About the Issue
Edelweiss Financial Services Ltd has launched its public issue of NCDs to mobilise funds from the debt market. Read further to know more about the business of Edelweiss Financial Services Limited.
| Issuer | Edelweiss Financial Services Ltd |
| Type of Instrument | Listed, Secured, Redeemable, Non-Convertible Debentures |
| Issue Size (Tranche I) | Rs. 200 crs + Rs. 200 crs (Green shoe option) |
| Face Value | Rs. 1,000 |
| Tenure | 25 months to 61 months across Series I-X |
| Yield | 8.94% to 10.46% across Series I-X |
| Application size | Minimum 10 NCDs and in multiples of 1 NCD thereafter |
| Security Cover | Minimum 100% security cover of the principal outstanding plus interest thereon |
| Credit Rating | ICRA AA+/Stable |
| Issue Open Date | 6-Apr-23 |
| Issue Close Date | 21-Apr-23 |
About the Edelweiss Financial Services Limited:
Previously known as Edelweiss Capital Limited, Edelweiss Financial Services Limited (“EFSL”) was incorporated in 1995 by Mr. Rashesh Shah and Mr. Venkat Ramaswamy. EFSL is registered as a Category I Merchant Banker with SEBI and is the parent company of the Edelweiss Group. The company on a standalone basis is primarily engaged in investment banking services and provides development, managerial and financial support to the businesses of the Edelweiss group entities. The Edelweiss Group offers a range of products and services, spanning varied asset classes and diversified consumer segments. The businesses of Edelweiss are organized around 8 broad lines –housing finance, NBFC, Wealth management & Mutual Funds, Alternatives, Life and General insurance and Asset Reconstruction.
About the Group
Over the years, the Edelweiss group has established a presence across major verticals in financial services business-like asset management, insurance, asset reconstruction and wealth management. The group is comprised of 28 subsidiaries and 10 associate companies as of December 31, 2022. The total income of the company was ₹ 7,304.6 crs for the year March 31, 2022, and was ₹ 5,629.87 crs for the nine months ended December 31, 2022, on a consolidated basis. The company earned profit of ₹ 212.07 crs for the year ended March 31, 2022, and ₹ 233.44 crs for the nine months ended December 31, 2022, on a consolidated basis.
EFSL is promoted by Mr. Rashesh Shah and Mr. Venkatchalam Ramaswamy and hold 15.44% and 6.16% of equity respectively. The holding of Edelweiss group is described in the chart below:
History of Edelweiss Financial Services Ltd:
Edelweiss Financial Services Limited was incorporated on November 21, 1995, under the name Edelweiss Capital Limited and started operations as an investment banking firm after receipt of a Category II license from SEBI. Edelweiss Capital Limited subsequently received a Category I Merchant Banker license from SEBI with effect from October 16, 2000. The name of Edelweiss Capital Limited was changed to ‘Edelweiss Financial Services Limited’ with effect from August 1, 2011.
Edelweiss group operates through various entities offering a bouquet of products including loans, insurance, wealth management, etc. Following table provides a brief understanding of the entities and their businesses:
| Entity | Product/Business | Incorporation |
| ECL Finance | Retail Loans, SME Loans, Corporate Loans | July 2005 |
| Edelweiss Retail Finance Ltd | February 1997 | |
| Edelweiss Housing Finance Ltd | Housing Loans | May 2008 |
| Edelweiss Asset Management Ltd | Mutual Fund | August 2007 |
| Edelweiss Alternate Asset Advisors Ltd | Alternative Asset Management | May 2008 |
| Edelweiss Asset Reconstruction Company Ltd | Asset Reconstruction | October 2007 |
| Edelweiss Tokio Life Insurance Company Ltd | Life Insurance | November 2009 |
| Edelweiss General Insurance Company Ltd | General Insurance | March 2016 |
| Nuvama Wealth Management Ltd | Wealth Management | August 1993 |
EFSL Focus & Strategy
- Asset Management and Insurance will be key growth verticals going forward
- Credit will be retail-focused and scaled in an asset-light model built on partnerships
- New paradigms of focus – processes, institutionalisation, and tech
- Targeting listing of EWM by March 2023
Financial Performance (at consolidated level)
| Particulars | 9MFY23 | FY22 | FY21 | FY20 |
| Net Worth | 8,369 | 7,592 | 7,677 | 7,207 |
| Borrowings | 24,690 | 22,711 | 28,436 | 36,657 |
| PAT | 233 | 212 | 254 | (2,044) |
| PAT margin | 4.22% | 2.90% | 2.34% | -21.28% |
| Debt to Equity | 2.95 | 2.99 | 3.70 | 5.09 |
*The company has gradually lowered its leverage since FY20 from 5.09x to 2.95x as of December 2022. It has incurred heavy losses in FY20 and has shown an irregular trend in its profits since then.
CRAR of NBFCs in the group:
Borrowings:
Top 10 NCD holders:
Nature of Borrowings:
| Nature of Borrowings | FY22 | FY21 | FY20 |
| Secured | 13,596.88 | 15,988.66 | 19,140.53 |
| Unsecured | 9,114.09 | 12,447.37 | 17,516.79 |
| Total | 22,710.97 | 28,436.03 | 36,657.32 |
Type of Borrowings:
| Type of borrowing | FY22 | FY21 | FY20 |
| Bank Borrowings | 4,238.58 | 6,965.85 | 10,310.05 |
| Debt Securities | 15,505.70 | 17,485.85 | 20,758.50 |
| Subordinated Debt | 1,548.65 | 1,508.77 | 2,360.88 |
| Other Borrowings | 1,418.04 | 2,475.56 | 3,227.89 |
| Total | 22,710.97 | 28,436.03 | 36,657.32 |
Peer Comparison* (December 2022):
| Particulars | Edelweiss | Motilal Oswal | JM Financial |
| Revenue (Rs in crs) | 5,535 | 3,200 | 2,629 |
| PAT (Rs in crs) | 233 | 771 | 540 |
| Net Worth (Rs in crs) | 7,714 | 6,230 | 8,025 |
| Loan Book (Rs in crs) | 15,697 | 6,980 | 15,234 |
| ROE | 3.70% | 19.40% | 9.20% |
| ROA | 0.73% | 5.30% | 3.50% |
*Consolidated
| Rating Agency | Edelweiss | Motilal Oswal | JM Financial |
| CRISIL | AA-/Negative | AA/Stable | AA/Stable |
| ICRA | A+/Stable | AA/Stable | AA/Stable |
| CARE | A+/Negative | Not Rated | Not Rated |
| India Ratings | Not Rated | AA/Stable | Not Rated |
Credit Rating
| Year | Aug-20 | Mar-22 | Dec-23 |
| Rating | AA-/Negative | AA-/Negative | AA-/Negative |
Conclusion
Comforts:
- Adequate capitalisation with continuous capital raise
- Diversified businesses across various financial services
- Comfortable asset quality with GNPAs at 2.97 % and NNPA at 1.91% as of December 2022
- Majority of the portfolio backed by gold
Concerns:
- Low profitability at the consolidated level
- Inconsistent trend in income at the consolidated level
- Exposure to real estate in the wholesale loan book
