Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q4 FY2017 Earnings Presentation
66 slides from Edelweiss Financial Services's earnings presentation, Mar 1, 2020
Slide 1: Q4FY17 and FY17 Earnings Update
Edelweiss Financial Services Limited Q4FY17 and FY17 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 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 • Corporate Credit • Retail Credit • Distressed Credit Delivers consistent growth and profitability Franchise Helps manage short term volatility in the business cycle • Wealth Management • Asset Management • Capital
Slide 6: With Consistent Growth Over the Past 5 Years
..With Consistent Growth Over the Past 5 Years… PAT ( INR Cr) Balance Sheet ( INR Cr) 38,667 609 32,145 27,072 414 16,204 14,224 329 220 178 FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 Non linear growth in profitability 6
Slide 7: Across Key Performance Parameters
…Across Key Performance Parameters RoE RoA 20.7% 2.4% 18.6% 15.6% 1.9% 1.9% 1.7% 1.8% 12.2% 15.5% 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 FY13 FY14 FY15 FY16 FY17 Ex-Insurance RoE Consolidated RoE Ex-Insurance RoA Consolidated RoA Continued improvement in profit
Slide 8: PAT Growth of 47% in FY17
PAT Growth of 47% in FY17… (INR Cr) FY16 FY17 YoY Growth PAT 414 609 47% Consolidated Credit 337 447 33% Franchise 72 193 168% Insurance (104) (110) - BMU, Corp & Others 110 79 -28% ...With 20% growth in Assets Balance Sheet 32,145 38,667 20% 8 BMU, Corp & Others – Balance Sheet Management Unit, Cor
Slide 9: With Significant Scale and Growth in Assets
…With Significant Scale and Growth in Assets As on 31st March’17 INR Cr YoY Growth On Balance Sheet Assets 38,700 20% Clients ~11,00,000 Off Balance Sheet Assets 1,17,900 93% Distressed Credit (ARC Assets) 34,700 38% Employees Assets Under Advice (Wealth Management) 60,300 104% 6,972 Funds under Man
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 - Q4FY17
Quarterly Performance Highlights - Q4FY17
Slide 13: Q4FY17 Results Highlights
Q4FY17 Results Highlights 1 Q4 Consolidated PAT at INR 170 Cr; 36% CAGR over 20 quarters 2 Non linear growth in profitability Consolidated PAT growth 40% YoY; Ex-Insurance PAT growth 37% YoY Balance Sheet growth 20% YoY 3 Profit growth across businesses Credit business grew 25% YoY Franchise busines
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) 212 187 166 154 155 170 133 155 120 111 140 144 98 103 122 89 90 70 72 106 69 62 68 91 96 57 83 88 46 48 51 78 79 56 58 61 46 51 46 39 40 42 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14
Slide 15: Consolidated Q4 PAT Growth of 40%
2 Consolidated Q4 PAT Growth of 40% (INR Cr) Q4FY16 Q3FY17 Q4FY17 YoY Growth PAT 122 155 170 40% Consolidated PAT Ex-Insurance 155 187 212 37% ..... With 20% growth in Assets Balance 32,145 37,245 38,667 20% Sheet Non-Linear growth in Profitability made possible by the Franchise business 15
Slide 16: Profit Growth Across Businesses
3 Profit Growth Across Businesses (INR Cr) Q4FY16 Q3FY17 Q4FY17 FY16 FY17 PAT 122 155 170 414 609 Credit 102 117 128 337 447 Franchise 30 51 78 72 193 Insurance (33) (31) (42) (104) (110) BMU, Corp & Others 22 18 7 110 79 16
Slide 17: Improving Key Performance Parameters
4 Improving Key Performance Parameters Consolidated Key Ratios Q4FY16 Q3FY17 Q4FY17 FY16 FY17 Cost to Income Ratio 76% 65% 67% 71% 67% RoE 14.5% 15.4% 16.1% 12.9% 15.5% RoA 1.3% 1.7% 1.7% 1.3% 1.7% Ex-Insurance Cost to Income Ratio 61% 53% 51% 60% 54% RoE 21.2% 20.9% 22.2% 18.6% 20.7% RoA 2.0% 2.5%
