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.
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