Archive for April 2nd, 2015

How Edelweiss built a business for the long run..

April 2, 2015

Nice article by Salil Panchal and Sourav Majumdar.

At the 15th floor boardroom of Edelweiss House in Mumbai’s Bandra-Kurla Complex financial hub, Rashesh Shah, chairman and group CEO of Edelweiss Financial Services Ltd (EFSL), walks us to the large glass windows and asks us to glance at the sprawling, open MMRDA grounds below. “We get a great view of open spaces,” says the 51-year-old co-founder of the diversified financial services group. “Closer to the edge, the view might be better. But we don’t need that. I can stay three steps away and the view is still as good. I don’t need to go to the edge,” he points out. 

As it is with views from windows, so it is with business. This philosophy—which Shah calls the ‘margin of safety’—has not only saved Edelweiss the blushes (of possible financial losses) but has, in fact, become its mantra for success.

Shah explains this with the example of wholly-owned subsidiary Edelweiss Commodity Services Ltd, set up in 2006 as part of their strategy to diversify from being a capital market-led firm nearly two decades ago. The commodity subsidiary sources, distributes and helps in the financing of agri-commodities and precious metals, earning it a 14 percent annual return. In a country where commodities change hands frequently, evaluating them and managing risk are critical.

In 2013, some of India’s large brokerage firms suffered losses in the fallout of the Rs 5,690-crore financial imbroglio at the Jignesh Shah-promoted National Spot Exchange Limited (NSEL). Contracts were sold to investors without necessary collaterals in place, resulting in defaults and losses.

It is in this context that Edelweiss’s risk philosophy—of staying away from the edge, despite the better view—worked for the company.  Edelweiss’s risk management team had considered the attractive brokerage fees that could have potentially come their way. “In fact, there was one client who was upset that we did not provide him with the opportunities to make good returns,” an Edelweiss insider said, requesting anonymity. But Edelweiss chose to stay away. “We stayed out of broking at NSEL because we understood that on the warehouse side, risk management is the most critical. We prefer a situation where we manage the collateral and then fund it,” Shah says, rather than the reverse.

🙂 Not so rosy. Sources say the firm learnt harsh lessons in 2008 crisis.

Anyways, nice to know of an emerging financial house..

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Indian Govt needs better nudges to limit cigarette smoking..

April 2, 2015

Harmala Gupta Founder-President, CanSupport has an article in ToI on the topic.

She says despite efforts to mitigate cig smoking, it has only risen. Infact, the rise is seen in women where companies are using better marketing:

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Are equities overvalued?

April 2, 2015

Well, they have been for a while now. With economies in a perennial doom, the so called leading indicator of equities has a different story.

Prof. Michael Spence has a piece on the same:

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Trials of democracy in Asian countries

April 2, 2015

Yuriko Koike has a piece reflecting on democracies in select Asian countries. Top leaders from each of these is under pressure for some or the other charges:

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