Edelweiss Financial Services Limited (Formerly Edelweiss Capital

Strictly Private and Confidential
Edelweiss Financial Services Limited
October 2011
(Formerly Edelweiss Capital Limited)
Contents
1.
Edelweiss Overview
2.
Performance Analysis & Environment
3.
Business Overview
4.
Edelweiss Strengths
5.
India: Growth Opportunities & Edelweiss Strategy
2
Edelweiss Group - Introduction
Leading diversified financial services organization
Incorporated in 1995 as an investment bank with focus on Private
Equity Syndication
Key businesses: Life Insurance, Housing Finance, Asset
Management, Credit and Capital Markets including Investment
Banking and Brokerage – Institutional, HNI and Retail
FY11 Revenue of ` 14.91 bn, PAT of ` 2.33 bn
12 year CAGR for Revenue 78% and for PAT 67% upto FY11
Balance Sheet size ` 109 bn as on Sept. ‟11
Group Networth ` 28.45 bn as on Sept. „11 (including Minority)
2860 employees and 308 offices in over 140 cities pan India
3
Evolution through Synergistic Diversification
Life Insurance
Retail Broking & Dist.
Retail Broking & Dist.
IPO Distribution
+ Broking, Anagram
acquisition
Asset Management
Asset Management
Alternatives
+ AMC
Credit
Credit
Credit
Sponsor and IPO
+ ESOP
+ LAS, Housing Loans
HNI Businesses
HNI Businesses
Wealth Advisory
Broking
+ Fin Product Dist.
+ Wealth Management
Treasury
Treasury
Treasury
Treasury
Equities Arbitrage
+ Special Situations
+ Fixed Income
+ Commodities
Institutional Equities
Institutional Equities
Institutional Equities
Institutional Equities
Equity Derivatives
+ MFs and Insurance
+ International Long
+ Automated Trading
Investment Banking
Investment Banking
Investment Banking
Investment Banking
Investment Banking
PE Syndication
+ M&A Advisory
+ ECM
+ DCM
+ Project Finance
1996 - 2000
2000 - 2005
2005 - 2007
2007 - 2009
2009 - 2011
From an Investment Banking firm to a Diversified Financial Services Organization
4
Market Presence Strategy
Synergistic Diversification in adjacent markets
across businesses, products, asset classes and client segments
Businesses
•Life Insurance
Growth Levers
•Housing Loans
•Domestic and
Alternate Asset
Management
•Credit
•Capital Markets
Asset Classes
• Equities &
Derivatives
• Fixed Income
Client Segments
• Institutions
• Corporates
• Commodities
• High Net-worth
Individuals
• Currencies
• Mass Affluents
• Distressed Assets
• Retail
5
H1FY12 Highlights
Total Revenue for H1FY12 ` 7,745 mn
Profit After Tax for H1FY12 ` 595 mn
Group‟s Total Networth ` 28.45 bn including Minority
Results after investments in incubating new businesses – Life Insurance
and Retail Businesses. Collective impact of these investments, other
investments which are currently non-yielding, depreciation on new
office building and challenging environment at Profit after Tax level is
about ` 220 mn in H1FY12
Life Insurance business commences operations in July’11
6
Q2/H1FY12 Consolidated Results
` Million
FY12
FY12
FY11
FY12
FY11
FY11
Q2
Q1
Q2
H1
H1
Annual
Fee and Commission Income
1,047
971
1,437
2,018
2,371
5,001
Interest and Treasury Income
2,763
2,882
2,313
5,645
4,172
9,718
43
39
11
82
58
192
3,853
3,892
3,761
7,745
6,601
14,911
Operating and Other Expenses
969
861
919
1,830
1,555
3,531
Employee Cost
623
612
606
1,234
1,105
2,354
1,761
1,844
1,215
3,605
1,991
5,322
85
57
36
143
73
204
3,438
3,374
2,776
6,812
4,724
11,411
Profit Before Tax
415
518
985
933
1,877
3,500
Tax Expenses
131
162
297
291
534
1,031
Profit After Tax
284
356
688
642
1,343
2,469
21
24
27
46
69
139
Profit After Tax and Minority Interest
263
332
661
596
1,274
2,330
Diluted EPS# (in `) (FV ` 1)
0.34
0.43
0.85
0.78
1.64
3.00
Other Operating Income
Total Revenues
