To revamp its lending book profile, Edelweiss Financial Services will review its corporate business. It will step up share of retail credit business to 75 per cent and cut corporate loan share to 25 per cent over the next two years.
After a detailed review, the group plans to update the expected credit loss model, which will likely help it get the detailed picture of asset quality to stakeholders and prospective investors. Such review will also be beneficial to expedite the sell-down of corporate credit book, it said in a filing after the announcement of third quarter results last week. Retail credit comprises retail mortgage, SME and business loans, and margin financing and agriculture and rural finance. The corporate credit comprises structured collateralised credit and wholesale mortgages.
The retail credit growth and corporate credit sell-down will remain its focus area. Corporate credit exposure reduced by Rs 1,050 crore on sell-down of loans to completion financing fund, an alternate investment fund. Corporate credit book was Rs 13,927 crore at the end of December 2019.
The size of retail credit book was Rs 14,256 crore in December 2019. To expand retail credit portfolio, Edelweiss has entered into a partnership with banks for co-origination, securitisation, and on-lending. It has set up branch network and focused on increasing originations through direct sales team.
On the benefit of reworking of loan book profile, Edweiss said the equity and liquidity released from corporate book sell-down would be available to grow the retail credit book.
The firm reported a sharp drop in profit before tax at Rs 51.50 crore in Q3FY20, from Rs 458 crore in Q3FY19 because of rise in credit costs.
Its expenses for the impairment on financial instrument almost doubled to Rs 220.48 crore in the quarter, from Rs 114.35 crore in Q3FY19. Also, expenses for change in valuation of credit impaired loans jumped to Rs 213.8 crore, from Rs 87.8 crore in Q3FY19.