Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q4 FY19 & FY19 Earnings Presentation
63 slides from Edelweiss Financial Services's earnings presentation, May 14, 2019
Slide 1: Cover letter to National Stock Exchange
EW/Sec/2019/126 May 14, 2019 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 quarter and year ended M
Slide 2: Q4FY19 & FY19 Earnings Update
Edelweiss Financial Services Limited Q4FY19 & FY19 Earnings Update
Slide 3: Contents
Contents 1 FY19 Performance Overview 2 Business Performance Highlights 3 Balance Sheet Highlights 4 ESG at Edelweiss 5 Detailed Financials 2
Slide 4: FY19 Performance Overview
FY19 Performance Overview
Slide 5: Edelweiss at a Glance: FY19
Edelweiss at a Glance: FY19 Ex-Insurance PAT Balance Sheet EOP Net Worth ₹ 1,193 Cr ₹ 53,932 Cr ₹ 8,715 Cr Market Cap BVPS Basic EPS as on 31st March’19 (FV ₹1) (FV ₹1) ₹ 18,444 Cr ₹ 86.5 ₹ 11.3 4
Slide 6: Ex-Insurance PAT CAGR of 36% over 8 years
Ex-Insurance PAT CAGR of 36% over 8 years Profit after Tax (Post MI) (INR Cr) Ex-Insurance PAT Consolidated PAT 1,193 1,011 995 719 863 519 381 609 226 272 414 141 329 178 220 127 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 5
Slide 7: FY19 Financial Snapshot
FY19 Financial Snapshot FY19 (INR Cr) EOP Equity Profit After Tax RoA RoE Total Pre Minority 8,715 1,044 Credit 4,870 752 2.0% 15.7% Distressed Credit 1,869 417 6.2% 28.4% Advisory 192 292 Life & General Insurance 1,048 (330) BMU, Corp & Others 736 (87) Minority Interest (MI) 1,038 49 Total Consolid
Slide 8: Capital Light Businesses Contribute over 50% to PAT
Capital Light Businesses Contribute over 50% to PAT Business Segments (INR Cr) FY19 Pre MI PAT % Contribution Retail Mortgage 100 7% SME, ESOP and Other Business Loans 120 9% Structured Collateralised Credit 217 16% Wholesale Mortgage 315 23% Distressed Credit Business 417 30% Wealth Management and
Slide 9: FY19 Performance Overview
FY19 Performance Overview 1 First half of the year was robust, however second half witnessed market headwinds 2 FY19 Ex-Insurance PAT grew 18% YoY; Consolidated PAT grew 15% YoY 3 Ex-Insurance RoA remained steady at 2.4% while RoE was at 17.6% 4 Raised fresh long term borrowings of INR 7,800 Cr in H
Slide 10: FY19 Business Performance Overview
FY19 Business Performance Overview 6 NIM and Asset Quality maintained across business cycles 7 ECL Finance raised equity of ~INR 1,800 Cr; first tranche of INR 1,040 Cr received in May’19 8 Distressed Credit benefited from strong recoveries 9 Wealth Management: AUA crossed INR 1 Trillion and scaled
Slide 11: Key Actions Taken
Key Actions Taken Liquidity: We entered Q4 with comfortable levels of liquidity • Overnight liquidity of INR 5,300 Cr - 12% of borrowings • Additional high quality assets liquid-able in less than 120 days at INR 4,750 Cr Liability Management: Emphasis on long term borrowings • Continued to increase
Slide 12: FY19 Ex-Insurance PAT Up 18% YoY
FY19 Ex-Insurance PAT Up 18% YoY Y-o-Y (INR Cr) Q4FY18 Q3FY19 Q4FY19 FY18 FY19 Growth Ex-Insurance PAT 298 273 287 1,011 1,193 18% Consolidated PAT 240 226 232 863 995 15% Balance Sheet 55,858 55,822 53,932 55,858 53,932 (3%) Non linear profitability growth: Ex Insurance PAT grew 18% YoY while Balan
Slide 13: PAT Distribution Across Businesses
PAT Distribution Across Businesses EOP PAT (INR Cr) Q4FY18 Q3FY19 Q4FY19 FY18 FY19 Y-o-Y Equity Total Consolidated 240 226 232 863 995 15% 7,677 Credit 172 256 250 642 994 55% 6,217 Advisory 84 75 60 300 292 (3%) 192 Life & General Insurance (59) (47) (55) (148) (198) - 593 BMU, Corp & Others 43 (58
Slide 14: Key Profitability Ratios
