Carlyle sells entire 8.2% stake in Edelweiss

Carlyle Group, the US-headquartered investment entity, announced on Friday it had sold its entire 8.2 per cent stake in Edelweiss Financial Services, in the secondary market. 

The exit has been well-timed. Shares of Edelweiss have risen 2.5 times in the past year, and gained nearly 40 per cent on a year-to-date basis.

Shares of Edelweiss on Friday closed at Rs 134.2 after touching a high of Rs 140 and a low of Rs 127. Block deal data showed First Carlyle Ventures Mauritius sold 68 million shares of the company at Rs 127.4 a piece for around Rs 867 crore.  Among the buyers were Goldman Sachs, Natwest Bank and GMO Emerging Markets. Market buzz suggested ace investor Rakesh Jhunjhunwala too was among the buyers, however, his name didn’t feature in the block deal data released by BSE, where the trade happened.

By a rough calculation, Carlyle would have made a gain of at least three-fold on its investment in the domestic financial services major. It first took a four per cent stake in the domestic brokerage in October 2011, for Rs 86 crore. It raised this by another 187 basis points to 7.48 per cent by September 2012, and by another 127 bps to 8.75 per cent by September 2014. At the end of the December 2016 quarter, Carlyle’s stake in Edelweiss was 8.2 per cent.

The share stayed between Rs 25 and Rs 35 between 2011 and 2012. It has seen huge buying interest in the past one year, along with other non-banking financial company stocks. Analysts say a diversification away from broking to new segments like lending, private wealth management, asset management and even insurance have helped Edelweiss.  For instance, contribution of the capital markets business for rival IIFL in profit before tax fell to 13 per cent in FY16 from 21 per cent in FY15. For the nine months ended December 2017, the contribution has further dropped to eight per cent.