Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q4 FY2018 Earnings Presentation
64 slides from Edelweiss Financial Services's earnings presentation, May 9, 2018
Slide 1: Investor Meet(s) / Conference(s) letter to BSE
EVV/Sec/2018/149 May 9, 2018 BSE Limited P J Towers, Dalal Street, Fort, Mumbai- 400 001. Dear Sirs, Ref.:- Scrip Code:- 532922 Sub: Investor Meet(s) I Conference(s) This is to inform you that the Company is participating in Investor Meet(s) / Conference(s) in the month of May, 2018 and June, 2018.
Slide 2: Q4FY18 and FY18 Earnings Update
US $ version Edelweiss Financial Services Limited Q4FY18 and FY18 Earnings Update
Slide 3: 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 4: Contents
Contents 1 Overview & Business Approach 2 Quarterly Performance Highlights 3 Annual Performance Overview 4 Business Performance Highlights 5 ESG at Edelweiss 3
Slide 5: Overview & Business Approach
Overview & Business Approach
Slide 6: Edelweiss at a Glance
Edelweiss at a Glance PAT Consolidated Balance Sheet Assets Customer Assets $ Mn $ Bn $ Bn 137 8.5 26.0 20 2.0 1.2 FY12 FY18 FY12 FY18 FY12 FY18 PAT Ex-Insurance RoE Ex-Insurance RoA Ex-Insurance $ Mn 22.1% 2.6% 159 1.2% 7.3% 22 FY12 FY18 FY12 FY18 FY12 FY18 5
Slide 7: 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 8: 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 $ Bn YoY Growth Balance Sheet Assets 8.5 42% Clients ~1.2 Million Customer Assets 26.0 43% Distressed Credit (ARC Assets) 5.8 9% Offices Assets Under Advice (Wealth Management) 13.9 49% 448 Funds under Management (Asset
Slide 9: Generating Profits from both Spread and Fee Income
…Generating Profits from both Spread and Fee Income FY18 Pre MI PAT Business Segments % Contribution ($ Mn ) Credit Business Retail Mortgage 10 6% LAS, SME, Agri and Business Loans 21 12% Structured Collateralised Credit 24 14% Wholesale Mortgage 28 16% Distressed Credit 30 17% Franchise & Advisory
Slide 10: Our Assets are Increasingly Retail on the Credit Side
Our Assets are Increasingly Retail on the Credit Side… Retail Credit - Capital Employed ($ Bn) 2.5 1.4 0.9 Building Platform 0.6 0.4 0.3 0.2 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 Mortgages 9
Slide 11: And on the Wealth Management Side
…And on the Wealth Management Side Wealth Management AUA ($ Bn) 13.9 9.3 4.5 2.7 1.1 1.4 0.7 FY12 FY13 FY14 FY15 FY16 FY17 FY18 We cater to UHNI as well as the fast-growing Affluent segments 10
Slide 12: One of the Fastest Growing Life Insurance Companies
We are one of the Fastest Growing Life Insurance Companies Collected Individual APE ($ Mn) Number of Policies in force 1,67,791 39 1,17,323 25 21 81,424 15 54,738 10 40,214 5 23,418 1 6,315 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Agency-led multi-channel distribution ap
Slide 13: 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 14: 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 15: 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 16: Diversified Model Delivers Consistent Growth
…Ensuring Our Diversified Model Delivers Consistent Growth PAT ($ Mn) Balance Sheet ($ Bn) 8.5 137 5.9 94 4.9 4.2 64 51 2.2 2.5 34 2.0 27 20 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY12 FY13 FY14 FY15 FY16 FY17 FY18 27% growth in balance sheet assets supported a 38% growth in profits 15
Slide 17: Consolidated PAT CAGR was 38% Over Quarters
Consolidated PAT CAGR was 38% Over 28 Quarters Profit after Tax ($ Mn) Ex-Insurance PAT Consolidated PAT 47 42 36 33 34 38 29 36 26 32 24 24 30 20 26 18 24 15 16 17 22 22 14 14 19 11 11 10 10 11 8 9 14 14 15 16 7 7 12 12 13 5 4 5 8 9 9 9 6 6 6 7 7 5 4 4 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY
Slide 18: 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 19: Quarterly Performance Highlights – Q4FY18
Quarterly Performance Highlights – Q4FY18
Slide 20: 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 21: Consolidated Q4FY18 PAT Growth of 46%
1 Consolidated Q4FY18 PAT Growth of 46% Y-o-Y ($ Mn) Q4FY17 Q3FY18 Q4FY18 Growth PAT 26 36 38 46% Consolidated ($ Mn) PAT Ex-Insurance 33 42 47 45% ($ Mn) Balance 5.9 7.5 8.5 42% Sheet ($ Bn) 20
Slide 22: Profit Growth Across Businesses
2 Profit Growth Across Businesses Y-o-Y 2 Year ($ Mn) Q4FY17 Q3FY18 Q4FY18 FY16 FY17 FY18 Growth CAGR 64 94 137 47% PAT 26 36 38 46% 52 69 99 38% Credit 20 26 30 50% 11 30 47 106% Franchise & Advisory 12 12 15 28% Insurance (6) (5) (9) - (16) (17) (22) - BMU, Corp & Others 1 4 3 - 17 12 13 - 21
Slide 23: 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 24: Annual Performance Overview - FY18
Annual Performance Overview - FY18
Slide 25: Financial Snapshot – FY18
Financial Snapshot – FY18 ($ Mn) EOP Equity Profit after Tax RoE RoA Pre Minority Credit 865 112 18.1% 2.2% Franchise & Advisory 35 47 BMU, Corp & Others 95 13 9.7% 1.0% Life & General Insurance 199 (40) (-) Minority 167 (4) Total Consolidated 1,026 137 17.1% 2.0% Total Ex-Insurance 914 159 22.1% 2.
