Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q1 FY2018 Earnings Presentation
53 slides from Edelweiss Financial Services's earnings presentation, August 2017
Slide 1: Edelweiss Financial Services Limited Q1FY18 Earnings Update
Edelweiss Financial Services Limited Q1FY18 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 Business Performance Highlights 4 Enterprise Update 3
Slide 4: Overview & Business Approach
Overview & Business Approach
Slide 5: We are a Diversified Financial Services Company
We are a Diversified Financial Services Company... Credit Multiple vectors of growth • Retail Credit • Corporate Credit • Distressed Credit Delivers consistent growth and profitability Franchise & Advisory Helps manage short term volatility in the business cycle • Wealth Management • Asset Managemen
Slide 6: With Consistent Growth Over the Years
..With Consistent Growth Over the Years… PAT ( INR Cr) Balance Sheet ( INR Cr) Annualised 784 43,634 38,667 609 32,145 27,072 414 329 16,204 14,224 220 178 196 FY13 FY14 FY15 FY16 FY17 Q1FY18 FY13 FY14 FY15 FY16 FY17 Q1FY18 6
Slide 7: Across Key Performance Parameters
…Across Key Performance Parameters RoE RoA 22.2% 20.7% 2.4% 2.5% 18.6% 15.6% 1.9% 1.9% 17.9% 1.7% 1.8% 12.2% 15.5% 2.0% 11.3% 1.7% 12.9% 1.5% 11.3% 1.4% 1.3% 1.2% 7.6% 8.2% FY13 FY14 FY15 FY16 FY17 Q1FY18 FY13 FY14 FY15 FY16 FY17 Q1FY18 Ex-Insurance RoE Consolidated RoE Ex-Insurance RoA Consolidated
Slide 8: Profit Growth of 41% in Q1FY18
Profit Growth of 41% in Q1FY18 (INR Cr) Q1FY17 Q4FY17 Q1FY18 YoY Growth PAT 140 170 196 41% Consolidated Credit 96 128 137 42% Franchise & 34 78 64 87% Advisory Insurance (16) (42) (26) - BMU, Corp 26 6 21 (19%) & Others PAT 155 212 222 43% Ex-Insurance 8 BMU, Corp & Others – Balance Sheet Managemen
Slide 9: With Significant Scale and Growth in Assets
…With Significant Scale and Growth in Assets As on 30th June’17 (rounded off to nearest 100) INR Cr YoY Growth On Balance Sheet Assets 43,600 32% Off Balance Sheet Assets 127,800 95% Clients ~11,00,000 Distressed Credit (ARC Assets) 36,600 33% Assets Under Advice (Wealth Management) 65,900 112% Fund
Slide 10: Our Business Approach
Our Business Approach Cost Risk and Governance People We focus on costs without Prudent risk management Our culture promotes compromising on the quality and relentless focus on leadership development of our offerings governance is central to all and partnership our businesses Customer Focus Product
Slide 11: Our Aim Over the Next 3 Years is to…
Our Aim Over the Next 3 Years is to… 1 Consistently grow our PAT at 25% - 35% annually 2 Reach a Consolidated RoE of 18% 3 Reach an Ex-Insurance RoE of 22% 4 Bring down Ex-Insurance Cost to Income Ratio below 50% 5 Increase Retail Credit Book to 50% of Total Credit Book 6 Maintain our asset quality
Slide 12: Quarterly Performance Highlights – Q1FY18
Quarterly Performance Highlights – Q1FY18
Slide 13: Q1FY18 Results Highlights
Q1FY18 Results Highlights 1 Q1 Consolidated PAT at INR 196 Cr; 38% CAGR over 24 quarters 2 Sustained growth in profitability Consolidated PAT growth 41% YoY; Ex-Insurance PAT growth 43% YoY Balance Sheet growth 32% YoY 3 Profit growth across businesses Credit business grew 42% YoY Franchise & Adviso
Slide 14: PAT Trajectory Continues to Trend Upwards
1 PAT Trajectory Continues to Trend Upwards Profit after Tax Ex-Insurance PAT Consolidated PAT (INR Cr) 222 212 187 166 196 154 155 170 133 155 120 111 140 144 98 103 122 89 90 70 69 72 106 62 68 91 96 48 51 57 78 79 83 88 46 35 61 27 46 51 56 46 58 39 40 42 26 29 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13
Slide 15: Consolidated Q1 PAT Growth of 41%
