Edelweiss profile may_2011

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Edelweiss Capital Limited: A Profile

October 2010 www.edelcap.com

CONTENTS

Introduction

Evolution of Edelweiss

Business Overview

Corporate Structure

Shareholding Pattern

Board of Directors

Senior Management

Financial Performance

Credit Ratings

Edelweiss Strengths

Corporate Social Responsibility

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Introduction

Edelweiss Capital Limited (www.edelcap.com), incorporated on 21st November 1995, today has emerged as one

of India‟s leading diversified financial services group. The Edelweiss Group offers one of the largest range of

products and services spanning varied asset classes and diversified consumer segments. The Group‟s product

offerings are broadly divided into Investment Banking, Brokerage Services, Asset Management and Financing.

The company‟s research driven approach and consistent ability to capitalize on emerging market trends has

enabled it to foster strong relationships across corporate, institutional and HNI clients. Edelweiss Group now

employs over 2380 employees after Anagram acquisition, leveraging a strong partnership culture and unique

model of employee ownership. It now operates through 297 offices, 53 franchise led offices and over 1300+ sub-

brokers in all major cities in India after the recent acquisition of Anagram Capital. The Edelweiss Group is a

conglomerate of 47 entities including 42 Subsidiaries and 4 Associate companies (September ‟10), which are

engaged in the business of providing diverse financial services. It is a listed company since December 2007

under the symbols NSE: EDELWEISS, BSE: 532922 and Bloomberg: EDEL.IN.

Evolution of Edelweiss

Business Overview Edelweiss‟ operations are broadly divided into Agency and Capital business lines. The Agency business line

includes Investment Banking, Broking - Institutional, HNI and Retail, Asset Management and Investment

advisory and distribution services. The Capital business line includes Financing and Treasury Operations. The

strategies employed ensure that there is a balanced mix of revenues among the three revenue streams viz.,

Agency fee & commission, Treasury operations income and Interest income, thereby achieving the intended

diversification in revenue streams.

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Investment Banking

Edelweiss has one of the most extensive product offerings in Investment Banking in India, catering to different

market and client segments. The verticals within Investment Banking include Equity Capital Markets which

include IPOs/FPOs, QIPs, Rights and Open Offers, and Advisory services which offer Mergers & Acquisitions

Advisory, Private Equity Syndication, Structured Finance Advisory and Infrastructure Advisory. Edelweiss also

offers full bouquet of products in Debt Capital Markets including Debt Syndication and broking. Edelweiss enjoys

strong franchise with emerging and mid-market companies which is reflected in the # 1 ranking in both

Bloomberg tables for Mid-market Private Equity placements in CY2007 and Prime Database league tables for

IPOs in Mid-market segment in FY2008. It was adjudged winner in the Best Merchant Banker category in the

Outlook Money NDTV Profit Awards 2008. It is ranked # 2 in QIPs and # 3 in ECM (QIP+IPO/FPO+Rights) in

FY10 as per Prime Database. Its client segments now span from private to public sector and from Mid-caps to

Large-caps across different industries.

Broking

Institutional Equities

Edelweiss has one of the leading institutional equities businesses in India backed by a large and experienced

research team and a large and diversified client base with a market share of ~5%, among the highest in Indian

brokerage firms. Intense servicing, seamless execution and innovative research products have helped Edelweiss

build strong relationships with over 300 active institutional investors, including domestic institutional investors

and FIIs across different geographies. Edelweiss arranges Investor Conferences every year in different locations

across the world with a strong investor and Indian corporates participation.

Research coverage presently extends to over 179 companies across 18 sectors accounting for over 70% of total

market capitalization representing one of the largest Research coverage universe. The quality and caliber of

research associated with Edelweiss is widely regarded across the institutional community. It has a strong

positioning in Thematic Research - identifying large structural themes across sectors, and its “India 2020”

thematic report issued in March ‟10 was a recent highlight. It is also considered a Thought Leader in Alternative

Research with over 15 regular products such as pair-trading strategies, corporate action tracker etc. Edelweiss‟

commitment to provide cutting edge research has resulted in a pioneering effort to provide online research to its

clients through the portal www.edelresearch.com with smart features of sorting of information, analysis and

archiving.

