Edelweiss Financial Services Limited. An Introduction

Transcription

1 Edelweiss Financial Services Limited An Introduction

2 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 ( 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 the ability to implement its 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 are its internal estimates unless otherwise stated, although its accuracy or completeness can not be guaranteed. The presentation relating to business wise financial performance, ex-insurance numbers, balance sheet, asset books of Edelweiss and industry data herein is reclassified/regrouped based on Management estimates and may not directly correspond to published data. The numbers have also been rounded off in the interest of easier understanding. Numbers have been re-casted, wherever required. PAT ex-ins is excluding Minority Interest. Prior period figures have been regrouped/reclassified wherever necessary. All information in this presentation has been prepared solely by the company and has not been independently verified by anyone else. 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. Edelweiss Financial Services Limited Corporate Identity Number: L99999MH1995PLC For more information, please visit or drop us an on ir@edelweissfin.com. NOTES: Slide 8,11,21: Balance Sheet numbers are on net basis Slide 21: Distressed Credit (ARC assets) and Funds under Management have been calculated after removing Edelweiss contribution Slide 24: Gross and Net NPA% calculated excluding Distressed Credit and Episodic book Slide 27: Others includes Provident Funds, Insurance companies & Corporates Slide 32: Key institutional shareholders: Holding of known affiliates have been clubbed together for the purpose of this information 2

3 Our Vision To become one of the top financial services companies in India, by exceeding the expectations of all our stakeholders 3

4 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Journey So Far: Our First 8 Years Profit after Tax INR 8 Cr Foundation of Edelweiss as an Investment bank in 1996 with a capital base of INR 1 Cr and 4 employees Expanded into Broking business in 2000 Grew to a 100-employee company in FY04 However it was clear that the significant profit pool in financial services was in credit : strengthening the capital base became key 4

5 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 The Next 8 Years : Counter-Cyclical Diversification Profit after Tax INR 8 Cr IPO INR 128 Cr Continued to build businesses with high quality talent Seeded and nurtured diversification through Corporate Loans, Home Loans and SME Loans Asset & Wealth Management Life Insurance Set up our philanthropic foundation EdelGive 5

6 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 The Current 8 years : Gaining Scale Profit after Tax INR 8 Cr IPO INR 128 Cr INR 890 Cr Focus is on scaling up existing businesses to a size so as to be amongst the top 5 players in each business Strong governance and risk management structures created to aid expansion Capital base of INR 7,762 Cr and 10,052 employees as on FY18 6

7 Today we are a Diversified Financial Services Company Credit Bank-like business model Retail Credit Corporate Credit Distressed Credit Multiple vectors of growth Franchise & Advisory Consistent growth and profitability Wealth Management Asset Management Capital Markets Reduction in volatility Insurance Life Insurance General Insurance Growth aligned with market tailwinds Career opportunities and retention of management 7

8 Snapshot of Edelweiss INR Cr PAT Consolidated Balance Sheet Assets Customer Assets , , ,289 7,500 FY12 FY18 FY12 FY18 FY12 FY18 PAT Ex-Insurance RoE Ex-Insurance % RoA Ex-Insurance 1, % 2.6% % 1.2% FY12 FY18 FY12 FY18 FY12 FY18 8

9 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Our profits have grown consistently and sustainably Profit after Tax (INR Cr) Ex-Insurance PAT Consolidated PAT Consolidated PAT CAGR of 38% over last 28 quarters 9

10 We have significantly improved capital efficiency RoE RoA Ex-Insurance RoE Consolidated RoE Ex-Insurance RoA Consolidated RoA 7.3% 6.0% 11.3% 12.2% 7.6% 8.2% 15.6% 11.3% 18.6% 12.9% 20.7% 22.1% 15.5% 17.1% 1.2% 1.7% 1.2% 1.2% 1.9% 1.9% 1.4% 1.5% 1.8% 1.3% 2.4% 1.7% 2.6% 2.0% FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Continued improvement in profitability ratios across business cycles 10

11 ..Ensuring our diversified model delivers consistent growth PAT (INR Cr) Balance Sheet (INR Cr) , ,667 32, , ,289 14,529 16,204 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY12 FY13 FY14 FY15 FY16 FY17 FY18 27% growth in balance sheet assets generates a 38% growth in PAT over 6 years 11

