Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Investor Presentation (March 2013)
45 slides from Edelweiss Financial Services's investor presentation, March 2013
Slide 1: Edelweiss Financial Services Limited
Strictly Private and Confidential Edelweiss Financial Services Limited Presentation to Investors - March 2013
Slide 2: Edelweiss - Overview
Strictly Private and Confidential Edelweiss - Overview
Slide 3: Introduction To Edelweiss
Introduction To Edelweiss ‘oO Edelweiss \deas create, values protect
Slide 4: Introduction
Introduction Incorporated in 1995 with focus on Investment Banking Currently has ~3,700 employees across 224 offices in over 106 cities through India Ownership Employees: ≈53% Institutions: ≈38% Government of Singapore Carlyle BIH SA Greater Pacific Capital Fidelity 4
Slide 5: Key Businesses: Leading Player in Several Lines of Business
Key Businesses: Leading Player in Several Lines of Business Credit Book size in excess of ` 65 bn Asset Management One of the fastest-growing fund house with an AUA of ≈ USD 600 mn Commodities Scaling up rapidly; network of ~400 clients Capital Markets Largest domestic Institutional Equities platfor
Slide 6: Performance Snapshot: Financials Have Shown Steady Growth
Performance Snapshot: Financials Have Shown Steady Growth Revenue Profit After Tax 20000 (INR mn) CAGR: 67% 3000 (INR mn) CAGR: 42% 15,841 16000 2500 1,864 2000 1,662 12000 9,005 1500 1,274 8000 1000 4000 500 281 78 0 0 PAT PAT Ex insurance Net Worth People (INR mn) CAGR: 77% (INR mn) CAGR: 50% 3200
Slide 7: The Edelweiss Story
The Edelweiss Story ‘oO Edelweiss \deas create, values protect
Slide 8: Edelweiss Vision
Edelweiss Vision To channelize capital into efficient investments. 8
Slide 9: Our History: Periods of Rapid Growth and Consolidation
Our History: Periods of Rapid Growth and Consolidation Credit crisis led to lower interest rates and increased competition Began IE business with an acquisition; Attained Edelweiss was Treasury pioneered leadership in founded and Arbitrage and Multi- Private Equity IPO led to began the Book trading
Slide 10: Our History: Periods of Rapid Growth and Consolidation
Our History: Periods of Rapid Growth and Consolidation Housing Finance Insurance Retail (MF and Broking) Commodities and Wholesale Credit We had to search for new growth areas in Financial Services and adjacent markets. 10
Slide 11: The Credit Crisis Forced Us to Take a Hard Look at Ourselves
The Credit Crisis Forced Us to Take a Hard Look at Ourselves Edelweiss was focused on Wholesale and Capital Markets Investment Banking Until 2008 Institutional Equities Treasury Capital Markets was 70% of Revenue Issues We Faced Wholesale was almost 100% of Revenue The challenges we faced in 2008 we
Slide 12: In Response, Our Strategy Evolved
In Response, Our Strategy Evolved: To be a Diversified Financial Services firm with a portfolio of cutting edge high growth businesses 12
Slide 13: Edelweiss's Core Approach
Edelweiss’s Core Approach Diversification 2009-2012 Efficiency 2013-2014 2014 Growth onwards 13
Slide 14: Diversification to Derisk and Create Growth Opportunities
Diversification to Derisk and Create Growth Opportunities Derisk and reduce volatility by Create a portfolio of scalable & diversifying across: high growth businesses by: 1. Businesses: To counter volatility in capital markets, 1. Expanding addressable entered into adjacent financial market segments
Slide 15: Leading To Diversified Revenue Streams
Leading To Diversified Revenue Streams FY08 FY12 Insurance Commodities 3% 7% Credit 15% Commodities Credit 18% 31% Treasury 34% Capital Treasury Capital Markets & 22% Markets & Asset Asset Management Management 44% 26% Derisking through Diversification 15 Notes: All numbers are Management Estimates
Slide 16: Focus Is Now On Creating Efficiencies
Focus Is Now On Creating Efficiencies… Cost to Income Ratio – Ex-Insurance 71% 70% 68% 67% 60% 57% 57% FY09 FY10 FY11 FY12 Q1'FY13 Q2'FY13 Q3'FY13 Diversification Phase Efficiency Phase Note: All numbers are management estimates 16
Slide 17: And Creating Scalable Growth Opportunities For The Future
… And Creating Scalable Growth Opportunities For The Future FY08 FY12 FY20 Insurance Capital Markets & Insurance Capital Asset Markets & Retail Management Asset Credit Capital Management Markets Corporate Credit Commodities Retail Corporate Credit Commodities Credit 20x growth in addressable revenue
