PAG increases stake in Edelweiss Wealth to 61.5% for Rs 2,900 cr
PAG has bought out two existing investors for around Rs 500 crore for a 10 per cent stake they held in the third largest player in the Rs 300-lakh crore domestic wealth management industry.
In last August, PAG had agreed to invest Rs 2,200 crore into EWM for a controlling 51.5 per cent stake, which has not gone up to Rs 2,366 crore, as the deal was a formula-based one. Now, as it concluded the deal on Tuesday, it bought out the 10 per cent stake that Kora Management and Sanaka Capital held in EWM for around Rs 500 crore, Edelweiss Group Chairman Rashesh Shah told PTI this evening.
The Rs 300-crore wealth management industry, which is set to touch Rs 540 crore by 2025 clipping at 12 per cent annually, is led by Kotak Wealth and IIFL Wealth occupying first and second slots, respectively.
Shah also said this investment will result in unlocking long-term value for shareholders and also accelerating business growth apart from hiving off EWM and taking it public over the next few years.
When asked about the fund utilisation, he said most of the fund will be kept with the holding company as none of its eight businesses need any big capital.
However, around Rs 400 crore will go into strengthen the balance sheet of EWM and grow business faster and some will also go into insurance, asset management company (AMC) and housing finance verticals, he said.
Post-deal, Edelweiss will hold 38.5 per cent in EWM, with the option to increase it to 44 per cent, he said adding that this divestment strengthens the equity base of the group apart from making the balance sheet stronger.
There are two upsides from the deal. For one, this is a strong capital raise and balance sheet strengthening for the group. Secondly, this leads the way for EWM to become an independent entity that will be listed leading to value maximisation for shareholders, Shah said.
The Edelweiss Group is into credit, investment banking, stock broking, alternative investments, asset management and asset reconstruction wherein it leads the market, housing and SME finance, life and general insurance, and mutual funds.
This partnership is a strong endorsement of the quality of businesses Edelweiss has built to scale over the years and “we look forward to leveraging our global experience to drive innovation and transformation to further strengthen EWM’s market position”, Nikhil Srivastava, partner, managing director and head of India private equity at PAG said.
EWM reported a net income of Rs 180 crore on a revenue of Rs 880 crore for the nine months to December 2020 when its assets under custody stood at Rs 1.45 lakh crore, making it the third-largest player. There were from over 2,400 of wealthy families as well as around 6.7 lakh affluent and high net-worth individuals.
As the wealth management industry expected to reach Rs 540 lakh crore over the next five years from Rs 300 lakh crore now, PAG is expected to invest over Rs 7,000 crore, including this Rs 2,900 crore, in the next two-three years.
EWM began its journey with acquisition of Rooshnil Securities in 1999 for about Rs 8 crore, and scaling it over the years with the acquisition of Anagram in 2011.
Over the past four years, its clients have grown times from 3.7 lakh in 2015-16 to 6.7 lakh by December 2020, while assets under custody have grown five times from Rs 29,500 crore in 2015-16 to Rs 1,45,100 crore in the third quarter of 2020-21.
PAG is a leading Asia-focused private investment manager, with strategies including private equity, private debt, real estate and hedge funds.
With over 200 investment professionals in 11 key offices around the world, it manages USD 40 billion in assets on behalf of over 150 institutional investors from Europe, North America, Asia, Australia and the Middle East.
