Edelweiss Financial Services


(Sridhar) #1

Edelweiss Financial services - CMP 54

Note: Starting this thread to get views from fellow VPs

EFS is a diversified financial services group operating in 4 business groups

1. Financial markets ( Incl AM)2. Credit/Loans3. Life Insurance4. Commodities

Credit include wholesale finance, Housing loans and SME Loans etc

Edelweiss today has touch points in 545 cities including 280 tier3 to 6 towns. This includes its own 211 offices in 106 cities.This presence helps the Group service a wide spectrum of over450,000 clients.

Though it has wonderful performance from 2003 to 2008, it has started struggling from 2009 to 2014. this is mainly due toIn the last five years it has launched sevenbusinesses -- Corporate Credit in FY08, Commodities and RetailFinancial Markets in FY09, Retail Credit in FY11, Life Insurance inFY12 and SMEand Small Ticket Housing Finance in FY13. Because of which profitability has hit severely and did not move anywhere.

Currently it seems to be consolidated its position with retail loans and financial markets broke even and insurance segment growing fast but in loss.

The same has been reflected in number at top line and bottom line

Consolidated numbers for last 5 quarters

in Crores

Sep'14

Jun'14

Mar'14

Dec'13

Sep'13

Total Income

904

806

696

641

579

Employee cost

170

143

129

122

101

Other expenses

181

148

150

123

102

PBIT

540

501

402

388

364

Interest

422

385

298

309

292

PBT

118

115

104

79

72

Tax

45

44

46

30

30

PAT

73

72

58

50

43

Not sure why the tax rate is so high.

Current PE: 15, P/B:1.5, Div Yield: 1.3 % MCAP: 4161 Cr

Disl: Not invested.


(..pd..) #2

Adding to it, Rakesh Jhunjhunwala bought 1cr. shares @ 55/-


(Naveen Gupta) #3

Asset reconstruction division has a portfolio of Rs 180 billion. If they are able to earn net profits of 5% over next 3-5 years it can be Rs 900 cr profits which is 3 times the total annual net profits of the entire company right now. Can seniors familiar with ARC business throw more light on this?


(Rajesh Kumar) #4

It is a large financial conglomerate, which operates through 48 subsidiaries. It is present in almost all financial services, and most probably it will also apply for small bank license. It is a complicated business and difficult to analyse here.

Still at 4000 Mcap, appears undervalued. In falling interest rate scenario, its profit will soar.


(vaibhav) #5
  • The promoter has been buying in good numbers.

  • Jhunjhunwala has bought @55.

  • Board had approved buyback max. upto at 45/- a few months back.

  • Interest rate lowering and Insurance bill may be triggers for the stock

  • RoE has been increasing for past 3 years. Excluding the insurance biz., the RoE is actually decent. Investor presentation dated 15th May is present here -

http://www.researchbytes.com/Edelweiss-Financial-Services-Limited-E0360.htm

Disc: bought today (partially).


(Nelson) #6

First of all to people starting a thread…Please do make sure that the name of the company is spelled correctly…otherwise people searching for it may not get the right results due to wrong spelling.

I had gone through the 2015 AR and one unique thing I found is that they do not look at yearly plans they have a well defined plan of 3 years. That speaks volumes about the thinking of the management and people running the company. Mr Rasesh Shah is well known and respected. Also in the AR they talk about return on equity ex insurance since it is a relatively new business and will guzzle cash for some time.

I feel it is slightly undervalued at current price. I feel it may need to show at least few quarters of decent growth for people to get excited about it and have a re-look.

There are some decent businesses in the company. Problem is many of them have not attained scale which is critical. The AMC biz is small so is the Housing Fin biz. But this may also be a blessing in disguise if they can manage good growth albeit on a lower base. If we look at the prospective sectors and sub sectors that the company is in and take a long term view then it has lot of headroom to grow. Falling interest rates may be a catalyst. As can be strategic acquisitions.
Views Invited from Senior Members.

Disclosure: Invested at 55


(jinushah) #7

Edelweiss as i know has a very efficient risk management. This is what separates the Financial services business. As rightly pointed out by Nelson ECL has been actively incurring capex since last few years and benefit of the same will be seen during years to come. The strategy seems well defined and on path. The only concern was the ARC business. ECL is working towards a quasi banking structure and has allocated capital towards many different businesses which done rightly can create good synergy.

