Edelweiss Financial Services NCD Public Issue October 2023 Review

4 min read • Published 30 September 2023
Written by Vinit Kulkarni

About the Issue

Edelweiss Financial Services Ltd has launched its public issue of NCDs to mobilize funds from the debt market. Read further to know more about the business of Edelweiss Financial Services Limited.

IssuerEdelweiss Financial Services Ltd
Type of InstrumentListed, Secured, Redeemable, Non-Convertible Debentures
Issue Size (Tranche III)Rs. 100 Crs + Rs. 100 Crs (Green shoe option)
Face ValueRs. 1,000
Tenure24 months to 120 months across Series I-X
Yield8.95% to 10.45% across Series I-X
Application sizeMinimum 10 NCDs and in multiples of 1 NCD thereafter
Security CoverMinimum 100% security cover of the principal outstanding plus interest thereon
Credit RatingCRISIL AA-/Negative
Issue Open Date6-Oct-23
Issue Close Date19-Oct-23

Series Issue Structure

Screenshot 2023 09 30 at 6.50.30 PM

*All the existing holders of NCDs/Bonds of ECL Finance Limited, Edelweiss Retail Finance Limited, and Nido Home Finance Limited (formerly known as Edelweiss Housing Finance Limited) are eligible for an additional incentive of 0.20%

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 27 subsidiaries as of September 22, 2023. The total income of the company was ₹ 8,632.59 crs for the year March 31, 2023, and ₹ 7,212.59 crs for the year March 31, 2022, on a consolidated basis. The company earned profit of ₹ 405.56 crs for the year ended March 31, 2023, and ₹ 212.07 crs for the year ended March 31, 2022, on a consolidated basis.

EFSL is promoted by Mr. Rashesh Shah and Mr. Venkatchalam Ramaswamy and who hold 15.44% and 6.32% of equity respectively. The holding of Edelweiss group is described in the chart below:

Screenshot 2023 09 30 at 7.02.40 PM

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:

EntityProduct/BusinessIncorporation
ECL FinanceRetail Loans, SME Loans, Corporate LoansJuly 2005
Edelweiss Retail Finance LtdFebruary 1997
Edelweiss Housing Finance LtdHousing LoansMay 2008
Edelweiss Asset Management LtdMutual FundAugust 2007
Edelweiss Alternate Asset Advisors LtdAlternative Asset ManagementMay 2008
Edelweiss Asset Reconstruction Company LtdAsset ReconstructionOctober 2007
Edelweiss Tokio Life Insurance Company LtdLife InsuranceNovember 2009
Edelweiss General Insurance Company LtdGeneral InsuranceMarch 2016
Nuvama Wealth Management LtdWealth ManagementAugust 1993

Financial Performance (at consolidated level)

ParticularsFY23FY22FY21FY20
Net Worth7,4847,2207,2207,207
Borrowings21,73622,71128,43636,657
PAT406212254(2,044)
PAT margin4.70%2.92%2.32%-21.28%
Debt to Equity2.903.153.945.09

*The company has gradually lowered its leverage since FY20 from 5.09x to 2.90x as of March 2023. It incurred heavy losses in FY20 and since then has been steadily improving its profitability.

CRAR of NBFCs in the group

Name of the NBFCMinimum Regulatory CRARMarch 31, 2023March 31, 2022March 31, 2021
ECL Finance Ltd15%30.84%30.50%25.29%
Edelweiss Retail Finance Limited15%72.25%36.90%39.85%
Nido Home Finance Limited (Formerly known as Edelweiss Housing Finance Limited) (HFC) (calculated as per Ind AS) Total Capital Ratio4% by March 31, 202132.06%28.28%26.49%
5% by March 31,2022
Edelweiss Asset Reconstruction Company Ltd15%49.23%42.00%37.38%

Borrowings

Top 10 NCD holders as of June 30, 2023

Screenshot 2023 09 30 at 7.00.43 PM

Nature of Borrowings: (Rs crs)

Nature of BorrowingsFY22FY21FY20
Secured13,596.8815,988.6619,140.53
Unsecured9,114.0912,447.3717,516.79
Total22,710.9728,436.0336,657.32

Type of Borrowings: (Rs crs)

Type of borrowingFY22FY21FY20
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* (March 2023)

ParticularsEdelweissMotilal OswalJM Financial
Revenue8,6334,3203,343
PAT406930597
Net Worth7,4846,2508,084
AUM11,6027,72015,653
ROE5.43%17.50%8.90%
ROA0.92%4.40%3.40%

*Consolidated

Rating AgencyEdelweissMotilal OswalJM Financial
CRISILAA-/NegativeAA/StableAA/Stable
ICRAA+/StableAA/StableAA/Stable
CAREA+/NegativeNot RatedNot Rated
India RatingsNot RatedAA/StableNot Rated

Credit Rating (CRISIL)

YearFeb-23Jun-23Aug-23
RatingAA-/NegativeAA-/NegativeAA-/Negative

Conclusion

Comforts

  • Adequate capitalization with multiple capital raises
  • Diversified businesses across various financial services
  • Comfortable asset quality with GNPAs at 2.01% and NNPA at 1.36% as of March 2023
  • Reduction of exposure to real estate financing

Concerns

  • Low profitability at the consolidated level
  • Inconsistent trend in income at the consolidated level
  • Exposure to real estate in the wholesale loan book

Was this helpful?

Vinit Kulkarni

Credit Principal
CA with experience in Credit and Risk, has underwritten loan book of 500Cr+. Previously worked at Essel Finance and Western Capital.

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