Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q3 FY2019 Earnings Presentation
60 slides from Edelweiss Financial Services's earnings presentation, Jan 24, 2019
Slide 1: Cover letter to National Stock Exchange
EW /Sec I 2019/32 Janua ry 24, 2019 Nationa l Stock Exchange of India Limit ed Exchanp,c Pla za, Bandra Kurla Complex, Bandra (E), Mum bai- 400 051. Dear Sirs, Ref.:- Symbol: EDl:LWEISS Sub: Investor Presentation Please find enclosed lhe lnveslor Presen tation on l·:a rnin p,s Updates for lhC' qua r
Slide 2: Q3FY19 Earnings Update
Edelweiss Financial Services Limited Q3FY19 Earnings Update
Slide 3: Contents
Contents 1 Quarterly Performance Highlights 2 Q3FY19 Analysis 3 Business Performance Highlights 4 Balance Sheet Highlights 5 ESG at Edelweiss 2
Slide 4: Quarterly Performance Highlights
Quarterly Performance Highlights
Slide 5: Financial Snapshot – Q3FY19
Financial Snapshot – Q3FY19 INR Cr EOP Equity Profit after Tax RoA RoE Total Pre Minority 8,785 258 Credit 6,372 316 2.8% 19.8% Franchise & Advisory 152 75 Life & General Insurance 1,089 (75) BMU, Corp & Others 1,172 (58) Minority Interest (MI) 1,032 32 Total Consolidated Post MI 7,753 226 1.8% 11.9
Slide 6: Consolidated 9MFY19 PAT Up 22% YoY
Consolidated 9MFY19 PAT Up 22% YoY Y-o-Y (INR Cr) Q3FY18 Q3FY19 9MFY18 9MFY19 Growth PAT Consolidated 235 226 623 763 22% PAT 279 273 712 906 27% Ex-Insurance Balance 48,983 55,822 48,983 55,822 14% Sheet PAT growth expected to be ~15% for FY19 5
Slide 7: PAT Distribution Across Businesses
PAT Distribution Across Businesses Y-o-Y EOP PAT (INR Cr) Q3FY18 Q3FY19 9MFY18 9MFY19 Growth Equity Total Consolidated 235 226 623 763 22% 7,753 Credit 185 256 470 744 58% 5,872 Franchise & Advisory 82 75 216 232 7% 152 Life & General Insurance (44) (47) (89) (143) - 604 BMU, Corp & Others 12 (58) 2
Slide 8: Diversified Business Model Reduced Volatility Impact
Diversified Business Model Reduced Volatility Impact 9MFY19 Pre MI PAT Business Segments % Contribution (INR Cr) Credit Business Retail Mortgage 73 7% LAS, SME, Agri and Business Loans 99 10% Structured Collateralised Credit 179 17% Wholesale Mortgage 232 22% Distressed Credit 293 28% Franchise & Ad
Slide 9: Key Performance Parameters
Key Performance Parameters Key Ratios Consolidated Q3FY18 Q3FY19 9MFY18 9MFY19 RoA 2.0% 1.8% 2.0% 1.8% RoE 16.6% 11.9% 16.3% 13.9% Cost to Income Ratio 59% 64% 59% 62% Ex-Insurance Q3FY18 Q3FY19 9MFY18 9MFY19 RoA 2.7% 2.4% 2.5% 2.4% RoE 21.6% 15.6% 20.3% 18.1% Cost to Income Ratio 45% 51% 47% 49% Ro
Slide 10: 9MFY19 Consolidated PAT at INR 763 Cr
9MFY19 Consolidated PAT at INR 763 Cr Profit after Tax (INR Cr) 1,017* 890 609 414 329 763 220 178 128 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 *Annualised 9 Numbers for FY19 are as per IndAS and for prior periods as per IGAAP
Slide 11: Steady growth in Balance Sheet and Customer Assets
Steady growth in Balance Sheet and Customer Assets As on 31st Dec’18 (rounded off to nearest 100) INR Cr YoY Growth Balance Sheet Assets 55,800 14% Customer Assets 1,91,600 19% Distressed Credit (ARC Assets) 38,200 (1%) Assets Under Advice (Wealth Management) 1,00,300 18% Funds under Management (Ass
Slide 12: Good Funding Support from All Sources
