Services — Q4 FY2018 Earnings Presentation on 6ix