Edelweiss Financial Services April 2023 Public Issue NCD Review

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.

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:

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)

*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:

Type of Borrowings:

Peer Comparison* (December 2022):

*Consolidated

Credit Rating

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