#unnecessary data analysis
In Last one month FIIs are back and guess whos back
Axis long term equity performance -
Overall mood/behaviour meter - Green
What I am feeling about front running scam - forgotten
What I am feeling about underperformance - very comfortable. Convinced that XIRRs will improve
I live in a town which is similar to places where krsnaa sets up their diagnostic centers. my town has a population of 1 lakh. I was checking the population of places where krsnaa has centers and the population is more or less similar. Hence I came to the conclusion. Once I admitted my father to the hospital but to do xray i had to take him outside. usg was done in the hospital but there was a huge queue for it. The hospital is of a sub divisional level hospital to where patients from nearby villages (actual villeges) come. calling my town as rural area will be very wrong. it has a college, 6 high schools. There are no shortage of patients in the hospital. Very often for critical cases or serious cases patients are referred to district level hospital. so I don’t think krsnaa has centers in rural areas or villeges.
IMO, revs can easily grow at 25%. But margins will likely remain subdued as company is aiming for rapid growth and the ROCEs and utilization rates will take time to mature amd fixed costs which don’t show immediate results stay elevated on account of constant expansion and new tenders.
Need to wait for expansion to slow down for margins to hit 30-35% and ROCE to grow to 25-30%.
Quarter was definitely muted and below average margins.
For all these costs that the company is incurring, the centres that are newly opened needs to slowly garner enough footfall before the rewards can be reaped. Operating leverage is atleast 2 years out imo, mgmt doesnt look like they will slow down on setting up new centres as long as they see the demand. Long term great but short term pain(how much pain and for how long is to bee seen).
Secondary thoughts, compared to normal diag companies engaging in b2c, I feel like even thought capacities present are more than enough, utilization rates may not ramp up as expected, aren’t they dependent on patients from public hospitals? So footfall might be limited as in rural areas, there maybe only a certain number of people in rural locations where technically Krsnaa’s capacities may be there to do more tests per day but it is practically impossible to increase them as it is dependent on population nearby who use the govt hospital. Whereas on b2c side, more people enter based on name(like lal path labs) and footfall in individual diag centrest increase that way. Please correct me if I’m wrong.
The number of bids and the scale of capacities show enough opportunities for company to scale up but revenues are still not hitting 150 crores atleast. Lets see how mgmt responds.
Disc - invested. largest position. Margins and roce and slower growth definitely concerning.
very well put @investor12321.
The star of the Q1 results is AIF and they are one of the leader in the segment in India. AIF needs lot of experience and it takes time to develop and needs track record to demonstrate it. The fact that their AUM (committed not deployed) is showing rapid growth auger well for the AIF business.
They have deployed 20k cr so far and in last 2 quarters they have deployed around 2800-3000 cr. So if they continue their earlier momentum, fee paying AUM will cross more than 25k in next four quarters. Currently AIF is showing 21 cr PAT, so by next June, it is likely to be around 30cr and that is only fee paying income.
The management (Mr Shah) said, that once they start exiting the investment there will be decent carry income. In last 2/3 quarts they have saying they have existed investment but they have not said how much is the carry income, neither they mentioned what is IRR for these investments. This is very basis things one would have expected them to report, so it looks like they may not have earned decent returns.
Having said, I think this business shall report 100cr PAT + going forward (with consistently and stability) in their fee income. Once they start receiving carry income, the PAT could double, but it shall take another couple of years to materialise once they start existing their investment. Untill then, fee income will be keep the momentum going.
As per this document in early 2022
Also the good part is they own 100% of it. I wish and hope that they do not dispose it the way they dispose the Wealth management business at depress price.
Rest of the business are more or less same as Q4-Fy22, with same profitability, except insurance which is reporting higher losses because they have increased their shareholding in life insurance business from 51 to 66%.
Also they have been talking about co-lending since ages, but it is yet to show in their results. Looks like others NBFC (e.g. IIFL, Capri) are firing on all cylinders as far as co-lending is concerned, but Edel is happy to just talk about it now leaving the execution for some other day.
So in nutshell, pretty ordinary Q1 result, with nothing more to talk about it.
I found this info very helpful if one wants to know little bit more about AIF business of Blackstone, the biggest alternative asset manager in the world with AUM around $1 trillion.
Note- Invested and biased.
10.5% revenue growth in core business revenue is low in my opinion. Let’s see what they mention is tomorrow’s investor meet. While disclosures are ok it does look like management is overcommitting.
If some one notes the QOQ core revenue growth slowly it’s accelerating. In Q2FY22 to Q3FY22 it was 1.8%, from Q3FY22 to Q4FY22 it was 1.0% and now Q4FY22 to Q1FY23 it’s 5.9%. So slowly it’s accelerating. Maybe PBT level it will be subdued but EBITDA level soon it should make difference. Here other income component also varies quarter to quarter so if we see the core business revenue it’s accelerating IMO.
@Chins see this.
Amortisation is not like Depreciation. Hard assets are depreciated over their useful life time. Post that the value of asset becomes zero. And rightly so.
In case of Amortisation, the value of acquired asset… instead of depreciating, actually appreciates over its life time.
So when amortisation is charged from P&L account, the company gets a tax break and the value of acquired asset or brands keeps growing. So, its a win win for the company.
On ESOP, I believe it would be charged only for Q1. So from Q2 onwards, the company should get the full benefit of operating leverage on the increased sales.
Regards,
Ranvir Dehal
This is the dark side of the capitalist world. Unfortunately, rarely gets highlighted in all of the glitz and glamour
Scattered Thoughts on EDEL:
Mutual Fund Ownership:
A total of 5 mutual fund schemes own EDEL - all passive ETFs.
Stock is definitely overlooked, I’d have expected some value hunter fund manager to invest here.
Valuation
Annualised Q1 FY23 profit takes us to 14x earnings at the current price
(I’m using the ex-insurance PAT, thus assuming 0 value for insurance subs.)
All businesses, except Alternatives, generate terribly low ROE - no wonder stock trades at 0.8x BV.
Business Quality:
I think the key issue is while Financial Services is a great growth story in general - all of Edelweiss’ businesses are subpar - not in the top 3 or top 5 of the category.
(Except ARC (where ROE is <10%) and haven’t looked at the data in Alternatives which actually looks like a good business)
Three key things: Scale, Competitive Advantage, and Speciality. These businesses have none (0/3) - combined with the fact that the market doesn’t believe one word coming out of Rashesh Shah’s mouth (and I don’t think that unfair either)
Way Forward:
That said if you’re a shareholder, and I am - the expectations are low and the market is allocating very little or zero value to potential improvements in business prospects.
Any enterprising investor with a SOTP, please do share.