Financial Expenses
Depreciation
Total Expenses
Share of Minority Interests in Profits
Capital based Revenue 73% of Total Revenue in Q2FY12
#Qtly/Hyl EPS not annualised, adjusted for corporate actions
7
Financials of Edelweiss Financial Advisors Ltd. (formerly Anagram Capital) consolidated wef 16 th July „10
Agency & Capital Revenue Analysis
Net Revenue concept becoming more relevant to Edelweiss with growth in
Capital-based Revenue
` Million
FY12
FY12
FY11
FY12
FY11
FY11
Q2
Q1
Q2
H1
H1
Annual
Agency (Fee and Commission Income)
Income from Broking
675
724
771
1399
1,297
2,936
Investment Banking Fees
110
72
439
183
654
1,117
Asset Mgt & Other Advisory Fees
262
175
227
437
420
948
1,047
971
1,437
2,019
2,371
5,001
2,763
2,882
2,313
5,644
4,172
9,718
43
39
11
82
58
192
Less: Interest Cost
1,761
1,844
1,215
3,605
1,991
5,322
Capital Net Revenue
1,045
1,077
1,109
2,121
2,239
4,588
Total Net Revenue
2,092
2,048
2,546
4,140
4,610
9,589
Total Operational Expenses
1,677
1,530
1,561
3,207
2,733
6,089
Operating and Other Expenses
969
861
919
1,830
1,555
3,531
Employee Cost
623
612
606
1,234
1,105
2,354
85
57
36
143
73
204
415
518
985
933
1,877
3,500
Agency Net Revenue
Capital Revenue
Interest & Treasury Income
Other Operating Income
Depreciation
Profit Before Tax
Balanced mix of Agency and Capital Net Revenue
8
Financials of Edelweiss Financial Advisors Ltd. (formerly Anagram Capital) consolidated wef 16 th July „10
Balanced Growth & Business Mix at Net Revenue Level
(In ` million)
H1FY12
52%
2,121
2,019
FY11
48%
48%
4,588
FY10
5,001
52%
55%
2,171
4,331
3,493
Net Interest & Treasury
and Others
Fee & Commission
Agency and Capital Net Revenue contributing nearly equally
9
3,504
4,438
45%
Summary Balance Sheet
As on Sept 30, ‟11
Unaudited
` Million
As on Mar 31, ‟11
Audited
Sources of Funds
Shareholders‟ Funds
26,048
24,399
Loan Funds
80,497
78,370
2,405
1,155
108,950
103,924
Fixed Assets
5,076
4,781
Goodwill on Consolidation
1,395
1,395
15,393
3,887
537
528
Current Assets
97,883
140,755
Less Current Liabilities
11,334
47,421
86,549
93,334
108,950
103,924
Minority Interest
Total Sources of Funds
Application of Funds
Investments
Deferred Tax Assets
Net Current Assets
Total Application of Funds
Strong Balance Sheet with a reasonable Leverage
Prior period figures have been regrouped/reclassified wherever necessary
10
Liquid Balance Sheet with Reverse ALM
Assets
As on Sept 30, ‘11
Short-term Assets
Bank Bal. & FDs – Rs. 3200 cr
(30%)
Liabilities
Short-term Borrowings
CPs - Rs. 4500 cr
(41%)
Short-term Assets
Treas & WC Assets – Rs. 3700 cr
(33%)
Mid-term Borrowings
Bank Borrowings – Rs. 2100 cr
CBLO Borrowings – Rs. 700 cr
(26%)
Long-term Borrowings
NCDs/Bonds – Rs. 750 cr
(7%)
Mid-term Assets
Credit Book – Rs. 2600 cr
(24%)
Long-term Liabilities
Networth – Rs. 2850 cr
(26%)
Long-term Assets
Corp. Assets – Rs. 1100 cr
Inv. – Rs. 300 cr
(13%)
Figures in brackets indicate % of total assets or liabilities
11
Edelweiss Over The Years
Financial Year
(In ` mn except as indicated)
H1FY12
2011
2010
2009
2008
2007
2006
2005
2004
Total Income
7,745
14,911
9,778
9,005
10,888
3,718
1,533
727
281
Total Expenditure
6,812
11,411
6,450
5,715
6,421
1,971
898
383
175
Profit Before Tax
933
3,500
3,328
3,290
4,467
1,747
636
345
106
Tax Expenses
292
1,031
879
1,199
1,540
646
218
107
28
Net Profit (after minority)
595
2,330
2,292
1,864
2,732
1,099
417
237
78
12
23
34
37
41
47
41
47
38
757
752
375
375
375
45
38
29
28
26,048
24,400
22,574
21,154
18,476
5,823
1,784
539
302
34
32
30
28
25
9
4
2
1
0.8
3.0
2.9
2.4
4.0
2.1
0.9
0.6
0.2
5
10
10
9
28
34
39
56
30
Pre Tax Margins (%)
Paid up Equity Share Capital
Book Networth (excl.
