Edelweiss arm to quit wholesale loan biz

MUMBAI: Edelweiss Financial Services Ltd Tuesday said its nonbank subsidiary ECL Finance Ltd will sell its wholesale loan book within two years to focus solely on retail lending. Edelweiss will, however, continue to extend wholesale loans through its separate asset management company.

ECL Finance, which has a total loan book of ₹19,100 crore, sold wholesale loans worth ₹4,000 crore to global investors recently, and is looking to sell ₹3,000 crore more this fiscal year, company executives said at an earnings call. At the end of the March quarter, it had outstanding wholesale loans 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 it in the AMC business, which has assets under management of ₹21,000 crore. A lot of project and construction finance business has a lot of uncertainty around cash flows. If you do it in the fund format, then you take ALM (asset-liability mismatch) risk and NPA (non-performing assets) issue out of the way,”

Edelweiss group chairman and chief executive Rashesh Shah said.

Edelweiss reported a March quarter loss of ₹2,245 crore on Friday, its first loss in 25 years, after making additional provisions of ₹900 crore towards loan losses due to the Covid-19 pandemic, taking the total provisions to ₹2,549 crore at the end of March 2020.

Shah said the NBFC business is looking to shift to a capital-light model by collaborating with banks through co-lending, on-lending and securitisation. In a co-lending model, the NBFC takes 20% of the credit risk by way of direct exposure, with the balance being taken by banks.

ECL FINANCE IS EYEING

THE SALE OF LOANS WORTH ₹3,000 CRORE IN THE CURRENT FISCAL