Hi Sandeep,
Would you have this file. It is not avaiable on the site now.
Thaanks,
VIshal
Sorry @vishalprasad, I tried searching without luck.
Investor Day 2016 Transcript (here)
Investor Day 2017 Presentation (here) - could not find transcript/ audio/ video
Investor Day 2018 Videos (here)
For the full year 2018-19, Edelweiss Financial’s net profit grew 15% to ₹995 crore as against ₹863 crore a year ago
Edelweiss Financial Q4 net profit falls 3.3% to ₹232 crore
Not sure why Edelweiss is merging Distressed Credit into “Advisory/Wealth Management”
Distressed Credit is buying Distressed Asset at discounted price and there may be defaults or non recovery …
Isn’t this to paint artificially that “All is well …”
Feedback requested …
The second investor presentation released today on the Outlook for future explains this part, each group of businesses will have separate investors.
CDPQ has invested in ECL Finance only and not in EARC.
That i can understand but doesn’t that makes “Wealth Management” business unit prone to surprises too like in Credit Business Group …
A default in EARC can drag the entire profitability of "Wealth Management " Business unit …
Predictability and sustainability of earning of Wealth Management is also now NOT predictable 
That can happen irrespective of any business merging with other business under the same listed company .
Am I missing anything ?
In ARC business , the amount of money put in b Edelweiss will be very less. Its more like a fixed management fee with additional income based on the recovery rate. Also it works on a fund based structure where I raises money from other investors along with Edelweiss’s own money to be deployed in ARC.
CDPQ has invested in ARC as well long back. The recent transaction is only in ECL finance business.
My understanding is that management wants the ARC business to move to a model where rather than it being a balance sheet business, they use a fund based structure to have investors co-investing with them in the ARC space, while they also earn fees. This spreads risk, keeps a reasonable upside, and earns them fees. If they’re setting up an org structure for the future, it makes total sense for it to be included with the rest of their funds.
Oh, did I mention that it earns them fees?
Management keep on extending the expected break-even year for Insurance business.
Earlier guidance was FY19 now the latest guidance is by FY22. Any reason for this? Is there something wrong?
Life insurance they have broken even as per the results presentation. General Insurance they would make losses of ~Rs.150 Cr. per year for next 3 to 4 years as per the result presentation
here’s something interesting - Edelweiss shareholder filed with the exchanges in the end of March says Pabrai holds 1.15% (https://www.bseindia.com/corporates/shpPublicShareholder.aspx?scripcd=532922&qtrid=101.00&QtrName=March%202019). In the results presentation slide 52 (page 53 in the PDF), they say Pabrai holds 2.7% as on March 2019.
So the options are:
- I’m looking at the data wrong
- One of these % numbers is incorrect
- Or more interestingly, Pabrai bought more of Edelweiss after March 2019, and some poor soul who was in charge of that slide in the results presentation picked up latest shareholding instead of March 2019.
(post withdrawn by author, will be automatically deleted in 24 hours unless flagged)
Another reason could be Pabrai might be holding additional stake in different entities controlled by them and Edel has simply consolidated it in one name. I think it must at the end of March 2019 not the latest.
Can someone help me understand how the money (Premiums) that they get from insurance business gets reinvested? How the business model around their insurance business has been structured by Edelweiss?
Edelweiss Value.pdf (45.4 KB)
I have attempted to value Edelweiss. I believe my assumptions are conservative; as previously, I have tried to be roughly right rather than precisely wrong.
I have presented two ways of valuing ECL Finance. I faced the following difficulties:
- CDPQ has invested 150mil USD (out of the 250mil USD)
- CDPQ is likely to have a stake in the teens – 2 to 5 yrs. out
The valuation does not capture balance sheet strength – overnight liquidity, CAR & DER – which, IMHO, is vital in a “tight liquidity” scenario like the present.
Views requested.
Few Comments from my side:
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ARC Business should be valued at-least 4x the book - considering the ROE (25%+) & ROA (3.5x+) along with the huge opportunity size. Also, I don’t think the minority interest needs to be subtracted from the book value as Edelweiss would be reporting book value adjusted for minority interest (would anyways check once).
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Valuing the NBFC at 2x is not prudent as losses in the structure and wholesale book are given.The quantity we would get to know over time. CPDQ has invested as compulsory convertible debentures (ccds) which carry interest and would be converted into shares at a later date and the full amount would be invested in stages.
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Want to better understand the basis of valuing the Wealth Management Business as 5% of AUM.
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Want to understand the basis for valuing the Insurance Business at 2x.
Deepsbhai: Thanks for the comments.
- ARC: Yes, netting out MI seems incorrect.
It’s true that the opportunity size is huge. However, I have the following concerns: a. RoE & RoA are likely to fluctuate significantly on a quarterly basis, b. Time is a critical factor in returns, esp. in NCLT cases and c. The low hanging fruit available to an early mover are likely to decrease going forward. Still, yes, 2x book seems harsh.
Will suitably modify the valuation to reflect the above. - Wealth Management: No listed peers; IIFL Wealth is likely to list soon. Kotak, IIFL & Edel seem to be the top three, going by AUA. Private deals in this space seem to derive their justification on the basis of AUA; not too much info available. 5% of AUM seems a conservative guesstimate.
Would be nice to have your thoughts. - Insurance: LI is a late mover in its infancy. The addition of GI will only confound the picture. Any estimate of value is likely to be way off the mark – in either direction; use of IEV may well reflect availability bias. Again, would be nice to have your thoughts.