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Edelweiss Capital Ltd Investor Presentation
Third Quarter Results
January 2009
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Safe Harbor
This presentation and the discussion that follows may contain certain words or phrases that are forward - lookingstatements, based on current expectations of the management of Edelweiss Capital Ltd. or any of its subsidiariesand associate companies (Edelweiss). Actual results may vary significantly from the forward-looking statementscontained in this presentations due to various risks and uncertainties. These risks and uncertainties include theeffect of economic and political conditions in India and outside India, volatility in interest rates and in the securitiesmarket, new regulations and Government policies that may impact the businesses of Edelweiss as well as its ability
to implement the strategy. The information contained herein is as of the date referenced and Edelweiss does notundertake any obligation to update these statements. Edelweiss has obtained all market data and other informationfrom sources believed to be reliable or its internal estimates, although its accuracy or completeness can not beguaranteed.
This presentation is for information purposes only and does not constitute an offer or recommendation to buy or sellany securities of Edelweiss. This presentation also does not constitute an offer or recommendation to buy or sellany financial products offered by Edelweiss. Any action taken by you on the basis of the information containedherein is your responsibility alone and Edelweiss or its directors or employees will not be liable in any manner for theconsequences of such action taken by you. Edelweiss and/or its directors and/or its employees may have interestsor positions, financial or otherwise, in the securities mentioned in this presentation.
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Contents
1. Financial Highlights
2. Industry Trends
3. Performance Highlights
4. Challenges Going Forward
5. Edelweiss Across The Years
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1. Financial Highlights
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Revenues of INR 1,986 mn (INR 2,496 mn in second quarter FY09)
Fee & Commission Income of INR 477 mn (INR 678 mn)
Treasury, Arbitrage and Trading Income of INR 448 mn (INR 853 mn)
Interest Income of INR 927 mn (INR 844 mn)
Profit After Tax and Minority of INR 381 mn (INR 436 mn)
PBT Margin improvement to 36.5% (33.0%)
Diluted quarterly EPS of INR 4.93 (INR 5.56)
Consolidated Results at a Glance
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Consolidated Unaudited Quarterly Results
INR Million FY09 FY09 FY08 FY09 FY08 FY08
Q3 Q2 Q3 9M 9M Annual
Fee and Commission Income 477 678 1,252 2,041 2,993 4,438
Treasury, Arbitrage and Trading Income 448 853 946 2,003 2,150 3,493
Investment and Dividend Income # 134 115 363 586 599 766
Interest Income 927 844 671 2,534 1,085 2,171
Other Operating Income 1 6 3 7 4 21
Total Revenues 1,986 2,496 3,235 7,171 6,831 10,889
Operating and other expenses * 579 723 628 1,960 1,373 2,280
Employee Cost 382 482 480 1,361 1,234 2,057
Financial expenses 258 423 673 1,120 1,182 2,012
Depreciation 42 44 17 120 40 73
Total Expenses 1,261 1,672 1,798 4,561 3,829 6,422
P rofit Before Tax 725 824 1,437 2,610 3,001 4,467
Tax expenses 276 325 473 962 1,014 1,540
P rofit After Tax 449 499 964 1,648 1,988 2,927
Share of minority interests in profits 67 63 40 193 81 195
P rofit After Tax and Minority I nterest 381 436 924 1,455 1,907 2,732
Diluted EPS (INR-not annualized) 4.93 5.56 12.95 18.81 30.03 39.99
(#) Quarter and 9 months ended 31 st Dec 2008 includes income of INR 61.6 mn and INR 282.7 mn respectively, from liquid mutual funds.(*) Quarter and 9 months ended 31 st Dec 2008 costs include Securities Transaction Tax of INR 117.1 mn and INR 612.9 mn respectively.
