Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q2FY18 Earnings Presentation
54 slides from Edelweiss Financial Services's earnings presentation, Nov 3, 2017
Slide 1: Investor Presentation filing letter to BSE
‘oO Edelweiss Ideas create, values protect Ref No.: EW/Sec/2017/651 November 3, 2017 BSE Limited PJ Towers, Dalal Street, Fort, Mumbai - 400 001. Dear Sirs, Ref.:- Scrip Code:- 532922 Sub: Investor Presentation Please find enclosed the Investor Presentation in respect of quarter and half year ended
Slide 2: Q2FY18 Earnings Update
Edelweiss Financial Services Limited Q2FY18 Earnings Update
Slide 3: 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 4: Contents
Contents 1 Overview & Business Approach 2 Half Yearly Performance Highlights 3 Quarterly Performance Highlights 4 Business Update 5 ESG at Edelweiss 3
Slide 5: Overview & Business Approach
Overview & Business Approach
Slide 6: We are a Diversified Financial Services Company
We are a Diversified Financial Services Company... Credit Bank-like business model with multiple vectors of growth in the • Retail Credit NBFC space • Corporate Credit • Distressed Credit Has helped us deliver consistent growth and profitability Franchise & Advisory Helps manage short term volatilit
Slide 7: Consistent Non-Linear Growth Over the Years
…With Consistent Non-Linear Growth Over the Years… PAT (INR Cr) Balance Sheet (INR Cr) Annualised 812 47,819 609 38,667 32,145 414 27,072 329 220 16,204 178 13,289 14,529 128 406 FY12 FY13 FY14 FY15 FY16 FY17 H1FY18 FY12 FY13 FY14 FY15 FY16 FY17 H1FY18 26% growth in assets has supported a 36% growth
Slide 8: Across Key Performance Parameters
… Across Key Performance Parameters RoE RoA 22.2% 20.7% 2.5% 2.4% 18.6% 15.6% 18.1% 1.9% 1.9% 1.8% 1.7% 2.0% 12.2% 15.5% 11.3% 1.7% 12.9% 1.2% 1.5% 11.3% 1.4% 7.3% 1.3% 1.2% 1.2% 7.6% 8.2% 6.0% FY12 FY13 FY14 FY15 FY16 FY17 H1FY18 FY12 FY13 FY14 FY15 FY16 FY17 H1FY18 Ex-Insurance RoE Consolidated Ro
Slide 9: Significant Scale and Growth in Assets
…With Significant Scale and Growth in Assets… As on 30th Sep’17 (rounded off to nearest 100) INR Cr YoY Growth Balance Sheet Assets 47,800 33% Clients ~11 lacs Assets under Management and Advice 1,43,000 78% Distressed Credit (ARC Assets) 37,500 36% Assets Under Advice (Wealth Management) 76,300 73%
Slide 10: Our Retail Credit Book has Scaled Meaningfully
Our Retail Credit Book has Scaled Meaningfully… Retail Credit - Capital Employed (INR Cr) 11,783 8,952 6,031 4,188 2,799 2,115 1,535 FY12 FY13 FY14 FY15 FY16 FY17 H1FY18 9
Slide 11: Wealth Management AUA Growth
…As Also our Wealth Management AUA… Wealth Management AUA (INR Cr) 76,300 60,300 29,500 17,700 7,000 8,900 4,800 FY12 FY13 FY14 FY15 FY16 FY17 H1FY18 10
Slide 12: Bringing Significant Operating Efficiencies
…Bringing Significant Operating Efficiencies Consolidated Cost to income ratio 73% 73% 70% 71% 68% 67% 59% FY12 FY13 FY14 FY15 FY16 FY17 H1FY18 11
Slide 13: Half Yearly Performance Highlights – H1FY18
Half Yearly Performance Highlights – H1FY18
Slide 14: Financial Snapshot – H1FY18
Financial Snapshot – H1FY18 INR Cr EOP Equity Profit after Tax RoE RoA Pre Minority Credit 4,015 337 18.7% 2.2% Franchise & Advisory 215 130 - - BMU, Corp & Others 610 40 10.2% 0.9% Insurance 645 (91) - - (-) Minority 798 10 - - Total Consolidated 4,687 406 18.1% 2.0% Total Ex-Insurance 4,354 456 22
Slide 15: Credit Business Performance Snapshot
Credit Business Performance Snapshot Y-o-Y Y-o-Y Y-o-Y Y-o-Y H1FY18 (INR Cr) Total Growth Retail Growth Corporate Growth Distressed Growth EOP Capital Employed 32,540 31% 11,783 40% 15,398 19% 5,359 53% EOP Equity 4,015 34% 1,071 43% 1,946 13% 998 94% Net Revenue 1,162 55% 292 53% 649 30% 221 281% P
