Edelweiss Financial Services Limited – Bond Public Issue

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Edelweiss Financial Services Limited is coming up with Secured, Rated, Listed, Redeemable Non-Convertible Debentures on April 08, 2024, and closing on April 23, 2024. This investment holds promising opportunities for investors due to its A+/Stable by CRISIL and its strong profile and impressive financial track record. This blog provides valuable insights about the company, its current offering, and its financial performance. Below are the details of the issue:

Issue Highlights

Issuer Name Edelweiss Financial Services Limited
Nature of Instrument Secured Rated Listed Redeemable Non-Convertible Debentures
Rating A+/Stable by CRISIL 
Seniority Senior
Face Value Rs. 1,000 per NCD
Issue Size Rs.100 crores with green shoe option of Rs.100 crores
Coupon Up To 10.45%
Tenor 24/36/60/120 months
Issue Date April 08, 2024, to April 23, 2024
Minimum Investment Rs. 10,000  and in multiple of 1NCD thereafter

Specific Terms of the NCD Public Issue across different series

 

 

 

 

Company Profile

  • Edelweiss Financial Services Limited (EFSL) was established in 1995 and is one of India’s leading financial services conglomerates offering the right financial solutions for every stage. 
  • Edelweiss Group is promoted by Mr. Rashesh Shah and Mr. Venkat Ramaswamy, who are seasoned professionals in the financial services industry with over three decades of experience. 
  • The company, based in Mumbai, services its client base of ~6.7 million through a network of 247 offices and nearly 6,092 employees as of December 31, 2023.
  • EFSL’s key line of business includes: 
  • Retail as well as Corporate Credit
  • Asset Management & Reconstruction
  • Wealth Management and 
  • Insurance 

Financials Highlights for the Quarter ended December 2023

 

 

Key Highlights of Business: 

(Source: Investor Presentation EFSL)

  • Healthy profitability across businesses
  1. Ex-insurance PAT grew by 12% YoY
  2. Alternative Asset Management Fee Paying AUM grew by 22% YoY; MF Equity AUM grew by 47% YoY
  3. GI Gross written premium grew by 70% YoY; LI Gross premium grew by 12% YoY
  4. Retail credit disbursements through co-lending  multiplied 2x YoY; collection efficiency at 97%
  5. Customer assets increased by 17% YoY to INR 2.1 Tn; reach increased by 33% YoY to 6.7 Mn
  • A strong balance sheet with well-capitalized businesses
  • Reduced net debt by INR 3350 Cr YoY

Key Shareholders:

 

 

 

Other shareholders include Baron Asset Management, BIH SA, Miri Capital Management, Blackrock, Barclays, etc.

Financial Metrics across Edelweiss Financial Services Limited’s Businesses as of December 30, 2023.

Alternative Asset Management

The Edelweiss Group is one of the key players in the alternative asset management segment.

  • Aum at INR 52,100 Cr, up 16% YoY
  • Fee-Paying AUM at INR 29,500 Cr, up 22% YoY
  • Only Indian Alternatives player to feature in ‘Top PDI Fund Raisers” for 3 consecutive years
  • Award-winning asset manager- 3 excellence accolades received from the Government of India for highway assets this quarter.

Mutual Funds

  • AUM grew 23% YoY to Rs. 1,23,000 cr; market share of 2.39% as of Dec.23. 
  • Equity AUM grew by 47% YoY to Rs. 40,000 cr.
  • Net inflows of INR 5,300 Cr during the quarter with a market share of 8.1%.

Asset Reconstruction

  • Recoveries of INR 2,052 Cr for the quarter; of which, the retail portfolio contributed 11.7%.
  • Obtained debt assets of INR 1,910 Cr in the quarter, of which ~40% were retail assets.
  • The share of retail assets share in capital employed stood at 15%. 

NBFC

  1. Improved traction in co-lending disbursal with the Central Bank of India, IDFC First Bank, and Standard Chartered Bank.  
  •  ~80% of disbursal during the quarter under the co-lending model

2. Signed co-lending partnership with Godrej Capital

3. Asset quality continues to be healthy

  • GNPA at 2.69%, improved 28 bps YoY.

Housing Finance 

  • Distributed INR 300 Cr in the quarter, of which 32% was under the co-lending model 
  • Collaboration with Standard Chartered Bank and State Bank of India continues to deepen as ongoing disbursals persist.

