Listing of Edelweiss' advisory business within 2 years, says Nitin Jain

The NBFC sector is undergoing huge turbulence and policy makers will have to take further steps to tackle the problem, says Nitin Jain, CEO of Global Wealth & Asset Management at Edelweiss Financial Services. In an interview to Samie Modak, Jain spells out plans for the company. Edited excerpts:   

1. Kora has invested Rs 525 crore in Edelweiss’ advisory business. How much would the valuation of the advisory vertical be? 

The investment is through a compulsorily convertible instrument based on our earnings for FY21. This means the valuation could be from Rs 8,000-10,000 crore, which is the upper cap. 

The valuation will essentially be a function of how we perform on various financial parameters.

2. What are the plans in terms of separating all the three verticals of Edelweiss?

At present, the plan is under discussion. It is a likelihood that we might go for a listing of the advisory business within the next 18 to 24 months through an initial public offering or some other route. The investors would eventually want some kind of a platform to exit. 

3. Within the advisory business, which is the biggest one in terms of profitability?

Wealth management is the largest part, followed by asset reconstruction and asset management. However, over a period of time, asset management will also become quite significant as we are the largest alternate asset management in the country. 
 

4. Are you the biggest player when it comes to wealth? 

It is fair to say that we are among the largest, with Kotak and IIFL being the other large players. Everyone reports numbers differently and hence it becomes difficult to compare like-to-like.  The opportunity in this space is large. We are not as focused on competition but on customers. If we are keeping them happy, then growth 

will be there. 

5. Given the volatile market environment, valuations across sectors have come off. Was there an urgency to get this investment? How are the debt levels in Edelweiss?  

The group debt is around 3.7 times equity. This probably makes us one of the least-levered non-banking financial companies (NBFCs). After the infusion, debt will reduce further. At 3.5 times debt-to-equity and around 10-15 per cent of the balance sheet as liquidity cushion, Edelweiss is in a very good position. On the credit side, things are not comfortable at an industry level. I would love to be able to borrow more, and at a cheaper rate. If we see the industry, things are not normal. Most of the NBFCs are not growing at the right pace. 

6. What are the factors to have impacted growth, and what measures are required?

It is a crisis of confidence. The Centre announced some measures recently. It has also announced detailed guidelines on incentives to banks to take over pooled assets of sound NBFCs. 

There has to be another 50-75 bps interest rate cut. The system has just come in surplus in terms of liquidity. If we maintain the system in surplus liquidity, it will find its way to the right places. A more positive commentary will help. 

7. When do you see the markets coming out of the woods? 

You have seen meaningful slowdown in select sectors and this will persist for another 3-6 months. However, I would never bet against India. I think fundamental demographics of this country and the underlying growth potential is massive. Maybe we can see other round of price corrections. But that should be a buying opportunity. ­