by NR INDRAN / INT
Edelweiss Financial Services Limited, India?s leading? diversified financial services company, declared its? unaudited, consolidated results for the? quarter and half-year? ended? September 30, 2012 today.
? Total? Revenue for the quarter ` 511 cr compared to ` 368 cr for Q2FY12, up 39%
? Profit After Tax? ` 42 cr
compared to ` 26 cr for Q2FY12, up 58%
? Group Networth? ` 2,952 cr; Tangible Equity ` 2,619 cr
Edelweiss continues to record consistently improved financial and business performance quarter on quarter in the last four quarters, despite challenging environment, as a result of? the conscious strategy to de-risk? the business model? by diversifying across businesses, asset classes and client segments.? These results are after? the impact of investments made in incubating our new businesses ? Life Insurance and Retail Financial Services for future growth. The profit after tax for the second quarter of FY13? is ` 54 cr excluding the loss of our life insurance business.
Speaking on the occasion, Mr. Rashesh Shah, Chairman and CEO,? Edelweiss Financial Services Limited said:
?After a prolonged period of inaction, government announced a slew of? economic reforms during the quarter? setting in a renewed sense of optimism.? Improvement in liquidity,? banks signaling reduction in their? lending rates, robust FII inflows? and stable or declining commodities prices indicate that growth is bottoming out. However, the key to investment coming back on track will be the? execution of reforms process. At the same time, controlling inflation and fiscal deficit remain the? key challenges. We are hopeful that the reforms process? will continue to engage the government and we see growth returning soon.
For us, the second quarter has seen? higher? activity in? credit,? investment banking, broking and corporate debt syndication. We have also been able to demonstrate consistently improved financial and business performance sequentially in the past four quarters as a result of significant diversification in our businesses and the execution efficiencies that we? have been constantly ?working on. We continue to? invest in new businesses on the path to becoming a fully diversified financial services group. Given the strengths of Edelweiss, we are confident of capturing our share of growth in the markets when it reappears.
Financial Highlights:
? Interest and Treasury income from capital based businesses is? ` 418 cr for the quarter(` 279 cr in Q2FY12), up significantly 50%. This? income stream? includes income from Credit, Commodities and Treasury businesses.
? Capital based income? accounts for 83% of the total income for? Q2FY13, compared to 77% in Q2FY12 as a result of the scale up of Credit business.
? Fee & Commission income from agency businesses is? `? 80 cr for? the quarter? (` 84 cr in Q2FY12), down 5% reflecting continued challenging environment for agency businesses overall in the past four quarters though the activity levels improved this quarter marginally compared to the previous quarter. Agency Fee & Commission income? includes income from broking, investment banking, asset management and wealth advisory businesses.
? Our Life Insurance business, which is in a nascent stage, recorded Premium income of ` 6 cr for the quarter.
? Agency based? income accounts for 17% of the total income for? Q2FY13 compared to 23% in Q2FY12.
The revenue mix reflects the diversified nature of Edelweiss? businesses and income streams which successfully lowers the volatility in performance.
Business Highlights:
Businesses of Edelweiss are organised around? five? broad? business groups ? Credit including Retail? Finance and? Debt Capital? Markets, Capital Markets including? Asset Management, Commodities, Life Insurance and Treasury.
? Credit Business:
Edelweiss offers? Wholesale finance by way of? collateralized? loans? and? Retail finance which? includes housing mortgage, loan against property and SME finance. The total credit book of the group stands at ` 5,773 cr at the end of this quarter compared to ` 5,219 cr as at the end of Q1FY13. The wholesale collateralized loan book is adequately secured with an average collateral cover of 2.72 times. Asset quality of the? credit book continues to be satisfactory inspite of the tough operating environment with Gross NPLs at 0.42% and Net ?NPLs at 0.12% as a result of robust risk management.
Edelweiss forayed into Retail finance two years ago by launching housing finance business following the articulated strategy of diversifying into adjacent markets and client segments.
Retail Finance business has? now? built? a book? of? `? 1,195 cr by the end of this quarter compared to? ` 946 cr at the end of the previous quarter. This business currently operates across 9 major metros and plans to enlarge its footprint going forward.
The Indian Housing finance market, characterised by a very low penetration at present, is expected to grow over four times by the end of this decade given the young demographic profile that India enjoys and? the fact that it is the aspiration of every Indian to own a home. In addition, migration of working class from rural to semi-urban and urban cities will also drive demand for housing in these cities. This business, therefore, presents vast opportunity to Edelweiss for long-term growth together with designed diversification in the revenue streams.
? Debt Capital Markets business continued to? be? a leading debt? arranger in the country with a market share of 8% during? Q2FY13 in private placement of debt (source: Prime Database).