Slide 18: To Summarize
To Summarize: Rapid expansion through diversification Revenue growth from `~9,800 mn to `~16,700 mn in two years Even in a tough macroeconomic environment Wholesale businesses are stable Retail businesses are close to breakeven Core RoE is among the highest in the peer set Investments in Infrastruct
Slide 19: Edelweiss – Financial and Business Highlights
Strictly Private and Confidential Edelweiss – Financial and Business Highlights
Slide 20: Financial Highlights – 9MFY13
Financial Highlights – 9MFY13 20
Slide 21: Financial Highlights – Ex-Insurance
Financial Highlights – Ex-Insurance (` mn) FY11 FY12 9MFY13 Revenue 14,264 16,175 15,278 Profit Before Tax 3,587 2,168 2,239 Profit After Tax 2,426 1,458 1,646 Tangible Equity* 21,564 20,205 21,883 Return on Tangible Equity 11% 7% 10% Ex-Insurance ROE improving #Does not include “Intangibles” consis
Slide 22: Profitability Now Recovering
Profitability Now Recovering Profit after Tax (` mn) 700 606 600 542 513 481 500 381 400 330 279 300 416 460 200 388 398 332 294 263 100 0 Q1'FY12 Q2'FY12 Q3'FY12 Q4'FY12 Q1'FY13 Q2'FY13 Q3'FY13 PAT PAT Ex-Insurance Sustained Growth in Profitability 22
Slide 23: Summary Balance Sheet
Summary Balance Sheet As on As on ` Million Dec 31 ’12 Mar 31 ’12 (Unaudited) (Audited) Equity and Liabilities Shareholders’ Funds 27,650 26,360 Minority Interest 2,388 2,388 Borrowings 110,071 104,140 TOTAL 140,109 132,890 Assets Goodwill 1,399 1,395 Fixed & Non-Current Assets 46,367 33,426 Net Cur
Slide 24: 9MFY13 Performance: Key Takeaways
9MFY13 Performance: Key Takeaways Consistent improvement over financial and business performance QoQ in the last five quarters despite challenging environment Focused approach to improving efficiency and productivity leading to improvement in operating metrics and sustainable growth in profitability
Slide 25: Business Highlights
Business Highlights ‘o Edelweiss Ideas create, values protect
Slide 26: Overview: Growth through Synergistic Diversification
Overview: Growth through Synergistic Diversification Joint Venture with Tokio Marine Holdings Inc. (Japan) Insurance Life Insurance Launch Q2FY12. 45 offices in 35 cities today Commodities Agri 400+ customers Commodities Commodities Bullion Commodities 12 bullion distribution centres Bullion Debt Ca
Slide 27: Edelweiss Capital Markets & Asset Mgt. – Business Description
Edelweiss Capital Markets & Asset Mgt. – Business Description Capital Markets Asset Management Investment Banking and Institutional Alternative Asset Management Equities One of the fastest growing Indian Consistently in top 10 in League Tables Alternative Asset Management in Investment Banking p
Slide 28: India Opportunity: Capital Markets & Asset Mgmt.
India Opportunity: Capital Markets & Asset Mgmt. Increasing Role of Capital Markets INR bn 600 500 Equity Capital raised 400 42% 300 CAGR 200 100 0 2003 2004 2006 2008 2010 2012 Significant Interest from International Retail Participation to Drive Growth Investors INR bn INR mn 10000 41% 25 19% Numb
Slide 29: Edelweiss Treasury – Business Description
Edelweiss Treasury – Business Description Focus on: ● Balance sheet management FDs ` 3.84 bn ● Liquidity management ● Capital preservation with optimum returns Treasury allocation continues to be a function of: ● Capital requirement of businesses ● Opportunities in the markets ● Liquidity management
Slide 30: Edelweiss Credit – Business Description
Edelweiss Credit – Business Description Corporate Credit Retail Credit Began credit operations in 2007 Began in 2011 Comprises of Comprises of • Collateralized Lending to • Housing Finance Corporates • SME Financing • Debt Capital Markets Ranked overall 6th in the League Controlled growth, focus on
Slide 31: India Opportunity: Credit
India Opportunity: Credit Rapid Growth in Bond Markets INR bn 35000 30000 Central and State Bonds 18% CAGR 25000 20000 15000 10000 5000 0 1999 2003 2007 2010 2011 2012 Greater Credit Growth outside Banking Retail Credit will grow INR bn 6000 5,361 Non Banking Credit Growth 5000 26% Retail* 4000 CAGR
Slide 32: Edelweiss Commodities – Business Description
Edelweiss Commodities – Business Description Started Commodities business in 2007 as part of the strategy to diversify across asset classes; now a strategically important business group Edelweiss is now a leading player in precious metals and agriculture commodities Precious Metals Agriculture Commo