minority)#
BVPS (FV ` 1) (`)#
Diluted EPS (FV ` 1) (`)#
RoE (%)
(#) Adjusted for corporate actions; Half Yearly EPS not annualized
12
Performance Analysis and Environment
Operating environment continues to be tough
Volatile equity markets coupled with lower activity
Low ECM and M&A activity in Q2
Interest rates continue to remain high
14
Markets continued to be volatile in Q2
In H1 markets showed
growth; esp near end of Q2
Mid caps dropped significantly;
volatility and risk increased
Tight monetary stance of RBI;
investment demand impacted by
negative sentiment
130
100
70
40
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
S&P 500
Feb-11
Nifty
15
Apr-11
Nifty Midcap
Jun-11
Aug-11
Sept-11
Short term rates continue to be high
Yield
Percent
10 Yr Gsec
8.5
8
7.5
1 Yr Gsec
7
6.5
6
5.5
5
4.5
4
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
1 Yr G-Sec
10 Yr G-Sec
16
Apr-11
Jun-11
Aug-11
Oct-11
Marginal rise in overall volumes, cash ADV declining Q-on-Q…
Average Daily Volume
Average Daily Volume
` in bn
` in bn
1200
1500
53%
57%
1550
1330
1470
65%
67%
69%
25%
23%
21%
1200
1000
800
600
400
31%
29%
200
16%
14%
10%
11%
9%
Q2'11
Q3'11
Q4'11
Q1'12
Q2'12
0
Q2'11
Q3'11
Cash
Q4'11
Futures
Q1'12
Q2'12
Options
Cash
Overall volume increased in Q2, up 11% Q-o-Q
Volume mix further skewed towards options
Cash volumes further declined in Q2
17
Futures
Options
Net FII Outflow in Q2
Net FII Flow
USD bn
14
12
10
8
6
4
2
-2
-4
-6
Q1'08
Q3'08
Q1'09
Q3'09
Q1'10
Q3'10
Q1'11
Q3'11
Q1'12
Net FII outflow of ~USD 0.15 bn in last three quarters
18
Fund raising activity declining over the quarters…
Capital raised
Capital raised
` in bn
` in bn
501
533
1,539
426
298
879
208
186
147
120
140
180
FY10
FY11
40
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
FY12YTD
FY10
FY11
FY12
Market activity declined significantly in Q2 compared with Q1FY12
Low ECM activity also impacted associated revenues in IPO funding and trading
investments
19
M&A and PE activity flat or lower QoQ
M&A Deals
Private Equity
1000
125
800
300
100
No. of Deals
Volume in ` bn
No. of Deals
600
200
400
100
0
200
Q1'10
Q3'10
Q1'11
Volume
Q3'11
Q1'12
200
150
75
100
50
50
25
0
0
No. of Deals
Q1'10
Q3'10
Q1'11
Volume
20
Q3'11
Q1'12
No. of Deals
-
Volume in ` bn
400
Mutual Fund Industry Average AUMs
` bn
8,000
7,000
6,000
Negative quarter after 3
quarters of marginal
increase in AUMs
5,000
4,000
3,000
2,000
Q1'09
AUMs do not include Fund of Funds
Q3'09
Q1'10
Q3'10
21
Q1'11
Q3'11
Q1'12
Retained/increased market shares in this tough environment
Market Share
Q2FY12
FY11
FY10
Institutional Equities
4.5%
4.6%
5.0%
Retail Broking
1.2%
1.2%
0.5%
Q2FY12
FY11
FY10
Credit Book
26
26
18
Asset Management
AUM/AUA
23
18
11
Book Size/AUM
In ` bn
Established businesses holding their ground; retail businesses gaining traction
Market Share based on management estimates
22
Core Business Operations Strong
Declining Market activity; Despite slowdown in IB and lower cash volumes,
Wholesale Capital Markets businesses continue to be strong as market shares
have been retained/increased
Retail Capital Markets businesses volatile; lack of retail participation and
uncertainty in markets; focus on containing costs
Credit business focus on expanding margins and controlling credit costs
Rising interest rates impacting PBT adversely across businesses; operating
parameters at acceptable levels