? While Edelweiss? is a large wholesale debt arranger in the country, this quarter marked its entry in public issues of debt by being a Lead Arranger in the NCD issues of `? 436 cr for Shriram City Union Finance? and of? `? 500 cr for India Infoline. Other ?transactions this quarter included? Long-term Bonds? placements for? large clients like REC (three issues),? HDFC,? Tata Capital Housing Finance,? Sundaram Finance and Dhanlaxmi Bank across seven deals.
? In addition, the Fixed Income Advisory business handled one advisory transaction.
The business, in all, handled 10 transactions in Q2FY13 compared to 9 in Q1FY13.
? Capital Markets & Asset Management Business:
? Investment Banking business continues to witness slow deal closures on the back of lackluster? investment? demand even though the deal pipeline continues to be strong.
Despite this, the business? handled? two transactions? during the quarter? ? a private equity placement of? `? 155 cr for Parag Milk Foods and de-listing of shares of India Securities.
? Institutional Broking business continued to be among the market leaders during the quarter.? The market sentiments and activity levels improved towards the end of the quarter on the back of a? slew of reforms announcements by the government.
Edelweiss was quick to capture these business opportunities leading to an increase in market share and an uptick in the income from broking in the second quarter.
Edelweiss? Research? covers 189 stocks across? 20 sectors representing? over 70% of market capitalization.
During the quarter, Edelweiss arranged the? EdelPulse Conference on? the theme? ?Reality: Moving? towards Ruralism which brought together over 25 dealers/sector experts and 140 participants from over 70 funds to? facilitate an understanding of ground level developments in the field of rural initiatives and emerging opportunities.
EdelPulse? is a unique event that has earned an enviable reputation over the years among institutional investors in India for its insightful window into the real world of business whereby the industry participants (dealers, marketing personnel and intermediaries) provide an unbiased view of the ground level realities.
? Retail? Capital Market? businesses continued? to? add new clients taking the base to 389,300 and? build scale during the quarter. The online portal? www.edelweiss.incontinues to be one of the most popular sites with the? cumulative number of unique visitors reaching 53 lac with 8 cr page views till September 30, 2012.
? Wealth Management business? continued to manage assets of? over `? 3,000 cr and Depository Participant (DP) AUMs at ` 1,500 cr by the end of Q2FY13. The Structured Products? portfolio? scaled up? to about `? 800 cr as at the end of? this? quarter with a handsome growth of around ` 100 cr in the quarter.
? Asset Management:
? AUMs/AUAs under Alternative Asset Management? were US$ 590 million equivalent at the end of Q2FY13 including the Structured Products portfolio. This is a growth business? for Edelweiss and? is poised to achieve significant growth going forward
? Retail? Asset Management? business manages 11 funds across Equity, Debt and Liquid Schemes, with average AUMs of ` 306 cr during this quarter. This business now has an active base of over? 7,100 investors compared to 6,200 at the start of the quarter. It has a distribution network comprising over 3,000 Distributors. The focus of ?this business continues to be on developing a variety of products and building investment track record while the industry grapples with issues connected with its business model and growth.
? Commodities:
Edelweiss? entered Commodities business about? four years ago? following the strategy? to diversify across asset classes. It has now emerged as an independent? business. It? is engaged in sourcing and distribution of precious metals, currently bullion and silver, at 11 centres to over 400 active clients.
Commodities business further diversified into dealing in? agri commodities over a year ago and is building scale. We believe? that? with increasing financialization of commodities in India, this business presents large business opportunities going forward.
? Life Insurance:
Edelweiss? Tokio Life Insurance completed one year of operations this quarter.? It? recorded New Business Premium of ` 6 cr in the quarter compared to ` 3 cr in Q1FY13. It expanded its operations to? six major cities? ? Bangalore,? Mangalore, Hyderabad, Kanpur, Lucknow and Varanasi? during the quarter taking the total number of offices to? 39 across 29 cities in Gujarat, Maharashtra, Goa, New Delhi, Uttar Pradesh, Haryana, Punjab, Andhra Pradesh, Karnataka and Chandigarh. The agency channel has been? significantly? scaled up? with the number of Personal Financial Advisors (PFAs)? reaching 1,845? by the end of this quarter compared to 1,260 at the beginning of the quarter.
The business offers diverse products to meet the basic needs of customers on education funding, wealth accumulation & enhancement, living with impaired health, income replacement and? retirement funding. It also offers group products for credit and life protection.
The life? insurance joint venture with Tokio Marine, one of the? oldest and biggest global? life Insurance companies? from Japan,? was launched? to participate in the exciting growth opportunities that? this industry presents given extremely low level of penetration in India.
This business also significantly enlarges the addressable retail markets for Edelweiss.
? Treasury:
Treasury? actively manages our? liquidity? position? and balance sheet. Treasury? assets ?allocation continues to be a function of liquidity management needs, capital requirement of businesses and opportunities in the markets. Our strong focus on enterprise wide risk management ensures optimum returns while preserving our capital and ensuring adequate short-term liquidity position.
You can contact author @ nr_indran@rediffmail.com
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