Key Profitability Ratios Ex-Insurance Q4FY18 Q3FY19 Q4FY19 FY18 FY19 RoA 2.6% 2.4% 2.4% 2.5% 2.4% RoE 20.2% 15.6% 16.1% 20.3% 17.6% Cost to Income Ratio 45% 51% 52% 47% 50% Consolidated Q4FY18 Q3FY19 Q4FY19 FY18 FY19 RoA 1.7% 1.8% 1.7% 1.9% 1.8% RoE 14.4% 11.9% 12.0% 15.7% 13.4% Cost to Income Ratio
Slide 15: Demonstrated Ability to Raise Long Term Funding in H2
Demonstrated Ability to Raise Long Term Funding in H2 Fresh Long Term Borrowings (INR Cr) By Instrument H1FY19 H2FY19 Total 7,250 7,800 NCDs 5,660 6,290 Term Loans 1,590 1,510 By Source H1FY19 H2FY19 Total 7,250 7,800 Mutual Funds 1,520 1,280 Banks 1,670 2,270 Retail & Others 4,060 4,250 14
Slide 16: Debt to Equity Ratio Set to Improve Further
Debt to Equity Ratio Set to Improve Further D/E Excluding Treasury Assets 10 9 8 QIP of Post ECLF Equity ~INR 1,500 Cr Infusion 7 Internal threshold 6 5.2 5.0 5.2 5 5.0 4.4 3.9 4 3.1 3.1 3 2.7 2 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 15
Slide 17: Cost to Income Higher…
Cost to Income Higher… Cost to Income Ratio (Ex-Insurance) 59% 60% 53% 54% 52% 52% 50% 47% FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 …on account of continued investments in Retail Businesses – Retail Credit, Affluent in Wealth and Life Insurance 16
Slide 18: Credit: Maintained NIM across Business Cycles
Credit: Maintained NIM across Business Cycles Credit Business (Retail and Corporate Book) 10% NIM Quarterly Avg. 10 Yr. G Sec. Yield Declining interest rates Stable interest rates Rising interest rates 9% 8% 7.8% 7.7% 7.5% 7.4% 7.3% 7.4% 7.1% 7.1% 7.2% 7.2% 7.2% 7.1% 7.0% 7.0% 7.5% 7% 6.7% 6.6% 6.5%
Slide 19: Credit: Stable Asset Quality In Spite of Headwinds
Credit: Stable Asset Quality In Spite of Headwinds Demonetization RERA + GST 4.0% 3.5% 3.0% 2.5% 2.0% GNPA 1.78% 1.84% 1.87% 1.5% 1.71% 1.74% 1.74% 1.75% 1.75% 1.53% 1.59% 1.45% 1.44% 1.40% 1.40% 1.46% 1.32% 1.0% 0.83% 0.68% 0.70% 0.74% 0.79% 0.78% 0.55% 0.60% 0.61% 0.66% NNPA 0.39% 0.44% 0.50% 0.47
Slide 20: Advisory: Customer Assets cross INR 2 Trillion
Advisory: Customer Assets cross INR 2 Trillion As on 31st March’19 (rounded off to nearest 100) INR Cr YoY Growth Customer Assets 2,00,900 19% Assets Under Advice (Wealth Management) 1,06,000 18% Distressed Credit (ARC Assets) 39,200 4% Funds under Management (Asset Management) 35,800 26% Assets und
Slide 21: Business Performance Highlights: Credit
Business Performance Highlights CREDIT Retail Credit – Corporate Credit – Distressed Credit
Slide 22: Credit Business Mix
Credit Business Mix Capital Employed As on 31st March’19 % (INR Cr) Retail Credit 18,075 42% Retail Mortgage 8,996 21% Blend of loans to home owners and home buyers SME & Business Loans 4,591 11% Underserved and highly scalable market, key focus area ESOP and Margin Financing 4,089 9% Catering to cu
Slide 23: Credit Business Performance Snapshot
Credit Business Performance Snapshot FY19 (INR Cr) Total Y-o-Y Retail Y-o-Y Corporate Y-o-Y Distressed Y-o-Y EOP Capital Employed 43,510 4% 18,075 12% 18,055 (8%) 7,380 17% EOP Equity 6,739 24% 1,910 21% 2,960 15% 1,869 48% Net Interest Income 3,576 38% 936 42% 1,775 23% 865 75% PAT 1,169 61% 220 11
Slide 24: Asset Quality at a Glance
Asset Quality at a Glance As on 31st March’19 (INR Cr) Q3FY19 Q4FY19 Credit Book (Ex - Distressed Credit) 35,554 36,130 Of which Stage 3 654 677 ECL Provision 805 815 Of which Stage 3 378 377 Specific Provision Cover 58% 56% Total Provision Cover 123% 120% Average Collateral cover on Corporate Book
Slide 25: Retail Credit Growth Continues