Non-yielding Investments and depreciation on office property– drag on
profitability
23
Focus on Efficiency Enhancement
Steady businesses preserving topline; impact of challenging environment and
rising interest rates contained
Investments in incubating Retail businesses on track despite current headwinds;
build-out drag stable despite calibrated increase in costs
Growth businesses to break-even during FY12 & FY13
Insurance business build out costs to go up gradually with scale up of business;
overall impact at PAT level in FY12 to be ` 450 to 500 mn
Despite flat revenues QoQ, efficiency in steady businesses has been
improved/maintained
24
One more year of investing…
We have achieved top-line growth and product and business diversification over
the last 3 years
One more year of investing to impact PBT
Steady businesses will be able to absorb the impact; and
Benefits to start accruing on some investments
Industry going through a challenging operating environment and regulatory
changes
Edelweiss‟ business growth perspective aligned to the business outlook in the
medium term of 3 to 5 years
25
Business Overview
Business Portfolio
Housing Loans
Life Insurance
New
Businesses
Retail Broking
Asset Management
Credit
Growth
Businesses
Established
Businesses
HNI Businesses
Treasury
Institutional Equities
Investment Banking
Capital Businesses
Balanced Portfolio across
Agency and Capital based Businesses
Established, Growth and New Businesses
27
Agency Businesses
Life Insurance
Life Insurance business with JV partner Tokio Marine Holdings, Inc.
Business commences operations in Q2FY12
To enlarge Edelweiss‟ retail footprint as a part of overall retail businesses
strategy including recently launched retail broking, housing finance and domestic
Asset Management businesses
To expand beyond capital markets and tap large Indian household savings
Offers diverse products basket covering term plan, savings options, credit
protection and ULIP fund options
Presence now expanded through 19 branches at 14 centers
Trained force of 350 Personal Financial Advisors
To increase number of offices and PFA workforce going forward
` 5 bn equity infusion in the company by both the partners in Q1FY12 – highest
capitalization at start up in India for a life insurer
28
Housing Finance
Housing Finance business launched in H2FY11
Large business opportunity given young demographic profile of India and low
penetration of residential mortgages
Book size ` 3.50 bn at the end of Q2FY12 ; monthly disbursement run rate
~ ` 600 mn
Operations in Mumbai, NCR, Bangalore, Pune and Ahmedabad. Plan to cover more
metros in FY12
Product offering: Home Loans, Loans Against Property and Lease Rental
Discounting
Diversifies asset class in our Credit book
Significant opportunity to cross sell other products to its clients
29
Asset Management
Alternative Asset Management
Current focus largely on offshore institutional investors
Product Portfolio includes
EW Special Opportunities Fund
Real Estate (existing domestic fund), Distress Asset Fund, Structured
Products
AUMs/AUAs of USD 380 mn equivalent as the end of Q2FY12
Traditional Asset Management
Current focus on expanding the product portfolio and building investment
track record; Part of our strategy to have a larger retail footprint
Have 11 schemes across equity and debt funds with AUMs of ` 4.7 bn.