12 Our Retail Credit is expanding its footprint Retail Credit - Capital Employed (INR Cr) 16,188 8,952 6,031 1,535 2,115 2,799 4,188 FY12 FY13 FY14 FY15 FY16 FY17 FY18 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 Key vectors for our growth will be SME Loans and Retail Mortgages 12

13 While Corporate Credit has posted steady growth Corporate Credit - Capital Employed (INR Cr) 19,525 9,622 12,088 13,875 3,626 4,457 5,829 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Business Approach Strong client relations and expertise in providing customized solutions In-house team of experts at underwriting and legal structuring Detailed evaluations Counterparty, Collateral and Cash flows Ring fenced structures and hybrid collateral pool ensures negligible loss given defaults Scale up Corporate Credit opportunity through co-investment from Asset Management fund 13

14 We are the Largest Asset Reconstruction Company in India Distressed Credit Capital Employed/AUM 50,000 (INR Cr) 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000-9,200 20, ,226 27,100 1,896 39,500 4,781 44,100 6,297 FY14 FY15 FY16 FY17 FY18 AUM Capital Employed Business Approach 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 advisory board comprising of senior industry experts In-house capabilities for operational turnaround CDPQ has a stake in Edelweiss Asset Reconstruction Company which on fully diluted basis will be 20% 14

15 We now have ~450,000 Wealth Management clients Wealth Management AUA (INR Cr) 90,100 60,300 4,800 7,000 8,900 17,700 29,500 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Business Approach We cater to the UHNI as well as the fast-growing Affluent segments Multi asset class platform offering structured customized solutions Yields of bps on AUA We are more platform led vs. people led Invested in Next Gen Technology 15

16 We have established our leadership in Alternatives Alternative Assets (INR Cr) 17,700 11,400 1,900 3,400 FY15 FY16 FY17 FY18 Business Approach Leading player in the Private Debt space across Structured Credit, Wholesale Mortgage, Distressed Credit and Special Opportunities Differentiated product offerings for both global and domestic clients Designed to offer the best opportunity for investment growth in Indian asset classes Focus on risk and capital preservation 16

17 One of the Fastest Growing Life Insurance Companies in terms of Individual Annual Premium Equivalent Collected Individual APE (INR Cr) 251 Number of Policies in force 1,67, , , ,214 54, ,315 23,418 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Business Approach Long Term Value Creator Agency-led multi-channel distribution approach with emphasis on productivity Our 51% JV with Tokio Marine ensures both growth capital and specialist knowledge 17

18 Scale has led to steady increase in operating leverage Cost to income ratio (Ex- Insurance) 70% 65% 59% 59% 60% 54% 47% FY12 FY13 FY14 FY15 FY16 FY17 FY18 Cost-to-Income ratio improvements to contribute steadily to ROA and ROE improvement 18

19 Aided by technology initiatives across businesses Digital Acquisition Retail Lending Digital lending enabled by India Stack Life Insurance Lead management system across channels, integrated with policy issuance systems Distribution Life Insurance End to end portal for managing agents, from on-boarding to pay outs Asset Mgmt Distributor platform to manage clients account opening, transactions, and portfolio tracking Wealth Mgmt Edelweiss Mobile Trader >1.7 lakh users Contributing to 50% of online revenue Customer Experience Capital Markets Insurance aggregator platform for B2B clients Wealth Mgmt ESOP desk end to end processing for corporates Wealth Mgmt State of art desktop trading platform Advanced technical analysis Risk Retail Lending Automated underwriting and risk assessment Global Risk Integrated risk engagement and development platform Global Risk Provide early warning signals Enable proactive action on portfolio 19

20 Annual Snapshot FY18 20

21 Our asset base is a mix of own and customer assets As on 31 st Mar 18 (rounded off to nearest 100) INR Cr YoY Growth Balance Sheet Assets 55,100 42% Customer Assets 1,68,900 43% Clients ~12 lacs Distressed Credit (ARC Assets) 37,800 9% Assets Under Advice (Wealth Management) 90,100 Funds under Management (Asset Management) 28,300 56% 49% Offices 448 Assets under Custody & Clearing 12, % Total Assets 2,24,000 43% Employees 10,052 This helps us generate a good mix of spread and fee income 21