Slide 16: Franchise & Advisory Business Performance Snapshot
Franchise & Advisory Business Performance Snapshot Y-o-Y Wealth Y-o-Y Asset Y-o-Y Capital Y-o-Y H1FY18 (INR Cr) Total Growth Mgmt Growth Mgmt Growth Markets Growth Net Revenue 615 37% 268 56% 55 - 292 8% PAT 130 104% 53 97% 12 - 65 60% Cost to Income 68% - 70% - 67% - 66% - Revenue 4.1% AUA 76,300 A
Slide 17: Life Insurance Performance Snapshot
Life Insurance Performance Snapshot Edelweiss Tokio Life Insurance Company Limited (ETLI) (INR Cr) H1FY18 Y-o-Y Growth Total Income 275 22% Total Expenses 358 20% Profit After Tax (83) - Minority (41) - Edelweiss’ Share in PAT (42) - Scaling up as per plan to generate sustainable value 16
Slide 18: Quarterly Performance Highlights – Q2FY18
Quarterly Performance Highlights – Q2FY18
Slide 19: Q2FY18 Highlights
Q2FY18 Highlights 1 Q2 Consolidated PAT at INR 209 Cr; 37% CAGR over 26 quarters 2 Sustained non-linear growth in profitability Consolidated PAT growth 45% YoY; Ex-Insurance PAT growth 41% YoY Balance Sheet growth 33% YoY 3 Profit growth across businesses Credit business grew 40% YoY Franchise & Adv
Slide 20: Sustained PAT Growth Trajectory
1 Sustained PAT Growth Trajectory Profit after Tax Ex-Insurance PAT Consolidated PAT 234 (INR Cr) 222 212 187 209 166 196 154 155 170 133 155 120 111 140 144 98 103 122 89 90 70 69 72 106 62 68 91 96 48 51 57 78 79 83 88 46 33 27 35 61 46 51 56 46 58 33 39 40 42 26 29 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1F
Slide 21: Consolidated PAT Growth of 45%
2 Consolidated PAT Growth of 45% (INR Cr) Q2FY17 Q1FY18 Q2FY18 Y-o-Y Growth PAT 144 196 209 45% Consolidated PAT Ex-Insurance 166 222 234 41% Balance 35,822 43,634 47,819 33% Sheet 20
Slide 22: Profit Growth Across Businesses
3 Profit Growth Across Businesses Y-o-Y (INR Cr) Q2FY17 Q1FY18 Q2FY18 FY16 FY17 Growth PAT 144 196 209 45% 414 609 Credit 106 137 149 40% 337 447 Franchise & Advisory 30 64 66 123% 72 193 Insurance (21) (26) (24) (14%) (104) (110) BMU, Corp & Others 29 21 18 (38%) 110 79 21 Insurance includes both L
Slide 23: Improving Key Performance Parameters
4 Improving Key Performance Parameters Key Ratios Consolidated Q2FY17 Q1FY18 Q2FY18 FY16 FY17 RoE 15.2% 17.9% 18.3% 12.9% 15.5% RoA 1.7% 2.0% 2.0% 1.3% 1.7% Cost to Income Ratio 68% 59% 58% 71% 67% Ex-Insurance Q2FY17 Q1FY18 Q2FY18 FY16 FY17 RoE 19.9% 22.2% 22.2% 18.6% 20.7% RoA 2.2% 2.5% 2.5% 1.8%
Slide 24: Business Update: Credit
Business Update CREDIT Retail Credit – Corporate 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 Capital Employed % As on 30th Sep’17 (INR Cr) Share Retail Credit 11,783 36% Retail Mortgage 4,545 14% Blend of loans to home owners and home buyers SME & Business Loans 2,767 9% Highly scalable, focus area for future Loan against securitie
Slide 26: Credit Business at a Glance
Credit Business at a Glance Credit Business (INR Cr) H1FY18 FY17 Capital Employed 32,540 27,608 Average Interest Yield 16.3% 16.2% Average Cost of Borrowing 9.9% 10.3% Net Interest Margin 7.5% 7.2% Net Revenue 1,162 1,695 Cost to Income 35% 36% Provisions & Write Offs 227 319 PAT (post MI) 286 447 R
Slide 27: Asset Quality at a Glance
Asset Quality at a Glance At the end of H1FY18 FY17 Gross NPA (INR Cr) 474 362 Gross NPA % 1.74% 1.59% Net NPA % 0.66% 0.60% Outstanding Provision Held 407 314 Total Provision Cover 86% 87% Average Collateral cover on Corporate book 2.1x 2.3X Average Loan-To-Value on Retail book ~45% ~45% Credit Fra
Slide 28: Retail Credit Expanding Footprint
Retail Credit Expanding Footprint Capital Employed Business Highlights (INR Cr) SME • Originations up 23% on Y-o-Y basis in Q2FY18 11,783 • Expanding SME credit distribution capabilities; presence in 10,245 44 locations in Q2 from 17 locations at end of FY17 • Leveraging technology with tab based un
