Edelweiss Financial Services Q3 pre-tax profit dips to Rs 51.5 crore

Edelweiss Financial Services on Friday reported a sharp drop in profit before tax (PBT) at Rs 51.5 crore for the quarter ended December, against Rs 458 crore in the year-ago period, because of rise in credit costs.

Its stock on Friday closed 1.9 per cent lower at Rs 88.4 per share on the BSE.

The company's net profit also declined to Rs 35.32 crore in Q3FY20, from Rs 258.35 crore in Q3FY19. Total revenues from operations declined to Rs 2,639.6 crore, from Rs 2,881.9 crore in the year-ago period. Rashesh Shah, chairman and chief executive, said weak economic climate resulted in elevated credit costs, which, along with the cost of managing liquidity, resulted in muted earnings.

We do not have any relationship with Capstone Forex, says Edelweiss

Edelweiss on Sunday said its group entities do not have any relationship with Capstone Forex, which is being probed by the Enforcement Directorate (ED) for an alleged multi-crore forex violation.

The firm also said Sanjay Nathalal Shah, independent director on some group firms, who is under scanner for alleged connection with Capstone, has no other relationship with the group. Rashesh Shah, chairman and chief executive, Edelweiss Financial Services group, said all allegations of the Foreign Exchange Management Act (FEMA) violations were false. “Sanjay Nathalal Shah has no other association with the Edelweiss group. Nor is he in any way related to me. Shah is a common name,” Shah added.

The regulators and agencies have an obligation to investigate. “If any information is sought from us, as a responsible corporate house, we will, of course, provide the same,” Edelweiss said in a statement.

Shah has been asked to appear on January 13. Shah was earlier called to join the investigation on January 9. However, he is learnt to have sought some time due to personal engagements. The information about the case first surfaced after a whistle-blower wrote a letter to the government agencies.

Edelweiss eyes Rs 1.5 trn in personal wealth management corpus in 2-3 years

Homegrown financial services company Edelweiss is targetting a personal wealth management corpus of more than Rs 1.5 trillion in the next 2-3 years, compared to Rs one trillion at present.

Edelweiss Personal Wealth Advisory, the personal wealth management arm of Edelweiss Global Investment Advisory, clocked a robust revenue growth of 35 per cent CAGR in the last three financial years, the company’s senior executive vice president, Rahul Jain, told Business Standard here today.

He claimed the personal wealth management segment had not been adversely impacted by the current economic downturn. “In fact, the slowdown has accelerated the segment, since discerning investors are now seeking safer investment opportunities beyond the real estate and bullion sectors,” he added.

The company has a pan-India client base of more than 600,000 in the personal wealth management category, including 25,000 in Uttar Pradesh.

“In UP, we plan to double our client base to 50,000 in the next 2-3 years, considering the high client acquisition potential in the state, especially in cities like Lucknow, Kanpur and Meerut,” he added.

Jain said Edelweiss was investing heavily in technology in order to improve convenience and offer more value-added services to customers. “While more than half the users of our online platform are millennial, female participation is also picking up pace with the current share standing at 25 per cent,” he added.

Meanwhile, he said the personal wealth management arm had seen its mobile application ‘Edelweiss Mobile Trader' (EMT) usage clock 144 per cent growth in UP over the past two years. He attributed the high growth trajectory to the customised and ‘unbiased’ advisory to investors, especially in the retail segment, through user-friendly and advanced technology platforms developed in-house.

Commenting on the domestic financial market conditions, Jain claimed there was good demand from retail investors for debt products, which provided fixed income and were comparatively safer than shares.

“Recently, we have raised more than Rs 500 crore by floating non-convertible debentures (NCD) in the capital market. Going forward, we plan to mop up between Rs 300 crore and Rs 500 crore on regular basis through NCDs,” he added.

Earlier, Edelweiss had said that the funds raised through the issue would be used for onward lending, servicing of loans taken by the company and for general corporate purposes.

“India is in an exciting phase and it is the right time to adapt to the changing needs in the wealth management industry. As we move towards the dream of becoming a $5 trillion economy, I feel technology will play a crucial role in our business,” Jain said.

The company is also planning to expand its branch network from 65 at present to 85 in the next 12 months.

Edelweiss sees 177% surge in mobile app usage in Bhubaneswar in FY19

The personal wealth management arm of Edelweiss Global Investment Advisory, Edelweiss Personal Wealth Advisory, has seen its mobile application usage soaring 177 per cent in Bhubaneswar in FY19, bettering the nationwide average of 102 per cent. The mobile app, Edelweiss Mobile Trader (EMT) mostly serves the salaried professionals and High Net Worth Individuals (HNIs) and is used by them for trading and investing.

“In revenue terms, we have registered 35 per cent CAGR (compounded annual growth rate) over the last three financial years in Bhubaneswar. Over 50 per cent of our user base in the city comprises millennials. Unbiased advisory and information offered on performance of stocks and on the economy is our forté”, said Rahul Jain, head (personal wealth advisory), Edelweiss.

Edelweiss Personal Wealth Advisory has witnessed an increase of 25 per cent in its client base in Bhubaneswar in the last two financial years. The company has attributed its growth to customized and unbiased advisory provided to investors and user friendly and advanced technology platforms that have been developed in-house to enable easy investment and trading in the financial market.

Going ahead, Edelweiss plans to roll out services like Direct Mutual Fund and National Pensions Services (NPS). Under Direct Mutual Fund, the brokerage charges for investors would be cut down by half.