22 Our profits are well distributed across our businesses.. Business Segments Credit Business FY18 Pre MI PAT (INR Cr) % Contribution Retail Mortgage 66 LAS, SME, Agri and Business Loans 134 Structured Collateralised Credit 159 Wholesale Mortgage 180 Distressed Credit 192 6% 12% 14% 16% 17% Franchise & Advisory Business Wealth Management & Asset Management 162 Capital Markets 146 BMU, Corporate and Others 83 15% 13% 7% Total Ex- Insurance 1, % 22

23 While Credit provides growth & scalability, Franchise gives the ROE fillip INR Cr EOP Equity Profit after Tax RoE RoA Pre Minority Credit 5, % 2.2% Franchise BMU, Corp & Others % 1.0% Insurance 1,296 (260) (-) Minority 1,089 (28) Total Consolidated 6, % 2.0% Total Ex-Insurance 5,944 1, % 2.6% RoE is calculated on Average Equity 23

24 Credit Business Performance Snapshot Credit Business FY18 (INR Cr) Total Y-o-Y Retail Y-o-Y Corporate Y-o-Y Distressed Y-o-Y EOP Capital Employed 42,010 52% 16,188 81% 19,525 41% 6,297 32% PAT % % % % Net Interest Margin 7.7% 5.2% 9.4% 9.1% Cost to Income 34% 46% 31% 27% RoE 18.1% 15.8% 18.8% 20.0% RoA 2.2% 1.6% 2.2% 3.6% GNPA% 1.75% NPA% 0.70% Growth driven by our diversified credit book Retail credit to constitute 50% of total credit book by 2020 (currently at 39%) PAT and RoE are Pre MI 24

25 Franchise & Advisory Business Performance Snapshot Franchise & Advisory Business FY18 (INR Cr) Total Y-o-Y Wealth Mgmt Y-o-Y Asset Mgmt Y-o-Y Capital Mkts Y-o-Y Net Revenue 1,330 25% % % % PAT % % % % Cost to Income 65% 67% 63% 64% Customer Assets Assets under Advice Assets under Management Assets under Custody and Clearing 90,100 49% 29,200 60% 12, % Cost to income ratio down from 85% in FY16 to 65% in FY18 as businesses scale up 25

26 Our capital base is ever stronger Capital Structure as on 31 st Mar 18 (INR Cr) Capital Adequacy Ratio Tier I 7, % Tier II Total Capital 1,594 9,528 Debt- Equity Ratio (excluding Treasury assets ) 4.9 Risk Weighted Assets 55,904 First fund raise in Q3 FY18 since listing of ~INR 1,500 Cr and backed by a liquidity cushion of 9% of Balance Sheet 26

27 With a diversified borrowing base Sources of Borrowings As on 31 st Mar 18 Others 11% Retail 11% 30% Mutual Funds Asset Specific Borrowing 7% Total Borrowings INR 47,323 Cr 41% Banks 27

28 Building a High Quality Organization 28

29 We respect Risk in every form Business Risk Technology Risk Financial Risk Fraud Risk Eight Risk Framework Liquidity Risk Reputational Risk Regulatory & Compliance Risk Operational Risk 29

30 Business Corporate Controller & audit When faced with Risk we ask ourselves : Can we afford it? AND Is it worth it? Oversight by Board Risk Committee Global Risk Committee Business Risk Group Risk Enterprise Risk Management Council Implementation of risk framework First line of defence Define Organisation risk framework Second line of defence Identify key current and potential risks Develop mitigation plan 30

31 We aim for the highest standards in governance 6 out of 11 directors are independent Mr. K Chinniah Served as Managing Director & Global Head Infrastructure, Portfolio, Strategy & Risk Group with GIC Special Investments Mr. P N Venkatachalam Banking sector expert and former member of the Interim Pension Fund Regulatory Authority of India Former MD, State Bank of India Mr. Sanjiv Misra President of Phoenix Advisers Pte. Ltd, a boutique advisory firm. Worked with Goldman Sachs, Citigroup Mr. Berjis Desai An independent legal counsel engaged in private client practice. Retired as Managing Partner at J. Sagar & Associates Mr. Navtej S. Nandra Served as President of E*TRADE Financial Corp. Prior to this he served as CEO for Morgan Stanley Investment Mgmt Inc. and COO for Wealth Management at Merrill Lynch Mr. Biswamohan Mahapatra Former RBI Executive Director, chaired various committees of RBI Handled varied areas of banking regulations, policy and supervision A diverse board with rich experience: 300+ years of collective work experience across multiple fields Key board committees like audit and remuneration consist almost entirely of Independent Directors 31