Slide 29: Calibrated Growth in Corporate Credit
Calibrated Growth in Corporate Credit Capital Employed Business Highlights (INR Cr) • Risk-management centered approach to collateralized lending • In house team of experts for carrying out detailed 15,398 evaluations 14,491 12,919 • Counterparty, Collateral and Cash flows • Ring fenced structures a
Slide 30: 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 3,558 793 2,838 514 2,015 912 438 270 2,765 243 1,745 1,926 Q2 FY17 Q1 FY18 Q2 FY18 Q2 FY17 Q1 FY18 Q2 FY18 Business Highlights • One of the few organized players providin
Slide 31: Distressed Credit Performance is on Track
Distressed Credit Performance is on Track Capital Employed Business Highlights (INR Cr) • Focus on large operating and EBITDA earning assets that 5,133 5,359 are financially broken 3,511 • Significant focus on resolution driving higher recoveries • H1 FY18 cash recovery at 90% of entire FY17 recover
Slide 32: Business Update: Franchise & Advisory
Business Update FRANCHISE & ADVISORY Wealth Management – Asset Management – Capital Markets
Slide 33: Franchise & Advisory Business at a Glance
Franchise & Advisory Business at a Glance Franchise & Advisory H1FY18 FY17 (INR Cr) Net Revenue 615 1,060 Cost to Income 68% 73% PAT 130 193 Credit Franchise & Advisory Life Insurance 32
Slide 34: Wealth Management AUA Continues to Scale Up
Wealth Management AUA Continues to Scale Up Assets Under Advice Business Highlights (INR Cr) • Ramp up of RM capacity in UHNI on track; added 25 RMs in 76,300 H1 FY18 65,900 44,200 • Cost to income ratio improved to 69% for the quarter from 77% in Q2FY17 • Yield on AUA ranges between 70-80 bps Q2FY1
Slide 35: Asset Management Building a Sustainable Franchise
Asset Management Building a Sustainable Franchise Asset Management AUM Business Highlights (INR Cr) Alternative Assets 22,100 • Leading player in the Private Debt space across special 19,700 opportunities, real estate credit and distressed assets credit 8,600 • Alternatives AUM increased 14% on a Q-
Slide 36: Capital Markets Strong Performance Continues
Capital Markets Strong Performance Continues Key Equity Capital Market Deals Business Highlights Equity Capital Markets • Successfully closed 4 deals in investment banking in Q2FY18 • Continue to build market share in blocks with share of 5.3% in Q2FY18 ICICI Lombard Cochin Shipyard Dodla Dairy IPO
Slide 37: Business Update: Life Insurance
Business Update Life Insurance
Slide 38: Life Insurance – Long Term Value Creation
Life Insurance – Long Term Value Creation Products Mix Distribution New Business Premium H1FY18 • Agency-led multi-channel distribution approach with emphasis on productivity 14% 29% • 104 branches and ~25,000 PFAs across 77 cities in India 31% • 11% of individual new business premium is generated 2
Slide 39: One of the Fastest Growing in Individual Annual Premium Equivalent
One of the Fastest Growing in Individual Annual Premium Equivalent Individual Annual Premium Equivalent Number of Policies Issued CAGR growth since FY15 (Individual Business ) 23% 12,105 18% 9,689 7,478 4% Edelweiss Tokio Peer Set Industry Q2FY17 Q1FY18 Q2FY18 Life Insurance Business Highlights • In
Slide 40: Life Insurance – Key Financials
Life Insurance – Key Financials Edelweiss Tokio Life Insurance Company Limited (ETLI) (INR Cr) H1FY18 FY17 Net Premium Income 185 426 Investment Income & Other Income 90 151 Total Income 275 577 Commission & Operating Expenses 165 324 Change in Policy Liabilities and Benefits paid 193 469 Total Expe
Slide 41: Balance Sheet
Balance Sheet oO Edelweiss Ideas create, values protect
