1 The ancient Japanese art form of Origami cras paper into a million possibilies. Used as a liet-mof throughout Edelweiss House, the art form represents intelligent, smart soluons offered by the organisaon. Inside the House Performance Highlights 02 Leer from the Chairman 18 Management’s Discussion & Analysis Report 34 Welcome to Edelweiss House 04 EdelGive Foundaon 22 Corporate Governance Report 52 A Foundaon of Values 06 Board of Directors 24 Consolidated Financial Statements 61 Business Pillars 08 Company Details 25 Standalone Financial Statements 115 The Walls of Enterprise 14 A Strategy that forms the Roof 16 Directors’ Report 26 2 Edelweiss Annual Report 2011-12 FINANCIALS Performance Highlights Consolidated Financial Performance of Edelweiss Financial Services Limited and its subsidiaries (in ` million except per share data) Year Ended March 31, 2012 2011@ 2010 2009 2008 2007 2006 2005 2004 2003 2002 Total Income 16,707 14,290 9,778 9,005 10,888 3,718 1,533 727 281 104 75 Total Expenditure 14,720 10,790 6,450 5,715 6,421 1,971 898 383 175 95 71 Profit Before Tax 1,987 3,500 3,328 3,290 4,467 1,747 636 345 106 9 4 Tax Expenses 681 1,031 879 1,199 1,540 646 218 107 28 4 2 Net Profit (aer minority) 1,277 2,330 2,292 1,864 2,732 1,099 417 237 78 5 2 Paid up Equity Capital 757 752 375 375 375 45 38 29 28 27 27 Networth* 28,748 25,554 24,706 23,303 23,274 7,222 1,787 539 302 226 222 BVPS (FV ` 1) (`)# 34.79 30.56 30.04 28.21 24.65 9.36 3.93 1.58 0.92 0.69 0.69 Diluted EPS (FV ` 1) (`)# 1.66 3.00 2.94 2.43 4.00 2.08 0.93 0.64 0.24 0.02 0.01 (#) adjusted for Corporate Acons (*) Networth including minority (@) Previous years’ figures have been regrouped wherever necessary Total Income (` million) Net Profit (` million) CAGR : 92% CAGR : 72% Performance Highlights 3 Net Worth (` million) CAGR : 63% Book Value Per Share FV ` 1 (`) Diluted Earning Per Share FV ` 1 (`) CAGR : 48% CAGR : 67% 4 Edelweiss Annual Report 2011-12 Welcome to Edelweiss House A short distance from the financial hub of the country – Bandra-Kurla Complex in Mumbai – is a gleaming new building called Edelweiss House, headquarters of the Edelweiss Group. This 15-storey building is the centre of pan-India operaons of the Group’s five businesses peopled by over 3,100 employees. A building is like an organisaon. It requires careful thought, planning, creavity and flawless execuon to transform a collecon of steel, cement, glass and wood into a modern, energy-filled corporate hub. The same ingredients go into building a thriving business like Edelweiss. Introducon 5 17% Top-line growth in FY12 despite adverse economic circumstances globally and in India Edelweiss has consistently delivered Debt Capital Markets and Corporate This story of growth and investment is the growth and profits year-on-year. In FY12 Loans while building new businesses real edifice that Edelweiss has built. despite adverse economic circumstances like Life Insurance, Commodies, Retail Welcome to this guided tour of the globally and in India, the Group managed Capital Markets and Retail Credit. With real “Edelweiss House”. a 17% top-line growth. an eye on the future, it has connued to The Group has connued to maintain its invest in systems, processes, technologies leadership posion in mature businesses like and training to improve efficiencies and Instuonal Equies, Investment Banking, enhance skills. 6 Edelweiss Annual Report 2011-12 BUSINESS PRINCIPLES A Foundaon of Values A building is only as strong as its foundaon. Building a successful business too, requires a solid foundaon for it to grow. Edelweiss rests on the strongest possible foundaon – the Edelweiss Business Principles. These principles uphold the Edelweiss value proposion: “Ideas create, values protect” and have helped the Group to grow from a monoline company a few years ago to a mul-line diversified financial services group with a pan-India footprint. Business Principles 7 • We will focus on Growth Group’s DNA. It is invesng technology and processes that have In the last decade, Edelweiss’ revenues significant resources in making the not only built but instuonalised the have grown at a Compounded Annual organisaon more customer-focused. organisaon. Its themac, alternave Growth Rate (CAGR) of 72%. More Edelweiss’ senior-most execuves and corporate research products importantly, these revenues now come have undergone an internaonally provide in-depth analysis and are from a diversified set of businesses, renowned orientaon programme and respected throughout the industry. de-risking the business model. another 1,000 employees are being given rigorous training to evangelise a • Our Reputaon and Image is • We will focus on the Long Term culture of customer focus and service more important than any financial Over the last three years, Edelweiss throughout the organisaon. reward has invested significantly in new Financial