Active investor base crosses 5,000; Distribution network scaled up, ~3,000
distributors empanelled
Edelweiss Absolute Return Fund received Best Marketing Campaign of the
year and Brand Excellence in BFSI segment awards at the 2011 CMO Asia
Awards, Singapore
30
Credit
Credit business
Steady state credit book at ` 26.4 bn at the end of Q2FY12
Average yield on steady state credit book 16.6% in the second quarter
Average collateral cover at 2.71x
Capital Adequacy Ratio of ECL Finance Ltd 33.6% as on 30th Sept ‟11
with a Networth of ~` 12.67 bn
Focus on scaling Credit business across wholesale and retail products
Wholesale - Loans to Sponsors, Corporates & SME; Retail – LAS, ESOP, IPO, LAP & Housing Loans
31
Credit Book Growth and Exposures
Credit Book Growth & Composition
Top Sector Exposures as on 30th Sept '11
35
30
Mortgages/LAP
5%
25
13%
` in bn
6%
20
Media & Entertainment
Real Estate
6%
Infrastructure
15
12%
7%
Organized Retail
Consumer
10
Others/ Diversified
8%
11%
5
10%
-
Wholesale
Retail
BSFI (Banking/NBFC)
Engg & Cap Goods
10%
IT & Telecom
Housing /LAP Loans
A well diversified credit book with a robust risk
management approach
Retail loans constitute 30% of the total book
32
Investment Banking
One of the widest product portfolios among the investment banking franchises in
India
Broad range of services from Capital Markets (ECM - IPOs, FPOs, QIPs,
Rights, Open Offers, Buy Backs and DCM) to Advisory (PE Syndication, M&A,
Structured Finance, Infrastructure Advisory)
Advised over USD 1 billion PE Investments and Strategic Exits since May ‟09
Strong franchise with emerging and mid market companies, Public and Private
Sectors, gaining traction with large corporates
Fixed Income Syndication ranked 4th among debt arrangers for H1FY12#
47 deals across ECM, Advisory and DCM in FY11; 17 deals in H1FY12
Edelweiss is ranked 2nd in ECM (IPO, FPO, Rights & QIPs) by number of deals below ` 4 bn in FY11#
#Source
Prime Database
33
Marquee ECM & Advisory Transactions FY11
Edelweiss is ranked 8th in ECM by total number of deals in FY11#
#Source Prime Database
34
Debt Capital Market Transactions FY11
Edelweiss is ranked 3rd in Short Term Bonds placement and 4th in CP issuance in FY11#
#Source Prime Database
35
Advised over USD 1 bn of Investments and Strategic Exits since May „09
Transaction
Company
Investors
Private Equity Investment
INR 9,600 Mn
Private Equity Investment
INR 1,500 Mn
Private Equity Investment
INR 2,400 Mn
Leading liquid logistics co.
Private Equity Investment
INR 1,500 Mn
Private Equity Investment
INR 13,500 Mn
Private Equity Investment
INR 5,800 Mn
Strategic Exit
INR 7,000 Mn
Macquarie – SBI Infrastructure Fund
Xcel Telecom
Strategic Exit
INR 7,396 Mn
WL Ross & Co
Strategic Exit from an Internet company
Edelweiss acted as a trusted advisor to over USD 1 billion of Private Equity Investments and Strategic Exits since May 2009
36
Institutional Equities
One of the Leading players in Institutional Equities
market share of ~4.5%
Wide client coverage – across investor types and geographies
Robust technology platform and strong execution capabilities
Broad range of Trading products – Blocks, Bulk deals, ETF/Basket trading,
Index replication products, Derivatives modules, Algo execution
186 stocks under coverage - one of the largest Research coverage universe
Strong positioning in Thematic Research - identifying large structural themes
across sectors
Thought leader in quant and alternative research
over 15 regular products such as pair-trading strategies, corporate event
tracker, special situations
Significant access to corporates through Research coverage, Global
conferences and events
37
Research Coverage – Sample Reports
38
HNI Businesses
Wealth Advisory and Investment Services
HNI is a large growing market opportunity
India has an existing base of nearly 0.5 m individuals with greater
than USD 0.5 m investible assets, expected to grow at ~15-18% per
annum
A truly multi-asset class offering with innovative, customised and
structured solutions; Product portfolio strengthened to include currencies
and Real Estate advisory
Among the largest domestic issuers of Structured Products
