Edelweiss Financial Services

Gaurav_Catalyst · May 18, 2025, 8:58am

Financial makeup at its best - when management has not done what they shout in each concall / interview - this is what they do - increase the base of last year. Here they simply removed the value of Nuvama stake to increase the last year (FY2024) net debt value when compared to this year (FY2025) net debt position.

Based on what company has reported over last 1 year, following can be observed:

Business	Mar – 2024	June – 2024	Sep – 2024	Dec – 2024	Mar – 2025	YOY Change
NBFC	4,126	Left blank as company reported gross debt	3,650	3,089	2,890	(1,236)
Nido	1,370		1,465	1,293	1,750	380
EAAA	445		385	414	364	(81)
ARC	1,351		830	299	(159)	(1,510)
Corporate	8,048		5,480	6,496	6,325	(1,723)
Net Debt	15,340	12,710	11,810	11,591	11,170	(4,170)

NBFC net debt reduced by just Rs. 1,236 Cr. - which must be in proportion to recoveries and scale down of legacy AUM.
Nido net debt increased by Rs. 380 Cr. - can be attributed to improved disbursement
EAAA net debt reduced by Rs. 81 Cr. - not much material impact
ARC net debt reduced significantly by Rs. 1,510 Cr. - as the recoveries from stressed assets are improving
Corporate net debt reduced just by Rs. 1,723 Cr - this is the pain point and needs surgical strike with absolute precision.

From above, it seems financial makeup in reporting has been done to hide goof up at corporate level debt.

From Nuvama stake sale - company earned more than Rs. 3000 Cr+ (in June 2024 results PPT they reported Nuvama stake at Rs. 3,055/-) considering the high price at which stake was sold in two different tranches.

Now, considering the pure cash inflow of Rs. 3000 Cr+ and debt reduction of Just Rs. 1,723 Cr - creates a gap of Rs. 1,275 Cr.

This gap requires serious clarification from management - but will they explain - not sure.

If we retail investors have material answer to this gap - absolutely not.

If company has invested this amount in any business to solidify financial position - no disclosure from company.

Is it good or bad - for sure it is bad corporate governance - if this gap remains unanswered or if is known to only few.

Disc: Invested.

imurlovish · May 18, 2025, 10:38am

Since you are an investor, you may reach out to them via email - cs@edelweissfin.com

They might respond to it.

cb1994 · June 13, 2025, 8:31am

Bilt graphics loan got repaid 3100 cr approx. Kotak and Allianz/bank of America got issued new NCDs at 8-14% with 20% redemption premium.

This is great for EAAA and EARC.

With EAAA DHRP filing by month end as per investor call, it’s seems a positive period for edelweiss.

amit.wilson · June 13, 2025, 10:47am

Can you point me to the source of this news?

amit.wilson · June 23, 2025, 1:09pm

From ET 18-Jun-2025:

EAAA IPO expected in late 2025.
The group has exited several credit exposures, including Dindigul Vatika, Adhunik Metaliks, and BILT Graphic Paper Products (BGPPL).
Kotak Alternate Asset Managers and Allianz Global Investors, raised ₹3,100 crore in rupee bonds to repay ₹3,000 crore to Edelweiss ARC.
In April, Edelweiss ARC exited Adhunik Power & Natural Resources, recovering ₹1,250 crore.
This recovery followed a ₹1,400-crore loan extended by Davidson Kempner.
Other recoveries include Vatika Hotels (repaid by promoters) and Century Developers (debt being partially refinanced by Ares SSG).

never_overpay · July 9, 2025, 8:19am

The Indian economy from 4T to 6T in 2-3 yrs! really? thats a 50% increase in GDP!!!

Gaurav_Catalyst · August 1, 2025, 5:07am

EAAA has declared Q1 FY2026 financial results - https://www.bseindia.com/xml-data/corpfiling/AttachLive/c9e27b21-ba72-4228-8627-71c34e0b53c9.pdf

This time management even didn’t bother to mention if it is standalone or consolidated.

