PAG, among the largest Asia focussed alternative asset management firm on Thursday said in an official statement, it is paying Rs 2244 crore to buy a 51% stake in these businesses that will be carved out of Edelweiss subsidiary called. Edelweiss Global Investment Advisors.
In Edelweiss both these businesses come under the omnibus umbrella of Edelweiss Global Wealth Management Limited (EGWML). The company will issue Compulsorily Convertible Debentures (CCDs) to PAG worth Rs 2204 crore. There will also be a primary issuance of securities by Edelweiss’s Securities business of around Rs 140 crore to EGWML and PAG along with the other existing shareholders.
The sale was approved at the board meeting held on Thursday, the company announced to the exchange. Parent Edelweiss will retain around 37% stake in the entity while existing investors Sanaka Capital and US-based Kora Management will own a total 12%, the company filings with the exchanges show. Together, they had invested Rs 1,160 crore in EGIA last year.
ET was the first to break the news of the impending deal on August 26
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The businesses will be spun off through a demerger scheme and eventually get listed in the next 12-18 months.
The transaction will help Rashesh Shah led Edelweiss Group to unlock value and provide liquidity to its balance sheet that took a significant knock post IL&FS collapse as significant loan exposures given to corporates and real estate turned bad. The 25 year old financial services company, has four main verticals – credit, EGIA, asset reconstruction and insurance. It decided to scale down and exit the wholesale credit business by 2022, shifting its focus to retail along with asset and wealth management after posting a maiden loss in the March quarter of Rs 2,245 crore after a Rs 900-crore additional, one-time provision for the pandemic, taking total provisions to Rs 2,549 crore.
“We remain committed to unlocking value for businesses and shareholders,” said Shah, Chairman & CEO, Edelweiss.
PAG is believed to have pipped peers Blackstone, Bain in the deal.
Haitong Securities was the advisor to Edelweiss.
Edelweiss Wealth Management, the second largest non-bank wealth management company in the country. As of March 31, the assets under administration (AuA) at the wealth management business stood at Rs 1.14 lakh crore. The capital markets businesses include institutional equities, investment banking advisory and issuer services, forex trading, prime brokerage and financial products distribution. The company claims to be among the largest Indian domestic institutional broking houses in the country, with a market share of 4 to 4.5% by revenue.
The asset management, mutual funds, private equity, private debt and asset reconstruction businesses will not be part of the transaction.
The investment banking and wealth businesses clocked around Rs 1,128 crore revenue and profit after tax of Rs 280 crore in FY20.
These businesses got clubbed together following a re-organisation of business verticals some years back to synergise several of its fee and advisory management businesses. Even alternative asset management and mutual funds were brought under the combined asset management and wealth management arm that got rechristened as Edelweiss Global Investment Advisors (EGIA)
PAG is looking to invest upwards of a billion dollars in India over the next three years to buy out targets, provide growth equity and even structured finance with an eye to fix the broken balance sheets at India Inc, its CEO Weijian Shan, told ET in an earlier interview.
The buyout group has invested more than $50 billion across Asian PE and real estate. PAG set up its India office in 2019, almost a decade after raising its first fund, roping in senior KKR & Co. executive Nikhil Srivastava.
“We strongly believe in long term growth and the investment in Edelweiss Wealth marks a milestone in PAG’s investments in the India market,” Weijian Shan, its Chairman and CEO.
In the past Edelweiss have on boarded strategic partners across its businesses who contributed domain expertise and capital. In life Insurance it teamed up with Tokio Marine while CDPQ invested in the asset reconstruction and credit verticals.