MUMBAI : The Edelweiss Group’s asset management, insurance and retail credit businesses will continue to be growth areas for the company, said chairman and chief executive officer Rashesh Shah. He said in an interview that the group is now very comfortable with its equity and liquidity position. On Thursday, the company said private equity investor PAG will invest ₹2,200 crore in Edelweiss Wealth Management (EWM) for a 51% stake.
This includes a primary infusion of ₹300 crore into the wealth management business, while the rest will come from secondary stake sales, said Shah.
EWM has grown its customer assets at a cumulative annualized growth rate of 44% from ₹18,500 crore in 2014-15 to ₹1.27 trillion in the first quarter of fiscal 2021. The wealth management business will be demerged and listed independently.
“If you look at it, two years ago, we had a lot of equity, but liquidity was not there. Then liquidity improved and now we have raised equity also with this deal," said Shah. “We don’t need more capital for the credit businesses, but the advisory, asset management, wealth management and insurance business, they need capital for growth over the next two to three years. This deal will provide that capital."
Shah added that the group will become capital-surplus after this transaction. The asset management and insurance businesses will need around a couple of hundred crore rupees over the next two years to pursue their growth plans, he said.
He believes growth and profitability are going to be challenging because the business is working at about 75% of normal levels. “In April, we were down to 40% of normal and May was at 50-60%. There is a long way to go. Cost is a problem, profitability is a problem, and growth is still not going to come back for another year."
On the stressed assets business, Shah said that Edelweiss has been focusing on recoveries and it has improved in the last few months. “There will always be good assets to buy. Our approach is (to be) where assets are good but the management is not or (where companies) have broken balance sheets. Those are the best businesses to buy from a distressed point of view." He added that a lot of good businesses will still have broken balance sheets.
On rationalization, Shah said the group is looking at streamlining processes and using technology. “I think the rationalization is mainly in terms of processes, technology adoption and digital because that will be important, going forward," he said.
Speaking about India’s economic recovery, Shah said he believes the green shoots are real, but it will take time. “I think in April and May there was the covid-19 pandemic along with the associated panic. Now that panic is not there, people feel that...in the next five to six months, the curve will flatten and India’s growth can restart."
shayan.g@livemint.com
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