2 Consolidated Q1 PAT Growth of 41% (INR Cr) Q1FY17 Q4FY17 Q1FY18 YoY Growth PAT 140 170 196 41% Consolidated PAT Ex-Insurance 155 212 222 43% Balance 33,092 38,667 43,634 32% Sheet 15
Slide 16: Profit Growth Across Businesses
3 Profit Growth Across Businesses (INR Cr) Q1FY17 Q4FY17 Q1FY18 FY16 FY17 PAT 140 170 196 414 609 Credit 96 128 137 337 447 Franchise & Advisory 34 78 64 72 193 Insurance (16) (42) (26) (104) (110) BMU, Corp & Others 26 6 21 109 79 16
Slide 17: Improving Key Performance Parameters
4 Improving Key Performance Parameters Key Ratios Consolidated Q1FY17 Q4FY17 Q1FY18 FY16 FY17 Cost to Income Ratio 66% 67% 59% 71% 67% RoE 15.1% 16.1% 17.9% 12.9% 15.5% RoA 1.6% 1.7% 2.0% 1.3% 1.7% Ex-Insurance Q1FY17 Q4FY17 Q1FY18 FY16 FY17 Cost to Income Ratio 57% 51% 49% 60% 54% RoE 19.4% 22.2% 2
Slide 18: Business Performance Highlights – Q1FY18: Credit
Business Performance Highlights – Q1FY18 CREDIT Retail Credit – Corporate Credit – Distressed Credit
Slide 19: Credit Business is a Mix of Diversified and Scalable Assets
Credit Business is a Mix of Diversified and Scalable Assets As on 30th June’2017 Book Size (INR Cr) % Share Retail Credit 10,245 34% Blend of loans to home owners and home buyers Retail Mortgage 4,032 13% SME & Business Loans 2,327 8% Highly scalable, focus area for future Loan against shares 3,007
Slide 20: Credit Business at a Glance
Credit Business at a Glance Credit Business (INR Cr) Q1FY18 FY17 Capital Employed 29,869 27,608 Net Revenue 565 1,695 Net Interest Margin 7.6% 7.2% Cost to Income 35% 36% Provisions 115 319 PAT (post MI) 137 447 Gross NPA 1.71% 1.59% Net NPA 0.61% 0.60% RoE (post MI) 18.7% 18.2% RoA 2.2% 2.1% Credit
Slide 21: Improving NIMs and Robust Asset Quality
Improving NIMs and Robust Asset Quality Key Parameters Q1FY18 At the end of Q1FY18 Average Interest Yield 16.4% Gross NPA 422 Gross NPA % 1.71% Average Cost of Borrowing 9.9% Net NPA % 0.61% Net Interest Margin 7.6% Total Provision Held 375 Total Provision Cover 89% Average Collateral cover on Corpo
Slide 22: Retail Credit Expanding Footprint
Retail Credit Expanding Footprint Capital Employed Q1FY18 Performance Highlights (INR Cr) • Strong Q1 with originations up 28% on Y-o-Y basis • Focus on home loans through developer tie-ups, and participation in Affordable Housing programs 10,245 8,952 • Building SME credit distribution capabilities
Slide 23: Steady Growth in Corporate Credit
Steady Growth in Corporate Credit Capital Employed Q1FY18 Performance Highlights (INR Cr) • Amongst the top 5 players in the Structured Collateralised Credit space in India • Recent regulations like RERA will be beneficial for both lenders and home buyers 14,491 13,875 12,733 • Maintained high colla
Slide 24: 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 3,470 3,558 2,726 793 514 1207 463 834 390 2,765 1,892 2,263 Q1 FY17 Q4 FY17 Q1 FY18 Q1 FY17 Q4 FY17 Q1 FY18 Business Approach • One of the few organized players providing
Slide 25: Distressed Credit – Performance on Track
Distressed Credit – Performance on Track Capital Employed Q1FY18 Performance Highlights (INR Cr) • 2nd tranche of equity infusion by CDPQ in ARC – INR 64 Cr in 5,133 June’17 4,781 2,983 • Continued focus on resolutions and recovery • Strategic recovery plan for few large cases underway • Developing
Slide 26: Business Performance Highlights – Q1FY18: Franchise & Advisory
Business Performance Highlights – Q1FY18 FRANCHISE & ADVISORY Wealth Management – Asset Management – Capital Markets
Slide 27: Franchise & Advisory Business at a Glance
Franchise & Advisory Business at a Glance Franchise & Advisory Q1FY18 FY17 (INR Cr) Net Revenue 315 1,060 Cost to Income 69% 73% PAT 64 193 Credit Franchise & Advisory Life Insurance 27
Slide 28: Wealth Management AUA Continues to Scale Up
