Edelweiss: Well-Managed, Growing, Diversified Financial Services Firm

Rashmi Kwatra of Sixteenth Street Capital presented her investment thesis on Edelweiss Financial Services (India: EDEL) at Asian Investing Summit 2018.

Summary thesis:

Edelweiss, a secular growth story in Indian financials, was co-founded by Rashesh Shah and Venkat Ramaswamy in 1995. Founded as an investment banking and advisory services firm, it has consistently allocated capital well, using bear markets to invest in its people and incubate new businesses. Edelweiss is now a diversified financial services company.

It plans to shift the mix of its credit business from 39% retail-focused (FY17) to 70% retail-focused (FY20). There is potential for Edelweiss’ credit business to re‐rate given its strong ROE of 18% (retail segment), two‐year growth of 57% CAGR, and planned segment mix shift to retail. Rashmi projects a loan book CAGR of 40% from FY18-20 for the retail book, driven by strong macro conditions for affordable housing and SME financing (and a low base for Edelweiss) and a muted corporate loan book growth of 13.5% in the same period. Edelweiss has shown significant traction in the wealth/asset management business to become the third-largest player in wealth management in India. The firm is also seeing growth in the asset reconstruction business.

Based on Rashmi’s conservative estimates, Edelweiss was recently available at a fair price, and should compound capital at a significant rate in the long term.

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About the instructor:

Rashmi Kwatra is the Founder of Sixteenth Street Capital, and the Portfolio Manager of the Sixteenth Street Asian GEMS fund. The Sixteenth Street Asian GEMS strategy is focused on providing equity exposure to the highest growth Frontier and Emerging Asian markets. Though focused on public equities, Rashmi values a business as would a long-term private buyer. Rashmi was previously Partner at Prince Street Capital Management, a specialist in Frontier and Emerging markets . She was recently named one of 50 leading women in hedge funds globally by the Hedge Fund Journal. Rashmi holds a dual degree in Finance and Management from The Wharton School of The University of Pennsylvania, where she graduated magna cum laude. She is a Thai national, of South and Southeast Asian descent, and speaks English, Thai, Hindi, and Punjabi.