Edelweiss Financial Services : A long term opportunity player in bfsi domain.

Edelweiss Financial Services

Edelweiss is in the financial services, providing services in Credit, Asset Management, Wealth Management, Distressed Asset, Insurance. With people pouring in an unprecedented amount of money into mutual funds, these companies are going to be biggest beneficiaries.

Edelweiss Financial Services Ltd has sold its Singaporean subsidiary Cross Border Synergy Pte. Ltd to commodity trading firm Searock International Pvt. Ltd for Rs 8.47 crore ($1.3 million), it said in a stock-exchange disclosure.
The share sale and the purchase agreement were executed in September.
Edelweiss held interest in Cross Border Synergy, earlier known as Edelweiss Commodities Pte. Ltd, through its wholly-owned subsidiary EFSL Comtrade Ltd.

As of 31 March 2017, Cross Border Synergy’s net assets were valued at Rs 54.9 crore, according to its annual report.Mumbai-based Searock International is in the business of trading bulk commodities, minerals and other products.
Chartered accountants Dhiraj Khandelwal and Amit Sharma are the promoters of the company, according to its website.
Financial conglomerate Edelweiss group’s main business lines are credit (comprising wholesale, retail, SME and agricultural financing), non-credit (comprising financial markets-related fee businesses, asset management and commodities), and life insurance. These businesses offer loans to companies and individuals, mortgage finance, commodity sourcing and distribution, stock broking, corporate finance and advisory, wealth management, third-party financial products distribution, and alternative and domestic asset management.

 Edelweiss Tokio Life Insurance on Thursday announced an equity capital infusion of Rs 670 crore from Edelweiss Financial Services and Tokio Marine to fund business expansion, develop its bancassurance channel, and explore inorganic growth opportunities. The company is a joint venture between Edelweiss Financial Services and Tokio Marine Holdings where Edelweiss Financial Services owns 51 per cent and Tokio Marine owns the rest 49 per cent. In February 2016, Edelweiss Tokio Life Insurance had Edelweiss Tokio Life Insurance had received Rs 527 crore in capital from Tokio Marine.

We are evaluating inorganic opportunities. Currently, there’s no transaction in the advanced stage and if there is a need, the promoters will be willing to invest more capital.”
Edelweiss Tokio Life Insurance looks to expand the number of branches to 180 from 110.
“Insurance serves the dual purpose of mobilizing long term savings into investments, and providing protection,” said Rashesh Shah, chairman Edelweiss Group.

“With the increasing financialization of savings acting as a significant growth driver for Life Insurance, Edelweiss Tokio Life has laid a strong foundation, and is well poised to take advantage of this growth opportunity.”

Along with insurance , Currently, Mutual Funds in India are owned by around 6% of Households and Mutual Funds AUM to GDP stands at 8%. This is similar to the situation in the US in 1985. US witnessed unprecedented growth in Mutual Funds AUM in 1982 to 2000 period, during which time their Index rallied up to 15 times from 100 to 1500. Currently, in US, 56% of households own Mutual Funds and the Mutual Funds AUM to GDP is at staggering 90%.

In the Credit division, Housing market finance and SME finance is growing rapidly in India, and this is expected to generate lots of revenues going forward.

Vijay Chopra of enochventures.com told CNBC-TV18, "I think that Edelweiss Financial Services is one of the best placed financial services companies today in the entire market. With an ARC, with an insurance business, as a broking business, they have diversified very well and my sense is that if somebody holds out with a longer-term perspective, this stock can even double in the next 3-5 years."
"Any kind of fund infusion happening in the company would definitely bring in more business provided that asset quality remains stable. So as of now, Edelweiss looks extremely wonderful on the charts as well. The diversification in business is what gives strength to this company. So definitely a hold and in a correction, if somebody wants, can buy as well," he added.

Hence I believe there is a lot of potential in India in the mutual funds and credit space and Edelweiss is rightly placed to gain an advantage of this.

Also, take a look at its recent financial performance

Sales and Net profit are growing by leaps and bounds. This is expected to continue for many years to come

In Summary : Edelweiss Financial Services is selected due to the long-term growth potential in the bfsi sector they are operating in. It has good capability to execute things at scale, which is a very important factor.

The management of  Rashesh Shah at Edelweiss is effective and have are experienced people in their respective fields and have the passion to grow the companies by leaps and bounds.

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