Good Funding Support from All Sources Q3FY19 (INR Cr) By Instrument By Source Fresh Borrowings 8,800 Fresh Borrowings 8,800 NCDs and others 4,090 Mutual Funds 3,600 CP 2,760 Banks 3,000 Term Loans 1,950 Retail & Others 2,200 Recently closed NCD public issue with good Retail participation 11 Note: Ex
Slide 13: Liquidity at a Glance
Liquidity at a Glance • Currently we hold balance sheet liquidity of INR 14,000 Cr, almost half of this is from our Liquidity Cushion of INR 7,100 Cr; can be converted into cash within 24-48 hours • We have Other Liquid Assets (OLA) comprising INR 6,900 Cr, which includes our highly liquid treasury
Slide 14: Q3FY19 Analysis
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Slide 15: Q3 at a Glance
Q3 at a Glance Liquidity : We entered Q3 with liquidity adequate for ~1 year • Liquidity cushion increased by INR 1,700 Cr to 15% of borrowings • Balance sheet assets provided incremental liquidity of INR 5,500 Cr • All repayments and redemptions were seamlessly met Liabilities : Successfully raised
Slide 16: Key Actions Taken this Quarter
Key Actions Taken this Quarter Liquidity • Remained conservative on liquidity throughout the quarter • Quick conversion of assets to cash: LAS book scaled down by ~INR 2,200 Cr; Corporate book by ~INR 3,300 Cr Liabilities • Reduced dependence on CPs: share of CPs in borrowings down from 18% as at Q2
Slide 17: Business Highlights
Business Highlights • Businesses scaled back growth without compromising existing customer franchise • Credit NIMs maintained despite higher cost of funds; helped by marquee resolution of Binani Cement and lowering of D/E • Largest distressed fund raised in India - Closed EISAF II fund at $1.3 Bn •
Slide 18: Profit Change Attribution: Q2FY19 to Q3FY19
Profit Change Attribution: Q2FY19 to Q3FY19 Profit After Tax INR Cr Comments Q2FY19 272 Binani resolution 48 Fee & carry income on resolution of Binani cement Scale down of Corporate Credit and LAS Book (33) Average book size reduced by ~INR 3,000 Cr Higher liquidity cushion & increased cost of hold
Slide 19: Business Performance Highlights: Credit
Business Performance Highlights CREDIT Retail Credit – Corporate Credit – Distressed Credit
Slide 20: Credit Business Mix
Credit Business Mix Capital Employed % As on 31st Dec’18 (INR Cr) Share Retail Credit 17,756 42% Retail Mortgage 8,468 20% Blend of loans to home owners and home buyers SME & Business Loans 3,967 9% Underserved and highly scalable, focus area for future Loan against Securities 4,738 11% Catering to
Slide 21: Credit Business at a Glance
Credit Business at a Glance Credit Business (INR Cr) Q2FY19 Q3FY19 Capital Employed 49,012 42,380 Average Interest Yield 16.0% 17.4% Average Cost of Borrowing 9.5% 10.3% Net Interest Margin 7.7% 8.6% Net Revenue 916 958 Cost to Income 37% 37% Provisions & Write Offs 133 107 PAT 284 316 RoA 2.4% 2.8%
Slide 22: Asset Quality at a Glance
Asset Quality at a Glance At the end of 31st Dec’18 (INR Cr) Q2FY19 Q3FY19 Credit Book 41,722 35,554 Of which Stage 3 743 654 ECL Provision 829 805 Of which Stage 3 413 378 Specific Provision Cover 56% 58% Total Provision Cover 112% 123% Average Collateral cover on Corporate Book 1.9x 1.9x Average L