Slide 18: Annual Performance Overview - FY17
Annual Performance Overview - FY17
Slide 19: Financial Snapshot – FY17
Financial Snapshot – FY17 INR Cr EOP Equity Profit after Tax RoE RoA Pre Minority Credit 3,778 507 18.3% 2.1% Franchise 122 193 - - BMU, Corp & Others 655 79 9.0% 0.9% Insurance 733 (216) - - (-) Minority 958 (46) - - Total Consolidated 4,330 609 15.5% 1.7% Total Ex-Insurance 3,948 719 20.7% 2.4% 19
Slide 20: Credit Business Performance Snapshot
Credit Business Performance Snapshot Credit Business FY17 Total Y-o-Y Corporate Y-o-Y Retail Y-o-Y Distressed Y-o-Y (INR Cr) EOP Capital Employed 27,608 38% 13,875 15% 8,952 48% 4,781 152% EOP Equity 3,778 63% 2,110 40% 936 74% 731 164% Net Interest Income 1,695 41% 1,064 27% 430 72% 201 76% PAT 507
Slide 21: Franchise Business Performance Snapshot
Franchise Business Performance Snapshot Franchise Business FY17 Wealth Asset Capital Total Y-o-Y Y-o-Y Y-o-Y Y-o-Y (INR Cr) Mgmt Mgmt Mkts Net Revenue 1,060 50% 453 87% 52 490% 556 22% PAT 193 165% 71 262% 7 - 115 69% Cost to Income 73% - 76% - 80% - 69% - • Cost to income ratio down from 85% in FY1
Slide 22: Life Insurance Performance Snapshot
Life Insurance Performance Snapshot (INR Cr) FY17 Y-o-Y Gross Premium Income 441 42% Investment & Other Income 151 74% Total Income 592 49% Total Expenses 808 46% Profit After Tax (216) - Minority (106) Edelweiss’ share in PAT (110) Net Worth 733 Embedded Value 1,012 Scaling up as per plan to genera
Slide 23: Profits Well Distributed Across Business Segments
Profits Well Distributed Across Business Segments Pre MI PAT Business Segments % Contribution (INR Cr) Credit Business Structured Collateralised Credit 120 15% Wholesale Mortgage 168 22% Retail Mortgage 50 6% LAS, SME, Agri and Business Loans 72 9% Distressed Credit 97 13% Franchise Business Wealth
Slide 24: Business Performance Highlights – FY17: Credit
Business Performance Highlights – FY17 CREDIT Corporate Credit – Retail Credit – Distressed Credit
Slide 25: Credit Business is a Mix of Diversified and Scalable Assets
Credit Business is a Mix of Diversified and Scalable Assets As on March’17 Book Size (INR Cr) % Share Corporate Credit 13,875 50% Customized credit solutions with robust risk Structured Collateralised Credit 6,763 24% management systems Wholesale Mortgage 7,112 26% Developer financing for primarily
Slide 26: Credit Business at a Glance – FY17
Credit Business at a Glance – FY17 Credit Business (INR Cr) Q4FY17 FY17 Capital Employed 27,608 27,608 Net Revenue 517 1,695 Net Interest Margin 7.7% 7.2% Cost to Income 30% 36% Provisions 140 319 PAT (post MI) 128 447 Gross NPA 1.59% 1.59% Net NPA 0.60% 0.60% RoE (post MI) 18.6% 18.2% RoA 2.2% 2.1%
Slide 27: Improving NIMs and Robust Asset Quality
Improving NIMs and Robust Asset Quality Key Parameters Q4FY17 FY17 At the end of Q4FY17 Average Interest Yield 16.4% 16.2% Gross NPA 362 Gross NPA % 1.59% Average Cost of Borrowing 10.0% 10.3% Net NPA % 0.60% Net Interest Margin 7.7% 7.2% Total Provision Held 314 Total Provision Cover 87% Average Co
Slide 28: Steady Growth in Corporate Credit
Steady Growth in Corporate Credit Capital Employed FY17 Performance Highlights (INR Cr) • Corporate Credit PAT grew 23% YoY 13,875 13,875 • Strong deal flow across Structured Collateralised 13,222 12,088 12,088 Credit and Wholesale Mortgage • Maintained asset quality with high collateral cover • Imp
