Edelweiss Financials – My investment case below
I have not finished reading the complete annual report however went through presentation and other details I could gather. A year back also I had a flirting with this stock twice but at that time I don’t remember what happened but I never made it an investment position. However the stock definitely deserve a closer look and may be a worthwhile investment case.
Well laid out fortified diversified business model, innovative and ambitious company, they seem to be in right spaces and are pacing up at right time.
I always maintained that Financial services like new age banking and NBFCs with a mindset of innovation in roots and powered by digital wave, fore front in best in class IT technology and data analytic adaptation would be biggest wealth creators in coming times. One needs to have perhaps a basket kind of approach just as in case of Pharma sector in a portfolio with a sizable chunk allocation. Look around and you will see even in worst times banks and NBFCs do tend to make profits and here the competition intensity does not matter much as the profit pool size is humongous. Many a times I am surprised not to see banks and NBFCs in portfolios. At best little allocation here or there with housing finance little more lucky. Why this is reserves for sometime later and I will write later on it but for now….
Few quick facts
1. Since listing always a dividend paying company without fail
2. Since inception every single quarter profitable with CAGR in PAT>30% for past 10 yrs
3. Company ROE ex insurance finally breaking 15% threshold and seems to be sustainable now. Sometime back I went through MOST 100 bagger study and there was an interesting theory of an inflection point wherein company passes 15% ROE for the first time and on sustainable basis and thus announcing the emergence of itself as a multibagger.
4. GNPA and NNPA are relatively better at 1.4% and 0.39% respectively
5. Since I have an Edelweiss trading and demat account I can vouch for their better digital interface platform and customer relationship service than ICICI or Sharekhan atleast. The research reports are good enough. Just gives me good confidence as a whole on the company though the broking side of business may be of little % as a whole.
6. RJ, Saif Advisors and Amansa Capital in Top 10 shareholder category. RJ investment here is sizable so he must have done due diligence. Same can be said about Amansa Capital as well.
7. P/B of 1.4 on TTM basis looks very attractive.
8. Their insurance business with Tokyo Marine of Japan as JV partner is the fastest growing insurance business in India and their funds are top rated by Morningstar. They also have the highest branch productivity in the country.
9. Agri Financing business, one of their new product has untapped and very large scale opportunity in coming times and has the potential to be a game changer.
10. Ranked no 1 in public issuance of bonds with 55% market share
11. Cost to income ratio very high at 59% and is negetive
12. There was a buy back by company in 2014 at a price of Rs 45. CMP is 55.
13. Promoter’s shareholding is low at 30.53% out of which 60% approx is pledged which is slight negative.
I guess for now above info is good enough for me to have it classified as low conviction stock and will allocate the capital accordingly. As and when the conviction builds up and the information flows to me then will make a case later.
Good Night
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