Edelweiss Investor Presentation. March 2008

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Annabella Elliott
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1 Edelweiss Investor Presentation March

2 Disclaimer 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 Capital Ltd. or any of its subsidiaries and associate companies ( Edelweiss ). Actual results may vary significantly from the forward-looking statements contained in this presentations due to various risks and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India and outside India, volatility in interest rates and in the securities market, new regulations and Government policies that may impact the businesses of Edelweiss as well as its ability to implement the strategy. The information contained herein is as of the date referenced and Edelweiss does not undertake any obligation to update these statements. Edelweiss has obtained all market data and other information from sources believed to be reliable or its internal estimates, although its accuracy or completeness can not be guaranteed. This presentation is for information purposes only and does not constitute an offer or recommendation to buy or sell any securities of Edelweiss. This presentation also does not constitute an offer or recommendation to buy or sell any financial products offered by Edelweiss. Any action taken by you on the basis of the information contained herein is your responsibility alone and Edelweiss or its directors or employees will not be liable in any manner for the consequences of such action taken by you. Edelweiss and/or its directors and/or its employees may have interests or positions, financial or otherwise, in the securities mentioned in this presentation 2

3 Industry Overview 3

4 Indian Financial Services Sector: Overview Banking & Other Lending Companies Insurance Companies Capital Market Players Non Banking Financial Institutions/Others Private Sector Banks Public Sector Banks (10) (15) (45) General Insurance- Public Sector (5) General Insurance- Private Sector (3) Life Insurance Corporation Life Insurance- Private Revenue (FY 08 E) USD 70 Bn USD 50 Bn Market Capitalisation USD 115 Bn USD 16 Bn* (27) (15) Investment Banking (Advisory, ECM) (0.8) Institutional Equities (Equities and Derivatives) (1.2) Retail Broking and Distribution (3.6) Wealth Management (0.3) Asset Management (Traditional and Alternative) (2.0) Others (Treasury, Financing, Trading etc) (2.1) USD 10 Bn USD 10 Bn Source: Internal Estimates, figures in brackets indicate estimated revenue size in USD Bn * Based on estimates of embedded value of private sector insurance businesses of listed companies 4

5 Key Trends Convergence across categories: Mutual Funds and Banks Insurance and Asset Management Broking and Financing Growth in Capital Markets have outpaced others: Median Revenue CAGR ( ) Private Banks 30% Public Banks 8% NBFCs 42% Insurance 31% Capital Markets 80% Source: Internal Estimates 5

6 Edelweiss Overview 6

7 Edelweiss: Overview Edelweiss: Overview Overview Revenue Segmentation (9 months ended Dec 07) Diversified financial services company Founded in 1996, currently has 1,500 employees Headquartered in Mumbai with 43 offices across 19 cities Treasury Wholesale Financing Investment Banking Institutional Equities Private Client Broking Asset Management Wealth Management Insurance Broking Summary Financials (Rs. mn, unless otherwise specified) FY 05 FY 06 FY 07 9 months ended Dec 07 Total Revenue 770 1,580 3,713 6,831 % Growth 151.8% 105.1% 135.0% Net Income (after min. int) ,090 1,907 % Margin 29.2% 25.7% 29.4% 27.9% Return on Net Worth 55.6% 38.2% 28.7% 30.0% 7

8 Well Diversified Integrated Financial Services Model Balanced agency and capital-based businesses. Balanced recent growth initiatives and established businesses Agency-based Capital-based Recent Initiatives / High Growth Areas Revenue: INR 6,831mn (9 mo) Wholesale Financing Treasury 47% Asset Management Wealth Management Revenue: INR 93mn Treasury Insurance Broking Private Client Broking 44% Institutional Equities Institutional Equities Investment Banking Investment Banking Investment Banking FY 2000 FY 2003 Dec 2007 Strategy of selectively building new businesses adjacent to our current offerings 8

Track Record of Capitalizing on Capital Market Trends Ongoing identification of key trends creating service

Management India Diversified Fund Retail Asset Management Wealth Management Investment Advisory and Planning

Investment Banking 2004 Alternative Asset Management Real Estate Fund Blue River Capital 2001 Equity

9 Track Record of Capitalizing on Capital Market Trends Ongoing identification of key trends creating service offerings and businesses around them Key Trend Fund-Based Lending Wholesale Finance Business 2007 Asset Management India Diversified Fund Retail Asset Management Wealth Management Investment Advisory and Planning Services 2006 Qualified Institutional Placement ( QIP ) Managed First QIP 2005 Indian Real Estate Real Estate Investment Banking 2004 Alternative Asset Management Real Estate Fund Blue River Capital 2001 Equity Derivatives Pioneered Arbitrage and Multi-Book Trading Acquired Rooshnil Late 1990s Private Equity Pioneer in PE Advisory 9

10 Strong Research & Analytics Platform Backbone of our businesses - cutting-edge research and analytical rigour TREASURY Research & Analytics 60 analysts Cover 215 companies Fundamental Research Alternative/Quantitative Research INSTITUTIONAL EQUITIES WEALTH MANAGEMENT INVESTMENT BANKING PRIVATE CLIENT BROKERAGE Fundamental Research Early identification of emerging market themes 2003: India export-oriented manufacturing industry 2005: Lifestyle Consumption products and services 2006: Indian infrastructure industry Top-down macro research to spot themes, combined with Bottom-up research to identify stock ideas Alternative / Quantitative Research Conventional and proprietary analytical techniques/models to identify short and mediumterm opportunities Product suite includes: Relative Strength Comparison Pair Strategy Edelweiss Market Scan Master Moves Sector Fact Sheets 10

Experienced Management Team Experienced and Capable Management Strong track record of identifying business opportunities and executing on strategy Depth in Management Team Experienced business heads