Retail Credit Growth Continues Capital Employed SME Retail Mortgage (INR Cr) Secured Unsecured HL LAP Average Yields % 14% 21% 11% 12% 18,075 Median Ticket Size (INR) ~1.2 Cr 10 lacs 15 lacs 20 lacs 16,188 RoA 1.50% - 2.00% 1.00% - 1.50% Locations (#) 108 96 8,951 • Key focus areas - SME and Retail
Slide 26: Corporate Credit will Grow in Fund Form
Corporate Credit will Grow in Fund Form Capital Employed Structured Wholesale (INR Cr) Collateralised Credit Mortgage Average Yields % 15% - 17% 17% - 19% RoA 1.75% - 2.50% 2.50% - 3.00% 19,525 18,055 Portfolio Granularity 76 accounts 162 projects 13,875 Typical Ticket size INR 100-125 Cr 12,088 9,6
Slide 27: Wholesale Mortgage: Lending Philosophy
Wholesale Mortgage: Lending Philosophy Focus on mid-income residential RE projects; ~77% of inventory within INR 1 Cr category Provide funding to projects of mid-sized developers having an execution track record Financing projects only after key approvals are in place Senior Secured Sole Lender at S
Slide 28: Seasoned book with Robust Risk Management Track Record
Seasoned book with Robust Risk Management Track Record Wholesale Mortgage H1FY19 H2FY19 1 Loan Book INR 11,758 Cr INR11,599 INR 11,603 Cr Cr 2 5 accounts amounting to 3 accounts amounting to Stage 3 Accounts INR 346 Cr INR 208 Cr 84% cash recovery and 84% cash recovery and 3 Historical recovery on d
Slide 29: Distressed Credit Pipeline Robust
Distressed Credit Pipeline Robust Capital Employed ARC Recoveries (INR Cr) (INR Cr) 7,380 6,297 7,019 4,781 2,574 1,896 1,226 1,082 FY15 FY16 FY17 FY18 FY19 FY17 FY18 FY19 SR Issued: Resolution Strategy wise Break-up Top 10 industry exposure% by SRs outstanding Steel 5% Power 19% 23% Infrastructure
Slide 30: Business Performance Highlights: Advisory
Business Performance Highlights ADVISORY Wealth Management – Asset Management – Capital Markets
Slide 31: Advisory Business Performance Snapshot
Advisory Business Performance Snapshot Wealth Asset Capital FY19 (INR Cr) Total Y-o-Y Y-o-Y Y-o-Y Y-o-Y Mgmt Mgmt Mkts Net Revenue 1,310 - 725 30% 243 88% 342 (45%) PAT 292 (3%) 162 49% 63 52% 67 (55%) Cost to Income 66% 67% 58% 69% PAT Yield 17 bps 19 bps - Assets under Assets under Assets under Ad
Slide 32: Wealth Management
Wealth Management Assets Under Advice (INR Cr) As on Number of AUA Number of 31st March’19 Clients (INR Cr) RMs Ultra High Net ~2000 82,200 186 Worth Individuals Affluent Investors ~4,85,000 23,800 874 1,06,000 90,100 Wealth AUA Breakup 6% 11% 60,300 27% 26% 30% 96,300 94% 89% 29,500 73% 74% 70% 17,
Slide 33: Asset Management
Asset Management Alternative Assets (INR Cr) Alternative Assets AUM as on 31st March’19 (INR Cr) 25,600 Distressed Credit Fund 24% 17,700 Structured Debt Fund 39% 11,400 INR 25,600 Cr Infrastructure Fund 3,400 16% Real Estate Credit Fund 1,900 Multi Strategy Funds 10% 11% FY15 FY16 FY17 FY18 FY19 an
Slide 34: Steady Growth in Net New Flows
Steady Growth in Net New Flows Wealth Management AUA Movement in FY19 Asset Management AUM Movement in FY19 (INR Cr) (INR Cr) 6,800 1,000 4,000 11,900 101,100 1,06,000 29,200 37,000 90,100 Opening AUA Net New Market Closing AUA Opening Net New Market Closing AUM Money Movement AUM Money Movement 33
Slide 35: Market Leading Position in Equity and Debt Capital Markets
Market Leading Position in Equity and Debt Capital Markets Key Equity Capital Market & Advisory Transactions QIP QIP PE PE INR 750 Cr INR 510 Cr INR 225 Cr INR 248 Cr March 2019 January 2019 January 2019 March 2019 Left Lead GCBRLM Sole BRLM Buy side Advisor Financial Advisor Key Debt Capital Market
Slide 36: Business Performance Highlights: Life Insurance
Business Performance Highlights Life Insurance
Slide 37: Life Insurance Performance Snapshot
