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Edelweiss Financial sees muted growth Apr-Sep, group recast in FY20

Wednesday, May 15

 

MUMBAI – Edelweiss Financial Services Ltd has guided for muted growth in Apr-Sep, with "normalcy" returning in Oct-Mar, and added that it has already prepared for this phase of growth through equity raising by non-bank finance arm ECL Finance.

 

The group is set to restructure its operations into three clear sub-divisions–credit, advisory business, and insurance business–in the current financial year, with "strategic investors" for each to drive growth over the next three-four years.

 

Under the credit vertical, Edelweiss aims to have retail credit that includes retail mortgages, loans to micro, small and medium enterprises, business loans, agriculture and rural finance, along with structured collateralised corporate credit and wholesale mortgages. This vertical will also include the fixed income advisory business.

 

The advisory vertical will include wealth management, asset management, asset reconstruction business, and capital markets, and their sub-divisions.

 

The insurance vertical will include the life insurance, general insurance and health insurance businesses.

 

Edelweiss Financial Services said it would continue to rationalise the number of entities within the group with to have just 32 entities by 2021-22 (Apr-Mar). Over the last two years, the group has wound up 20 companies and aims to rationalise another 23, it added.  

 

Through these efforts, the aim is to increase its consolidated profit after tax at 20-25% annually by 2021-22.

 

CREDIT OPS

As per an investor presentation, in Apr-Sep, the credit business will prioritise conservation of liquidity, and maintaining asset quality over growth in the book.

 

Driven by retail credit growth, Edelweiss aims to "at least double" the credit book by 2022, along with addition of one-two high-return-on-asset businesses. This will enable the business to achieve return on asset of 2.25-2.75% and a debt-to-equity ratio of not more than six, according to the presentation.

 

Return on equity from this line of business will be 15-18%, it added.

 

Edelweiss aims for a 65-70% retail share in credit business by 2022, with the remaining 30-35% coming from wholesale credit operations. This would mean a retail-to-corporate credit ratio of 2:1, along with a gross non-performing asset ratio below 2%.

 

Even on the liability side, the aim is to achieve at least 25-30% share for retail, and 40-45% share in borrowings from banks. "Liquidity cushion to be maintained at 10-12% of borrowings," it said.

 

ADVISORY, INSURANCE OPS

This financial year, the advisory business will focus on scaling its wealth management in the affluent segment, while alternatives will provide opportunities for increase in private credit.

 

It aims to grow wealth assets at 25% a year, with the alternatives business raising about $1 bln annually.

 

The asset reconstruction company will grow its book 20-25% per annum, and Edelweiss Financial hopes for return on asset of at least 5% from this line of business.

 

Within the insurance sector, the focus will be on achieving break-even for the life insurance business by 2022, and an investment of 250-350 mln rupees per quarter in general insurance.

 

Edelweiss Financial said that excluding insurance, the cost-to-income ratio should be below 50% by March 2022, with return on assets of 2.5-3.0%.

 

Today, shares of the company ended 0.2% lower at 155.95 rupees on the National Stock Exchange. End

 

Reported by T. Bijoy Idicheriah

Edited by Avishek Dutta

 

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