Slide 26: 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 EOP Capital 6.5 52% 2.5 81% 3.0 41% 1.0 32% Employed ($ Bn) EOP Equity ($ Bn) 0.9 49% 0.2 68% 0.4 36% 0.2 61% Net Interest Income ($ Mn) 401 54% 102 54% 225 37% 75 141% PAT ($ Mn) 112
Slide 27: 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 ($ Mn) Mgmt Mgmt Mkts Net Revenue 204 25% 89 28% 20 151% 95 12% PAT 47 60% 20 83% 5 354% 22 28% Cost to Income 65% 67% 63% 64% Assets under Assets under Assets und
Slide 28: Life Insurance Performance Snapshot
Life Insurance Performance Snapshot ($ Mn) FY18 Y-o-Y Net Premium Income 95 45% Investment & Other Income 25 8% Total Business 120 36% Profit After Tax (36) - Minority (18) - Edelweiss’ share in PAT (18) - Net Worth 178 58% Equity infusion in Q3FY18 from Edelweiss and JV partner Tokio Marine to fund
Slide 29: Business Update: Credit
Business Update CREDIT Retail Credit – Corporate Credit – Distressed Credit
Slide 30: 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 ($ Bn) Share Retail Credit 2.5 39% Retail Mortgage 1.0 16% Blend of loans to home owners and home buyers SME & Business Loans 0.6 9% Underserved and highly scalable, focus area for future Loan against
Slide 31: Credit Business at a Glance
Credit Business at a Glance Credit Business FY17 FY18 Capital Employed ($ Bn) 4.2 6.5 Average Interest Yield 16.2% 16.3% Average Cost of Borrowing 10.3% 9.8% Net Interest Margin 7.2% 7.7% Net Revenue ($ Mn) 261 401 Cost to Income 36% 34% Provisions & Write Offs ($ Mn) 49 95 PAT ($ Mn) 69 99 RoE 18.2
Slide 32: Asset Quality at a Glance
Asset Quality at a Glance At the end of FY17 FY18 Gross NPA ($ Mn) 56 96 Gross NPA % 1.59% 1.75% Net NPA % 0.60% 0.70% Outstanding Provision Held ($ Mn) 48 78 Total Provision Cover 87% 81% Average Collateral cover on Corporate book 2.3X 2.1X Average Loan-To-Value on Retail book ~45% ~45% Credit Fran
Slide 33: Retail Credit Expanding Footprint
Retail Credit Expanding Footprint Capital Employed Business Highlights ($ Bn) SME • Originations up 76% on Y-o-Y basis • Digital journey (Phygital) begun - Enhanced efficiency and client 2.5 2.5 experience 2.2 • 88 locations live up from 17 locations as on March’17 Retail Mortgage 1.4 1.4 • Strong F
Slide 34: Calibrated Growth in Corporate Credit
Calibrated Growth in Corporate Credit Capital Employed Business Highlights ($ Bn) • Risk-management centered approach to collateralized lending 3.0 3.0 • In house team of experts for carrying out detailed evaluations 2.5 − Counterparty, Collateral and Cash flows 2.1 2.1 • Ring fenced structures and
Slide 35: Agri Credit Expected to Scale Up
Agri Credit Expected to Scale Up Collateral Value ($ Mn) Agri Credit Book Size ($ Mn) Collateral Manager Stock Storage Stock 136 537 398 115 71 258 127 40 113 422 271 145 FY16 FY17 FY18 FY16 FY17 FY18 Business Highlights • One of the few organized players providing end to end business solutions in t
Slide 36: Distressed Credit Performance on Track
Distressed Credit Performance on Track… Business Highlights Capital Employed ($ Bn) • Focus on large operating and EBITDA earning assets that need financial restructuring 1.0 1.0 • Strong focus on resolutions aided by changes in Insolvency 0.9 and Bankruptcy Code norms 0.7 0.7 • Actively targeting o
Slide 37: With Improvement in Recoveries
…With Improvement in Recoveries Top 10 industry exposure% by Acquisition price ARC Recoveries ($ Mn) 396 Steel Power 12% 7% Cement 18% 8% Real Estate Infrastructure 7% 166 Paper 7% Textiles 104 22% Chemicals 6% 5% Ship Building 4% 4% Ports FY16 FY17 FY18 Others Credit Franchise & Advisory Life Insur
Slide 38: Business Update: Franchise & Advisory
Business Update FRANCHISE & ADVISORY Wealth Management – Asset Management – Capital Markets
Slide 39: Franchise & Advisory Business at a Glance
Franchise & Advisory Business at a Glance Franchise & Advisory FY17 FY18 ($ Mn) Net Revenue 163 204 Cost to Income 73% 65% PAT 30 47 Credit Franchise & Advisory Life Insurance 38
Slide 40: Wealth Management AUA Continues to Scale Up