Life Insurance Performance Snapshot (INR Cr) FY18 FY19 Y-o-Y Growth Net Premium Income 601 855 42% Investment Income & Other Income 148 202 36% Total Business 749 1,057 41% Profit After Tax (236) (270) - Minority (115) (133) - Edelweiss’ Share in PAT (120) (138) - Net Worth 1,160 929 36
Slide 38: Life Insurance – Long Term Value Creation
Life Insurance – Long Term Value Creation Product Mix VNB Margin % (Overall) New Business Premium FY19 42% 33% 22% 18% 24% 25% 26% 34% FY 16 FY 17 FY 18 FY 19 Traditional Par Traditional Non Par ULIP Group Channel Mix 13th Month Overall Renewal Rate Persistency Individual New Business Premium FY19 6
Slide 39: One of the Fastest Growing Life Insurers in Individual APE
One of the Fastest Growing Life Insurers in Individual Annual Premium Equivalent Collected Individual Annual Premium Equivalent CAGR growth since FY16 • Collected Individual Annual Premium Equivalent 35% (APE) - INR 340 Cr grew 36% YoY 23% 16% • Gross premium of this business in FY19 was INR 885 Cr
Slide 40: Balance Sheet Highlights
Oa” “tom 8 ) * foxy . * ¢in Balance Sheet Highlights 3 Edelweiss Ideas create, values protect
Slide 41: Key Highlights – Balance Sheet
Key Highlights – Balance Sheet 1 Maintained adequate Liquidity Cushion at 12% of Borrowings 2 Diversified Borrowings mix 3 Matched Asset-Liability profile 4 Comfortable capital adequacy ratio at 18.0% and D/E (Ex- Treasury) of 4.4x 40
Slide 42: Maintained Liquidity Cushion of 12% of Borrowings
1 Maintained Liquidity Cushion of 12% of Borrowings Liquidity Cushion INR Cr • A well diversified liquidity cushion 5,200 5,300 comprising: 4,050 2,300 o Banking Lines: INR 2,300 Cr 2,450 2,900 1,350 o Fixed Deposits and bank balance: INR 900 Cr 1,700 1,630 920 2,700 2,750 3,000 o Government Securit
Slide 43: Liquidity Cushion Bolstered by High Quality Liquid Assets
1 Liquidity Cushion Bolstered by High Quality Liquid Assets As on 31st March’19 (INR Cr) Overnight Liquidity 5,300 Assets Liquid-able in less than 120 days 4,750 Total 10,050 In addition ~INR 9,000 Cr of business inflows expected over the next one year 42
Slide 44: Diversified Borrowing Profile By Instruments…
2 Diversified Borrowing Profile By Instruments… NCDs 27% 33% 41% 41% 54% Bank Loans 26% 28% 27% CBLO 37% 17% 17% 5% 39% CPs 7% 29% 25% 22% 14% ICDs 5% 1% 1% 2% FY15 FY16 FY17 FY18 FY19 Total Borrowings 23,540 27,773 33,379 48,031 45,217 (INR Cr) 93% of borrowings are from NCDs and Bank Loans; Reduce
Slide 45: …And By Source
2 …And By Source Bank 23% 30% 31% 41% 45% Retail 12% 14% 15% 13% MF 23% 32% 35% 42% 29% Corporates 15% 2% 1% 4% PF & Insurance 2% 6% 8% 2% 4% 14% 17% 5% 4% ASB 5% 7% 5% FY15 FY16 FY17 FY18 FY19 Total Borrowings 23,540 27,773 33,379 48,031 45,217 (INR Cr) 33 banking relationships include all major pr
Slide 46: Increasing Percentage of Long Term Borrowings
2 Increasing Percentage of Long Term Borrowings % of Total Borrowings 61% 58% 51% 34% 36% FY15 FY16 FY17 FY18 FY19 45
Slide 47: Positive ALM Across Durations
3 Positive ALM Across Durations Assets Liabilities 100% 100% % of Assets and Liabilities 66% 44% 63% 34% 24% 32% 4% 22% 17% 4% Asset Specific 0-3 months 3-6 months 6-12 months 1-3 years 3+ years Borrowing • BMU manages ALM under the aegis of Asset Liability Committee 46
Slide 48: Comfortable Capital Adequacy Ratio
4 Comfortable Capital Adequacy Ratio Capital Structure as on 31st March’19 (INR Cr) Core Equity Tier I 8,370 14.5% Additional Tier I 345 0.6% Capital Adequacy Ratio Tier II 1,695 2.9% 18.0% Total Capital 10,410 Risk Weighted 89% of gross assets of INR 57,833 65,288 Cr Assets 47 Capital Adequacy Rati
Slide 49: Debt to Equity Ratio Reduced from Last Year
