Edelweiss alt investment arm raises $900 mn in largest funding this year

Investors include Ontario Teachers' Pension Plan Board, Florida's State Board of Administration, Swedish Pension Fund - AP4 and a European insurance investor

Edelweiss Group on Monday said it secured an investment of $890 million from global investors, in its alternate investment arm.  

The investment, the equivalent of Rs 6,600 crore, will be deployed in Edelweiss Alternate Asset Advisors’ (EAAA) for a fund--ESOF III--which is focused on providing structured credit to Indian companies. 

EAAA is part of Edelweiss Asset Management (EAM), which has an asset under management of Rs 75,000 crore, including Rs 30,000 crore in alternative fund.  

This is the largest fund raise in the year in the Indian private credit space, amid subdued economic climate, said Edelweiss. Investors include Ontario Teachers’ Pension Plan Board (OTPP), Florida’s State Board of Administration, Swedish Pension Fund - AP4 and a European insurance investor. 

Globally 80 per cent of the bonds are having yields of less than 2 per cent, whereas in India, the returns are better, making it a very attractive destination for investors, explained Hemant Daga, CEO of Edelweiss Asset Management.  

Specifically in India's case, banks and non-bank financial companies are moving away from infrastructure lending, and focusing on retail and such granular level lending operations, which is allowing alternate investment firms to provide patient capital to companies and infrastructure space for a long-term basis, said Rashesh Shah, chairman and CEO of Edelweiss Group. 

“We want to be somewhere in the middle of these two,” Shah said in a press conference to discuss closure of the fund. 

The group has no negative list as such and the fund can be deployed in any sector and in any company that generates adequate cash flow, has good counter-party history. The group anticipates lots of good opportunities opening up in India in the next six to 18 months space.   

The fund is expected to generate returns of 16-18 per cent, in line with the previous two funds alternative fund from the group that gave returns of 15-17 per cent.  

According to Shah, investor appetite is on the rise globally after remaining subdued till June. In the last three months in particular, liquidity has been surplus everywhere, and in India, the crisis phase is over. Investors believe in the India story given the long-term opportunity in India, and given the political stability, insolvency code, liquidity infused by the Reserve Bank. 

“I think this is going to be a great opportunity and global investors are very bullish on India for the long term, say four to five years. In fact, India is one of the few last opportunities where you can expect to have high yields. So, investors are also coming to India to remain invested for 20-30 years," Shah said.  

According to Shah, calendar 2021 will be good for India’s growth parttly due to the base effect, but also because the economy is gaining traction faster than was anticipated.