Edelweiss Financial Services fell 6.50% to Rs 73.40 after the company issued interim business update during trading hours today, 9 October 2019.Shares of Edelweiss Financial Services tanked 24.33% in four trading sessions to its current market price of Rs 73.40, from a recent closing high of Rs 97 on 1 October 2019.
The company announced that unprecedented market dislocation is coming to a gradual end, though markets may be skittish currently. Festive season will be closely watched for signs of green shoots of returning consumer confidence. The slew of recent government measures will go a long way in restoring confidence.
The high rates of interest and the improving situation means India is now being looked at as a yield destination for fixed income investors-not just a growth destination for equity investors, the company said.
The company said it expects the current dislocation will unwind gradually over the next three to four quarters led by easy liquidity.
Banks have received fresh infusions of capital. The company expects that the partial credit guarantee scheme will be operational soon. Big ticket recoveries via NCLT will also deliver fresh liquidity to the banks.
As on 30 June 2019, the company's total debt stood at Rs 40,859 crore, while treasury assets stood at Rs 4,570 crore. Net debt (ex-treasury assets) was Rs 36,289 crore. Equity was Rs 9,844 crore. Debt-to-equity (D/E) ratio (ex-treasury assets) was 3.7-times. The company said D/E will decline to 3.4x by end FY20.
The company's book value as on 30 June 2019 is Rs 87 per share.
The firm added that Edelweiss Global Investment Advisors (EGIA) business contributed 76% of total profit after tax (PAT) in Q1 June 2019 compared with 51% in the year ended March 2019. EGIA business comprises of wealth management, asset management, capital markets and asset reconstruction.
Edelweiss said that it continues to maintain liquidity at about 15-20% of balance sheet. No change is anticipated to its stated liquidity plan. While this comes at a cost, the company thinks it is the right stance until markets normalize. The company expects strong well capitalized state banks to be key drivers of gradual liquidity transmission to NBFCs.
The firm said it remains committed to its guidance of increasing credit costs which will be about Rs 800 crore for FY2020. The firm is confident that credit costs will be contained at this level, subject to a tolerance of 10-15%.
The company said it is the only player in the industry to have raised fresh equity twice since the crisis started.
Repayments from corporate credit will fund the growth in retail credit. Overall book growth will remain flat for FY2020, it added.
Meanwhile, the S&P BSE Sensex was almost flat at 37,532.64.
On the BSE, 1.73 lakh shares were traded in the counter so far compared with average daily volumes of 5.88 lakh shares in the past two weeks. The stock hit a high of Rs 78.70 and a low of Rs 73.20 so far during the day.
The stock hit a 52-week high of Rs 210.3 on 04 Jun 2019. The stock hit a 52-week low of Rs 78.7 on 09 Oct 2019.
Edelweiss Financial Services' consolidated net profit fell 50.1% to Rs 132.02 crore on a 2.6% increase in total income to Rs 2,545.93 crore in Q1 June 2019 compared with Q1 June 2018.
Edelweiss Financial Services is engaged in providing investment banking and advisory services, and holding activities/investments. The firm's segments include agency business, capital based business and life insurance.
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