PAG
has agreed to buy a controlling stake in the wealth management and capital markets
business of Edelweiss Financial
Services NSE 0.48 % that also
includes investment banking, its first large deal in the country after setting
up local base in 2019.
PAG,
among the largest Asia-focussed alternative asset management firm, on Thursday
said in an official statement that it is paying Rs 2,244 crore to buy a 51%
stake in these businesses that will be carved out of Edelweiss subsidiary,
called Edelweiss Global Investment Advisors.
In
Edelweiss, both these businesses come under the omnibus umbrella of Edelweiss Global
Wealth Management Limited (EGWML). The
company will issue compulsorily convertible debentures (CCDs) to PAG worth Rs
2,204 crore. There will also be a primary issuance of securities by Edelweiss’
securities business of around Rs 140 crore to EGWML and PAG along with the
other existing shareholders.
The
sale was approved at a board meeting held on Thursday, Edelweiss announced to
the stock exchanges. Parent Edelweiss Financial Services will retain an around
37% -41% stake in the entity while existing investors Sanaka Capital and
US-based Kora Management will own around 8%. Together, the funds had invested Rs
300 crore in Edelweiss Wealth Management last year.
The businesses will be spun off through a demerger
scheme and eventually listed over the next 12-18 months.
This will help Rashesh Shah-led Edelweiss Group to unlock value and provide liquidity to its balance sheet that took a significant knock post IL&FS collapse as significant loan exposures given to corporates and real estate turned bad. The 25-year-old financial services company has four main verticals – credit, Edelweiss Global Investment Advisors (EGIA), asset reconstruction and insurance. It has decided to scale down and exit the wholesale credit business by 2022, shifting its focus to retail along with asset and wealth management after posting a maiden loss of Rs 2,245 crore in the March quarter after creating a Rs 900 crore additional, one-time provision for the pandemic, taking total provisions to Rs 2,549 crore.
“We
remain committed to unlocking value for businesses and shareholders,” said
Shah, Chairman & Chief Executive Officer, Edelweiss. “This will take care
of our growth capital needs for the time being. We are seeing growth in the
wealth management business even during Covid and it will grow going forward.
Even capital markets have been growing and we have been clocking around Rs
400-500 core revenues every quarter.”
PAG
is believed to have pipped peers Blackstone and Bain in the deal. Haitong
Securities was the adviser to Edelweiss.
Edelweiss Wealth Management is the second largest non-bank
wealth management company in the country. As of March 31, assets under
administration (AuA) at the wealth management business stood at Rs 1.14 lakh
crore. The capital markets businesses include institutional equities,
investment banking advisory and issuer services, forex trading, prime brokerage
and financial products distribution. The company claims to be among the largest
Indian domestic institutional broking houses, with a market share of 4 to 4.5%
by revenue.
The asset management, mutual funds, private equity, private
debt and asset reconstruction businesses will not be part of the transaction.
The investment banking and wealth businesses clocked around Rs 1,128
crore revenue and profit after tax of Rs 280 crore in FY20.
Sandip Ginodia , CEO
ALTIUS INVESTECH PVT LTD
We deal in over 60 unlisted companies with 15 years of experience
For latest prices visit : www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .
Email : ginodiasandip1@gmail.com
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