HNI Broking

Edelweiss offers dedicated broking services to high net-worth individuals with a strong emphasis on building

long-term relationships with clients. Product offerings include specialized trading execution for active trading

clients and structured products backed by high quality execution and reporting.

Retail Broking & Distribution

Retail Broking and Distribution are the new initiatives of the Group under its Retail Business strategy. The

organic Retail broking business is through the online portal www.edelweiss.in and provides advisory and

research based broking services supported by high quality execution platform and best in class reporting. It

currently has over 75,000 clients under the online broking. Edelweiss has also completed the acquisition of

Anagram Capital Limited in July „10. This adds over 211,000 clients, over 1300 sub-brokers, 140 own offices and

53 franchise led offices to Edelweiss group. The acquisition is in sync with the existing Retail Strategy of the

group with minimal overlap.

Distribution business focuses on giving advice and analyzing the best financial product options available in the

market. It involves the distribution of the full range of third party financial products and services including IPO

syndication for the retail customer. For the year ended 31st March 2010 Edelweiss is ranked # 2nd in HNI

category and # 4th in Retail category by amount mobilized in IPOs as per Prime Database. For the half year

ended 30th September 2010, these rankings are 2nd and 5th respectively. Edelweiss also secured 1st rank in NIB

category both in NHPC and OIL India IPOs by the number of applications earlier in FY10. The Distribution

Business is expanding into other products such as MFs, Corporate Debt and Insurance.

http://www.edelresearch.com/

http://www.edelweiss.in/

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Wealth Advisory & Investment Services

The Primary focus is on understanding each client's profile including life style, risk appetite, growth expectations,

current financial position and income requirements to create comprehensive and tailored investment strategies.

The broad range of offerings includes a truly multi-asset class allocation advisory to Structured Products,

Portfolio Management, Mutual Funds, Insurance, Derivatives Strategies, Direct Equity, Private Equity, and Real

Estate Funds etc.

Asset Management

Alternative Asset Management currently focuses largely on offshore institutional investors offering

advisory/management expertise for India focused Multi-Strategy Fund, Real Estate Fund and a Special

Opportunities Fund. Recent Initiatives that have been announced include setting up an ARC for which RBI

registration has been received. The product portfolio is planned to be expanded by offering a Distress Assets

Fund. On the Domestic AMC side, Edelweiss Mutual Fund has launched a mix of 10 schemes across equity and

debt funds. The current focus of this business is on broad basing the product portfolio and building investment

track record.

Financing

With a deep knowledge and understanding of capital markets backed by strong origination capabilities, the

Company‟s primary offering in the financing business includes collateralized loan products such as sponsor

funding, loans against shares, IPO financing, loans against ESOPs and margin funding etc. The sponsors of mid-

to-large corporates constitute its key clientele. Its prudent financing norms, strong risk management and a

conservative margin of safety (typical collateral cover ranges from 2x to 3x) ensures low or nil non–performing

loans. Edelweiss continues to work on new product offerings around other asset classes. Edelweiss Housing

Finance Limited has recently commenced the business of Home Loan Finance and would help the group diversify

the collateral class.

Treasury

The Treasury operations in Edelweiss are similar to that of a Treasury in a Commercial Bank and focus on

liquidity management and capital preservation. This business adopts a multi–strategy/multi-book approach to

diversify and grow its portfolio while imparting liquidity in the balance sheet. The group follows a disciplined and

conservative approach to cash management with emphasis on strong risk policies. This has resulted in a low or

no correlation between the market returns and the treasury performance.

Corporate Debt Syndication

Our Debt Syndication Desk focuses on origination, sales, trading and research. It has gained a strong foothold

and visibility in the market.

Ranked # 2 in CP Placement and Short Term Debt Placement for FY09

Ranked # 4 in CP Placement and Short Term Debt Placement for FY10

Also ranked # 2 in CP placement and 3rd in Short Term Bonds Placement in H1FY11 (Rankings as per as per Prime Database)

Its clients in the recent past include large corporates like Reliance Industries, SAIL, REC, PFC, PGC, Tata Capital,

Sundaram Finance, Yes Bank, State Bank and Bank of India.

Growth Initiatives Edelweiss has announced that it is entering into an agreement with Tokio Marine Holdings, Inc., one of the

world‟s leading insurance groups headquartered in Japan, to establish a Life Insurance Joint Venture in India

subject to regulatory approvals. It has also completed the acquisition of Anagram Capital and it has also soft

launched home loans business recently. It also has received the RBI approval for setting up an asset

reconstruction company. These initiatives would lead to long term investment opportunities for the Group in the

financial services industry while enlarging its retail footprint.