11 Experienced Management Team Experienced and Capable Management Strong track record of identifying business opportunities and executing on strategy Depth in Management Team Experienced business heads supported by a deep layer of skilled middle managers Continuity Track Record Employee Ownership Most members of the management team have been with the company for over five years Management and employees together hold approximately 55% of the Company (20% owned by non-promoter employees) Senior Management Team 40 Member Senior Leadership Team (SLG) 45 Member Leadership Team (LG) 11

12 Active Board of Directors with Complementary Skills Board of Directors Name Key Affiliation(s) Key Skill-Set Rashesh Shah Management Representative Chairman and CEO Edelweiss 18 years experience in public and private markets in India Board Member Since 1996 Venkatchalam Ramaswamy Management Representative Executive Director Edelweiss Diverse experience in financial sector 1996 Sanjay Santhanam Non-Executive Nominee MD & Head of Risk Management Galleon Group Expertise in risk management 2006 Kunnasagaran Chinniah Non-Executive Nominee Executive Vice President GIC, Singapore Highly experienced in global private equity 2007 Ramanan Raghavendran Independent Managing Partner Kubera Partners Diverse experience in global financial services 2000 Sunil Wadhwani Independent Co-Founder & CEO igate Corporation Strong background in entrepreneurship across geographies 2000 P.N. Venkatachalam Independent Former MD State Bank of India Considerable experience in Indian credit markets 2007 Narendra Jhaveri Independent Former Joint MD ICICI Former Chairman ICICI Securities Extensive experience in Indian capital markets

13 Business Overview Diversified across asset classes, products and client segments Investment Banking Wide range of expertise across verticals like Equity Capital Markets, Mergers & Acquisitions, Structured Finance, Private Equity, Real Estate & Infrastructure Advisory Institutional Equities Institutional Brokerages in cash & derivatives segment with a global client base. Research coverage across Fundamental, alternative and thematic themes Asset Management Advisory services for Institutional & HNWI s across Alternate asset classes like Real Estate, Private Equity and multi-strategy fund and Portfolio Management services Wholesale Financing Innovative financial solutions to HNWI & corporate clients. Offerings include IPO funding, Loan against shares, ESOP Funding Private Client Broking Wealth Management Brokerage advising to HNWI & corporate clients on Equities, Derivatives & Commodities Investments spread across 43 branches in 19 cities Customized advice to HNWI & corporate clients on asset allocation across different asset classes from Structured Products, PMS, Mutual Funds, Insurance, Derivative strategies, Private Equity, IPO s, Real Estate Fund & Art Fund Insurance Broking Specialists in Auto & Fire Insurance, Employees Benefit Schemes & Liabilities Insurance 13

14 Growth Strategy Growth through adjacent markets across products, asset classes and client segments Growth Levers 14

15 Financial Snapshot 15

16 Solid Track Record of Profitable Growth (INR mn) Revenue Growth Revenue Breakdown CAGR: 130% Net Income (1) (INR mn) Net Income Growth Return on Equity CAGR: 142% (Annualised) Net Income Margin 25.0% 29.2% 25.7% 29.4% 27.9% 1. Net income after minority interest 16

17 9 months FY08 Financial Overview (consolidated) 9 months FY08 Financial Overview (consolidated) INR Million FY08 FY07 Growth FY08 FY07 Growth Q3 Q3 YOY 9 Mths 9 Mths YOY Fee and Commission Income 1, ,993 1,411 Trading and Arbitrage Income , Investment and Dividend Income Interest Income , Total Revenues 3, % 6,827 2, % Employee Cost , Operating and other expenses , Financial expenses , Depreciation Total Expenses 1, % 3,831 1, % Profit before tax 1, % 2,996 1, % Tax expenses (including Deferred and Fringe Benefit Tax) , Profit after tax % 1, % Share of minority interests in profits Profit after tax and minority interest % 1, % Earnings Per Share (EPS) in Rupees - Basic (Not annualised) Diluted (Not annualised) More than 50% of the costs are variable in nature: linked to business volumes 17

18 Strong Liquid Balance Sheet Indicative Balance Sheet INR Billion Sources of Funds Equity # 19.3 Other Long Term Capital 2.7 Borrowings 18.0 Total 40.0 Application of Funds Treasury Assets 15.0 Wholesale Financing Book 8.0 Working Capital 10.0 Liquidity Cushion 4.0 Other Assets 3.0 Total 40.0 # including Minority Interest Based on representative numbers 18

19 Revenue Mix Well diversified revenue streams Fees and Commission 44% Trading and Arbitrage 31% Fees and Commission 58% Trading and Arbitrage 31% Interest and Other 16% Investment and Dividend 9% Interest and Other 4% Investment and Dividend 7% 19

20 Client Revenue Mix shift towards greater balance Individual Clients 20% Individual Clients 11% Institutional/ Corporate Clients 80% Institutional/ Corporate Clients 89% For Agency related businesses 20

21 Key Challenges 21

22 Key Challenges & our approach (1/2) People High and well distributed employee ownership Focus on training and building our own Unique partnership culture Risk Management Board level oversight Audit and Risk Committees Strong focus on Risk Measurement and Monitoring 22

23 Key Challenges & our approach (2/2) Business Volatility Diversified Business Model Flexible resources: capital and people Flexible cost base Regulatory & Compliance Strong Corporate Governance Compliance Culture Competition Unique Business Model Execution culture Focus on innovation 23

24 Thank You 24

Edelweiss Capital Limited

May 16, 2008 PRESS RELEASE FY09 - Revenues of INR 900.50 crores and PAT of INR 186.44 crores Mumbai, : Edelweiss Capital Limited, one of India s leading integrated financial services companies announced