Wealth Management AUA Continues to Scale Up Assets Under Advice Q1FY18 Performance Highlights (INR Cr) • Amongst the top 3 Wealth Management players in India with 65,900 consistent increase in AUA 60,300 • Differentiated value proposition delivered through Specialist 31,100 Financial Advisors (FAs)
Slide 29: Asset Management – Building a Sustainable Franchise
Asset Management – Building a Sustainable Franchise Alternative Assets Q1FY18 Performance Highlights (INR Cr) • Completed first closure of Edelweiss Credit Opportunities fund 11,800 (ECOF) of INR 260 Cr 11,400 • Raised INR 575 Cr in Multi Strategy Funds PMS and Alternative Investments Funds 3,750 •
Slide 30: Capital Markets - Pioneer and Market Leaders
Capital Markets - Pioneer and Market Leaders Institutional Equities Revenue Market Share Q1FY18 Performance Highlights • Successfully closed 23 deals in equity and debt capital markets 4.3% 5.0% 5.1% in Q1FY18 • Featured as top public issue arranger and in top 15 rankings in private placement league
Slide 31: Business Performance Highlights – Q1FY18: Life Insurance
Business Performance Highlights – Q1FY18 Life Insurance
Slide 32: Life Insurance – An Additional Value Creator
Life Insurance – An Additional Value Creator Products Distribution Traditional Par Traditional Non Par ULIP Group • Agency-led multi-channel distribution approach with emphasis on productivity • Focus on building direct capability 33% 11% • ~23,000 PFAs across 66 cities in India 32% 24% Investments
Slide 33: Fastest Growing Individual Annual Premium Equivalent
Fastest Growing Individual Annual Premium Equivalent Individual Annual Premium Equivalent Number of Policies Issued CAGR growth since FY15 (Individual & Group Business ) 28% 30% 7,502 25% 20% 4,786 5,269 14% 11% 15% 10% 5% 0% Edelweiss Tokio Peer Set Industry Q1FY16 Q1FY17 Q1FY18 Life Insurance Q1FY
Slide 34: Life Insurance – Key Financials
Life Insurance – Key Financials Edelweiss Tokio Life Insurance Company Limited (ETLI) (INR Cr) Q1FY18 FY17 Net Premium Income 64 426 Investment Income & Other Income 42 151 Total Income 106 577 Operating Expenses 77 324 Change in Policy Liabilities and Benefits paid 73 469 Total Expenses 150 793 Pro
Slide 35: Balance Sheet Management Unit – Q1FY18
Balance Sheet Management Unit – Q1FY18 BMU, Corporate and Others
Slide 36: Balance Sheet Management Unit at a Glance
Balance Sheet Management Unit at a Glance BMU, Corporate & Others (INR Cr) Q1FY18 FY17 Capital Employed 9,971 7,380 Net Revenue 102 492 Cost to Income 68% 76% PAT 21 79 36
Slide 37: Balance Sheet Management Unit
Balance Sheet Management Unit BMU, Corporate and Others (INR Cr) Key Objectives 5,120 • Create liquidity cushion through investment in 2,518 2,333 High Quality Liquid Assets • Asset Liability Management Govt Liquidity cushion Fixed, Tax, and • Manage Treasury assets and Investments Securities Corpor
Slide 38: Balance Sheet
Balance Sheet Ge Edelweiss Ideas create, values protect
Slide 39: Key Highlights – Balance Sheet
Key Highlights – Balance Sheet 1 Over $26 billion of Assets – On and Off Balance Sheet 2 Matched ALM 3 Comfortable capital adequacy ratio at 17.05% 4 Diversified Liability mix 5 Increased quantum of long term liabilities 6 Liquidity cushion at 10.3% of Balance Sheet 7 Stable business model reflected
Slide 40: Over $26 billion of Assets – On and Off Balance Sheet
1 Over $26 billion of Assets – On and Off Balance Sheet As on 30th June’17 ( rounded off to nearest 100) INR Cr USD bn On Balance Sheet Assets 43,600 6.7 Off Balance Sheet Assets 127,800 19.8 Distressed Credit (ARC Assets) 36,600 5.7 Assets Under Advice (Wealth Management) 65,900 10.2 Funds under Ma
Slide 41: Comfortable Asset - Liability Profile
