Edelweiss Financial up 3% as PAG picks 51% stake in Edelweiss Wealth

The deal values EWM at around Rs 4,300 crore and "unlocks value" for shareholders, the company said

Shares of Edelweiss Financial Services rose as much as 3.16 per cent to Rs 86.50 on the BSE on Friday after Hong-Kong based private equity group PAG picked up 51 per cent stake in Edelweiss Wealth Management (EWM) for Rs 2,200 crore.

The Edelweiss Group runs corporate and retail credit, wealth management, asset management and life and general insurance businesses. EWM houses the capital markets and wealth management services businesses of the group. The transaction is part of its planned demerger and subsequent listing of the business. The group also houses Edelweiss Asset Management, but it is not part of the divestment.

The deal values EWM, which manages assets worth Rs 1.27 trillion, at around Rs 4,300 crore and "unlocks value" for shareholders, the company said in an exchange filing yesterday.

Set up 25 years ago, EWM offers wealth management services to over 2,400 of the country's wealthiest families as well as 6.1 lakh high net-worth individuals. It is clipping at 44 per cent cumulative annualised growth rate, from Rs 18,500 crore FY15 to Rs 1.27 trillion in the first quarter of FY21.

Rashesh Shah, the founder chairman and chief executive of Edelweiss Group, said the proceeds from the partnership will go to the group holding company, which will deploy the funds into its various verticals.

The Rs 300-lakh crore domestic wealth management industry has been expanding rapidly, with a five-year cumulative annualised growth rate of 11.3 per cent. It is expected to reach Rs 540 lakh crore over the next five years, growing at 12.5 per cent per year.

Meanwhile, Edelweiss Financial Services Limited also announced its June quarter results for 2020-21 (Q1FY21) yesterday in which the company reported a loss of Rs 245.08 crore as compared to the profit of Rs 132.02 crore reported in Q1FY20. Consolidated total income declined by 25.7 per cent YoY to Rs 1,919.68 crore during the quarter.

Net interest income (NII) stood at Rs 53.33 crore, a decline of 86.7 per cent YoY. The company reported operating loss of Rs 242.62 crore in Q1FY21 as against operating profit of Rs 203.13 crore in Q1FY20.

At 9:50 am, the stock had pared the gains and was trading flat at 83.80 as compared to 0.57 per cent gain in the S&P BSE Sensex. Around 12.5 lakh shares have changed hands on the NSE and BSE,combined, so far.