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Key Metrics
Period ending 9M09 2008 2007 2006 2005 2004
Net Worth (INR mn) * 25,692 23,274 7,222 1,787 539 302
Book Value Per Share (FV INR 5) (INR) # 269.6 246.5 93.6 39.3 15.8 9.2
Diluted EPS (FV INR 5) (INR)#
18.81 39.99 20.76 9.34 6.43 2.42
Pretax Margins 36% 41% 47% 41% 47% 38%
RoE (Annualized) 10% 28% 34% 39% 56% 30%
(*) Includes minority interest(#) Adjusted for corporate actions, Not annualized for 9M09
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Diversified Revenue Streams
FY07
Fee & Commission Treasury Interest Investment & Others
Achieving Greater Balance Through Diversification of Revenue Streams
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FY08 9M09
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2. Industry Trends
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Secondary Markets
INR bn
Volumes down 17% on QoQ basis, 41% YoY
Includes volumes on BSE and NSESource: BSE, NSE
Net outflow of ~ USD 13 bn in last four quarters
USD bn
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ECM and Advisory Transactions
Public Equity Deals Domestic Debt Market
Notes:Public Equity Deals include Domestic Equity Offerings, Rights, FCCBs and Depository Receipts
Domestic Debt Markets include Debt Private Placements and commercial papersSource: Bloomberg, Prime Database, Venture Intelligence
V o
l u m e
i n I N R b n
N o .
o f D e a
l s
V o
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i n I N R b
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N o .
o f D e a
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M&A Deals Private Equity
Notes:M&A Deals are announced deals all announced deals which may or may not have been completedSource: Bloomberg, Prime Database, Venture Intelligence
ECM and Advisory Transactions
V o
l u m e
i n I N R b
n
V o
l u m e
i n I N R b n
N o .
o f D e a
l s
N o .
o f D e a
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3. Performance Highlights
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Investment Banking business closed 3 transactions in Q3 and 9 transactions YTD
Key transactions include
Acquisition of PeopleSupport, Inc. by Aegis for USD 250 mn
Private equity placement of USD 75 mn for SKS Microfinance
Adjudged winner in the Best Merchant Banker category in the Outlook Money NDTV
Profit Awards 2008
Agency Businesses
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In the first full year of operations of Debt Syndication Desk Ranked #1 as per Prime Database in Short Term Debt Placement for CY08
Ranked #9 by Bloomberg and Thomson Reuters in Indian Domestic Bonds Market
League Table for CY08
Equity and Derivatives average daily trading volumes
Q309 of INR 31.5 bn; 9M09 of INR 43 bn
Market share * of 6.6% of total average daily volumes 9M09
Research covers over 200 stocks across 19 sectors accounting for 70% of total
market capitalization
Alternate Asset Management AUMs/AUAs now stand at USD 440 mn. Launched a new
debt fund this quarter
Agency Businesses
(*) Market share based on the reported volumes on NSE and BSE
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One of the worst quarters for the equity indices globally
Risk management approach tested, kept focus on capital preservation
Moved part of the treasury allocation to Bank FDsTreasury book size reduced, but yields remained stable
Fall in arbitrage revenues, partly offset by increase in interest income and reduction inSTT
STT for the quarter was INR 11.7 cr, down from INR 24.3 cr in the previous quarter
Capital Businesses
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Interest businesses comprises of interest income on collateralized lending and theinterest earned on working capital in the form of Bank FDs
Interest income increased for the quarter by 10% reflecting higher yields on thelending book and increase in FDs base
Bank FDs as of end of quarter stood at INR 15.5 bn
As on end of quarter, lending book asset base stood at INR 8 bn (INR 10 bn at end of
previous quarter)
Maintained sufficient collateral cover across all loans, average collateral cover above2.9x at the end of the quarter
0.5% Prudential General Loan Loss Provision in the Lending Book
Interest Businesses
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4. Challenges Going Forward
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Key Challenges and Our Approach
Risks Our Approach
Business VolatilityFall in business volumes in the midst
of domestic and global financialturmoil
Diversified Business Model
Flexible resources: capital and people
Flexible cost base: nearly half of our costs arevariable in nature
Risk to CapitalSharp fall in asset prices, one of the
worst quarters for equity indices,
deteriorating credit environment
Strong risk management cultureApproach to Capital PreservationBoard level oversight
Board Risk committee headed by an external Director
Liquidity Risk
Significant asset liability mismatchescompounded by global liquiditysqueeze
Strong and Liquid Balance Sheet