Slide 29: Corporate Credit - Business Approach
Corporate Credit - Business Approach Business Approach Client Centric Solutions Robust Risk Management Processes • Strong client relations • In –house team of experts at underwriting and legal structuring • Expertise in providing customized solutions • Multilevel appraisal process • Detailed evaluat
Slide 30: Retail Credit Expanding Footprint
Retail Credit Expanding Footprint Capital Employed FY17 Performance Highlights (INR Cr) 8,952 8,952 • Strong origination momentum of H1FY17 back in 8,207 March post demonetization • Improving spread driven by product mix and 6,031 6,031 reduced cost of funding • Geographic expansion on track with la
Slide 31: Retail Credit - Business Approach
Retail Credit - Business Approach Business Approach • Established and optimized business infrastructure and platform • Products tailored for target segments that are large, growing, underpenetrated and profitable • Focused approach to improving operating efficiency • Digital Transformation - Migrati
Slide 32: Agri Credit Expected to Scale Up Post FY18
Agri Credit Expected to Scale Up Post FY18 Collateral Value (INR Cr) Agri Credit Book Size (INR Cr) Collateral Manager Stock Storage Stock 2,589 463 1,681 828 262 735 183 739 108 1,761 631 946 FY15 FY16 FY17 FY15 FY16 FY17 Business Approach • One of the few organized players providing end to end bus
Slide 33: Growth in Distressed Credit due to Higher Acquisition
Growth in Distressed Credit due to Higher Acquisition Capital Employed (INR Cr) FY17 Performance Highlights 4,781 4,781 3,543 • Significantly higher acquisitions in FY17 1,896 1,896 • Gross loans of ~INR 80,000 Cr purchased which is ~8% of stressed assets in the Banking sector Q4 Q3 Q4 FY16 FY17 FY1
Slide 34: Distressed Credit - Business Approach
Distressed Credit - Business Approach Business Approach • Largest asset reconstruction company in India • Focus on large operating and EBITDA earning assets but financially broken • Delivering long term risk adjusted returns akin to LP GP model (Limited Partner & General Partner ) • Created an advis
Slide 35: Business Performance Highlights – FY17: Franchise
Business Performance Highlights – FY17 FRANCHISE Wealth Management – Asset Management – Capital Markets
Slide 36: Franchise Business at a Glance – FY17
Franchise Business at a Glance – FY17 Franchise (INR Cr) Q4FY17 FY17 Net Revenue 350 1,060 Cost to Income 67% 73% PAT 78 193 Credit Franchise Insurance 36
Slide 37: Wealth Management AUA Continues to Scale Up
Wealth Management AUA Continues to Scale Up Assets Under Advice (INR Cr) FY17 Performance Highlights 60,300 60,300 53,700 • Rapidly gaining market share with consistent increase in AUA 29,500 29,500 • INR 6,600 Cr added in Q4FY17 • Differentiated value proposition delivered through Q4FY16 Q3FY17 Q4F
Slide 38: Wealth Management - Business Approach
Wealth Management - Business Approach Business Approach • Large market opportunity • UHNI segment: INR 35 lac Cr AUM • HNI & Mass Affluent: INR 30 lac Cr AUM • Present across the spectrum of client segments - Ultra High Net Worth, High Net Worth and Mass Affluent Business Approach • Multi asset clas
Slide 39: Asset Management – Building a Sustainable Franchise
