They do not do con call every quarters now a days. Instead they do it in alternate quarters.
When they do not do con call, that time they publish investor letter like this one.
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Just want to know the possibility is there or no
Currently the ARC business is under edelweiss financial services as a subsidiary I am aware of ARC business is not allowed to list on markets directly or do IPO but currently it is listed indirectly through EFSL In the same way can edelweiss put the ARC business in asset management business as a subsidiary while unlocking value(demerger or ipo)in asset management business when it happens so the both the businesses will get valuation on the earnings asset management business can act as a holding company
Pls someone ask the management in the AGM or concall
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Some problems and issues I want management to act
For Insurance Business
1)management need to do agressive partnership with banks for Bancassurance as it gives presence and strong distribution mix
2) Any guidance for protection products mix and VNB margins
3) focusing on building trusted brand and transperancy as insurance is selling trust and also competition is heating up
Management should compare with top 3 or 5 private insurers not with industry(inefficient)
management should improve quality of disclosures like revenue mix distribution mix segment mix commentary guidance etc like peers eg Aditya Birla capital current Disclosures are very limited
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they purposely compare themselves with industry rather than top 3.
Their insurance been loss making for more than decade now, whereas they hade been keep giving hope to investor that they will be profitable by 2020.
I highly doubt that it will perform beyond 2x, lets see.
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Me thinking aloud.
I am highly invested in it, but now i am losing all hope, not because i got bored sitting in it but i am not seeing any progress in their business.
I think now i am regretting going heavy on it where acrysil was on my radar in compare to this company.
Now the situation is even if they split their business, i am not seeing its going more than 2x. So, it arise new question for me is that much research and patientce worth 2x. I think not.
I may have waited alot in edelweiss but just bcz i lost some time here, I am not gonna be victim of sunk cost fallacy.
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Their insurance business is yet not seem to be profitable soon, ARC business is not giving profit like it used to give in their prime time.
mutual fund is yet to become substantial.
This is exactly what i used to think, turn around story is the toughest and financial business is not really business to make money.
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I think to really reap the fruit it will take 4-5 years management also mention it in the concall they optimistic to maximize the value for shareholders in 4-5 years It can be a multi special situation opportunity
Current SOTP valuation
Nbfc business - 3900cr equity 0.8<1Ăp/b
1)Currently I donât think they have started to lend still in the process to do tie ups
2)donât know the capital allocation strategy the equity of nbfc is rising management was telling they will use this capital for other businesses now they have taken debt(135cr) for alternatives.
3) demerging their nbfc business can be a good option after wealth management business like the piramal did with itâs nbfc and pharma business but I think management want to show they can also create value in credit business too this will take time FY26 (guys tell your views on it)
For ARC Business
2511cr equity cdpq valued this business at Ă5 p/b can be 12500cr
- headwinds - bond markets issue not able to leverage RBI should look into it or company should giving regular update about developments 2) NARCL large assets will go there large assets has good IRR and high changes of carry income yes they are lumpy every government try to establish bad bank but they failed now also RBI is concerned retail assets are low IRR and less carry income business 3) if there is possibility to move it to asset management business and unlock value the business can get valuation on the earnings
For asset management business- mutual fund/AIF currently AUM 124500cr 4% of Aum comes 4500 to 5000 cr so they have to earn 250cr to justify 20pe AIF carry income should add to it after march FY23 I think they will look to demerger or ipo this business in 2 years as carry income starts coming
For life insurance business
Current EV is 1550cr so to be conservative Ă2.5 3800-3900cr 66% of edelweiss - 2500cr
Itâs been 10+ years and only 2 Bancassurance partners fincare and CSB banks they really need more partners according to their investor relation they have focus to keep balance between profitability and growth
VNB margins and protection products to decide the valuations
Should focus on to create trustable brand and touchpoints
For general insurance
It is 1200 to 1500 cr business
In future they will partner with some other insurer as every general insurance company has done
it has started in 2018 but just 1 year before go digit have started their GP is 5200cr for FY 22 and edelweiss GP is if we go by current quarter GP 117cr so 117Ă4 468cr we can see insurance needs lot of capital to scale âŠin the news go digit ipo can come at a valuation of 30000 to 35000 cr at Ă6 GP market leader ICICI Gl trades around Ă3.7 edelweiss management should use the nbfc capital in insurance businesses and asset management to scale and ring fence their businesses they can create more value in this businesses credit business is not good option
For wealth management business - its approx valuation
March fy 23 demerger estimated 2200cr equity by then so 30% to public shareholders 14% to edelweiss group 56% promoter âŠ2200cr -30% = 660cr Ă4 p/b= 2600cr âŠin my opinion every shareholder can get 1 share for 6 to 8 EFSL (at face value 10rs of EFSL)
I think new management has start to make business predictable focus on recurring revenues like distribution income and management fees we can see scaling up like IIFL wealth as earlier PAT suddenly down due to market and shareholders were not aware why bcz of limited disclosures wealth management should do PAT 400cr not combine with securities business like IIFL WEALTH AND IIFL SECURITIES PAT is different
Housing finance 800cr equity 1>1.5 Ăp/b canât say much
Conclusion
Sometimes it feels like management is not aggressive and focus to scale multiple businesses insurance business as last bank partnership was done in 2019 Bancassurance gives presence can not be dependent on agents and digital and top insurers have started to sell direct leveraging their brands
Limited concalls, limited information guidance, disclosures for a company with 5 different businesses give much discomfort as investors are unaware what going to happen next quarter eg wealth management ( unaware of revenue mix and profit mix)
NBFC capital will be use for debt reduction suddenly FY 22 standalone balance sheet there is a debt
Management goes for growth but quality of growth and earnings are poor
Opportunity cost for reducing the wholesale book like they can use the capital to scale insurance business like go digit (feeling jealous 30000cr valuationđȘ)
Can management think to demerge the credit business? Imo market can reward this decision
Guys share your views
tracking from 1 year
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Questions we should ask to management in AGM and concalls
- capital allocation strategy first they were telling they have 3000cr capital in NBFC will use in insurance and asset management to scale up Now they will use it to reduce debt (1200cr)and remaining to scale credit businesses2500cr( I donât know why they are really after credit business not have any upper hand high cost of funds credit cost)
- when will we start lending in nbfc according investor relation we are still in the process doing tie ups ?