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Corporate Structure

* Edelweiss Capital Limited has 100% holding in its subsidiaries unless specifically mentioned in parenthesis, as on 30th September 2010.

Shareholding Pattern

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Board of Directors

The Edelweiss Board comprises of three independent directors and one non-independent non-executive director

out of a total of six directors, each of whom brings in his own expertise in diverse areas. The focus is on strong

corporate governance. The directors of the company are:

Senior Management

Edelweiss has an experienced and capable Senior Management team with a strong track record of identifying

business opportunities and executing on strategy. The company has experienced business heads supported by a

deep layer of skilled middle managers. Most members of the senior management team have been with the

company for over five years. A four tier leadership pool covering over 10% of the organization provides stable

leadership across various businesses while building bench strength.

Financial Performance at a Glance Edelweiss over the past years has delivered strong operating and financial performance since its inception. It has

consistently demonstrated a strong track record of high growth and profitability. Its Revenues and PAT have

grown at an 11-year CAGR of 80% and 75% respectively till FY10.

As on 30th September 2010 Edelweiss Group‟s Networth after minority interest stood at over ` 23.35 billion

(` 28.09 billion including minority interest), indicating a strong balance sheet. Equity capital is the primary

source of funding for the group besides debt. The leverage as on 30th September „10 is 2.17 times including the

Minority Interest indicating a healthy position whereby the balance sheet can be further levered easily.

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Consolidated Financial Performance of Edelweiss Capital Limited:

Edelweiss benefits from a strong and liquid balance sheet with a low leverage. A strong capital base and

adequate profitability year after year allows Edelweiss to constantly invest in new businesses with an eye on

future growth while scaling up the existing businesses. A large capital base also allows it to transact larger

volumes of broking and trading in the markets giving it a leadership position in Institutional Equities business. It

also enables the group to add debt capital as and when required at reasonable rates. Its market capitalization as

on 30th September ‟10 was over ` 41 billion and places the company among top 5 brokerage houses in the

country by market cap.

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Highest Short–Term Credit Ratings Edelweiss Capital Limited and three other group companies enjoy highest short term rating as under:

(As on 30th September „10)

Entity Rating Agency

Rating

Edelweiss Capital Limited

Long-Term Debt Programme ICRA LAA-/LAA- pn/ LAA- pp/Stable

Short-Term Debt Programme CRISIL P1+

Edelweiss Securities Limited


ECL Finance Limited

Short-Term Debt Programme ICRA A1+

Long Term Debt Programme ICRA LAA- pp

(SO)/Stable

Long Term Debt Programme CRISIL AA-/Stable


Edelweiss Commodities Ltd. (formerly ECAL Advisors Ltd.)

Short Term Debt Programme CRISIL P1+

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Edelweiss Strengths

1. Brand: Edelweiss – the brand, today is a strong franchise in the capital markets backed by a consistent focus

on execution and innovation. It constantly emphasizes innovation which is reflected in leadership in new

products and asset classes and new client segments.

2. Edelweiss‟ Core Strategic Approach to business is founded on growth with profitability backed by

synergistic diversification across the businesses; Control and flexibility of cost, capital and balance sheet,

diversified revenue streams, strong risk management and organization build up by developing

leadership in bench and investing in culture which rewards thinking about long-term in a partnership cohesive

approach. It believes in growth through adjacent markets, adjacent asset classes, adjacent product classes and

adjacent client segments.

3. Integrated & Diversified Business Model: Edelweiss derives its strength from a distinct but

complementary set of diversified businesses which also protect the Group from any downward cyclical pressures.

To this end, Edelweiss continues to look to invest in long term business opportunities in financial services. Its

core business diversification approach is based on growth through adjacent markets and through widening the

product mix in existing businesses. The synergistic diversification ensures three broad streams of revenue, viz.

Agency fee & commission, Treasury operations income and Interest income contribute approximately one-third

each of the total revenues.