Balance Sheet size of INR 33 bn, Group net-worthin excess of INR 25 bn Low gearing Reverse ALM position duration of assets is lower
than that of liabilities
Maintaining higher cash and cash equivalents
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5. Edelweiss Across the Years
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Consolidated Financials
Year Ended March 31 9M09 2008 2007 2006 2005 2004
Total Income 7,171 10,889 3,718 1,533 727 281
Total Expenditure 4,561 6,422 1,971 898 383 175
Profit Before Tax 2,610 4,467 1,747 636 345 106
Tax Expenses 962 1,540 646 218 107 28
Net Profit (after tax and minority interest) 1,455 2,732 1,099 417 237 78
Paid up Equity Share Capital 375 375 45 38 29 28
Net Worth* 25,692 23,274 7,222 1,787 539 302
Diluted Earnings Per Share (FV INR 5) (INR) # 18.81 39.99 20.76 9.34 6.43 2.42
Book Value Per Share (FV INR 5) (INR) # 269.6 246.49 93.58 39.33 15.83 9.16
(In INR mn except per share data)
(*) Includes minority interest(#) Adjusted for corporate actions, Not annualized for 9M09
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Solid Track Record of Profitable Growth
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(*) after minority interest
Revenues Profit After Tax *
NetIncomeMargin
25% 29% 26% 30% 25% 20%
I N R m n
9M I N R m n 9M
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Net Worth *
Solid Track Record of Profitable Growth
(*) Including minority interest
(#) Based on average equity for the year , annualized for 9M09
Return on Equity #
I N R m n
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6. Edelweiss Profile
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Agency-based
Capital-based
Institutional Equities
Investment Banking
Treasury
Wealth Management
Private Client BrokingTreasury
Institutional Equities
Investment BankingInvestment Banking
2000 2003 2008
Strategy of selectively building new businesses adjacent to our current offerings
Asset Management
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Well Diversified Integrated Financial Services Model
Lending
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Private EquityInvestors34.4%
Promoters
38.1%
Individuals14.6%
OtherInstitutions*12.9%
Top 5 External Shareholders #
As on 31 st December 2008
Name Percent
1 GIC (Singapore) 8.3%
2 Galleon 7.9%
3 Greater Pacific Capital 6.5%
4 Fidelity 4.3%
5 Americorp Ventures Ltd. 4.0%
(*) includes FII, DII, Insurance companies, Banks, MFs etc.(#)Holding of known affiliates have been clubbed together for the purpose of this information
Shareholding Pattern & Top External Shareholders
Quality institutional investors from different geographies
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Active Board of Directors with complementary skills
18 yrs experiencein public andprivate markets
in India
Diverseexperiencein financial
sector
Strong expertisein riskmanagement andalternate asset
management
Experiencedin global
private equity
Rashesh ShahManagement
Representative
VenkatchalamRamaswamyManagement
Representative
SanjaySanthanam
Non-Executive
KunnasagaranChinniah
Non-Executive
SunilWadhwaniIndependent
P.N.Venkatachalam
Independent
Narendra Jhaver iIndependent
Chairman & CEO ExecutiveDirector
MD & Head of RiskGalleon Group
[Head of Risk Committee]
Executive V.P.GIC, Singapore
Managing PartnerKubera Partners
Co-Founder & CEOiGATE Corporation
Former MDState Bank
of India
FormerJt. MD ICICI
Former ChairmanICICI Securities
[Head of Audit Committee]
Strongbackground inentrepreneurship
acrossgeographies
Extensiveexperience inIndian credit
markets
Extensiveexperiencein Indian
capital markets
Extensiveexperience inmanaging
Investments globally
Experienced Board of Directors with diverse areas of expertise
Six independent /non-executive directors out of eight
Independent Risk Committee headed by an external director
Strong corporate governance
RamananRaghavendran
Independent
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Experienced Management Team
Senior M anagement Team
Experienced and CapableManagement Strong track record of identifying business opportunities and executing on strategy
Depth in Management Team Experienced business heads supported by a deep layer of skilled middle managers
Continuity Track Record A large % of the senior management team have been with the company for over five years
Employee OwnershipManagement and employees together hold approximately 55% shares (including ESOPs)of the Company (20% owned by non-promoter employees)
45 Member Senior Leadership Team (SLG)
80 Member Leadership Team (LG)
VenkatRamaswamyExecutive Director
Rashesh ShahChairman & CEO
Rujan Pan jwan iAsset Management
Global RiskMember of CEO Office
Deepak MittalCFO
Naresh KothariBroking
Wealth ManagementMember of CEO Office
Vikas KhemaniInstitutional Equities
Mohan NatarajanPrivate Client Group
Peeyoosh ChaddaAsset Management
Ravi BubnaWholesale Financing
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For more information, please visit www.edelcap.com
Or email [email protected]
Thank you
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