The Edelweiss Group, which runs the country's second largest wealth management business, on Thursday sold 51 per cent stake in the vertical to private equity firm PAG Partners for Rs 2,200 crore.
The Edelweiss Group, which runs the country’s second largest wealth management business, on Thursday sold 51 per cent stake in the vertical to private equity firm PAG Partners for Rs 2,200 crore. The transaction is part of its planned demerger and subsequent listing of the business. The deal values Edelweiss Wealth Management (EWM), which manages assets worth Rs 1.27 lakh crore, at around Rs 4,300 crore and unlocks value for shareholders, the company said.
The Hong Kong-headquartered PAG manages USD 40 billion in assets and is one of the world’s largest Asia-focused private investment firms. EWM is part of Edelweiss Global Investment Advisors, which also houses Edelweiss Asset Management — the country’s largest alternatives and asset reconstruction platform — but it is not part of the divestment.
Set up 25 years ago, EWM offers wealth management services to over 2,400 of the country’s wealthiest families as well as 6.1 lakh high net-worth individuals. It is clipping at 44 per cent cumulative annualised growth rate, from Rs 18,500 crore FY15 to Rs 1.27 trillion in the first quarter of FY21. Rashesh Shah, the founder chairman and chief executive of Edelweiss Group, said the proceeds from the partnership will go to the group holding company, which will deploy the funds into its various verticals.
The Rs 300-lakh crore domestic wealth management industry has been expanding rapidly, with a five-year cumulative annualised growth rate of 11.3 per cent. It is expected to reach Rs 540 lakh crore over the next five years, growing at 12.5 per cent per year.
“The stake sale is part of our group strategy to be cash surplus so that when growth returns, which is most likely from next fiscal, we have enough cash to fuel that and also to distribute profit to the shareholders by unlocking value…
“Over the next 18-24 months, EWM will be hived off and we will make it a publicly listed company, either through an IPO or through a demerger,” Shah told PTI. Asked why cede majority control with this partnership, Shah said the company was anyway planning to hive it off and so majority stake has no meaning.
After all, in any highly regulated sector, majority control is not encouraged by the regulator and it also has no meaning, he added. Whether he will continue to remain the chairman of EWM, he answered in the affirmative. The name of the company will also not change till the listing, he added.
“Our strategy is to make all businesses to be standalone, and a strong financial partner can support such a unlocking of the value,” Shah explained, adding that upon listing, existing Edelweiss shareholders will get direct shares in the demerged entity. He parried a question on the next candidate for demerger, but said EWM is the most evolved vertical, followed by asset management. However, there is no immediate plan for a demerger in the next two years, he added.
“The forthcoming demerger comes in the 25th year of our operations and sets the foundation for the growth for the next 25 years,” Shah said.
“This investment by PAG endorses our core strategy of incubating businesses, building value and growing them into market leaders as they gradually move from inter-dependence to independence. We remain committed to unlocking value for businesses and shareholders alike and remain future-ready to ride the economic trajectory post-pandemic,” Shah said.
Weijian Shan, chairman of PAG, said it is committed to India and strongly believes in the long-term growth of the market.
The Edelweiss Group runs corporate and retail credit, wealth management, asset management and life and general insurance businesses.