Slide 23: Credit Business Performance Snapshot
Credit Business Performance Snapshot Q3FY19 (INR Cr) Total Y-o-Y Retail Y-o-Y Corporate Y-o-Y Distressed Y-o-Y EOP Capital Employed 42,380 18% 17,756 25% 17,798 10% 6,826 22% EOP Equity 6,372 31% 1,741 19% 2,966 29% 1,665 53% Net Interest Income 958 48% 240 48% 436 20% 282 136% PAT 316 57% 52 14% 12
Slide 24: Highest NIMs in this Quarter
Highest NIMs in this Quarter Quarterly evolution of NIM of the Credit Business NIM Quarterly Avg. 10 Yr. G Sec. Yield 10% Declining interest rates Stable interest rates Rising interest rates 9% 8.6% 8% 8.4% 7.7% 7.8% 7.7% 7.6% 7.5% 7% 7.3% 6.9% 6.9% 7.0% 6% 5% 4% Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q
Slide 25: Retail Credit
Retail Credit Capital Employed SME Retail Mortgage (INR Cr) Secured Unsecured HL LAP Average Yields % 14% 21% 10% 12% Median Ticket Size (INR) ~1.5 Cr 10 lacs 15 lacs 20 lacs 17,756 16,188 RoA 1.50% - 2.00% 1.00% - 1.50% Locations (#) 107 79 8,951 • Conserved liquidity by reduction mainly in LAS boo
Slide 26: Corporate Credit
Corporate Credit Capital Employed Structured Wholesale Collateralised Credit Mortgage (INR Cr) Average Yields % 15% - 17% 17% - 19% RoA 1.75% - 2.50% 2.50% - 3.00% 19,525 Portfolio Granularity 80 accounts 174 projects 17,798 Typical Ticket Size INR 100 Cr – 150 Cr 13,875 12,088 • Focus on asset qual
Slide 27: Distressed Credit Witnessed Good Recoveries this Quarter
Distressed Credit Witnessed Good Recoveries this Quarter Capital Employed Top 10 industry exposure% by SRs outstanding (INR Cr) 6,826 6,297 Steel 4,781 Power 19% 21% Infrastructure Paper 1,896 3% Real Estate 1,226 4% Textiles 4% 13% Chemicals FY15 FY16 FY17 FY18 9MFY19 5% Ship Building 6% EPC 11% AR
Slide 28: Business Performance Highlights: Franchise & Advisory
Business Performance Highlights FRANCHISE & ADVISORY Wealth Management – Asset Management – Capital Markets
Slide 29: Franchise & Advisory Business Performance Snapshot
Franchise & Advisory Business Performance Snapshot Wealth Asset Capital Q3FY19 (INR Cr) Total Y-o-Y Y-o-Y Y-o-Y Y-o-Y Mgmt Mgmt Mkts Net Revenue 354 12% 179 27% 93 160% 82 (42%) PAT 75 (8%) 39 18% 25 111% 11 (70%) Cost to Income 65% 67% 52% 76% Assets under Assets under Assets under Advice Managemen
Slide 30: Wealth Management
Wealth Management Assets Under Advice (INR Cr) As on Number of AUA Number of 31st Dec’18 Clients (INR Cr) RMs Ultra High Net ~2000 76,900 180 Worth Individuals Affluent Investors ~4,75,000 23,400 1,000 1,00,300 90,100 Wealth AUA Breakup 6% 11% 60,300 27% 26% 27% 96,300 94% 89% 29,532 73% 74% 73% 17,
Slide 31: Asset Management
Asset Management Alternative Assets (INR Cr) Alternative Assets AUM as on 31st Dec 2018 (INR Cr) 25,300 Distressed Assets 24% 17,700 Structured Debt 39% 11,400 INR 25,300 Cr Infrastructure 3,400 16% Real Estate 1,900 Multi Strategy Funds 10% 11% FY15 FY16 FY17 FY18 9MFY19 and PMS Mutual Funds AUM (I
Slide 32: Steady Growth in Net New Flows
Steady Growth in Net New Flows Wealth Management AUA Movement in Q3FY19 Asset Management AUM Movement in Q3FY19 (INR Cr) (INR Cr) 700 300 2,600 101,100 (300) 35,400 36,400 98,000 1,00,300 Opening AUA Net New Market Closing AUA Opening Net New Currency & Closing AUM Money Movement AUM Money Market Mo
