Edelweiss Financial plans to slash wholesale book by half to Rs 5,900 crore

Edelweiss Financial Services plans to reduce its wholesale book from Rs 11,400 crore in March 2021 to Rs 5,900 crore in two years (2022-23, or FY23) as part of its strategy to follow an asset-light business model.

 

The reduction in assets worth Rs 6,300 crore has happened in the last two years (2019-20 and 2020-21). The scaling-down work is expected to continue on the back of strong inflows.             

 

Edelweiss has pegged inflows of Rs 3,700 crore in the current financial year (2021-22) and Rs 3,800 crore in FY23.

 

It aims to further reduce wholesale advances to Rs 1,800 crore in the next two years (by 2024-25), according to a filing with the BSE.

 

Growth will be driven by an asset-light micro, small and medium enterprise (MSME) credit model. The assets under management of the MSME book are expected to reach a level of Rs 9,000 crore by the end of March 2026. The loan portfolio will be split in half – 50 per cent on the book, balance off-book, the company said in a statement.

 

The financial services group has changed strategy from direct exposure on the balance sheet to growing its corporate business through alternative investment funds. Besides risk of stress on books in a challenging business environment, a direct exposure also locks in more capital to meet regulatory norms.

 

The capital adequacy ratio of the non-banking financial company, which manages lending business, stood at 25.3 per cent in March 2021. The provisions for loan exposure held in book were Rs 400 crore in excess of those required under regulatory norms.

 

A substantial portion of the wholesale book consists of exposure to real estate projects. They have been hit by a slump in demand and other regulatory issues, said analysts.

 

Strong recoveries in the wholesale business will help profitability from FY23 onwards, further strengthening the capital adequacy. The asset liability matrix will continue to be comfortable even in stressed scenarios.

 

The approach will continue to be conservative on liquidity management till the complete impact of the Covid-19 pandemic is mitigated, added the company.