Hence, in absence of any clarity, i am assuming these are standalone results (also on the basis of comparison to last published results i.e. Q4FY2025).

Results looks awesome QOQ as well as YOY.

Also EAAA approved ESOPs @ Rs. 993 per equity share.

Considering, outstanding share quantity of approx. 6.4 Crores (basis equity share capital as on Q4FY2025) - valuation of EAAA turns out to be approx. Rs. 6,000/- Crores.

This is Pre-IPO valuation. Let’s see for what valuation Mr. Shah file revised DRHP for EAAA.

Gaurav_Catalyst · August 6, 2025, 9:24am

While EAAA, is yet to file revised DRHP with SEBI.

ARCIL has filed DRHP (SEBI | ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED - DRHP)

ARCIL may be valued at approx. Rs. 4500 Crores to Rs. 5000 Crores.

Edelweiss ARC will get a relative valuation, and may be a potential candidate (in queue) for public listing.

palsingh · August 8, 2025, 3:03pm

EAAA IPO is expected around April 2026.

Source: https://www.bseindia.com/xml-data/corpfiling/AttachLive/6e817e8f-7cd1-4c94-bb58-65285dedd6af.pdf

paragbharambe · August 12, 2025, 10:18am

Q1-26 con call notes

Debt Reduction & Liquidity

Current gross debt stands at ₹11,000cr. The target is to reduce it by ₹3,500–₹4,500cr over the next two years.
Most underlying businesses are asset-light, meaning they require minimal capital for growth and generate strong free cash flow. These cash flows are returned to the holding company as dividends—this quarter, underlying businesses paid ₹500cr in dividends.
Excess liquidity at the holding company is being used to repay loans, which will reduce the interest burden.

NBFC (Non-Banking Financial Company)

Focus this year: reducing the wholesale loan book (i.e., large loans to corporations rather than retail loans).
Housing finance was not a key focus during the clean-up phase. Now, attention is shifting back to NBFC and MSME lending.
Last year’s disbursements were ₹500cr; the target for FY26 is ₹1,000cr.

Property & Investment

The holding company has properties and investments worth ₹2,000cr, including assets such as Edelweiss House, other buildings, and partial investment in AIF.

Mutual Fund (MF) Business

MF equity AUM stands at ₹72,000cr—a 38% YoY increase, indicating exceptional growth.
The company has sharpened its focus on profitability and plans to sell a portion of its stake, expecting a solid Profit After Tax (PAT).
Yields are at 5bps, much lower than the industry average of 10–15bps, due to a large non-equity portfolio. As the equity proportion rises, yields are projected to move towards 13–14bps in 5 years.

Insurance (General & Life)

Zuno General Insurance (formerly Edelweiss General Insurance) is growing at 16%, ahead of the industry average of 11%.
Expecting a loss of ₹80–100cr in FY26; Q1 profit was driven by investment gains.
Life insurance: Targeting 13–14% growth and aiming for break-even in FY26.
General insurance: Aiming for 18–20% growth and break-even by FY27.

Alternative Business

Three growth drivers:
1. Management fees on AUM
2. Carry income
3. Investment income (company invests 3–10% of own capital in these businesses; gains are realized on exit)
SEBI requires investment income to be reported as other income, with fees and carry as operational income. The company is modifying its financial reporting accordingly.
Employee co-investment ensures “skin in the game.”
Market slowdown (domestic and international): Some newly launched funds may close in Q2/Q3, at which point assets will be added to ARR. Expect 25% CAGR in the medium term.
Strong equity markets: Many players are raising capital and repaying loans, reducing risk and generating returns via carry income.
Employees invest alongside the funds, benefiting from exits.