Slide 33: Capital Markets
Capital Markets Key Equity Capital Market & Advisory Transactions • Ranked 1st as QIP banker of 2018 with 7 issuances • Closed one of the largest PE IPO Largest PE Placement Buyback transaction in infrastructure space for INR 1,640 Cr In Road Sector BRLM Sole Advisor Sole Manager Cube Highways with
Slide 34: Business Performance Highlights: Life Insurance
Business Performance Highlights Life Insurance
Slide 35: Life Insurance Performance Snapshot
Life Insurance Performance Snapshot Y-o-Y Y-o-Y (INR Cr) Q3FY18 Q3FY19 9MFY18 9MFY19 Growth Growth Net Premium Income 127 182 43% 303 481 59% Investment Income & Other 28 85 207% 126 133 6% Income Total Business 155 267 72% 429 614 43% Profit After Tax (70) (58) - (143) (201) - Minority (34) (28) -
Slide 36: Life Insurance – Long Term Value Creation
Life Insurance – Long Term Value Creation Product Mix Investments Capability (5 Year CAGR%) New Business Premium Q3FY19 12.6% Fund Benchmark 11.5% 11.3% 10.1% 18% 8.7% 8.3% 20% 27% 36% Equity Large Cap Bond Fund Managed Fund Traditional Par Traditional Non Par ULIP Group Fund Channel Mix • Multi-cha
Slide 37: 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 Q3FY16 • Robust growth during the quarter 43% 20% 17% o Collected Individual Annual Premium Equivalent (APE) - INR 80 Cr grew 49% YoY Edelweiss Tokio Peer
Slide 38: Balance Sheet Highlights
Balance Sheet Highlights Ge E Edelweiss s protect
Slide 39: Key Highlights – Balance Sheet
Key Highlights – Balance Sheet 1 Liquidity cushion at 15% of Borrowings 2 Diversified Borrowings mix 3 Matched Asset-Liability profile 4 Comfortable capital adequacy ratio at 17.8% and D/E of 4.2x 5 Stable business model reflected in credit ratings 38
Slide 40: Liquidity Cushion – Consistently a Clear Focus Area
1 Liquidity Cushion – Consistently a Clear Focus Area Liquidity Cushion INR Cr 7,100 • Increase in on-book liquidity 1,600 5,200 o Government Securities, Mutual Funds etc.: INR 4,800 Cr 4,050 2,450 2,900 1,350 o Fixed Deposits and bank 5,500 balance: INR 700 Cr 1,700 1,630 2,700 2,750 920 o Banking
Slide 41: Diversified Borrowing Profile By Instruments
2 Diversified Borrowing Profile By Instruments… Total Borrowings 23,540 27,773 33,379 47,323 47,037 (INR Cr) 6% 2% 6% 5% 8% 27% 33% 42% 42% 51% 22% 20% 25% 32% 29% 22% 32% 25% 14% 17% 17% 7% 5% 7% 5% FY15 FY16 FY17 FY18 Q3FY19 CBLO CPs Term Loans NCD Others CPs are down to 7% of total borrowings ; 4
Slide 42: …And By Source
2 …And By Source Total Borrowings 23,540 27,773 33,379 47,323 47,037 (INR Cr) 4% 5% 7% 11% 10% 14% 14% 15% 11% 19% 17% 5% 7% 17% 5% 31% 27% 30% 41% 44% 38% 42% 34% 30% 22% FY15 FY16 FY17 FY18 Q3FY19 Mutual Funds Banks Asset Specific Borrowings Retail Others Mutual Funds are now 22% of total borrowin
Slide 43: Increasing Percentage of Long Term Borrowings
2 Increasing Percentage of Long Term Borrowings… % of Total Borrowings 62% 58% 51% 34% 36% FY15 FY16 FY17 FY18 Q3FY19 We continue to strengthen our long term liability profile 42
Slide 44: Leading to Positively Matched ALM Profile
3 …Leading to Positively Matched ALM Profile Assets Liabilities 100% 100% % of Assets and Liabilities 69% 48% 64% 39% 29% 32% 4% 22% 17% 4% 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 ALM under the aegis o
