BE WISE, INVEST IN EDELWEISS!
Edelweiss Financial Services Limited (EDEL), incorporated in 1995, is a diversified financial services group. Since its inception, the company’s total revenue has grown at a CAGR of 85 per cent up to FY17. Here, at DSIJ, we present an exclusive analysis of Edelweiss Financial Services Limited, a leading financial services group in India.
Edelweiss Financial Services comprises three scalable business segments, namely, credit, franchise and insurance.
The credit business of Edelweiss consists of retail credit, corporate credit and distressed assets resolution business (DARB). Its franchise businesses include wealth management, asset management and capital markets. The company has a client base of about 1.1 million, which it serves through more than 6900 employees based out of more than 275 domestic and international offices in more than 125 cities. The company also has a network of over 4500 sub-brokers and authorized persons.
Over the years, Edelweiss has expanded its business from capital markets to credit, asset management, life insurance and asset reconstruction (ARC). Although Edelweiss remains a niche player in the credit business, it is among the market leaders in asset reconstruction, wealth management and domestic capital markets. It is also one of the fastest growing life insurance company in India over the last three years. So far, the credit business has been the major contributor to the bottomline. However, the non-credit businesses have improved and will soon start to make a meaningful contribution to the bottomline of the company. The company’s board has recently approved raising up to ₹2,000 crore through various modes, including bonds, rights issue or qualified institutional placement (QIP). Recently, CRISIL assigned the rating of 'CRISIL A1+' to the two proposed short term debt issues of the company having issue size of ₹3000 crore each.
RETAIL CREDIT BUSINESS TO INCREASE
The company’s credit book has grown at a three-year CAGR of 46 per cent. In FY17, the credit business contributed 73 per cent to the company’s consolidated profit. At the end of June 2017, Edelweiss had an outstanding credit book of ₹299 billion. Currently, about 49 per cent of the credit book comprises of corporate credit. Over the next few years, the company plans to increase the share of retail segment in its credit book. In Q1FY18, retail loans formed 34 per cent of total credit, which is likely to increase further. Maintaining credit quality is the key to sustainable growth in the credit business. The company follows conservative risk management practices and focuses only on collateral lending. We expect growth trends to remain strong given the company’s low share in the credit market and presence across niche product categories.
CAPITAL MARKETS BUSINESS
Edelweiss is a formidable player in the capital markets business and also a leading domestic broking house. It enjoys a sizeable market share in the broking and investment banking businesses. In FY17, the company’s revenue from the capital markets business grew by 22 per cent YOY to ₹556 crore, while the profit grew by 69 per cent YOY to ₹115 crore. Given the buoyant outlook for the Indian capital markets, Edelweiss is well placed to gain.
AGRI SERVICES BUSINESS TO EXPAND
Edelweiss is expanding its wings in the agri-services business. Currently, the company provides warehouse and agri-credit services. As of March 2017, Edelweiss operated about 435