IPO Timeline

IPO for EAAA slated for April 2026, chosen to avoid Q4 distractions (conferences, fund-raising) and focus on business. This date was unexpectedly delayed, affecting market sentiment: some investors seeking an IPO catalyst may exit in the next 2–3 quarters, leading to sideways share price movement, despite positive fundamentals.
Past precedent: Nuvama spin-off was similarly delayed but eventually completed.
Typical IPO process in India, from board approval to listing, spans 7–12 months depending on SEBI and market factors.

ARC (Asset Reconstruction Company)

ARC holds ₹3,500cr in capital, generating PAT of ₹300–₹350cr (ROE ≈10%, near the cost of capital).
There is ₹1,500–₹2,000cr in excess capital, which is being returned. In Q1, excess capital reduced by ₹650cr, with ₹350cr paid to Edelweiss (60% owner).
Two-year target: Reach ideal equity level of ₹2,000cr.
ARC is pivoting from wholesale to retail business and does not need significant equity for growth.
Fees are accumulated and realized upon exit, so profitability is expected to improve as investments are exited.

Note: invested

Rishabh_Nair · August 15, 2025, 10:48am

Can’t wrap my head around this.
The remaining subsidiary listings are only stake sales, and not demerger like Nuvama.
So what kind of value creation can we expect here? Sure the stake sale will help reduce corporate debt, and EFS will become holding company and with individual listed businesses finding their true value, maybe EFS could rise in value.
But even then the Holding company discount will still be applicable.

In my opinion - demerger would be the best bet.

They’re trying to find strategic partners for AMC, and ARC business. If I’m not wrong didn’t they do something similar with Nuvama? PAG came in, and then it got demerged and listed.

So a question to the people tracking this stock for a while - does getting a strategic partner mean an eventual demerger?

paragbharambe · August 15, 2025, 11:10am

They have ruled out a demerger of EAAA. Their plan is to IPO it first, using the funds raised to reduce debt slightly. There will always be a holding company discount, and management has said in earlier calls that if the discount becomes too large, they may consider a share buyback. However, such a step would be very long-term in nature and could take years to materialize.

Even under an optimistic scenario where EAAA is listed in April 2026, this is still far off. Not long ago, they had planned to list it in April 2025, but within just a few months, the listing has been delayed by another year.

If the holding company discount becomes significant, they could also sell additional stakes to reduce debt at the holding company level, thereby directly strengthening EDEL’s balance sheet without resorting to an EDEL buyback.

MF Business: They are planning to sell a minority stake. Assuming the business generates ₹80 crore in PAT and applying a 30x PE multiple, it would command a market cap of around ₹2,500 crore. Even if they sell a 30% stake, they would likely realise only about ₹700–800 crore, which may not make a material difference for Edel at this stage. Given that the MF business is delivering strong PAT growth despite heavy investment in expanding its distribution network, it may be worth delaying the stake sale. It will be interesting to see at what valuation the MF business stake is eventually sold.

As per management commentary, they are pivoting towards lending for the retail business. They want to double lending in HFC and MSME from ₹500 crore to ₹1,000 crore in FY26. A significant portion of the lending will be in the form of co-lending. I think this part of the business has real potential to add to PAT, as most of it will be fee-based.

They have been saying the same thing for the last 3-4 years, but it has not yet shown any meaningful progress, possibly because they wanted to fully focus on reducing wholesale funding. They reiterated this again in the Q1 call; hopefully, they keep their word this time.

Gaurav_Catalyst · August 15, 2025, 3:00pm

In latest concall, ARC listing / strategic sale is ruled out. Instead Mr. Shah mentioned that optimal capital base for ARC is Rs. 2000 Cr - Rs. 2500 Cr. And from Capital base of Rs. 3500 Cr (as on March 31, 2025) desired level will be achieved in couple of years down the line - and the way to do this is via corporate action like buyback / dividend. For Ex: EARC in Q1 did buy back as well as paid huge dividend which resulted in capital base of Less than Rs. 3000 Cr as on June 30, 2025.

For quick reference Q1FY2026 results do have this info on EARC (refer Networth numbers).

So EARC will be a milking cow now onwards - and not a compounder for EFSL.