Asset Management – Building a Sustainable Franchise Alternative Assets FY17 Performance Highlights (INR Cr) 11,400 10,700 11,400 235% • AUM growth of 4X during the year 3,400 3,400 • Completed first closure for three funds (EISAF II, EREF, EROF) garnering AUM of INR 4,500 Cr Q4FY16 Q3FY17 Q4FY17 FY1
Slide 40: Asset Management – Business Approach
Asset Management – Business Approach Business Approach • Leading player in the Private Debt space across real estate credit, distressed assets credit and special opportunities • Differentiated product offerings for both global and domestic clients • Designed to offer the best opportunity for investm
Slide 41: Capital Markets - Pioneer and Market Leaders
Capital Markets - Pioneer and Market Leaders Institutional Equities Revenue Market Share FY17 Performance Highlights 4.4% 4.3% • Institutional Equities and Investment Banking saw 4.2% top line growth of ~28% • Investment Banking raised over INR 12,300 cr FY15 FY16 FY17 through 6 IPOs • Bond issuance
Slide 42: Capital Markets – Business Approach
Capital Markets – Business Approach Segments Business Strengths and Approach • Largest domestic institutional brokerage house in India • Market leadership driven by strong fundamental and alternative derivatives Institutional desk Equities • Pioneering technologies & robust risk management systems •
Slide 43: Business Performance Highlights – FY17: Insurance
Business Performance Highlights – FY17 INSURANCE
Slide 44: Life Insurance – An Additional Value Creator
Life Insurance – An Additional Value Creator Products Distribution Traditional Non Par Traditional Par Group ULIP • Agency-led multi-channel distribution approach 29% with emphasis on productivity • Focus on building direct capability specifically 47% online • ~21,400 PFAs across 66 cities in India
Slide 45: Fastest Growing Individual Annual Premium Equivalent
Fastest Growing Individual Annual Premium Equivalent Individual Annual Premium Equivalent Number of Policies Issued CAGR growth since FY13 (Individual & Group Business ) 45,868 37,881 48% 29,243 8% 3% Edelweiss Tokio Peer Set Industry 2015 2016 2017 Life Insurance Persistency (Individual & Group Bus
Slide 46: Insurance – Key Financials
Insurance – Key Financials Edelweiss Tokio Life Insurance Company Limited (ETLI) (INR Cr) Q4FY17 FY17 Gross Premium Income 205 441 Investment Income & Other Income 40 151 Total Income 245 592 Total Expenses 327 808 Profit After Tax (82) (216) Minority (40) (106) Edelweiss’ Share in PAT (42) (110) Ne
Slide 47: Balance Sheet Management Unit
Balance Sheet Management Unit BMU, Corporate and Others
Slide 48: Balance Sheet Management Unit at a Glance – FY17
Balance Sheet Management Unit at a Glance – FY17 BMU, Corporate & Others Q4FY17 FY17 Capital Employed 7,380 7,380 Net Revenue 112 492 Cost to Income 94% 76% PAT 7 79 RoE 2.8% 9.0% RoA 0.3% 0.9% 48
Slide 49: Balance Sheet Management Unit
Balance Sheet Management Unit BMU, Corporate and Others (INR Cr) Key Objectives 2,724 2,334 2,322 • Create liquidity cushion through investment in High Quality Liquid Assets • Asset Liability Management Govt Liquidity cushion Fixed, Tax, and • Manage Treasury assets and Investments Securities & Bond
Slide 50: Balance Sheet
Balance Sheet Ge Edelweiss Ideas create, values protect
Slide 51: Key Highlights – Balance Sheet
Key Highlights – Balance Sheet 1 ~ $24 billion of Assets – On and Off Balance Sheet 2 Matched ALM 3 Comfortable capital adequacy ratio at 17.01% 4 Diversified Liability mix 5 Increased share of long term liabilities 6 Liquidity cushion at 10.5% of Balance Sheet 7 Stable business model reflected in c