Wealth Management AUA Continues to Scale Up… Assets Under Advice ($ Bn) Business Highlights • Over 50% CAGR growth in AUA in the last 5 years • Maintained yields of ~70-80 bps on AUA 13.9 13.9 13.0 • Added 63 RMs in the UHNI business, bringing the total strength to 172 9.3 9.3 As on Number of AUA Nu
Slide 41: Driving Efficiency and Productivity
…Driving Efficiency and Productivity… Cost to Income Ratio AUA per $ of Total Cost ( $ ) 3.6 90% 88% 76% 2.7 67% 2.1 1.9 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 … through digitization of core and front end technology platform Credit Franchise & Advisory Life Insurance 40
Slide 42: Wealth Management Business Overview
Wealth Management Business Overview Wealth AUA Breakup $ Bn Wealth AUA Movement in FY18 Distribution Assets Advisory Assets 6% 11% 2.3 27% 26% 2.3 13.9 94% 89% 73% 74% 9.3 FY15 FY16 FY17 FY18 Opening Net New Market Closing AUA AUA Money Movement Credit Franchise & Advisory Life Insurance 41
Slide 43: Asset Management has Healthy Growth in AUM
Asset Management has Healthy Growth in AUM Alternative Assets ($ Bn) Business Highlights Alternative Assets 2.7 2.7 2.3 1.8 1.8 • Raised $235 Mn in first closure of Edelweiss Infra Yield Fund • Deployed ~ $154 Mn across real estate and stressed funds Q4 Q3 Q4 FY17 FY18 in Q4 FY18 FY17 FY18 FY18 Mutu
Slide 44: Present Across Asset Classes in Private Debt Space
Present Across Asset Classes in Private Debt Space $ Bn Alternative Assets AUM Asset Management AUM Movement in FY18 Distressed Assets 0.1 28% Structured Debt 32% 1.6 Infrastructure $ 2.7 Bn 4.5 Real Estate 2.8 15% Multi Strategy 16% Funds and PMS 9% Opening Net New Market and Closing AUM AUM Money
Slide 45: 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 $ 307 Mn QIP $ 154 Mn IPO $ 144 Mn BRLM BRLM BRLM • Increased block market share during the year from 4.1% t
Slide 46: Business Update: Life Insurance
Business Update Life Insurance
Slide 47: 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 48: 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 49: Life Insurance – Key Financials
Life Insurance – Key Financials Edelweiss Tokio Life Insurance Company Limited (ETLI) ($ Mn) FY17 FY18 Net Premium Income 65 95 Investment Income and Other Income 23 25 Total Business 89 120 Profit After Tax (33) (36) Minority (16) (18) Edelweiss’ Share in PAT (17) (18) Net Worth 113 178 Indian Embe
Slide 50: Balance Sheet
Balance Sheet oO Edelweiss Ideas create, values protect
Slide 51: 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 52: Matched Asset - Liability Profile
1 Matched Asset - Liability Profile As on 31st March’18: $ 8.5 Bn 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 manages
Slide 53: Comfortable Capital Adequacy Ratio
2 Comfortable Capital Adequacy Ratio Capital Structure as on 31st March 2018 ($ Bn) Tier I 1.2 Capital Adequacy Ratio Tier II 0.2 17.04% Total Capital 1.5 Debt/Equity : 4.9 (excluding Treasury assets ) Risk Weighted 8.6 Assets 88% of gross assets of $ 9.8 Bn 52
Slide 54: 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 $ 7.3 Bn 41% Banks 53
Slide 55: Liquidity Cushion at 9% of Balance Sheet
4 Liquidity Cushion at 9% of Balance Sheet Liquidity Cushion • A well diversified liquidity $ Mn cushion comprising: 800 − Banking Lines 623 − Fixed Deposits 423 − Government Securities, 446 Mutual Funds etc 415 261 251 • Steady growth in liquidity 141 377 cushion to provide for any 195 208 liquidit
Slide 56: 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 57: 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 58: ESG at Edelweiss
ESG at Edelweiss Ge Edelweiss Ideas create, values protect
Slide 59: 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 60: 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 61: 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 62: 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 63: 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 64: 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