Strong research advisory support
Launched “Edelweiss Private Banker Programme”, a talent development
initiative
39
Retail Broking & Distribution - 1
Retail Broking
New growth initiative at Edelweiss – targeting the mass affluent
Centralized model of online (www.edelweiss.in) and tele-calling based
broking
Decentralized model of branch and franchise based broking through
Edelweiss Financial Advisors (formerly Anagram Capital)
Client base of over 354,000 as on Sept „11
Nationwide network of 261 own offices, 47 franchise offices, over 4000
Sub-brokers and Authorized Persons
Strong product offering based on delivering services as per client profile
High quality execution platform with best in class reporting
One of the widest Research offering for individual clients
40
Retail Broking & Distribution - 2
Retail Distribution
Started in 2007 with initial focus on Equity Initial Public Offerings (IPO
distribution)
Network of 7000 distributors across 320 cities
Second largest mobilizer in IPOs for FY11# (non-ASBA)
Ranked 1st in HNI category (market share 16%) and 3rd in Retail category
(market share 8%) by amount mobilized in IPOs for FY11#
Expanding into other products: MF, Corporate Debt and Insurance
distribution
Unique web-offering to provide access to channel partners
#Source
Prime Database
41
Treasury & Investments
Manages liquidity in the Group with optimum risk adjusted returns
Strong focus on capital preservation and liquidity
no negative quarter since 2001, no negative month since 2005
~80% of the book can be liquidated within 3 days with less than 1%
impact costs
Origin in Equity and Equity Derivatives, now one of the few truly multi asset
class treasury operation including fixed income, commodities and currencies
Low correlation between market returns and treasury performance
50%
10.0%
40%
8.0%
30%
6.0%
20%
4.0%
10%
2.0%
0%
0.0%
-10%
-2.0%
-20%
-4.0%
-30%
-6.0%
Q1
FY08
Q3
FY08
Q1
FY09
Q3
FY09
Q1
FY10
Nifty Qtrly Returns (LHS)
Q3
FY10
Q1
FY11
Q3
FY11
Q1
FY12
Treasury Qtrly Returns (RHS)
42
Edelweiss Growth Strategy - 1
Synergistic diversification into adjacent markets, newer client segments,
newer asset classes within the financial services industry
Have followed this strategy to establish leading businesses in wholesale
markets
Insurance initiative - JV with Tokio Marine Holding Inc. to expand beyond
capital markets and tap large Indian household savings
Operations launched in July „11
While scale up of wholesale credit continues, now building retail credit book –
margin funding and housing finance
Asset Reconstruction Company scaling up operations
Wholesale Asset Management AUMs/AUAs to be scaled up
43
Edelweiss Growth Strategy - 2
Expanding the footprint to retail capital markets
Retail Broking platform www.edelweiss.in
Anagram acquisition
Wealth Advisory and Investment Services
Retail Distribution
Asset Management
This will require ongoing investments in building new businesses while
continuing to benefit from scale up of existing businesses
44
Edelweiss Strengths
Edelweiss Strengths
Growth with
Profitability
Culture &
People
Strong Balance
Sheet
Risk
Management
Diversified
Revenue
Streams
Cost
Flexibility
46
Growth with Profitability
12 year Revenue and PAT CAGRs of 78% and 67%
Approach: growth through adjacent markets and client segments; through
widening the product mix in existing businesses
` mn
` mn
Total Income
16,000
Profit After Tax
3,000
14,000
2,500
CAGR 78%
12,000
CAGR 67%
2,000
10,000
8,000
1,500
6,000
1,000
4,000
500
2,000
-
FY99
FY01
FY03
FY05
FY07
FY09
FY11
FY99
FY01
FY03
FY05
FY07
FY09
FY11
Growth with
Profitability
47
Culture &
People
Strong
Balance Sheet
Risk
Management
Diversified
Rev. Streams
Cost
Flexibility
Strong Balance Sheet
Strong balance sheet
Group Networth of ~` 28.45 bn (including minority) (Sept „11)
Steady State Gearing of 2.83x including minority, enough capacity to
lever
Liquid balance sheet
Liquid balance sheet with ~40% in Cash and Cash Equivalents
Total Treasury Assets account for ~50% of the total assets
Reverse ALM mismatch as Asset-side duration much lower than the
duration of Liabilities
Growth with
Profitability
48
Culture &
