Edelweiss Financial Services


(jainnitinp) #183

ok thanks…in that case, is Price Waterhouse Chartered Accountants LLP a different entity from PwC…? Because the former is currently the auditor for companies like Sterlite Tech etc…


(jainnitinp) #184

Looks like they both are the same entity…erstwhile PwC is now called Price Waterhouse Chartered Accountants LLP…question is if they are not allowed to audit for 2 years, how are they still auditing some other reputed firms?? What was the real reason then for them to resign?


(Chirag) #185

Maybe this is related to the discussion above. PWC is allowed to audit till Mar 2019: https://economictimes.indiatimes.com/markets/stocks/news/pw-can-carry-out-existing-clients-audit-work-till-march-2019-sat/articleshow/62934800.cms


(jainnitinp) #186

thanks this helps…however, if PW was allowed to audit till Mar 2019 why did they quit in May '18 from auditing Edelweiss?


(Chirag) #187

My guess is after the SEBI ban was announced, no company wants to wait till the end to change the auditor. Companies that can change the auditor early might just do it earlier!

Again just my guess.


#188

was going through the Q1 con call transcript and found keen interest of Motilal Securities in knowing outlook for Capital market, home finance and wealth management biz. In all three segments they are competitors though :slightly_smiling_face:

https://www.edelweissfin.com/documents/30595/238805/Concall%20Transcript%20Q1FY19.pdf


(Akansha17) #189

Mutual Fund holding of Edelweiss Financial Services has shown a decrease in the last month (i.e July’18)

Source: https://www.rupeevest.com/Mutual-Fund-Holdings/132922


(MD RH) #190

Edelweiss have 15% ROE now so upside will be limited from here for next 12-15 months seems…


(1.5cr) #191

We will take exinsurance as insurance is an accounting loss or notional loss. That is the way the business works untils it “breaks even”. Management says this will happen in 2021-2022 that is why exinsurance ROE is the number to go buy. Post that insurance will officially start contributing to the bottom line. They are able to pull 20% ROE in the finance business that is awesome. As base increases growth will slow due to larger base thus the growth rates and ROEs will start coming together hence dilution wont be much of an issue in the long run. This is my understanding please correct me if Im wrong.

Disc: I have a large postiion in edelweiss


#192

It has diverse biz which is difficult to value using a single metric. Consolidated ROE is not usable ratio since Insurance is at a fundamentally different operation with own accounting treatment. Do you use RoE to value insurance biz? Best is to do SOTP and arrive at correct valuation. I remove 2-3x of embedded value from the market cap to arrive at PE (~20x TTM)vs. ex-insurance RoE (20%+). On that basis it looks like less than fairly valued. Ex-insurance RoE has only one direction i.e. up since cost/income ratio in lending and savings products is coming down with scale and sweating of capital. It is generating extraordinary RoE in AMC/capital markets and even ARC which is part of lending. I was going through their wealth plus ulip product in the insurance vertical which has been a big hit.


(ashish agarwal) #193

Earnings are good even topline is good so upperside is not capped no one can predict it


(MD RH) #194

These all are Bullish view points. What about CAR ? It seems , Edel need to go through another set of dilution within 12-15 months which will again tapper off ROE again. The valuation Gap which was is in 2016, that was met (Rose 3 times). If there is no improvement in ROA further , PB re rating is not possible.


(1.5cr) #195

They only just did a QIP. They have enough money to sustain. I think he will dilute straight after the insurance business breaks even in 2021-2022. Even if they do go in for a QIP, they are still doing a 20% ROE so it is not going to be a negative. A business doing 20% ROE, I dont think diluting is a bad thing in the long run. Its not like they are doing 10-12% ROE and diluting. Their wealth mgmt business does not need any capital to grow. Lending is pulling a 20% ROE. That basically means they can grow without diluting for a long time. Please do elaborate as to why you think they need to raise capital again in such a short period of time. Rashesh Shah understands the market very well and he also wants market cap at the end of the day.


(jainnitinp) #196

Could anyone pl elaborate why promoter stake fell by about 2.3% in the Dec '17 quarter? Seems like a significant drop for one qtr.

image


(Alok Bhola) #197

Go to the shareholding details of the Company available on the BSE site and open the shareholding details for the comparison periods (Sep & Dec). Check out the qty of total shares of the company and the shares held by the promoters for the two periods.

You will notice that while promoters shareholding (qty) is unchanged, the total outstanding shares for the company has increased, hence the % held by promoters has come down.

If you are curious why the total no of shares have increased, google will tell you that in 2 min (hint: QIP).


(dprashant) #198

I have few contacts in the company a we are one of the IT supplier to them, they plan to hire around 2000 people this year across all business verticals ( that’s around 20% addition, current employee strength is 10000) , people have already started coming on board and we are under pressure to deliver the basic IT equipment etc. that’s needed by them.
looks like if all goes as per plans they can grow really fast from here on for next 3-4 years at least as some of the business that they are in are at inflection point. i.e. ARC etc.


(jainnitinp) #200

(jainnitinp) #201

(dprashant) #202

(dprashant) #203