Edelweiss to sell 26% stake in its housing finance arm

Edelweiss Financial Services will divest 26 per cent stake in its housing finance arm, Edelweiss Housing Finance, to a foreign strategic partner within an year, according to Rashesh Shah, chairman.

“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 per cent,” Shah told Business Standard on the sidelines of an event here on Friday. The company will appoint a merchant banker to manage the transaction. Edelweiss Housing Finance’s loan book is Rs 1,500 crore and the company plans to expand it by Rs 1,000 crore annually.

Shah said, “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.”

He said, “We want to replicate a similar model in housing finance. It is not because we need capital, but having a partner with understanding of the market globally will create a lot more focus.” He added the company will also explore inorganic opportunities, including portfolio buys to grow its loan book.

Edelweiss Financial Services also plans to infuse additional capital in its life insurance joint venture with Japan’s Tokio Marine Holdings over the 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 per cent stake, while Tokio Marine has the remaining 26 per cent stake with an option to increase it to 49 per cent 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 the 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,” said Shah.

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’s 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.