People
Strong
Balance Sheet
Risk
Management
Diversified
Rev. Streams
Cost
Flexibility
Diversified Revenue Streams
(In ` million)
FY11
51%
7,543
FY09
FY10
5,001
33%
35%
2,367
3,389
3,504
36%
37%
Treasury & Investment
Growth with
Profitability
Interest
Balanced mix across three key operating revenue streams
49
27%
36%
29%
Fee & Commission
2,441
4,438
3,4933,249
2,885
16%
2,171
3,315
Culture &
People
Strong
Balance Sheet
Risk
Management
Diversified
Rev. Streams
Cost
Flexibility
Cost Flexibility
~50% of total costs are variable in nature
Variable employee compensation – varies from 20% to 50% of the total
employee costs
Operating costs - Direct variable costs incl. STT and Transaction costs account
for 40 to 50% of the operating costs
Financing Costs (linked to yield asset book size) – Short term financing costs
account for nearly half of the total Financing Costs
Reflected in ability to maintain PBT margins across cycles
Growth with
Profitability
Culture &
people
Strong
Balance Sheet
Risk
Management
Diversified
Rev. Streams
Cost
Flexibility
50
Risk Management
Four tier oversight on risk covering key risk buckets – financial, operational,
compliance and corporate governance
Business level risk group
Centralized global risk group
Risk committee
Board committee
Strong internal framework for risk assessment supported by robust technology and
processes, and benchmarked to best global practices
Growth with
Profitability
Culture &
People
Strong
Balance Sheet
Risk
Management`
Diversified
Rev. Streams
Cost
Flexibility
51
Culture & People
Ownership
Employees (incl. key management) and employee trust own 53% of the company
One of the largest ESOP pools in the financial services space
~600 employees covered through ESOPs
~6% of our stock in Employee Trust
Leadership
Four tier leadership pool covering over 5% of the organization
Low rate of attrition among senior employees
Continued emphasis on training and leadership development
100 seater training center operational at Alibaug (near Mumbai)
Innovation
Reflected in leadership in new product and asset classes
and new client segments
52
Growth with
Profitability
Culture &b
people
Strong
Balance Sheet
Risk
Management
Diversified
Rev. Streams
Cost
Flexibility
India : Growth Opportunities & Edelweiss Strategy
India: A Structural Shift in Growth
Nominal GDP at USD ~1.4 tn (FY10)
Witnessing a structural shift in the growth trajectory from 4-5% in
70s and 80s to 7%+ in the current decade
1st phase of economic
reforms
Structural shift propelled
by services growth and
reforms
Source: CSO, Edelweiss
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GDP to Savings Flow
GDP
USD 1.4 tn
Banking (60%)
USD 120 bn
26%
Insurance
(20%)
Household Savings
USD 40 bn
USD 360 bn
45%
55%
Capital Mkt
(5%)
USD 10 bn
Physical Savings
Financial Savings
USD 160 bn
USD 200 bn
Others (15%)
USD 30 bn
Physical assets represent ~45% of the total Household Savings
Banking and Insurance account for ~80% of the Financial Savings
Source: Internal estimates
55
Flows reflected in the size of the industry verticals
Banking & Other
Lending
Insurance
Capital Market
Non Banking Financial
Institutions
(11.0)
Retail Capital Markets
Life Insurance
(5.5)
(40)
Banking
Wholesale Capital Markets
(59.0)
Non Life Insurance
(5.5)
(6)
~USD 70 bn
~USD 46 bn
Figures in brackets indicate revenue size in USD bn
Source: Internal estimates
56
~USD 11 bn
Retail accounts for ~50% of Capital Markets
Capital Market
Retail
Retail
(Broking and Distribution)
(4.5)
Traditional Asset Mgmt
(1.0)
Alternative and Offshore
Asset Mgmt
(1.5)
Investment Banking
(Advisory, ECM)
(0.8)
(5.5)
Wholesale
(5.5)
Institutional Equities
(0.8)
Treasury
(1.2)
Credit
(1.2)
~USD 11 bn
Figures in brackets indicate revenue size in USD bn
Source: Internal estimates
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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 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, 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.
For more information, please visit www.edelweissfin.com or drop us an e-mail on [email protected].
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