As per Q1FY2026 - following ways to reduce corporate debt has been mentioned.

Out of it Rs. 1500 Crores dividend from biz is quite achievable (approx. Rs. 1000 Cr from EARC, and remaining from EAAA and EAMC as they have done in FY2025 & Q1FY2026). All these three biz don’t require additional capital for growth, are profitable, & generate free cash flow year on year.

Rs. 2000 Cr from stake sale in businesses is also achievable - may be Rs. 1500 from EAAA and Rs. 500 Cr from EAMC. %age dilution in stake will be a key unknown until disclosed to public.

Biggest question is on Rs. 2000 Crores from Property & Other investments, if past record of edelweiss operators is an indicator this will remain on papers only.

While all this will happen, please note high cost of debt sitting on the books of EFSL, its other shadow NBFCs (like Edel Finance, Edel Sec & invest, Edel Global Wealth, Edel Rural & Corporate, Ecap Equities, Edelcap Securities and a large network of other group companies) - called as corporate debt will keep asking interest expenses.

Insurance Biz will keep asking growth capital infusion - that needs to be funded without questions.

Biggest black hole is NBFC businesses - and that is where all the optimism dies - look at the magnificent amount of capital diverted to these - and resulting ROE - it is a shame.

Srikanth_revoju · August 21, 2025, 1:22am

Westbridge Capital emerges front-runner for stake buy in MF arm of Edelweiss Financial Services

https://www.moneycontrol.com/news/business/westbridge-capital-emerges-front-runner-for-stake-buy-in-mf-arm-of-edelweiss-financial-services-13473062.html

Gaurav_Catalyst · August 21, 2025, 5:14am

Last major deal in AMC space, I think was IDFC AMC purchase by Bandhan Group led consortium at 4500 Cr for Avg AUM of 1.2 Lakh Crores (paying approx. 3.5% to 3.7% of Avg AUM) Bandhan Bank Idfc mf Deal: Bandhan-led group to buy IDFC MF, deal valued at ₹4,500 crore - The Economic Times.

Edelweiss AMC is at AVG AUM of Rs. 1.5 Lakh Crores, let’s see at what Enterprise value Edelweiss AMC is valued in expected transaction. Anything between Rs. 5,000 Cr - Rs. 5,500 Cr shall be at par with that of IDFC AMC transaction, above it (highly positive), less than it (negative sentiment).

sarthak_saraf · August 22, 2025, 7:25am

EDELWEISS: CO AND ITS SUBSIDIARIES WILL SELL UP TO 15% STAKE IN EAML AND ETCL TO WESTBRIDGE CAPITAL AFFILIATES FOR ₹450 CRORE,

Could have sold for a lot higher imo

Gaurav_Catalyst · August 22, 2025, 8:07am

15% at Rs. 450 Crores, translates to Just Rs. 3,000 Crores valuation.

Good for Westbridge .. Got AMC stake at 2% of Avg AUM .. such a bargain for them.

ajay81 · August 22, 2025, 9:33am

most of edelweiss portfolio is bharat bonds / etfs etc where fees is very low. hence % of AUM may not be a right comparison

investor12321 · August 22, 2025, 9:53am

If you look at the AGM presentation last year - they placed an intrinsic value on the Asset Mgmt business of 4500-5500 cr.

Base case in my SOTP was 2500 cr.

Gaurav_Catalyst · August 22, 2025, 11:59am

https://www.bseindia.com/xml-data/corpfiling/AttachHis/8e9a2638-d1d2-49db-b502-4a8aa7c18679.pdf - Last year AGM presentation.

So a good 40% reduction in intrinsic value of MF Business from Rs. 5100 Cr to Rs. 3,000 Cr → when it turned to real value while unlocking.

Will this, reduction in Intrinsic value, happen with EAAA as well or it already happened and that is why it’s IPO has been delayed by an year ? → Retail like us don’t know - But I am sure big operators close to Mr. Shah knows very well what’s going on.