Slide 33: India Opportunity: Commodities
India Opportunity: Commodities Commodities Turnover On Exchanges Commodities Imports – Bullion & Agri1 INR trn INR bn 20,000 200 45 % 181 15,435 CAGR 15,000 13,588 150 110 9,532 10,000 6,733 100 78 5,000 3,670 3,730 52 1,800 2,200 50 41 - 0 2008 2009 2010 2011 2008 2009 2010 2011 2012 Bullion Agricu
Slide 34: Edelweiss Tokio Life Insurance – Business Description
Edelweiss Tokio Life Insurance – Business Description Life Insurance in India is a sizable opportunity space in financial services ~25% of household savings flow into life insurance, second only to banking Low insurance density ($48 per capita , >$1000 for developed countries) Improving depend
Slide 35: India Opportunity: Life Insurance
India Opportunity: Life Insurance Rapid Premium Growth Low Penetration* INR bn 3000 Life insurance premiums as % of GDP 18 15 Life insurance premiums 2500 16 23 % 14 2000 CAGR 12 10 10 1500 10 8 8 7 1000 6 4 4 500 2 0 0 FY01 FY03 FY05 FY07 FY09 FY11 India S Korea Japan UK Hongkong Taiwan India likel
Slide 36: Enterprise Updates
Enterprise Updates ‘oO Edelweiss \deas create, values protect
Slide 37: Enterprise Resources
Enterprise Resources Human Resources Building a strong leadership pipeline Brand Building Building a financial services brand with a clear proposition – “Financial Empowerment” Risk Managing financial, liquidity and operational risk; identifying and mitigating regulatory & reputational risk Te
Slide 38: Human Resources: Multiplying Leadership Capability
Human Resources: Multiplying Leadership Capability Perspective building, communication through Manco meetings Leadership Group Manco Leadership Development: Breakthrough workshop Executive coaching Organisational connect through SL meets and SL lunches Senior Leaders Communication and Engagement thr
Slide 39: Building a Financial Services Brand
Building a Financial Services Brand FY07 FY08 FY09 FY10 FY11 FY12 FY13 & Beyond Introduction of Communicate brand proposition Manifestation of the proposition: Proposition Why the brand: what can we do for you how can we do it for you Understanding your who we are Needs is paramount 1.3 mn 1.7 mn 3.
Slide 40: Risk Management: Cornerstone of Our Corporate Philosophy
Risk Management: Cornerstone of Our Corporate Philosophy Risk-consciousness is an integral part of Edelweiss’ corporate culture and ethos All our decisions are evaluated based on Is it worth it? Can we afford it? Productive paranoia around risk – From risk managers to top leadership, we constant
Slide 41: Risk Framework
Risk Framework Business Risk Group Risk Global Risk Committee The Primary Risk Team Second Line of Defense Apex Risk Body Global Risk Group •Consolidated Risk Overview •Defined risk metrics •Consists of senior • Adequate Risk Controls management personnel • Day to Day Risk including CEO and COO • Po
Slide 42: Corporate Social Responsibility - EdelGive Foundation
Corporate Social Responsibility - EdelGive Foundation Philanthropic initiative to drive sustainable social change Impacted over 75,000 lives Current portfolio of 18 non- profit organisations Committed ` 220 mn till date Over 6000 hours of pro-bono support Focus on Education, Livelihoods and Womens’
Slide 43: Shareholding Pattern
Shareholding Pattern Top Institutional Shareholders above 1%# As on 31st Dec, 2012 Name Percent First Non Institutions (Incl. Corporates Invested and Individuals) 9% 1 Govt. of Singapore 8.2% Pre-IPO 2 Carlyle 7.5% Q3FY12 3 BIH SA 5.8% Pre-IPO Key Foreign management, Greater Pacific Institutions & e
Slide 44: Active Board of Directors with complementary skills
Active Board of Directors with complementary skills CHAIRMAN AND CEO EXECUTIVE DIRECTORS Mr.Rashesh Shah Mr. Venkat Ramaswamy Mr. Himanshu Kaji, Chairman & CEO Executive Director Executive Director Co founder of Edelweiss; Co-founder of Edelweiss; Diverse experience of over two Over 20 years of expe
Slide 45: Safe Harbor
Safe Harbor This presentation and the discussion that follows may contain certain words or phrases that are forward - looking statements, based on current expectations of the management of Edelweiss Financial Services Ltd. or any of its subsidiaries and associate companies (“Edelweiss”). Actual resu
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