Slide 52: ~$24 billion of Assets – On and Off Balance Sheet
1 ~ $24 billion of Assets – On and Off Balance Sheet As on 31st March 2017 INR Cr USD bn On Balance Sheet Assets 38,700 6.0 Off Balance Sheet Assets 1,17,900 18.2 Distressed Credit (ARC Assets) 34,700 5.4 Assets Under Advice (Wealth Management) 60,300 9.3 Funds under Management (Asset Management) 18
Slide 53: Comfortable Asset - Liability Profile
2 Comfortable Asset - Liability Profile Mar’17: INR 38,667 Cr Assets Liabilities 100% % of Assets and Liabilities 100% 68% 46% 67% 33% 27% 42% 5% 27% 29% 5% 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
Slide 54: Comfortable Capital Adequacy Ratio
3 Comfortable Capital Adequacy Ratio Liability Structure, Mar’17 (INR Cr) Tier I 5,088 Capital Adequacy Ratio Tier II 1,081 17.01% Total Capital 6,169 Debt/Equity : 5.2 (excluding Treasury assets) Risk Weighted 36,267 Assets 81% of gross assets 54 Based on RBI norms for NBFCs
Slide 55: Diversified Sources of Borrowing
4 Diversified Sources of Borrowing Others 5% 7% Retail 5% 15% Asset Specific Borrowing 15% 5% Bank 25% 31% Mutual Funds 50% 42% Total Borrowings Mar’ 11: INR 7,858 Cr Mar’17: INR 33,379 Cr 55
Slide 56: Increased Share of Long Term Liabilities
5 Increased Share of Long Term Liabilities Long Term Liabilities (INR Cr) Long Term Liabilities Breakup Sub-debt 7% 16,987 10,104 Term Loan NCD 8,098 57% 36% FY15 FY16 FY17 % of Total 34% 36% 51% Average Tenure (years) 3.46 Liabilities 56 Long Term Liabilities (LTL): Liabilities >1 year
Slide 57: Liquidity Cushion at 10.5% of Balance Sheet
6 Liquidity Cushion at 10.5% of Balance Sheet Liquidity Cushion INR Cr 4,050 • A well diversified liquidity cushion comprising of: 1,350 • Banking Lines 2,900 • Fixed Deposits 1,630 • Government Securities, Mutual Funds etc 1,700 920 2,700 • Steady growth in liquidity cushion to provide for 1,270 an
Slide 58: 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 58
Slide 59: Enterprise Update
Enterprise Update Ge Edelweiss Ideas create, values protect
Slide 60: Significant Institutional Ownership
Significant Institutional Ownership Shareholding Pattern Top Institutional Shareholders above 1% As 31st March 2017 Employee Name Percent Trust 1 BIH SA 5.3% Non 5.4% 2 Fidelity 3.4% Institutions 3 SAIF Advisors 2.5% 19.2% Promoters & Employees 4 Goldman Sachs 1.7% 45.0% 5 Government Pension Fund 1.
Slide 61: 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 62: 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 63: Awards and Recognition - Edelweiss Won 26 Awards in FY17
Awards and Recognition - Edelweiss Won 26 Awards in FY17 63
Slide 64: EdelGive Foundation
EdelGive Foundation Education Livelihood Women Empowerment Empowering children through Water and soil conservation, skill Promoting safety, gender holistic learning approach, development, financial inclusion justice, and economic life skill & research and livelihood generation for empowerment of wom
Slide 65: Board Comprises Majority of Independent Directors
Board Comprises Majority of Independent Directors 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 private equity arm of
Slide 66: Our Vision
Our Vision “To be a Respected Financial Services firm with a Portfolio of High Quality Growth Businesses” 66
Edelweiss Financial Services — Q4 FY2017 Earnings Presentation on 6ix