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Fundamental Analysis of Edelweiss Broking Limited v/s IndiaInfoline & Geojit BNP Paribas

Fundamental Analysis of Edelweiss Broking Limited v/s IndiaInfoline & Geojit BNP Paribas

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Publicado porAnish Vyas

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Categories:Types, Research
Published by: Anish Vyas on Sep 14, 2010
Direitos Autorais:Attribution Non-commercial


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The Management Efficiency ratios indicate that since Edelweiss moved into retail
in 2007, it has been doing well in terms of profit but after 2008 due to recession
profit of Edelweiss has reduced but still the company is in a better position than
some of its competitors.
Edelweiss hasn’t been financially stable according to the financial stability ratios.
The assets of Edelweiss increased in the year 2008 and then immediately
decreased to a great extent in 2009.The funds borrowed have reduced in 2009 in
comparison to 2008 which shows a slight improvement for Edelweiss.
According to the profitability ratios, Edelweiss displays a trend of reducing net
profit through the three years. This is due to increase in the shareholders funds
and also due to recession which affected the net profit of Edelweiss in 2009.
Taking into account all three years, Edelweiss has been efficient with respect to
certain ratios but hasn’t been up to the standards. Till 2008, it has been able to
collect it debts efficiently but then due to recession this ability suppressed. Also
the market price per share of Edelweiss had a reducing trend which lowered the
earnings per share and the price earning ratio. But at the same time Edelweiss
increased the dividend and reduced the debts making it efficient in certain areas.
Even though companies net profit has been decreased than also there is a
increase in Dividend Per Share over a period of time, which means company is
attracting its shareholders.
The debt equity ratio doesn’t show much variation. This indicates that every year
the increase of decrease in the debt and equity has more or less been
Current ratio is on a brighter side though it has declined as compared to ’08 in
’09. This brings the company in a better position as far as the creditors are
Debtor’s ratio had increased in ’08 but came down in ’09, this is result of the
declined sales of the company.

Page 49 of 54

A decline in interest coverage ratio is an indicator of the facts that the profit
before interest and tax of the company has reduced. Though it has improved in
‘09 as compared to ’08, the improvement is not substantial.
An obvious impact of decline in sales is on the profits ratios of the company.
Inspite of a 17.18% decline in sales in ’09 as compared to ’08, the company has
been able to maintain a positive and a reasonably good profit position.
Return on capital employed by the company is showing reducing trend. The
capital base of the company has increased in ’08 and has remained constant in
’09. However, the ROE ratio has been reduced by 50%. This is not good news for
the owner’s of the company, as profitability of their investment in the company
has been reduced dramatically. Similar analysis can be made for net worth ratio
as it has also declined drastically.
Despite of not so favorable result in ’09 as compared to ’07 and ’08, the company
has declared a good divided for the shareholders. This shows that the company is
more interested in pleasing the shareholders than accumulating funds for the
future plans of the company. This policy is further indicated by an improved
dividend payout ratio of the company.
A decline in the earning per share is as a result of decline in the profits of the
company. Thus amount of profit available per share has gone down.
Increase in the debt collection ratio is not a good sign, as it means that the
company’s collection department is taking more time to recover funds from the
debtors. This is even worse as the company’s sales have reduces. Thus the
company has not been able to manage the debtors properly, despite of reduction
decline in sales.
Proprietary ratio is showing an improvement. This indicates that the company
has enough assets to cover the proprietary funds (owners’ fund).
Capital gearing ratio indicates the risk taking capacity of the company. Higher
ratio is risky, but profitable for the equity shareholders. On the other hand lower
ratio is safe, but not preferred by the equity shareholders. In the present case a
decline in this ratio indicates that the risk to the company has reduced, but this
might not go well with the shareholders.

Page 50 of 54


The Management efficiency ratios indicate that Edelweiss is doing better
than India Infoline in terms of gross profit and expenses, but it has also
done well in terms of net profit. On the other hand, Geojit BNP Paribas has
been incurring losses in 2009 due to reduction in sales because of which
Edelweiss has an upper edge over Geojit BNP Paribas.
The Financial Stability ratios indicate that India Infoline hasn’t been
financially stable when compared to Edelweiss. This is because of the
amount of funds borrowed by India Infoline is quite high and also due to
increase in assets. In case of Geojit BNP Paribas, as the company has
incurred losses it hasn’t borrowed any loans because of which it is
financially unstable as compared to Edelweiss.
According to profitability ratios, India Infoline has better return on capital
employed than Edelweiss due to reduction of net profit for Edelweiss in
2009.Thus India Infoline is doing much better than Edelweiss in terms of
profit. Geojit BNP Paribas has not made any profit in 2009 indicating a
decrease in its earning capacity. Hence, Edelweiss has been more profitable
in 2009 compared to Geojit BNP Paribas.
Edelweiss has been efficient than India Infoline and Geojit BNP Paribas in
most of the ratios. Edelweiss is more capable of collecting its debt as
compared to India Infoline and Geojit BNP Paribas, Edelweiss EPS is also
more than these two companies, so in all it can be said that edelweiss is
much better in terms of its overall efficiency as compared to India Infoline
and Geojit BNP Paribas.

Page 51 of 54


After the acquisition of Edelweiss with Anagram Securities Limited it has
increased its number of branches all over Mumbai. E.g.: In Mumbai it has
only 7 branches.

The company’s future looks good after the acquisition & hope that it will do
good in the Broking sector.

Within a span of short period of time i.e one year the company is able to
attract a good number of customers approximately 1,00,000.

The company’s future looks good in long run because of in spite of
recession it was able to do very well as compare with other broking firms.

Page 52 of 54


Edelweiss has been doing well for quite some time now but lately due to
recession its net profit has been affected, so certain measures much be
taken by Edelweiss to cut down on its expenses.
Edelweiss has been repaying the debts borrowed efficiently, therefore it
must continue to do so even in tougher times when the funds borrowed are
of higher amount.
Through retail Edelweiss is doing average profit, hence Edelweiss can think
about going in for new ventures. They can introduce mutual funds and
allow it be handled online like their other features on the online trading

Attracting customers is more of a concern for Edelweiss because of lot of
competition, so they need to come up with various schemes and plans
which will pool in more customers. These plans must be beneficial for the
customers which will make them give more references, thus increasing
customers for Edelweiss which in turn gives the company more revenue.
The company’s customer service is very poor, as their main focus is
attraction of customers. The company prefers only target rather than
welfare for employees.
The company’s stock price once reached to a peak height of Rs.1,500 per
share but at present it down to Rs.520 per share it shows the company has
doing well in past but because of recession the FII’s (Foreign Institutional
Investors) pull out lot of money, still it was able to sustain its market image.

Page 53 of 54


Edelweiss Capital Ltd. as a company has been successful since it moved into
retail in 2007 but post recession in 2008 the company suffered a setback as
a result of reduction in profit. On a positive note the company always
focuses on long term goals so it is sure to improve in the future and sustain
in the market for a longer time.

In the last three years the earnings per share of Edelweiss Capital Ltd. has
shown a downward trend as a result of a fall in the market price of the
share. But with an aggressive and passionate sales trading team, they are
able to seamlessly execute complex trades, across the entire spectrum of
trading strategies.

Edelweiss Capital Ltd. has been performing well when compared with some
of its competitors. The examples of India Infoline and Geojit BNP Paribas
show that even though Edelweiss has not done well in recent times it still
has a better position in the market. Some of the products and services
offered by Edelweiss are quite unique which gives them an upper edge over
other competitors.

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