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Analyst Meet / AGM
30-Oct-18
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Conference Call
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Edelweiss Financial Services
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Aims to continue to maintain a liquidity cushion of 11%-13% of borrowings
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Edelweiss Financial Services conducted a conference call on 29 October 2018 to discuss its financial results for the quarter ended September 2018. Rashesh Shah, Chairman and CEO of the company addressed the call.
Highlights:
- The company has comfortable liquidity position to meet all liabilities over next 6 months, while the liquidity is returning to the system steadily and slowly. The company raised Rs 2600 crore since 21 September, including Rs 1450 crore in CPs. The company has bought back Rs 1000 crore in CPs.
- The liquidity cushion of the company stands at 9-10% of total asset and 11-12% of borrowings. The long term borrowings of the company are 59% of total borrowings and its aims to continue to maintain a liquidity cushion of 11%-13% of borrowings. The liabilities of the company upto March 2018 stands at Rs 7600 crore, of which Rs 550 crore is in CPs.
- The company expects liquidity situation to normalize by end November 2018 with volumes in the bonds market returning to 60-70% of normal levels from existing to 30%.
- The credit business of the company has surged 51%, while the asset quality was stable in Q2FY2019. The collateral cover for corporate book stands at 1.9x, while the LTV ratio for retail book stood at 45%.
- The company has posted strong 53% growth in the net life insurance premium collection in Q2FY2019.
- The company proposes to continue to strengthen focus on asset quality and liquidity, long term business and building customer value in the next six months, while it remain relentless on heightening risk management and corporate governance practices, technology investments, building foolproof systems and processes across businesses and strengthening our leadership pipeline.
- The liabilities maturing up to March 2019 stands at Rs 12000 crore, of which the company expects Rs 3000 crore to be met from ARC business and Rs 400-500 crore from per month inflows in credit business and around Rs 6000 crore in bank lines. In addition, the company also has liquidity cushion to meet liabilities and normalization of liquidity situation can further help to meet liability obligations.
- The company would be focusing on liquidity management till the liquidity situation normalizes, while the credit growth may moderate in H2FY2019.
- As per the company, the shrinkage in the CPs market would reduce CPs borrowings of the company to reduce by Rs 4000-5000 crore. The company used CPs to mainly finance its treasury and liquid credit book which is loan against shares generating RoA of 1%, so the dip in CPs financing is expected to impact lending in this segment and cause Rs 40-50 crore decline in the profits of the company.
- The loan book mix consists of Rs 13 thousand crore to retail and SME, Rs 12 thousand crore to real estate and wholesale mortgage, Rs 9 thousand crore to corporate, Rs 8 thousand crore to loan against securities and agriculture and Rs 7 thousand crore to ARCs and distressed assets.
- Within the real estate book, about 95% of exposure is towards housing finance projects and the company is the sole lender. The company expects recovery rate of 100%, as the company can takeover the project and sell the flats with personal sales team to recover dues. About 80% of the inventory is below Rs 1 crore, having good demand.
- The company is witnessing good traction in distressed assets business, while it is seeing recoveries from large ticket resolutions. The company has recorded recoveries of Rs 2000 crore in H1FY2019, while expects strong recoveries of Rs 10000-12000 crore in H2FY2019.
- The incremental cost of borrowing for the company has increased by 40-50 bps, while the company would pass on the higher cost of funds to customers. The margins are expected to be maintained in the range around 7.5%
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