EWM has 2 businesses effectively – Wealth Mgmt and Investment Banking/Institutional Equities.
WM has longer-term stable cashflows, IB though is a little bit more lumpy and cyclical.
They’re expecting to grow at 20-25% for WM and I assume IB can through the cycle grow at nominal GDP (let’s say 12%)
WM can potentially trade a high valuation let’s say 20-25x.
IB usually trades at lower (look at JM Financial, MOSL – high single digit P/E – although they also have lending operations lumped in together)
I suspect they can generate 350-400cr of net profits by FY24/FY25 and operating leverage will start to kick in once a platform is established and the incremental margins are higher.
Slap a 20x multiple and that’s a valuation of 7500cr to 8000cr
(In AGM earlier, mgmt put an intrinsic value of 7500 to 9000cr today, I am assuming it’s worth 7500-8000 in 2yrs)
Edelweiss’ stake (44%) will be worth c. 3400cr.
The market cap of EDEL today is about 5650cr.
So I think it is clear that EDEL is a good value opp – but requires value unlock through demergers and the market will only realise value if capital allocation improves.
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