Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Creating Wealth through Alpha and Compounding

Yellowstone Equity

Providing unbiased and independent research on Indian equities to global institutions and individual investors


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Regulatory Disclosure: 
Note that Ankit Agrawal (Proprietor of Yellowstone Equity) is a SEBI registered Research Analyst (Registration No.: INH000007216). Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

Research Analyst Contact Details:
Address: A-412, Shilp Aaron, Sindhu Bhavan Road, Ahmedabad, Gujarat - 380059
Email: services@yellowstoneequity.com
Mobile: +91-7575817289

Compliance/Grievance Officer:
Name: Ankit Agrawal
Email: services@yellowstoneequity.com
Mobile: +91-7575817289
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Equity Bottom-Up

Edelweiss Financial Services / Equity Bottom-Up

<ul>
<li>Credit business has seen decent recovery with asset quality stabilization and down-sizing of the wholesale loan book. Retail book is growing via co-lending and other asset-light models.</li>
<li>Asset Management business is scaling up well and is poised to benefit significantly from operating leverage, particularly in the Alternatives business as the carry fee kicks in from FY24.</li>
<li>Insurance businesses continue to scale up well. Edelweiss is seeking strategic partners for both the insurance businesses to take advantage of the new IRDA regulations.</li>
</ul>


Credit business has seen decent recovery with asset quality stabilization and down-sizing of the wholesale loan book. Retail book is growing via co-lending and other asset-light models.
Asset Management business is scaling up well and is poised to benefit significantly from operating leverage, particularly in the Alternatives business as the carry fee kicks in from FY24.
Insurance businesses continue to scale up well. Edelweiss is seeking strategic partners for both the insurance businesses to take advantage of the new IRDA regulations.


<ul>
<li>After a tough 3Y since the IL&amp;FS crisis, Edelweiss' credit business is now getting back on track. Asset quality has normalized to &lt;2% Net NPA.</li>
<li>Edelweiss' other businesses continue to post robust growth. ARC, Asset Management and Insurance businesses are scaling up well. Wealth Management business is on track for listing by Feb 2023.</li>
<li>At a market cap of INR 5200cr, Edelweiss is trading cheap even if one ascribes zero valuation to its Credit business.</li>
</ul>


After a tough 3Y since the IL&amp;FS crisis, Edelweiss' credit business is now getting back on track. Asset quality has normalized to &lt;2% Net NPA.
Edelweiss' other businesses continue to post robust growth. ARC, Asset Management and Insurance businesses are scaling up well. Wealth Management business is on track for listing by Feb 2023.
At a market cap of INR 5200cr, Edelweiss is trading cheap even if one ascribes zero valuation to its Credit business.


<ul>
<li>Excluding one-off gains, Edelweiss reported weak Q3FY22 earnings, led by the credit business that has been adversely impacted by operational de-leverage from declining AUM.</li>
<li>However, barring the credit business, Edelweiss’ rest of the businesses continue to post strong growth and profitability. </li>
<li>There are material headwinds in the credit business currently; however, these are poised to recede as the business scales up over the next 2Y.</li>
</ul>


Excluding one-off gains, Edelweiss reported weak Q3FY22 earnings, led by the credit business that has been adversely impacted by operational de-leverage from declining AUM.
However, barring the credit business, Edelweiss’ rest of the businesses continue to post strong growth and profitability. 
There are material headwinds in the credit business currently; however, these are poised to recede as the business scales up over the next 2Y.


Edelweiss: Cheap Valuation; Scaling Up The Credit Business Is Key

Alpha-Centric ESG Research

Kyle Rudden

<ul>
<li>In a recent Insight, <a href="https://www.smartkarma.com/insights/regulating-esg-ratings-in-india-outline-of-sebi-s-proposed-regulatory-framework" target="_blank" data-smartkarma-citation="insights:64468" rel="noopener">Regulating ESG Ratings in India: Outline of SEBI's Proposed Regulatory Framework</a>, I summarised SEBI's proposed regulatory framework for ESG ratings in India. </li>
<li>This Insight goes a bit further, looking at implications of regulation on stocks of ESG ratings providers (ERPs), especially Credit Rating Agencies (CRAs) and Research Analysts (RAs).</li>
<li>Downside risk are minimal for ERPs, but a few scenarios and stipulations related to conflicts of interest and compensation (how ERPs are paid, and by whom) could have an impact.</li>
</ul>


In a recent Insight, Regulating ESG Ratings in India: Outline of SEBI's Proposed Regulatory Framework, I summarised SEBI's proposed regulatory framework for ESG ratings in India. 
This Insight goes a bit further, looking at implications of regulation on stocks of ESG ratings providers (ERPs), especially Credit Rating Agencies (CRAs) and Research Analysts (RAs).
Downside risk are minimal for ERPs, but a few scenarios and stipulations related to conflicts of interest and compensation (how ERPs are paid, and by whom) could have an impact.


Credit Rating Agency Stocks Most Impacted by SEBI Regulation of ESG Ratings in India

<ul>
<li>After being focused on preserving liquidity and maintaining a strong balance sheet, Edelweiss is now gearing up for growth as the environment becomes conducive.</li>
<li>In line our our thesis, asset quality deterioration has stabilized and accordingly incremental provisioning continues to be minimal. </li>
<li>We think all stars are aligned for Edelweiss to grow from here and witness valuation re-rating. Management has also guided for substantial profit catalysts over the next 3 years.</li>
</ul>


After being focused on preserving liquidity and maintaining a strong balance sheet, Edelweiss is now gearing up for growth as the environment becomes conducive.
In line our our thesis, asset quality deterioration has stabilized and accordingly incremental provisioning continues to be minimal. 
We think all stars are aligned for Edelweiss to grow from here and witness valuation re-rating. Management has also guided for substantial profit catalysts over the next 3 years.


Edelweiss: Focus On Growth Is Back, The Stock Is Ripe For Re-Rating

India

Edelweiss Financial Services Ltd. provides financial services.  The Company offers financial services including lines of credit, investment banking, institutional and retail broking, financial planning, asset advisory, life insurance, and investment management services.

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Edelweiss Financial Services (EDEL IN)

Edelweiss: At An Inflection Point

Given that the listing of the Wealth Management entity is around the corner and the credit business has also normalized, Edelweiss' stock is ripe...

Ankit Agrawal, CFA

Edelweiss: On Track for Strong FY23

Edelweiss' credit business is normalizing after a 3Y hiatus. Rest of the businesses are also scaling up well. As the WM business is de-merged and...

Ankit Agrawal, CFA

Edelweiss: Cheap Valuation; Scaling Up The Credit Business Is Key

Edelweiss has potential to command a valuation of INR 25,000cr+ over next 3-5Y vs current valuation of around INR 6,000cr.

Ankit Agrawal, CFA

Credit Rating Agency Stocks Most Impacted by SEBI Regulation of ESG Ratings in India

The potential impacts of SEBI's proposed framework for regulating ESG ratings are unclear at this stage, but a few things (related to conflicts of...

Kyle Rudden

Edelweiss: Focus On Growth Is Back, The Stock Is Ripe For Re-Rating

We think all stars are aligned for Edelweiss to grow from here and witness valuation re-rating. Management has also guided for substantial profit...

Ankit Agrawal, CFA

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