“India is in its exciting phase and it is the right time to adapt to the changing needs in the wealth management industry. As we move towards the dream of becoming a $5 trillion economy, I feel technology will play a crucial role in our business”, said Jain.

Edelweiss to transfer wholesale loans worth Rs 2,000 crore to AIF

Edelweiss Financial Services will transfer wholesale loans worth Rs 2,000 crore to Alternative Investment Fund (AIF) for real estate completion financing, as it shrinks corporate credit portfolio by 50-60 per cent over the next two years. Its corporate loan book stood at over Rs 16,100 crore at the end of September. Of this, the wholesale book comprised of Rs 11,000 crore and balance was structured finance portfolio. Rashesh Shah, chairman and chief executive, EFSL said the deal with Korean Investor for AIF was timely, as a lot of real estate projects were economically viable but had been suffering from last-mile financing. This gives liquidity window as some of the current loans would get transferred to this AIF.

Edelweiss to transfer wholesale loans worth Rs 2,000 crore to AIF

Edelweiss Financial Services will transfer wholesale loans worth Rs 2,000 crore to Alternate Asset Fund for real estate completion financing as it shrinks corporate credit portfolio by 50-60 per cent over the next two years.

Its corporate loan book stood at over Rs 16,100 crore at the end of September 2019. Out of this, the wholesale book comprised of Rs 11,000 crore and balance was structured finance portfolio.

Rashesh Shah, chairman and chief executive, EFSL said it – the deal with Korean Investor for Alternate Asset Fund -- is very timely as a lot of real estate projects (economically viable) but have been suffering from last mile financing. This gives liquidity window as some of the current loans would get transferred to this Alternate Asset Fund (AIF).

Last week, Edelweiss Alternative Asset Advisors (EAAA), unit of Edelweiss group, and South Korean Financial services conglomerate Meritz Financial Group, inked a pact to start last mile financing platform. The platform will house funds that will buyout existing residential real estate loans and provide requisite completion financing to good quality, commercially viable projects.

The transactions will happen on arms-length basis and AIF would acquire portfolio from other lenders also, a senior company executive said.

The company expects corporate book to come down by 50-60 per cent in the next two years. Gradual rundown of the Corporate Credit will generate liquidity which will finance Retail Credit growth.

The Costs of maintaining liquidity will reduce as the book becomes more granular the credit risk will be more granular since the book will be predominantly retail credit.

Shah said “on wholesale side strategy continues to be same of de-growing the book in two ways – organic degrowth and other is what we did with Meritz (Korean investor). We will do few more of those”.

The company has been de-growing the balance sheet. Second, the cost of funds still remains elevated as transmission is not happening. With this cost of funding we do not want to grow very aggressively.

Book is going through a down cycle and is expected to reverse in next 3-4 quarters. Asset Management vehicles like AIF have proved to be a better source of long term stable and flexible capital for non-granular, high yield credit opportunities in the longer term.

The funds will come from global investors and domestic HNIs looking for duration and yielding assets. The company is accelerating the move of Corporate Credit from NBFC to fund form. The Corporate Credit business is being transitioned to the Asset Management model. Current drag on profitability is due to higher credit costs which will continue to impact profits for next 3-4 quarters, Edelweiss said.

Edelweiss financial arm raises Rs 3,000 crore in first half of FY20

Edelweiss Financial Services Group has raised Rs 3,000 crore, excluding commercial paper, in the first six months of H1FY20 as compared to about Rs 7,600 crore in the same period in 2018-19.

Rating agency CRISIL said given the current environment, with lenders exercising caution, the Edelweiss Group has witnessed a reduction in incremental funds raised post-September 2018. There has also been a rise in the borrowing cost.

Going forward, incremental fund raising is expected to improve with fresh bank sanctions (for credit) in the pipeline. The increase in securitisation/ assignment volumes and the group’s plan to start tapping capital markets (including retail NCDs) is expected to help in raising resources.

The overnight on-balance sheet liquidity (including cash, liquid investments and treasury assets) of the group stood at around Rs 4,200 crore as on September 26, 2019. This excludes other liquid assets (investments, securities-based lending book), which can be accessed if necessary — this stood at around Rs 4,600 crore.

Meanwhile, CRISIL said it had downgraded the rating for Edelweiss Housing Finance Ltd’s long-term debt instruments from “AA” to “AA-” rating for commercial paper have been reaffirmed at “A1+”.

CRISIL said it had factored in the group’s ability to raise capital as demonstrated even in the current market environment. In August 2019, the Edelweiss Group announced that Kora Management, a US-based investment firm, will invest around Rs 525 crore ($75 million) in the advisory business, Edelweiss Global Investment Advisors (EGIA).

EGIA includes the businesses of asset reconstruction, wealth and asset management and the institutional client group. In addition to this investment, Kora also plans to invest an additional Rs 350 crore ($50 million) into the group.

The group has said it planned to raise additional capital in EGIA of up to Rs 525 crore ($75 million), excluding the investment by Kora and is in talks with investors for the same.

Reported asset quality metrics witnessed an uptick with overall gross non-performing assets (GNPA) ratio at 2.3 per cent as on June 30, 2019, compared to 1.9 per cent as on March 31, 2019.

The loan book remains chunky, with about 50 per cent of the overall portfolio towards wholesale lending (of which 67 per cent is towards real estate). Further, a sizeable proportion of the wholesale book is under moratorium with bullet or staggered repayments.

While the group follows sound credit appraisal and risk management practices, it has adequate collateral cover for its wholesale loans. The group has built strong recovery capabilities, asset quality in the past was also supported by an active refinance market, particularly for the real estate loans.