2 Comfortable Asset - Liability Profile Jun’17: INR 43,634 Cr Assets Liabilities 100% % of Assets and Liabilities 100% 71% 48% 71% 38% 32% 45% 11% 30% 33% 11% 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 AL
Slide 42: Comfortable Capital Adequacy Ratio
3 Comfortable Capital Adequacy Ratio Liability Structure, Jun’17 (INR Cr) Tier I 5,697 Capital Adequacy Ratio Tier II 1,087 17.05% Total Capital 6,784 Debt/Equity : 5.3 (excluding Treasury assets) Risk Weighted 39,794 Assets 80% of gross assets 42
Slide 43: Diversified Sources of Borrowing
4 Diversified Sources of Borrowing Others 5% 9% Retail 5% 14% Asset Specific Borrowing 15% 13% Bank 25% 28% Mutual Funds 50% 36% Total Borrowings Mar’ 11: INR 7,858 Cr Jun’17: INR 38,036 Cr 43
Slide 44: Increased Quantum of Long Term Liabilities
5 Increased Quantum of Long Term Liabilities Long Term Liabilities > 1 year (INR Cr) Long Term Liabilities Breakup Sub-debt 8% 18,363 16,987 Term Loan NCD 33% 59% 10,104 8,098 FY15 FY16 FY17 Q1FY18 Average Tenure (years) 3.79 44
Slide 45: Liquidity Cushion at 10.3% of Balance Sheet
6 Liquidity Cushion at 10.3% of Balance Sheet Liquidity Cushion (rounded off to nearest 100) INR Cr 4,500 4,050 • A well diversified liquidity cushion comprising of: 2,900 2,000 • Banking Lines 1,350 • Fixed Deposits • Government Securities, Mutual Funds etc 1,700 1,630 920 2,700 2,500 • Steady grow
Slide 46: Stable Business Model Reflected in Credit Ratings
7 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+ 46
Slide 47: Enterprise Update
Enterprise Update ée Edelweiss Ideas create, values protect
Slide 48: Significant Institutional Ownership
Significant Institutional Ownership Shareholding Pattern Top 10 Institutional Shareholders As on 30th June 2017 Employee Name Percent Trust 1 BIH SA 4.8% DIIs, Non 5.3% 2 Fidelity 1.9% Institutions & Others 3 Goldman Sachs 1.7% 19.1% Promoters & Employees 4 Morgan Stanley 1.5% 46.2% 5 Amansa 1.4% 6
Slide 49: Our Risk Governance Structure
Our Risk Governance Structure Oversight by Board Risk Committee Global Risk Committee Corporate Controller & audit Business Risk Group Risk Risk Council • Define Organisation Business • Implementation of risk risk framework • Identify key current and framework • Risk aggregation and potential risks
Slide 50: Future Proofing through Leadership Development
Future Proofing through Leadership Development ~10% of our employees engaged in leadership groups at various levels • Focused endeavour towards shaping up next Managing Committee rung of leaders through significant time and resource investments Senior Leaders • Competency enabling and enhancing prog
Slide 51: EdelGive Foundation
EdelGive Foundation Education Livelihood Women Empowerment Empowering children Water and soil conservation, Promoting safety, gender through holistic learning skill development, financial justice, and economic approach, life skill & inclusion livelihood generation empowerment of women research and a
Slide 52: Awards and Recognition
Awards and Recognition Edelweiss featured in India Forbes Super 50 Companies Best Broker Award FinanceAsia Country Awards 2017 Ranked as one of the leading custodians in India Global Custodian Indian Domestic Survey 2017 Best Distributor - South and Southeast Asia; Best Performance - Asia-Pacific; B
Slide 53: Board Comprises Majority of Independent Directors
Board Comprises Majority of Independent Directors As on 30th June’17 Mr. K Chinniah Mr. P N Venkatachalam • Served as Global Head - Portfolio, • Banking sector expert and former member of the Strategy & Risk Group with GIC Special Interim Pension Fund Regulatory Authority of India Investment, the pr
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