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RBI restrictions on Edelweiss Financial: Shares of Edelweiss Financial Services tanked 17 per cent to Rs 64 on the BSE in Thursday's intraday trade after the Reserve Bank of India (RBI) barred the Edelweiss group's asset reconstruction company from acquiring financial assets and security receipts (SRs).
The RBI, on Wednesday, May 29, also barred the company's non-banking financial arm from undertaking any structured transaction for wholesale exposure, other than repayment and/ or closure of accounts in its normal course of business. The Edelweiss Asset Reconstruction Company Limited (EARCL) has also been barred from reorganising the existing SRs into senior and subordinate tranches.
The RBI stated that the action is based on material concerns observed during supervisory examinations, primarily arising from the group entities' conduct.
EARCL and ECL Finance were found to be "acting in concert" by entering into a series of structured transactions for "evergreening stressed exposure of ECL, using the platform of EARCL and connected AIFs, thereby circumventing applicable regulations", it said.
These directions shall be reviewed by RBI upon satisfactory remediation of their observations.
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EARCL said the company takes note of the RBI's guidance and will take necessary remedial steps as required immediately.
"We are reviewing the order and will address the observations mentioned in the RBI order. We are dedicated to maintaining transparency and upholding highest standards of corporate governance and committed to compliance with regulatory requirements. There will not be any material impact on Company’s resolution and recovery efforts which would continue normally," EARCL said in an exchange filing. CHECK FILING HERE
Meanwhile, ECL Finance said in the last Financial Year, the company passed a Board Resolution to discontinue this business (wholesale), which was disclosed in its financial statements for the period ending 31 March 2024. The company, therefore, believes these directions will not materially impact its strategy and its business. Reduction of the wholesale exposure will continue as permitted, in the normal course of business, ECL Finance said.
At 09:30 AM, Edelweiss was trading 11 per cent lower at Rs 68.56 as compared to 0.24 per cent decline in the S&P BSE Sensex. The average trading volume on the counter jumped 1.5 times so far in trade, with a combined 11.19 million equity shares having changed hands on the NSE and BSE.