Its results release claims 18 quarters of consistent growth in profits. it has divided business in to 2 major verticles

  1. Credit business which has wholesale credit, RE Finance, Distressed asset Credit, Retail credit of HFC, SME, Agri finance, and Rural finance with total book @ 20k crs growth of 33% yoy

  2. Non credit - which includes capital markets, wealth mgmt, Asset mgmt, and BMU ( Balancesheet management unit) which is evident of their risk practices. BMU is seen as independent function and has apt risk management processes.

Over all many of these businesses are just gearing up for next league.

disc: invested


(Vivek Gautam) #8

Not much activity on this thread. An excellent ppt on Rashesh Shah enclosed. Views invited


(Vivek Gautam) #9

http://edelweissfin.com/Portals/0/Documents/Financial_Information/FY16InvestorPresentation.pdf

discl-hv a small position


(Vrushali Rakesh Jadhav) #10

Q1Fy17 Result


(Vrushali Rakesh Jadhav) #11

When is analyst meet.please share details


(jinushah) #12

letter from chairman awesome insight on edelweiss

http://edelweissfin.com/Annual-Report-Microsite-2016/Pdfs/LetterfromChairman.pdf?utm_source=email_1&utm_medium=00&utm_campaign=LL


(Tirath Muchhala) #13

Their investor day conference - audio in the link.

http://edelweissfin.com/Mydnn/Portals/0/Documents/Miscellaneous/Investordayaudio.lite.mp3

I had attended it. Key takeaways:
Focused on risk control
Ability to scale back when things get too heated - hence, trying to diversify lending book
Diversified business model allows flexibility to reallocate capital or resources
Future focus is more on retail and SME credit book
Emulate HDFC and Kotak quite strongly - - risk control and aggression when others are in the dumps

Looking forward to some critical comments from members.

Add: They have published a transcript of the meet. Makes things easier.
3451AAD5_4E15_46AC_8AB6_FC1B8E5EBD98_154328.pdf (457.0 KB)


(jinushah) #14

thanks Tirath, great thought process


(Marathondreams) #15

excellent results from Edelweiss
http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/C1990E1E_2F79_46CB_B746_921DD3D1FA70_111112.pdf
Revenue up 28%, PAT up 51%

Disc- invested


(GSApte) #16

Hi All,

I am tracking this stock for some time, and looks reasonably valued at present after recent correction.

Stock Screener shows promoter pledging as 41.54%. Is this correct? Is this for expanding the business such as Insurance in past few years? I am not able to understand hence raising this query here.


(ramanhp) #17

This is Sept 2016 news. As per this the encumbered shares stood at 9.90%

Two lakh pledged shares, amounting to 2.43 per cent stake, of Edelweiss Financial Services have been released by Vistra in its capacity as a security trustee. These shares were pledged by the company’s promoter Rashesh Shah to secure a term loan facility, according to a filing on the BSE.
Following the release, the total amount of encumbered shares came down to 9.90 per cent.


(GSApte) #18

Hi,

I have studied the business model in detail and feel that, Management is of high quality and have diversified the business quite well across various areas. They have reduced the risk post 2008-09 days well, and Insurance business could grow faster in next few years, in additional to retail loans.

I have not understood the reason for high promoter pledging which is around 44% as per screener.in.

This is major concern for me which I am aiming to understand more. I generally prefer business where there is no promoter pledging or less than 10%-15% of promoter pledging.

Any guidance on this would help me understand this business better.
Current P/B looks attractive but unable to understand high promoter pledging in this case.
May be, my understanding of finance is limited compared to IT industry where I work.


(jinushah) #19

http://economictimes.indiatimes.com/mf/mf-news/edelweiss-completes-acquisition-of-jp-morgan-mf/articleshow/55679903.cms


(sushilkc) #20

Does anyone has any update from management or analyst community on impact of demonetization and the changed business environment on Edelweiss business ? I have not seen anything from management and interested to know if there is any update. Any view from fellow investors on the impact on business ?