32 While our culture of ownership is key to our success We have a Strong and Deep Leadership Pipeline Shareholder Profile (As on 31 st Mar 18) 6% of total no. of Employees DIIs, Non Institutions & Others Employee Trust 4.9% 22.5% 43.9% 28.7% Foreign Institutions & Companies Management & Employees 32

33 So is our culture of investment in our community EdelGive Foundation Our Unique Philanthropic Platform focusses on Education, Livelihoods and Women s Empowerment 33

34 India Tailwinds 34

35 5 irreversible trends of financial services as India goes to USD 5 Trillion Trend 1 Financialization of Savings 2 Democratization of Credit 3 Privatization of Economy These trends are not new they have been under way for nearly 25 years! 4 Disintermediation in financial services 5 Localization of Financial services As India gains scale, these trends are becoming more visible 35

36 120 % 100 % 80% 60% 40% 20% 0% Indian savings shifting to financial assets INR Trillion % 31% 33% 36% 36% 42% Financial Savings Physical Savings Financial Savings / Total Household Savings Coming decade likely to witness the trend of increasing proportion of financial assets as a proportion of total assets in line with global peers Source: CSO 36

37 Democratization of Credit Household credit growth to outpace other segments Moving towards efficient credit markets backed by Debt/ GDP Expected Growth Rate Improved Credit Underwriting Corporate 55% 14% Data access via Credit Bureaus Government 70% 12% Unique Identification Code Household 10% 24% Digitization of Collateral Source: Edelweiss Estimates 37

38 Privatization of Economy Privatization of Indian Economy Private Sector Banks gaining market share % share in incremental credit from Private Sector 50% 45% 59% 78% 50% 55% 41% 22% Public Private Source: Edelweiss Estimates 38

39 Disintermediation in Financial Services Banks ceding market share to Non-Banks 1 % of total outstanding credit % 24% 26% 77% 76% 74% Non-banks gaining share in total outstanding credit through increasing share in incremental credit Mutual Funds and Insurance companies substituting banks in Credit and Deposit streams Banks Non-Banks Source: CRISIL 39

40 Localization of Financial Services Foreign players have exited the Indian asset and wealth management market Asset Management & Wealth Management Fidelity JP Morgan Morgan Stanley BlackRock Goldman Sachs Nomura Deutsche Standard Chartered KBC Natixis ING Pine Bridge Royal Bank of Scotland Credit Without exiting, Foreign players are ceding their market share to domestic players 40

41 All these trends power our growth and profitability across businesses Edelweiss Business Benefited Trend Retail Credit Corporate Credit Wealth Management Asset Management Capital Markets Insurance Financialization of Savings Democratization of Credit Privatization of Economy Disintermediation in Financial Services Localization of Financial Services Our unique business model makes us a structural play on these tailwinds and not a cyclical one 41

42 Our 2020 aspirations : A report card FY17 FY18 1 Consistently grow our PAT at 25% - 35% annually 47% 46% 2 Reach a minimum Consolidated RoE of 18% 15.5% 17.1% 3 Reach a minimum Ex-Insurance RoE of 22% 20.7% 22.1% 4 Maintain Ex-Insurance Cost to Income Ratio below 50% 54% 47% 5 Increase Retail Credit Book to 50% of Total Credit Book 33% 39% 6 Maintain our asset quality with GNPA below 2% 1.59% 1.75% 7 Enhance long term credit rating to AAA AA AA 2020 Aspirations as disclosed in FY17 42

43 Our Right to Win Diversified model with Scalable, Profitable and Niche business segments Deep Talent Pool and Culture of Ownership Highest Standards of Risk Management & Governance 43

44 While tailwinds are constructive, we obsess about Helping our Customers achieve their goals Continuously simplifying the way we operate Maintaining our Culture and Values as we scale Being the home for the Best Talent in India Protecting our Reputation at all times While the India opportunity is available to all players, Execution is KEY 44

45 Awards and Recognition Wealth Creators Super 50 Dalal Street Journal 2018 Best Private Bank - India Asiamoney Best Bank Awards 2018 Best Product Innovation - Wealth Plus ET Now BFSI Awards 2017 Fastest Growing Housing Finance Company Golden Globe Tigers Awards 2018 Best Housing Finance Company (mid & small) ET Now BFSI Awards 2017 Featured among India s Super 50 Companies Forbes India