Slide 45: Comfortable Capital Adequacy Ratio
4 Comfortable Capital Adequacy Ratio Capital Structure as on 31st Dec 2018 (INR Cr) Core Equity Tier I 8,301 14.2% Additional Tier I 345 0.6% Capital Adequacy Ratio Tier II 1,751 3.0% 17.8% Total Capital 10,397 Risk Weighted 88% of gross assets of INR 58,487 66,307 Cr Assets 44 Capital Adequacy Rati
Slide 46: Debt to Equity Ratio Reduced
4 Debt to Equity Ratio Reduced Capital Structure as on 31st Dec 2018 (INR Cr) Total Balance Sheet 55,822 Less: Equity 8,785 Less: Cash & Liquid Assets 10,026 Debt 37,011 Equity 8,785 D/E ratio (Ex-Cash & Liquid Assets) 4.2 Cash & Liquid Assets include on balance sheet liquidity cushion of INR 5,500
Slide 47: 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+ CARE revised its Long term outlook Long term CARE AA from ‘Stable’ to ‘Positive’ Long term CRISIL AA Long term ICRA AA Lon
Slide 48: 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 • Define Organisation Business • Implementation of risk • Review “High Impact & risk framework framework Low Probability” ri
Slide 49: 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 48
Slide 50: Significant Institutional Ownership
Significant Institutional Ownership Key Shareholders above 1% (As on 31st Dec 2018) Shareholding Pattern Name Percent 1 BIH SA 4.1% Employee 2 HDFC Mutual Fund 2.6% Trust 3 Goldman Sachs Funds 2.2% DIIs, Non 4.8% Promoters Institutions & Employees 4 Vanguard 1.7% & Others 24.3% 5 Steadview Capital M
Slide 51: Detailed Financials
Detailed Financials Ge Edelweiss Ideas create, values protect
Slide 52: Consolidated Financials – P&L
Consolidated Financials – P&L (INR Cr) Q3FY18 Q3FY19 Total revenue from operations 2,205 2,776 Other income 19 15 Total Income 2,224 2,791 Expenses (a) Finance costs 992 1213 (b) Employee benefits expense 318 437 (c) Depreciation and amortisation expense 23 33 (d) Change in insurance policy liabilit
Slide 53: Bridge to Reported Financials
Bridge to Reported Financials Profit Before Tax (INR Cr) Profit After Tax (INR Cr) YoY YoY Pre MI Q3FY18 Q3FY19 Pre MI Q3FY18 Q3FY19 Growth Growth Consolidated 349 458 31% Consolidated 219 258 18% Ex-Insurance 427 533 25% Ex-Insurance 297 334 12% YoY YoY Post MI Q3FY18 Q3FY19 Post MI Q3FY18 Q3FY19 G
Slide 54: ESG at Edelweiss
ESG at Edelweiss oO Edelweiss Ideas create, values protect
Slide 55: Framework Based on 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 BILL¢ MELINDA Gan) O85. FORD 9° FOUNDATION TATA TRUSTS BOROSIL G CSR FOUNDATI atDta o& dalyan SDMC Trust ENTERPRISES Insight | Intellect | Integety CREDIT suisse VOLKART FOUNDATION INDIAN TRUST G genpact 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 30,500 hrs Field Visits till date 107 Capacity Building – Non financial support Employees provided skills and time pro bono in over 90 pro
Slide 59: Strong and Diverse Board of Directors with Rich Experience
Strong and Diverse Board of Directors with Rich Experience Board Comprises Majority of Independent Directors 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 Regu
Slide 60: 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
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