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Edelweiss Fin Tranche I - Dec 21 NCD issue review (May apply)

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  • This is the fourth debt offer from the company since December 2020.
  • The group has diverse activities in the financial sector.
  • The coupon rates are the same as per the last offer of August 2021.
  • The company replaced the rating agency from ICRA to CRISIL for this offering.

Edelweiss Financial Services Ltd. (EFSL), the flagship company of "Edelweiss" group is coming out with its fourth debt offer this month. The last one was in the month of August 2021. 

After commencing the business as an investment banking firm, the Company, through its subsidiaries has now diversified its businesses to include credit including retail and corporate credit, wealth management, asset management, asset reconstruction and insurance including life and general insurance businesses, which are conducted through its subsidiaries. It believes that research-driven and client-centric approach and consistent ability to capitalize on emerging market trends has enabled it to foster strong relationships across corporate, institutional (both domestic and international), high net worth individuals and retail clients. 

EFSL constantly pursues innovation and invests in new ideas, newer products, and newer alternate channels of delivery and so on. The company seek to add significant value by providing new and innovative products and services and are committed to focusing on six key vectors in a journey into the future - people management, cost management, risk management, technology, customer experience and innovation - while adhering to its business principles - which emphasize placing its clients' interests first, commitment to excellence and innovation and teamwork.

EFSL has a Pan-India and international network with approximately 219 domestic offices, 7 international offices (total 226 offices), in approximately 124 cities in India and 3 international locations and employed approximately 5685 employees as of September 30, 2021. The group comprises 32 subsidiaries as of September 30, 2021. Thus its total offices, employees count and subsidiary tally have come down compared to its tally as of June 30, 2021. 

EFSL is coming out with its third Non-Convertible Debenture (NCD) issue worth Rs. 200 crores with a greenshoe option of retaining oversubscription to the tune of Rs. 300 crores, thus taking the total issue size to Rs. 500 cr. It has a shelf limit of Rs. 1000 cr. debt issue. The company is offering NCD having a face value of Rs. 1000 each. Minimum application is to be made for 10 NCDs (i.e. Rs. 10000) and in multiples of 1 NCD (Rs. 1000) thereon, thereafter. The issue is opening for subscription on December 06, 2021, and will close on or before December 27, 2021. Post allotment, NCDs will be listed only on BSE. 

The company is offering coupon rates ranging from 8.75% to 9.70% and having tenures of 24 months, 36 months, 60 months and 120 months. The interest will be paid on a monthly, annually or cumulative basis as per the choice of investors. 

The company is likely to spend around Rs. 11.27 cr. for the entire issue process worth Rs. 500 crores. The company is going to use 75% of the net proceeds of this issue for the purpose of repayment/prepayment of interest and principal of existing borrowings and 25% for general corporate fund needs. Allotment in all these categories will be done on a "First come - First served" basis. EFSL has reserved 10% for QIBs, 10% for Corporate, 40% for HNIs and 40% for retail investors. 

The issue is solely lead managed by Equirus Capital Pvt. Ltd. while KFin Technologies Pvt. Ltd. is the registrar to the issue. Beacon Trusteeship Ltd. is the debenture trustee. 

This issue is rated "Acuite AA/Negative" by Acuite Ratings & Research Ltd. and CRISIL AA-/Negative by CRISIL Ltd. Instruments with this rating are considered to have adequate/high degree (respectively) of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. This time the company has replaced rating agency ICRA with CRISIL. Recent changeovers in rating agencies raise concerns.

The rating may be subject to revision or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating.

On the financial performance front, on a consolidated basis, EFSL has posted a total income / net profit (loss) of Rs. 11161.23 cr. / Rs. 1044.37 cr. (FY19), Rs. 9602.63 cr. / Rs. - (2043.77) cr. (FY20). And Rs. 10848.85 cr. / Rs. 253.92 cr. (FY21). Thus it has posted inconsistency in its top and bottom lines. Mega losses for FY20 still spillover on the last three fiscal's performances. 

For the first half of FY22 ended on September 30, 2021, it has earned a net profit of Rs. 90.51 cr. on a total income of Rs. 3502.56 cr. 

As of September 30, 2021, on a consolidated basis, its equity capital stands at Rs. 89.27 cr. and is supported by free reserves of Rs. 6530 cr. Post this issue its debt-equity ratio will rise from 3.30 to 3.43.

Conclusion / Investment Strategy

This company has recently emerged as the frequent debt market visitor with its offers. Based on rating the coupon rates are attractive and tempting. The company has also changed one of its rating agencies for this issue, which is raising concerns. Though debt instruments with AA or AAA are most preferred by investors, this AA rated instrument with higher coupon rates may attract investment from those who seek regular interest income in the falling interest rate regime. Those who have an appetite for risk and surplus funds may consider investing in this offer.

Review By Dilip Davda on December 1, 2021

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

The Edelweiss Financial NCD December 2021 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if Edelweiss Financial NCD December 2021 worth investing. The Edelweiss Financial NCD December 2021 Note sets the NCD expectations in systematic way which tells you if Edelweiss Financial NCD December 2021 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Edelweiss Financial NCD December 2021 by providing NCD recommendations i.e. subscribe, avoid and neutral.