Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Investor Presentation (April 2018)
52 slides from Edelweiss Financial Services's investor presentation, Apr 12, 2018
Slide 1: Cover letter to BSE: Investor presentation
EVV/Sec/2018/102 April12, 2018 BSE Limited P J Towers, Dalal Street, Fort, Mumbai- 400 001. Dear Sirs, Ref.:- Scrip Code:- 532922 Sub: Investor presentation In accordance with the provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, please find enclosed the Inv
Slide 2: Analyst Day April 2018
(Ae Analyst Day April 2018 oO Edelweiss Ideas create, values protect
Slide 3: Global Wealth & Asset Management
Global Wealth & Asset Management Wealth Asset Distressed Management Management Assets 2
Slide 4: Global Wealth Management
Global Wealth Management 3
Slide 5: Overview of Wealth Management Industry; Where we are today
Overview of Wealth Management 1 Industry 2 Where we are today Well positioned to capitalize on 3 future growth 4
Slide 6: Overview of Wealth Management Industry; Where we are today
Overview of Wealth Management 1 Industry 2 Where we are today Well positioned to capitalize on 3 future growth 5
Slide 7: How has Wealth Management industry evolved?
How has Wealth Management (WM) industry evolved? Early Stages: Indian Entry of Emergence of Private Sector Banks Foreign Players Independent WM • Cross-sell Mutual • Performed well during • WM became an Funds, & Insurance initial years independent business • Targeted captive client • Retreated durin
Slide 8: How large is the opportunity?
How large is the opportunity? 2018 2025 E GDP $2.5 Trn 2x $5 Trn Stock of Wealth $5 Trn 2x $10 Trn Household $3 Trn $8 Trn Financial Assets 2.7 x $250 Bn 4x $1 Trn Advised Wealth Demand is NOT a constraint ! Notes:Includes only financial assets; USD/INR @ 65; Source: Mckinsey, Kotak and CLSA report,
Slide 9: What is driving this growth?
What is driving this growth? Financialization of Assets Growing affluence Increasing Sophistication Savings moving to Household wealth has Increased investment financial assets grown from $1T in 2010 choices available today (Annexure) to $3T in 2017 Clients looking for advice Increased all
Slide 10: Competitive landscape
Competitive landscape AUA of top WM players in India (INR Cr) 99,450 102,010 84,700 45,500 27,950 15,300 (Est.: 1999) (Est.: 1999) (Est.: 2007) (Est.: 2008) (Est.: 2008) (Est.: 2010) Kotak Wealth Juilius Motilal Oswal Barclays Wealth IIFL Edelweiss GWM Baer Wealth Notes: 1. IIFL Wealth & Motilal Osw
Slide 11: Overview of Wealth Management Industry; Where we are today
Overview of Wealth Management 1 Industry 2 Where we are today Well positioned to capitalize on 3 future growth 10
Slide 12: We are amongst the top players in the industry
We are amongst the top players in the industry… Industry leading AuM growth… …with a robust Net Revenue CAGR¹ (INR Cr) (INR Cr) Avg. Yield of 70-80 bps (9MFY18) 84,700 545 453 60,300 242 29,500 156 17,700 FY 15 FY 16 FY 17 9MFY18 FY 15 FY 16 FY 17 9MFY18 (Annualized) ¹ CAGR calculated on annualized
Slide 13: Leadership in efficiency and productivity
…with leadership in efficiency and productivity Cost to Income Ratio AUA per Rupee of employee cost 90% 695 581 68% 400 320 248 FY 15 FY 16 FY 17 (Annualized) Typical WM FY 15 9MFY18 9MFY18 AUA per rupee of employee cost shows the value of the platform ¹ 9MFY18 employee cost annualized, AUA reflects
Slide 14: A highly profitable business at scale
…making us a highly profitable business at scale PAT Yield at Various Levels of AUA (avg.) Edelweiss PAT Yield (Bps) Expected PAT Yield (Bps)* 20-25 18-20 12-14 8-11 <8 INR Cr 15-30K 30-60k 75-100K 100 - 200K 200K+ Significant improvement in profitability after scale surpasses INR 1,00,000 cr. AUA 1
Slide 15: Overview of Wealth Management Industry; Where we are today
Overview of Wealth Management 1 Industry 2 Where we are today Well positioned to capitalize on 3 future growth 14
Slide 16: Our strategic advantage
Our strategic advantage 1 We are more platform led vs. people led More Charles Schwab model than Merrill Lynch (Annexure) Successful in both Affluent and UHNI client segment 2 Invested in Next Gen Technology Digitizing the core and front end (Annexure) 28% of enterprise headcount is in technology fu
Slide 17: Awards and Recognition
Awards and Recognition Best Private Bank Asiamoney Best Bank Awards 2018 Best Wealth Manager – Rising Star, India The Asset, Hong Kong, 2017 Excellence in Wealth Management India Asian Private Banker, Hong Kong, 2017 Best Consumer Mobile Service Award CMO Asia- BBC Knowledge’s, Regional Digital Mark
Slide 18: Questions!
