Edelweiss Financial Services


(Abhishek Basumallick) #143

Q4FY18 Highlights:

  • Total Revenue INR 2,623 cr (INR 1,945 cr for Q4FY17), up 35%
  • Profit After Tax INR 248 cr (INR 170 cr for Q4FY17), up 46%
  • Profit After Tax excluding insurance INR 308 cr (INR 212 cr for Q4FY17), up 45%
  • Return on Equity excluding insurance for Q4FY18 is 21.6% (22.2% for Q4FY17)

FY18 Highlights:

  • Total Revenue INR 8,623 cr (INR 6,634 cr for FY17), up 30%
  • Profit After Tax INR 890 cr (INR 609 cr for FY17), up 46%
  • Profit After Tax excluding insurance INR 1,036 cr (INR 719 cr for FY17), up 44%
  • Asset Base of the company ~ INR 55,100 cr
  • Group Gross Networth INR 7,762 cr; Networth excluding insurance INR 6,467 cr
  • Return on Equity excluding insurance 22.1%

(yudiagg) #144

Thanks. Should this stock be valued on the basis of PE or ABV pl


(Amit Mehta) #145

The credit business should be valued at P/B but the franchise and advisory business, capital markets business etc which doesn’t need balance sheet of a company cant be valued at P/B and should be valued at P/E


(Sameer Wakude) #146

Great result by Edelweiss. Growth has been captured in the price though. P/B is 4.16 and PE 33.

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Disc: Invested in JM.


(Abhishek Basumallick) #147

I am not sure if Edelweiss and JM are directly comparable, although they are in similar industries. Edelweiss is more than double the size of JM. For financial companies, size is important as it becomes easier to scale with size. Also their business segments are very different. ARC, Insurance are unique to Edelweiss.


#148

Results look good overall but few chinks i see in their lending biz -

  • NPA: despite no adequate seasoning and very high growth in loan books, NPA has risen steadily to 1.75% now. Absolute NPA has grown 91% yoy vs. 51% growth in loan book. They shoud provide segment wise NPA. I think corporate book continues to accumulate higher NPA.

  • capital adequacy - it has fallen 17% and fund raising should be due in 18-24 months only compared with 10 yrs gap for the recent one. They allocated substantial amount in the insurance biz which they would need again for launching health insurance and ramping up general/life insurance.

  • I am also slightly concerned they provide unsecured lending to SMEs also.

Disc : remain invested


(Rajesh_R) #149

Did you include NPA recognition change from 120 to 90 days?


#150

sorry, I thought this was the case all along at least in FY18.


(shyamutty) #151

The ARC business offers such big non-linear payoffs in such cases.
Next big trigger will be the Essar Steel resolution!


(yudiagg) #152

How much will Edelweiss get against their investment of Rs 2673 Cr.How much profit will Edelweiss make on this transaction ?


(BreakingBad01) #153

Edelweiss ARC bought those loans (~2700 crore) at around 80% of face value. Since the current bids assume no haircut for secured lenders, Edelweiss ARC’s profit would be 20% of that amount i.e. ~500 crore. Of this, listed entity owns 60% of the ARC, so effective pretax gain would be ~300 crore. Just my 2c


(yudiagg) #154

Thanks. This could imply that for Q1 FY 19, Edelweiss could have a pre tax profit of about 700 Cr compared to about 335 in Q1 FY18.


(shyamutty) #155

Saw in twitter that w. e. f March 23, Pwc resigned as auditors and SR Batliboi and company has been appointed, should this be of any concern?


(initin) #156

There is no such update on BSE website from company anyways SR Batliboi is part of EY one of Big 4 auditors so shouldn’t be a big concern but given the manpasand and vakrangee episode market could take this negatively.


(ranjan rakshit) #157

Could have something to do with this. They are banned by Supreme Court for 2 years? Can anybody please put some light on this ?


(Abhishek Basumallick) #158

PWC has to mandatorily step down as auditors. Hence, Edelweiss has moved to another auditor.


(Prince V) #159
  1. The article is dated Jan 2018 and the matter is still not settled. If indeed PWC is banned, they will have to give up all of their Audit assignments which would have been a Front Page Headline news.

  2. Changing auditors for Large Listed Companies is not unusual especially now since rotation of auditors is made mandatory as per Companies Act and SEBI guidelines. However, the usual procedure followed is that the new firm is appointed at the AGM while the old firm continues till then. In the case of Edelweiss, the old firm has resigned and it has created a Casual Vacanacy which is filled by the Board subject to approval by shareholders.

  3. PwC has also resigned from audit of another listed company- Atlanta. The communication does not paint a good picture for Atlanta. The point to note is that PwC has stated the reason for resignation in this letter unlike so in the case of Edelweiss.

I have worked in S R Batliboi for 3 years in the past and I am aware of the efforts taken by Partners to get new audit clients, and it is the same across the industry. Therefore I do not see the change in auditor as a reason to worry for investors, without any reason to suspect.

Disc- tracking Edelweiss. Not invested


(prashbglr) #160

What I know is Edelweiss changes their auditor every two years which is a good practice. BSR and associates was the auditor in Jan 2016.


(Abhishek Basumallick) #161

PWC received a 2 year ban. Now, they have a reprieve till March 2019. Pwc and most good companies they audit will plan accordingly.
https://economia.icaew.com/en/news/february-2018/pwc-india-gets-leeway-on-two-year-ban


(shyamutty) #162

Bank of America Merrill Lynch, Edelweiss, JM Financial, KKR, Lonestar-IL&FS, Resurgent Power, SC Lowy, Torrent, Varde Partners, SSG Asia, Worlds Window EXIM and NIIF are some of the financing agencies that may bid for the three stressed power projects that PFC has put up for sale.