Edelweiss farm to quit wholesale loan business
At the end of the March quarter, it had an outstanding wholesale loan of ??10,000 crore, down 43% from a year ago.
Hindustan Times, Bombay |Gopika Gopakumar
Edelweiss Financial Services Ltd said on Tuesday that its non-bank subsidiary ECL Finance Ltd would sell its wholesale loan portfolio within two years to focus solely on retail lending. Edelweiss will however continue to make wholesale loans through its separate asset management company.
ECL Finance, which has a total loan portfolio of ??19,100 crore, wholesale loans sold worth ??4,000 crore to global investors recently, and looking to sell ??3,000 crore more this fiscal year, company executives said on a earnings conference call. At the end of the March quarter, it had an outstanding wholesale loan of ??10,000 crore, down 43% from a year ago.
“We want to bring it (wholesale loans) down to zero by 2022. We will do that in the AMC business, which has assets under management of ??21,000 crores. Many project finance and construction companies have a lot of cash flow uncertainties. If you do it as a fund, you eliminate the ALM (asset-liability mismatch) risk and the NPA (non-performing assets) problem, ”said Edelweiss Group President and CEO Rashesh Shah.
Edelweiss announced a loss of ??2,245 crores on Friday, his first loss in 25 years, after making additional arrangements to ??900 crore in loan losses due to the Covid-19 pandemic, bringing total provisions to ??2,549 crore at the end of March 2020.
Shah said the NBFC company is looking to move to a small-cap model by working with banks through co-lending, on-lending and securitization. In a co-loan model, the NBFC takes 20% of the credit risk through direct exposure, with the balance being taken on by the banks.