General Insurance

  • Gross direct premium income (GDPI) growth of 73% YoY for the quarter 
  • The motor segment reported a strong 47% YoY growth in GDPI against industry growth of 10% 
  • Launched Zuno Health Plus Policy 
  • Partnered with Policy Bazaar for 4-wheeler policy issuance 

Life Insurance

  • Gross premium of INR 422 Cr, up 12% YoY
  •  AUM at INR 7,535 Cr, up 19% YoY 
  •  Awarded ‘Gold’ for Best Media Integration & ‘Silver’ for Most Effective Regional Campaign in Pitch BFSI Marketing Awards 2023

Rating Rationale

The rating rationale defines the following primary factors which impact the ratings of Edelweiss Financial Services Limited:

Strengths

  • Adequate capitalization backed by multiple capital raising.

The Edelweiss group has demonstrated its ability to secure capital from global investors across various businesses, notwithstanding the tough macroeconomic conditions. Since 2016, the group has raised Rs 4,400 crore across lending, wealth management, and asset management businesses. This has played a crucial role in maintaining a robust capital position, despite high credit costs, and in absorbing risks associated with assets. 

  • Demonstrated capability to establish a significant competitive stance across various businesses.

The Edelweiss Group functions as a diversified financial services entity, having a presence in four key sectors: credit (both wholesale and retail), insurance (both life and general), asset management, and asset reconstruction. The group has gained prominent positions in alternate asset and asset reconstruction sectors and is working on building a market presence in other sectors too, which is anticipated to lend stability to earnings in the long run.

Weakness

  • Subdued profitability relative to the current size and scale, considering the presence across various business segments.

Edelweiss Group’s profitability has lagged that of other major financial sector groups. Nonetheless, most of its businesses have been reporting profits since the last quarter of fiscal 2021.

  • The asset quality is subject to monitoring due to the increased level of monitorable portfolio.

The group has reduced its wholesale portfolio through various methods, with recoveries contributing to this. The reduction has been due to down-sell to ARCs (both internal and external) and AIFs. Nevertheless, any challenges encountered in effecting recoveries as per the plan could necessitate higher provisioning, potentially impacting profitability. Therefore, this remains a crucial factor to monitor for the rating.

Investor Categories 

The investor categories within a bond public issue can be defined as the various segments of investors who are eligible to take part in the offering. The allocation ratio is determined by the issuer as per the guidelines set by regulatory bodies such as SEBI for distributing the existing bonds among different sets of investors. The allocation ratio for Edelweiss Financial Services Limited’s Public Issue across these categories is given below.

Category I- Institutional Portion- 10% of the overall issue size- Public Financial Institutions, Insurance companies, Scheduled Banks, Provident Funds, AIFs, etc.

Category II– Non-institutional Investors- 10% of the overall issue size- Companies, Co-operative Banks, Trusts, Partnership Firms, Association of Persons, etc.

Category III– High Net-worth Individual Investors- 40% of the overall issue size- Resident Indian individuals or Hindu Undivided Families through the Karta applying for an amount aggregating to above Rs. 10,00,000 across all options of NCDs in the Issue.

Category IV– Retail- 40% of the overall issue size- Resident Indian Individuals or Hindu Undivided Families through Karta applying for an amount aggregating up to and including Rs. 10,00,000.   

How to Apply through TheFixedIncome?

Apply easily using the following three steps: 

 

 

 

 

 

 

 

Information Memorandum:

An Information Memorandum (IM) is a comprehensive document designed to provide investors with in-depth details about the bond issue. It contains in-depth insights into the various aspects of the issuer’s business operations, financial background, management structure, details of the offerings, potential investment risks, and fund allocation from the issue, besides regulatory and legal disclosures.

The link to the Information Memorandum of bond public issue of Edelweiss Financial Services Limited is given below:

https://www.thefixedincome.com/storage/bondprimary_imfiles/1712053560EdelweissIM.pdf

Conclusion

In conclusion, the bond public issue by Edelweiss Financial Services Limited presents an excellent opportunity for investors keen on investing in Secured Rated Listed Redeemable Non-Convertible Debentures. Investors can engage in the offering and benefit from the returns provided by this issue. However, it is crucial for investors to thoroughly review the Information Memorandum (IM) and evaluate their risk tolerance and investment goals before investing.

Disclaimer: This article is based on publicly available information and other sources believed to be reliable. The information provided in this article is intended for general, educational, and awareness purposes only and should not be considered a comprehensive disclosure of every material fact. It should not be interpreted as investment advice for any individual or entity. The article makes no guarantees regarding the completeness or accuracy of the information and disclaims all liabilities, losses, and damages arising from the use of this information. Investments in debt securities/ municipal debt securities/securitized debt instruments are subject to risks including delay and/or default in payment. Read all the offer-related documents carefully.

 

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