Questions! 17
Slide 19: Global Asset Management
Global Asset Management 18
Slide 20: Asset Management in India is on a high growth trajectory
Asset Management in India is on a high growth trajectory Y-o-Y growth INR Lac Cr 156% 1st Year Insurance Premiums Deposits MF Inflows 75% Mutual Fund inflows have gained 30% significant traction 21% 20% 12% 12% 12% 10% 10% 9% 8% - 2012 2013 2014 2015 2016 2017 Consolidated AUM 23 19 13 AUM has grown
Slide 21: Mutual Funds Vs Alternatives
Mutual Funds Vs Alternatives Mutual Funds Alternatives Strategies constructed primarily Investments that look to exploit utilizing public stocks and bonds. inefficiencies in markets by focusing on non-traditional assets and investment strategies. Characterized by: Characterized by: • Returns primari
Slide 22: Alternatives is growing at a much faster pace
Alternatives is growing at a much faster pace… INR Lac Cr AUM – Mutual Funds AUM – Alternatives PMS +AIF AIF 21 2.0 18 12 11 1.1 8 0.9 7 0.7 0.4 0.4 0.5 0.2 0.2 0.1 0.0 2013 2014 2015 2016 2017 9MFY18 2014 2013 2015 2016 2017 9MFY18 Alternatives in India are going ‘Mainstream’ Source: SEBI, AMFI AUM
Slide 23: What is driving this growth in Alternatives?
What is driving this growth in Alternatives? 1 Need for Yield Alternatives offer superior risk adjusted returns with diversification 2 Growing Affluence Alternatives Return ~10% - 16% Mutual Funds ~8% - 14% FD ~4% 3 Development of AIF platform Risk 22
Slide 24: Alternatives is a highly profitable business opportunity
Alternatives is a highly profitable business opportunity Mutual Mutual Funds Alternatives Funds Alternatives Net Yield (bps) ~60-70 ~120 AUM 21 2 (INR Lac Cr) C/I 50-60% 25% 2018 Profit pool PAT Yield (bps) 15-20 50-60 4,200 1,200 (INR Cr) AUM 80 20 (INR Lac Cr) 2025 Profit pool 16,000 12,000 (INR C
Slide 25: Edelweiss Asset Management has grown significantly
Edelweiss Asset Management has grown significantly Assets Under Management 26,000 (INR Cr) 18,200 5,000 2,700 FY15 FY16 FY17 9MFY18 • Large onshore • Acquired • Acquired Alpha (Hedge) Fund • Seeded PIPE Fund Private Debt Forefront • Partnered with CDPQ • Launched Infra Fund player PMS & AIF • Acquir
Slide 26: Growing our Mutual Funds business
While we are growing our Mutual Funds business AUM (INR Cr) AuM Split (Q3 18) Equity Debt 14X 10,800 6,800 29% 800 1,600 FY15 FY16 FY17 9MFY18 71% Business Growth Drivers • Drive consistent investment performance • Focus on Innovation • Digitizing our core Top Performing Midcap Fund Top Performing A
Slide 27: Clear leadership in Alternatives
We have established clear leadership in ‘Alternatives’ Alternatives AUM Alternatives Product Spectrum (INR Cr) 15,200 Alternatives AUM 15,200 Cr 11% 11% 11,400 13% 3,400 65% 1,900 FY15 FY16 FY17 9MFY18 PMS Hedge Fund Private Debt PIPE/PE One of the few asset managers in India with leadership positio
Slide 28: Uniquely positioned to capitalize on this opportunity
Uniquely positioned to capitalize on this opportunity 1 First movers advantage 2 Broad spectrum of products across strategies 3 Deeply entrenched relationships with clients 4 Experienced global multi asset investment teams 5 Robust Risk and Governance 27
Slide 29: Questions!
Questions! 28
Slide 30: Distressed Assets
Distressed Assets 29
Slide 31: NPA/Stressed assets are not dead assets
NPA/Stressed assets are not “dead assets” • Operating assets with viable business model Type A • EBITDA Positive • Stretched balance sheet due to downturn or other issues • Projects which are 80-90% complete Type B • Turned NPAs for the need for last mile funding Type C • Companies which have no hop
Slide 32: In a typical asset sale to ARCs
In a typical asset sale to ARCs.. Banks contribute up ARCs contribute at to 85% to an SPV least 15% to the SPV • SPV is like a distressed assets fund with the bank and the ARC as Limited Partners • Limited Partners earn from the return of capital as the fund recovers the distressed debt • However, t
Slide 33: Illustrative Example of ARC Economics
Illustrative Example of ARC Economics Assumptions Rs. Nominal Value of Debt with Coupon of 12% 200 Purchase Price of Debt 100 Issuer’s ability to service at 6% per annum 12 Management Fee per annum to ARC 2 ARC ‘s 15% share of the remaining cash flows 15% of Rs 10 1.5 (ie Rs 12 payout – Rs 2 managem
Slide 34: What makes Edelweiss ARC successful
What makes Edelweiss ARC successful 1 Experienced team with diversified skill sets across sourcing, resolution and turnaround • Lead by Industry Veterans – Mr. Siby Antony and Mr. R K Bansal • 100+ member team with complimentary skill set • Dedicated turnaround team with skill set across multiple se
Slide 35: Our growth has been steady over the years
Our growth has been steady over the years.. INR Cr 5,543 EARC is the largest asset AUM 4,781 reconstruction company in India EARC Capital Deployed 1,896 Total AUM of more than INR 44,200 Crores. 1,226 44,200 325 39,500 27,100 Well diversified portfolio of assets 20,300 9,200 CDPQ has acquired 20% eq
Slide 36: To Summarize
To Summarize… 35
Slide 37: Summary of AUM/AUA, net yield and PAT yield
Steady-state INR Cr AUM/AUA Net Yield PAT Yield GWM 84,700 70-80 bps ~0.20% GAM 26,000 90-100 bps ~0.35%* AUM Capital Deployed ROA ARC 44,200 5,543 4-5% *Indicative number; includes carry & after 50,000 cr. Assets 36
Slide 38: Questions!
