Edelweiss plans 26% stake sale in housing finance arm

The company will appoint merchant banker to manage the transaction

Edelweiss Financial Services plans to divest up to 26% stake in its housing finance arm to an overseas strategic partner in next one year.

"We want to do it in a year's time. Our idea is to divest as little [stake] as possible. But I think any strategic partner will want at least 26%," Rashesh Shah, chairman of Edelweiss Financial Services, told Business Standard on the sidelines of an event here today.

It will appoint a merchant banker to manage the transaction.

Edelweiss Housing Finance's loan book is currently around Rs 1,500 crore and the company plans to expand it by Rs 1,000 crore annually.

"Our insurance experience has been very good. What we did was we got a partner who provided capital and is also focused on the business. We want to replicate a similar model in housing finance. It is not because we need capital but having a partner, who have understanding of the market globally, will create a lot more focus," Shah said.

He added the company will also explore inorganic opportunities including portfolio buys to grow its loan book.

INSURANCE VENTURE

Edelweiss Financial Services also plans to infuse additional capital in its life insurance joint venture with Japan's Tokio Marine Holdings in next three years.

The life insurance venture, Edelweiss Tokio Life Insurance, started operations in 2011 with a start-up capital of Rs 550 crore, the highest by any private life insurer.

Edelweiss currently holds 74% stake while Tokio Marine has the remaining 26% stake with an option to increase it to 49% if the cap on foreign direct investment in Indian insurance space is raised.

"We have sufficient capital and will not need funds at least for next three years. But we plan to infuse capital ahead of the curve and want our paid-up capital to be around Rs 1,500 crore after three years," Shah said.

Out of the current Rs 550 crore paid-up capital, Edelweiss has contributed Rs 300 crore while the remaining Rs 250 crore has been contributed by Tokio Marine.

In the expanded capital base of Rs 1,500 crore, Edelweiss' contribution will be Rs 500 crore while Tokio Marine will provide Rs 1,000 crore.

Edelweiss Tokio Life Insurance today opened its first branch in eastern India in Kolkata, which is also its 39th branch in the country.