Edelweiss Financial Services Group has raised Rs 3,000 crore, excluding commercial paper, in the first six months of H1FY20 as compared to about Rs 7,600 crore in the same period in 2018-19.
Rating agency CRISIL said given the current environment, with lenders exercising caution, the Edelweiss Group has witnessed a reduction in incremental funds raised post-September 2018. There has also been a rise in the borrowing cost.
Going forward, incremental fund raising is expected to improve with fresh bank sanctions (for credit) in the pipeline. The increase in securitisation/ assignment volumes and the group’s plan to start tapping capital markets (including retail NCDs) is expected to help in raising resources.
The overnight on-balance sheet liquidity (including cash, liquid investments and treasury assets) of the group stood at around Rs 4,200 crore as on September 26, 2019. This excludes other liquid assets (investments, securities-based lending book), which can be accessed if necessary — this stood at around Rs 4,600 crore.
Meanwhile, CRISIL said it had downgraded the rating for Edelweiss Housing Finance Ltd’s long-term debt instruments from “AA” to “AA-” rating for commercial paper have been reaffirmed at “A1+”.
CRISIL said it had factored in the group’s ability to raise capital as demonstrated even in the current market environment. In August 2019, the Edelweiss Group announced that Kora Management, a US-based investment firm, will invest around Rs 525 crore ($75 million) in the advisory business, Edelweiss Global Investment Advisors (EGIA).
EGIA includes the businesses of asset reconstruction, wealth and asset management and the institutional client group. In addition to this investment, Kora also plans to invest an additional Rs 350 crore ($50 million) into the group.
The group has said it planned to raise additional capital in EGIA of up to Rs 525 crore ($75 million), excluding the investment by Kora and is in talks with investors for the same.
Reported asset quality metrics witnessed an uptick with overall gross non-performing assets (GNPA) ratio at 2.3 per cent as on June 30, 2019, compared to 1.9 per cent as on March 31, 2019.
The loan book remains chunky, with about 50 per cent of the overall portfolio towards wholesale lending (of which 67 per cent is towards real estate). Further, a sizeable proportion of the wholesale book is under moratorium with bullet or staggered repayments.
While the group follows sound credit appraisal and risk management practices, it has adequate collateral cover for its wholesale loans. The group has built strong recovery capabilities, asset quality in the past was also supported by an active refinance market, particularly for the real estate loans.