4. Balance Sheet: Edelweiss benefits from a strong and liquid balance sheet with a low leverage. Its focus

while managing the Balance Sheet is on strong risk management and capital preservation. A strong capital

base of ` 28.09 billion and adequate profitability year after year allows Edelweiss to constantly invest in new

businesses with an eye on future growth while scaling up the existing businesses. Edelweiss is also shielded from

any adverse asset liability mismatch as its asset-side duration is less than 9 months whereas its liabilities have

duration of about 120 months. Low leverage on the balance sheet and highest short term credit ratings

allow it ample leeway to lever the balance sheet further. The flexibility in the cost structure enables it to

protect the margins, strong risk management focuses on preservation of capital and the group maintains

adequate liquidity cushion to ensure smooth business operations across cycles.

5. Edelweiss Business Model is to be able to adjust to downturn in markets with inherent cost flexibility and

be able to quickly convert growth opportunities into business when they reappear. Our business growth

perspective is aligned to the medium term of 3 to 5 years.

6. Board level Commitment: A board comprising of three independent and one non-independent non-

executive director out of a total of six directors, all of whom play a governing role and provide expertise and

insight into building Edelweiss into one of the most reputable organizations with an admirable compliance and

corporate governance ethos.

7. Management: Edelweiss has an experienced and stable senior management team. We also have a strong

middle management team, which comprises of a 50 member Senior Leadership Group and an 80 member

Leadership Group forming the bench strength. The four tier leadership pool thus covers over 5% of the total

employee strength of the group. Edelweiss constantly emphasizes training and developing leadership and its 100

seater Training Centre at Alibaug (near Mumbai) is now operational.

8. Employee Ownership: Edelweiss has a widely distributed employee ownership and was among the pioneers

in the financial services industry in instituting an employee stock option scheme. It now has one of the largest

ESOP pool in the financial services space in India and over 600 employees are covered through ESOPs. The

employees including key management own over 50% of the company.

9. ISO Certification: Edelweiss has now been certified as ISO 9001:2000 compliant. This is an organisation

wide certification, which covers all lines of businesses and support functions. It ensures that Quality Management

System (QMS) of Edelweiss complies with International Standards.

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Corporate Social Responsibility

At Edelweiss, Corporate Social Responsibility is a part of its DNA and it focuses on initiatives that help to build a

better, more equitable and sustainable society. For Edelweiss, CSR means giving back to the society - beyond

the call of the business.

EdelGive Foundation, the CSR wing of Edelweiss, has accordingly been formed to create an effective institutional

platform to provide structure and direction to the philanthropic activities of Edelweiss, its employees, its clients

and its associates. Its primary focus is on creating educational, employment and sustainable livelihood

opportunities for underprivileged youth and it brings an „institutional banking and venture capital” rationale and

thinking to the social sector. Edelweiss leverages its strengths - the ability and expertise to act as a bridge

between providers and consumers of capital - to achieve the objective of addressing the primary needs of the

social sector.

EdelGive Foundation focuses on the twin areas of education and livelihood and leverages Edelweiss‟ intellectual

capital by encouraging Edelites to volunteer and use their skills to support non-profits in developing MIS

systems, reviewing their accounting and reporting systems and building five-year strategic and financial plans.

Kubera-Edelweiss Social Innovation Honours is a joint CSR initiative of Kubera Partners and Edelweiss to

encourage NGOs who are working to improve the status of the girl child in the areas of health, education and

employability. The Social Innovation Honours for the year 2009-10 received overwhelming response with over

280 entries out of which 5 NGO were selected for the award for their innovative work to empower women.

Edelweiss has been rated among the top 5% of companies in terms of CSR by Karmyog.com.

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This presentation is for information purposes only and does not constitute an offer or recommendation to buy or sell any securities or financial

products of Edelweiss. Any action taken by you on the basis of the information contained herein is your responsibility alone and Edelweiss or its

directors or employees will not be liable in any manner for the consequences of such action taken by you. This presentation may contain certain words

or phrases that are forward - looking statements, based on current expectations of the management of Edelweiss Capital Ltd. or any of its subsidiaries

and associate companies (“Edelweiss”). Actual results may vary significantly from the forward-looking statements contained in this presentation due to

various risks and uncertainties. The information contained herein is as of the date referenced and Edelweiss does not undertake any obligation to

update these statements. Edelweiss has obtained all market data and other information from sources believed to be reliable or are its internal

estimates, although its accuracy or completeness cannot be guaranteed.

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