Questions! 37
Slide 39: Annexure
Annexure 38
Slide 40: GP Competitive Landscape
GP Competitive Landscape USD Bn Edelweiss 3 Everstone KKR 2.5 IDFC Chryscap 2 Kotak 1.5 Multiples SSG Piramal 1 Avendus AION 0.5 Standalone Multi Strat Source: Media reports/Internal Estimates 39
Slide 41: First movers advantage
1. First movers advantage 1 One of the early domestic entrants in the Alternatives space 2 Ability to foresee trends • Pioneered launch of structured debt product in India (2011) • Launched distressed fund in 2012 • One of the few managers to launch ‘Infra’ Fund 3 Ability to leverage Edelweiss platf
Slide 42: Broad Spectrum of Products across strategies
2. Broad Spectrum of Products across strategies • Strategy: Public Markets - Long/Short fundamental driven strategy focusing on absolute Hedge returns with lower drawdowns Funds • Returns: Target Gross Portfolio IRR of 12-15% • AuM: 3,600 INR Cr • Strategy: Invest at Pre IPO Stage PIPE/PE • Returns:
Slide 43: Deeply entrenched relationships with clients
3. Deeply entrenched relationships with clients Sophisticated onshore and LPs across 9 Large investor Several large LPs offshore investor base geographies base in India are investors Sovereign and Pension Funds, (incl. Marquee Alternatives with across multiple banks, insurance companies, Investors l
Slide 44: Experienced global multi asset investment teams
4. Experienced global multi asset investment teams 1 Experienced multi-asset team 2 Senior team pedigree – Experience of working with large global investment managers 3 70+ dedicated investment professionals 4 Specialized teams – Operating/Investment for each product strategy 43
Slide 45: Robust Risk and Governance
5. Robust Risk and Governance Investment Process • IC comprising of independent members • Advisory Board – Governance Comprising of eminent industry experts • Chief compliance / • Business level CC Risk officer role Oversight • Risk and Compliance • Transparency in reporting Committees • Internal an
Slide 46: Indian savings shifting to financial assets
Indian savings shifting to financial assets… Savings witnessing a shift from Physical to Financial Assets Gross Financial Savings Gross Physical Savings Gross Financial Savings / Total Savings 35 120% 30 15.6 13.2 14.5 100% 15.0 14.5 25 14.2 80% 20 54% 45% 45% 49% 60% 15 40% 41% 40% 10 12.6 15.2 14.
Slide 47: Increased allocation into capital market instruments
…with increased allocation into capital market instruments Shift From traditional Bank Savings towards other financial instruments for long term value creation Incremental Savings Flow Incremental Savings Flow Industry AUM (INRT) 19 10% 66% 67% 64% 13 60% 11 57% 9 7 3% 45% 2% 2% 2% 2% FY12 FY13 FY14
Slide 48: Business Model Affluent
Business Model Affluent: Cost efficient multi-channel model for acquiring and servicing clients 1 Low cost acquisition 2 Personalization @ scale (low cost but high delivery) 3 Hybrid delivery channel 47 47
Slide 49: Business Model UHNI+HNI
Business Model UHNI+HNI: Segment specialization and solutions beyond investments 1 Segmentation of clients around behavior, attributes and needs 2 Specialization around segments 3 “Productization” of offerings 48 48
Slide 50: Comprehensive solutions platform
Comprehensive solutions platform Business Solutions Beyond Exclusive Products • Growth Capital Investment • In-organic • Manufacturing opportunities Capability • Wealth • Distressed structuring / Structured Assets succession Exclusive / Credit • Private Equity planning Bespoke • Illiquid • High Yiel
Slide 51: Digitizing Core: Streamlined operations
Digitizing Core: Streamlined operations have improved delivery, reduced complexities, and generated savings Straight-through processing of key Service Requests Single View of customer accounts & business dashboards Centralized data repository Digitized customer documents with easy search function Wo
Slide 52: Digitizing Front End
Digitizing Front End: Making it easier for clients to interact with us and advisors to serve more efficiently Clients Edelweiss.in Omni-channel access Edelweiss Mobile Trader ESOP Desk Advisors Spend more time with clients Portfolio Analytics CRM: 360 View Targeted Marketing 51
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