services brands are all about businesses, technology, systems and • We will operate as a Partnership trust. Edelweiss has acvely invested infrastructure. This was done with an Around 53% of Edelweiss is owned by in building a strong brand. As a result, eye on opportunies available in the the management and employees. This Edelweiss was chosen as a Business long-term. fosters an intrapreneurial culture and a SuperBrand by an independent strong sense of ownership. body. The organisaon has also been • Our Financial Capital is a crical awarded “Best Advisor Broker, Asia” at resource for growth • We will take care of our People the Exchanges & Brokers Awards 2012, As of March 31, 2012, the Group has a To enhance the skills of its people, organised by London based World balance-sheet size of ` 145 billion. This Edelweiss has some of the most broad- Finance magazine. has grown from ` 52 billion in 2010; based training programmes in the a CAGR of 67%. industry. Over the year, the Group has • We will Obey and Comply with the trained over 2,000 employees through rules of the land • We will respect Risk 2,441 man days of investment. This Edelweiss has always complied with An unrelenng focus on managing risk employee engagement is demonstrated the leer and spirit of the law and has ensured that Edelweiss’ capital by low senior management arion. ensured that all its businesses conform is preserved even during extremely with the governing regulaons and all challenging environments. • We will be a Thinking sales efforts are carried out in a Organisaon transparent manner. • We will be Fair to our clients Edelweiss is a thought leader in Customer-centricity is part of the pioneering research, cung-edge 8 Edelweiss Annual Report 2011-12 BUSINESSES Business Pillars The weight of a building is borne by its pillars. The stronger the pillars, the Today, Edelweiss stands tall on five taller the edifice can rise. main pillars: At Edelweiss, the pillars are its Businesses. Starng from one pillar, • Credit Investment Banking, the Group has consciously invested me, efforts and • Capital Markets & resources to build more pillars so that it can connue to grow taller and Asset Management more robust. • Commodies • Life Insurance • Treasury Businesses 9 CREDIT Leveraging the India story Growing a successful credit business entails efficient management of resources, a strong understanding of interest rate cycles and an unrelenng focus on risk management and migaon. The Credit business seeks to leverage the huge consumpon opportunity being generated by the growth of the Indian economy while keeping a keen eye on asset quality. Launched in 2007, in a short span of five years, the Credit business now contributes around one third of Edelweiss revenues. The Credit business comprises of three major units – Corporate Loans, Housing Finance and Debt Capital Markets. ` 39.6 billion • Outstanding loans for the Company 10.4%*. The business did 30 DCM outstanding loans stood at ` 39.6 billion as on March 31, transacons in FY12, compared to 2012, indicang a growth of 49% from 22 in FY11. 49% growth over FY11 last year. Of these, corporate loans • Long-term bonds issuance included were valued at ` 28 billion. large clients like PFC, NHPC, SIDBI, REC • Edelweiss’ Housing Finance business and Tata Motor Finance. launched in Mumbai in Q3FY11 has • In keeping with the constant aempt expanded to eight major cies across to diversify and address new client the country over the last year and aims segments, the Group launched the to enter another 10 metros soon. At SME Lending business in FY12. the end of FY12, this segment had built a book of ` 7.8 billion, compared to ` 1.2 billion at the start of the year. • In Debt Capital Markets (DCM), in FY12, Edelweiss was ranked as the sixth largest private Debt Arranger (overall) in India and fih in Commercial Paper (CP) issuance with a market share of * Source: Prime Database 10 Edelweiss Annual Report 2011-12 BUSINESSES (L-R) Nischal Maheshwari, Co-Head Instuonal Equies & Head Research, Edelweiss launched its Financial Planning service in 2011 that creates customised financial plans Venkat Ramaswamy, Execuve Director and Vikas Khemani, President for clients in order to achieve their financial goals and aspiraons. and Co-Head, Wholesale Capital Markets, Edelweiss Financial Services at the 10th anniversary celebraon of Edelweiss Instuonal Equies. CAPITAL MARKETS & ASSET MANAGEMENT Translang savings into investments 372,000 Edelweiss’ Capital Markets & Asset Management business is founded on a philosophy Total client base in the overall of cung-edge research, investments in technology, differenated product offerings and customer focus. The Indian savings rate connues to be among the highest in the retail broking increased by 15% world and the Group’s Capital Markets business seeks to translate these savings into investments.