3)why we are not doing or not showing aggressive in Bancassurance partnerships limited to only 2 banks that to not disclose in IR ? - guidance for protection products mix VNB margins for life insurance business ?
- are we prepare for the consolidation phase for insurance and asset management business as the new competition will come ?
6)why there is a debt on alternatives business what we using it for ? - guidance for GI business GP (I Think if management able to scale this business to 10000cr by FY26 I am assuming they will partner someone so 50-60% share holding comes to 5000cr valuation then it will look some good i dont it can happen with 100cr per annual strategy they really need capital
- why we are not aggressive in investing in insurance businesses other businesses have taken our share?
- what is the capital allocation strategy for insurance businesses can we go aggressive in it?
- can we improve are disclosures in IP like revenue mix, distribution mix, segment mix, product mix like are peers and do regular concalls as we have five businesses and help us whatâs going under each business it give comfort for long term investors
- can we demerger the credit business from EFSL as done by piramal enterprises limited to get value to it pharma business
- to look if there is the possibility can our ARC business can be demerge with asset management business as a subsidiary like now ARC business is indirect listed as subsidiary in EFSL
Guys Any other questions pls suggest
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for life insurance business
Data is from the annual reports from 2019 to 2022
they have limited themselves to 81000 policies and need to do at least a 10% increase every year
customers are in the same range not able to acquire new customers
persistency ratio is decreasing means miss selling is increasing
increase in advisors /agents not helping and not giving enough business they should try partnerships with banks and nbfcs and focus on creating their trustable brand and marketing
we should ask management about this
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Edelweiss released AGM PPT today.
Looking to reduce debt as per this plan. They are massively deleveraging. They are talking about reducing debt and no mention about growth in the ppt.
Valuing Weath management business at 7500+ cr.
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Market cap is 5600cr, and they say Intrinsic Value is 20-26k cr - they should be walking the talk and buying back stock hand over fist.
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Interesting to see they will be selling stakes in Housing Finance and Life Insurance as well.
Is this the first time theyâve said this?
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Someone asked them the same question in 2/3 con calls back, they said focus in on growth first and then buy back.
Currently they have two business which are loss making- Life Insurnace and GI. Combinely they generate loss of 300 cr. On top of that they need capital of around 250 cr per year.
Edelweiss does not have a excess cash. Also if they raised money and do a buy back, it will further strain their balance sheet. Their core business (all in total) are generating enough profit to float over on a consolidated basis, so they cannot afford to make any more mistake or they need bit of strenght for a rainy day. So I guess they would shy away from Buy back for a considerable amount of time.
I am glad that they are not thinking of selling a stake in AIF, which is ready to deliver good results going forward IMO.
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Its becoming too complicated.
1)Yes the gave guidance why they wouldnt be buying back their share, main reason of it that they dont have money. They barely recovered 2 quarter back they were full of surprised expense.
- Why they are giving valuation in their investor presentation, they have never done it before. more of seem like desperation. It really repel me rather than attract.
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I attended the AGM but as I was not preregister to ask questions( any one know how to preregister pls reply )
Speakers in the AGM weâre only praising the management and few with minor questions
Yes @gaurav_vimal it is looking complicated and some surprises
In may they disclosed they want to be debt free approx 2500cr by FY24 now the debt is 5500cr I donât understand does anyone have knowledge above it pls explain
In 2016 cdpq buys stake in ARC at Ă5 p/b valuations now they are giving it Ă1.2 p/b valuation
Closing the ECFL think so look at IP and no info on retail credit business
Selling stake in Life insurance is not good they should not as growing 10+ years
Imo Showing the intrinsic value in IP they really want to show the market so they can get value push in valuation and raise some capital or QIP
I can be wrong but Imo they should look to demerge the credit business as market is giving the valuation for credit business there is a possibility market will rerate and then raise capital but (canât be the option as they are degrowing and closing it )
Company need new DNA or professional management now
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Thanks @Omkar11 for sharing your view. I think it is sad that you could not ask question in AGM. Based on what you described, it looks people were only praising them, which is not dissimlar to what happens to other AGM. I am not sure what someone should praise them. I doubt if any investor got any return if he has invested in the business for over a decade.
I think you should attend their con call (as you have very valid and pointed questions) for next quarters whenever it happens. There they would have to allow you to ask question. Ask due to what is happening with them, there is ample time to ask question as last 2 con calls finished within 45 min (they could go around 60 min if there are enough particiapant in the call).
Yes @paragbharambe looking forward to it currently asked same questions to investor relations team (keeping them busy for a while 
)letâs see not expecting good answers as always
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as far as I know they dont allow retail investors, you have to be atleast fund manager of any fun so they can take you seriously. Operator will put you on hold but you wouldnt be given a chance to ask questions.
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Arent they about to zero their wholesale loan by 2022?