Slide 42: Key Highlights – Balance Sheet
Key Highlights – Balance Sheet 1 Matched Asset-Liability profile 2 Comfortable capital adequacy ratio at 16.75% 3 Diversified borrowings mix 4 Liquidity cushion at 10% of Balance Sheet 5 Stable business model reflected in credit ratings 41
Slide 43: Matched Asset-Liability Profile
1 Matched Asset - Liability Profile As on 30th Sep’17: INR 47,819 Cr Assets Liabilities 100% % of Assets and Liabilities 100% 72% 49% 71% 39% 32% 45% 37% 9% 30% 9% Asset Specific 0-3 Mnth 3-6 Mnth 6-12 Mnth 1-3 years 3+ years Borrowing • Positive asset-liability matching across durations • BMU manag
Slide 44: Comfortable Capital Adequacy Ratio
2 Comfortable Capital Adequacy Ratio Capital Structure as on 30th Sep’17 (INR Cr) Tier I 5,601 Capital Adequacy Ratio Tier II 1,410 16.75% Debt/Equity : 5.6 Total Capital 7,011 (excluding Treasury assets and Episodic) Risk Weighted 41,856 Assets 76% of gross assets 43
Slide 45: Diversified Sources of Borrowing
3 Diversified Sources of Borrowing Q2FY18 Others 9% Mutual Funds Retail 14% 32% Total Borrowings INR 42,335 Cr 11% Asset Specific Borrowing 34% Banks 44
Slide 46: Liquidity Cushion at 10% of Balance Sheet
4 Liquidity Cushion at 10% of Balance Sheet Liquidity Cushion (rounded off to nearest 100) INR Cr 4,800 • A well diversified liquidity cushion comprising: 4,050 • Banking Lines 2,200 • Fixed Deposits 2,900 1,350 • Government Securities, Mutual Funds etc 1,700 1,630 • Steady growth in liquidity cushi
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+ Long term CARE AA Long term CRISIL AA Long term ICRA AA Long term SMERA AA+ 46
Slide 48: Significant Institutional Ownership
Significant Institutional Ownership Shareholding Pattern Top 10 Institutional Shareholders (As on 30th Sep’17) Name Percent Employee Trust 1 BIH SA 4.5% DIIs, Non Institutions 2 Goldman Sachs 1.6% 5.3% Promoters & Others 3 Government Pension Fund Global 1.6% & Employees 21.1% 4 Morgan Stanley 1.5% 4
Slide 49: ESG at Edelweiss
ESG at Edelweiss Ge Edelweiss Ideas create, values protect
Slide 50: Creating Continuous Talent and Leadership Pipeline
Creating Continuous Talent and Leadership Pipeline • Our leadership programmes are focused towards identifying and grooming leaders at every level • Leadership development is an integral part of Leadership at our business and growth strategy Edelweiss • Development endeavors at Edelweiss are structu
Slide 51: Board Comprises Majority of Independent Directors
Board Comprises Majority of Independent Directors 6 out of 11 directors are independent Mr. K Chinniah Mr. P N Venkatachalam • Served as Managing Director & • Banking sector expert and former member Global Head Infrastructure, of the Interim Pension Fund Regulatory Portfolio, Strategy & Risk Group w
Slide 52: EdelGive Foundation - Unique Philanthropic Platform
EdelGive Foundation - Unique Philanthropic Platform Focuses on Education, Livelihood and Women’s Empowerment 51
Slide 53: EdelGive Foundation: Key Metrics
EdelGive Foundation: Key Metrics Employee Engagement Employee Engagement % More than 70% engaged in volunteering efforts Man Hours spent till date 22,500 hrs Field Visits till date 75 Capacity Building – Non financial support Employees provided skills and time pro bono in over 60 projects till date
Slide 54: Awards and Recognition
Awards and Recognition Best Wealth Manager - Rising Star, India The Asset, Hong Kong Best Performing Institutional Member NSE Market Achievers Award 2017 Ranked as one of the leading custodians in India Global Custodian Indian Domestic Survey 2017 Best Product Innovation – Edelweiss Tokio Life Insur
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