The investment and advisory business of Mumbai-based Edelweiss Financial Services is valued at $800 million-$1 billion and is looking at getting a minority partner for a 15-20% stake, said four people with direct knowledge of the development.
“Currently, the bidders are carrying out due diligence and the second round of bids is expected by the second week of July,” said one person.
Under the EGIA umbrella, the group operates fee-based businesses such as wealth management, capital markets, asset management and asset reconstruction. A stake sale will help Edelweiss, which is battling rising bad loans and liquidity issues, raise funds for its credit businesses.
Last year, US-based Kora Management invested $125 million (Rs 525 crore) while private equity firm Sanaka Capital put in $75 million in EGIA. They together hold about a 12% stake in EGIA.
KKR declined to comment, while emailed queries to Blackstone, Bank of Singapore and Baring Private Equity Asia, Edelweiss and TA Associates remained unanswered.
Edelweiss Wealth Management provides advisory distribution, broking and asset services, ESOP and margin funding. It advises assets of over Rs 1.11 lakh crore as of December 31, 2019. Assets under management of Edelweiss Mutual Fund stood at Rs 25,250 crore as of March 31.
Edelweiss ARC continues to be the largest asset reconstruction company in the country. It generated net liquidity of Rs 1,000 crore via the Essar Steel resolution last year. As of December 31, 2019, the asset reconstruction business had AUM of Rs 43,100 crore, capital employed of Rs 8,600 crore and recoveries of Rs 8,100 crore.
Edelweiss Financial Services, the main holding company, does credit, franchise and advisory and insurance. While insurance and credit are already separate companies, the potential transaction will see the creation of a third firm, majority-owned by Edelweiss and with outside investors.
Edelweiss Financial Services had reported a profit after tax of Rs 363 crore for the nine months ended December 2019, compared with Rs 1,338 crore a year earlier. Its net revenue declined 4% to Rs 7,579 crore in this period.
NBFCs are under stress due to tight liquidity conditions prevailing over the past nine months. Companies such as Edelweiss are affected by a prolonged slowdown in the real estate sector, coupled with the liquidity crunch in the overall market.
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