4 Debt to Equity Ratio Reduced from Last Year Capital Structure as on 31st March’19 (INR Cr) Total Debt 45,217 Less: Overnight Liquidity 3,000 Net Debt 42,217 Less: Treasury Assets 3,527 Net Debt (Ex-Treasury Assets) 38,690 Equity 8,715 D/E ratio (Ex- Treasury Assets) 4.4 48
Slide 50: Our Risk Governance Structure…
Our Risk Governance Structure… Oversight by Board Risk Committee Global Risk Committee Business Risk Group Risk Enterprise Risk Management Council Corporate Controller & audit Business • Define Organisation • Review “High Impact & • Implementation of risk risk framework Low Probability” risk framewo
Slide 51: …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 Operational & Technology Fraud Risk Infrastructure People Risk Process Risk Risk Risk Enterprise risk management approach: 11 Risk Framework 50
Slide 52: 13 Member Board Comprises Majority of Independent Directors
13 Member Board Comprises Majority of Independent Directors Mr. K Chinniah Mr. Biswamohan Mahapatra Independent Director Independent Director • Served as Managing Director & Global Head • Former RBI Executive Director, chaired various committees of RBI Infrastructure, Portfolio, Strategy & Risk Grou
Slide 53: Significant Institutional Ownership
Significant Institutional Ownership Shareholding Pattern as on 31st March’19 Key Shareholders above 1% Percent 1 BIH SA 4.1% Employee 2 Pabrai Investment Fund 2.7% Trust 3 HDFC Mutual Fund 2.6% DIIs, Non 4.8% Promoter Group 4 Goldman Sachs Funds 1.8% Institutions & Others 5 Vanguard Group 1.6% 23.8%
Slide 54: ESG at Edelweiss
ESG at Edelweiss
Slide 55: Our Framework is based on the UN Sustainable Development Goals
Our Framework is based on the United Nations Sustainable Development Goals People Focused Goals No Poverty, Zero Hunger & Economic Growth Quality Education Gender Equality Planet Focused Goals Affordable & Clean Energy Responsible Consumption Climate Support 54
Slide 56: 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 57: EdelGive Partners
EdelGive Partners HT Parekh Foundation & CDPQ have recently partnered with EdelGive 56
Slide 58: EdelGive Foundation - Key Metrics
EdelGive Foundation - Key Metrics Employee Engagement Employee Engagement % More than 60% engaged in financial and non financial giving Man Hours spent till date 32,500 hrs Field Visits till date 110 Capacity Building – Non financial support Employees provided skills and time pro bono in over 95 pro
Slide 59: Detailed Financials
Detailed Financials Ge Edelweiss Ideas create, values protect
Slide 60: Consolidated Financials – P&L
Consolidated Financials – P&L (INR Cr) FY18 FY19 Total revenue from operations 8,873 10,798 Other income 48 84 Total Income 8,920 10,881 Expenses (a) Finance costs 3,876 4,722 (b) Employee benefits expense 1,374 1,650 (c) Depreciation and amortisation expense 104 132 (d) Change in insurance policy l
Slide 61: Bridge to Reported Financials
Bridge to Reported Financials Profit Before Tax (INR Cr) Profit After Tax (INR Cr) YoY YoY Pre MI FY18 FY19 Pre MI FY18 FY19 Growth Growth Consolidated 1,349 1,744 29% Consolidated 837 1,044 25% Ex-Insurance 1,612 2,074 29% Ex-Insurance 1,100 1,374 25% YoY YoY Post MI FY18 FY19 Post MI FY18 FY19 Gro
Slide 62: Bridge to Reported Financials (Quarterly)
Bridge to Reported Financials Profit Before Tax (INR Cr) Profit After Tax (INR Cr) YoY YoY Pre MI Q4FY18 Q4FY19 Pre MI Q4FY18 Q4FY19 Growth Growth Consolidated 298 406 36% Consolidated 213 246 15% Ex-Insurance 402 494 23% Ex-Insurance 317 335 6% YoY YoY Post MI Q4FY18 Q4FY19 Post MI Q4FY18 Q4FY19 Gr
Slide 63: 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
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