Edelweiss Capital
Business now under pressure, but valuation attractive
Rating: Accumulate Target Price Rs49
Major shareholders
Promoters 38.01% Foreign 13.51% Domestic Inst. 3.59% Public & Other 44.89%
Overview: Leading diversified financial services organization
Key businesses now: Investment Banking, Brokerage - Institutional
and Retail, Asset Management, Financing and Treasury
2575 employees and 360 offices pan-India after Anagram acquisition
Result: Overall profitability remains under pressure.
Gross revenues grew by 16.7% QoQ, while PAT declined by 5.7% QoQ.
Net revenue grew by a modest 3.6% QoQ.
Commission income: Given the weak cash market volumes
Overall broking revenues for the company remained flat at about Rs810m
for the quarter. Overall Fee & Commission income declined by 5.8% QoQ.
Financing spreads decline as interest costs rise: The steady state loan book
remained nearly flat QoQ at Rs30.3bn. However due to higher yields
(16.4% in Q3) and episodic financing opportunities, interest income
grew by 33.2% QoQ. Due to the tight liquidity conditions in the systems,
EDEL’s borrowing costs increased (9.4% in Q3) which resulted in
interest cost shooting up by 44.1% QoQ.
Treasury income improves: With higher short-term interest rates in
the system, treasury yields also improved during the quarter.
Outlook better over longer-term: The core Broking business
remains under pressure due to weak cash volumes in the market.
Financing business was impacted due to higher borrowing costs
and lower spreads. Despite short-term pressure, valuations are
attractive from long-term perspective.
Disclaimer
The information, analysis and estimates contained herein are based sources believed to be reliable. We accept no liability whatsoever direct or indirect that may arise from the use of information herein and shall not be responsible for the completeness and accuracy. It is not an offer to sell or a solicitation to buy securities. This information is for circulation only
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