Edelweiss to sell 10-20% stake in Edelweiss Alternative Asset Management; stock dips 8%

Shares of Edelweiss Financial Services slashed as much as 8.4% to ₹73.43 apiece on the BSE today after it announced to sell its stake in its subsidiary, Edelweiss Alternative Asset Management. In contrast to this, the broader BSE Sensex was trading 0.05% or 35.21 higher at 71,518.96.

Edelweiss Financial Services has revealed its plan to sell 10 to 20% stake in Edelweiss Alternative Asset Management, its wholly owned subsidiary, initiating the equity monetisation process.

The goal is to raise ₹1,500-2,000 crore through the sale, with the expected completion of the process within 4-5 months. The generated funds will be used to facilitate debt reduction and ascertain the market value of the business, the company states.

As of September 2023, the company's Assets Under Management (AUM) amount to ₹50,000 crore, marking a Compound Annual Growth Rate (CAGR) of 31% since FY17. Over the last five years, investors in the fund have experienced a total realisation of ₹23,500 crore, the company says.

The investor base comprises major global pension funds and insurance companies spanning the US, Canada, Europe, and Australia, in addition to domestic institutions, banks, endowment funds, significant family offices, and high-net-worth individuals (HNI)/ultra-high-net-worth individuals (UHNI) clients.

Additionally, Edelweiss expressed dissatisfaction with the Securities Appellate Tribunal's ruling on Nuvama (formerly Edelweiss), whose securities were misused and improperly sold off by the brokerage.

In September, it was reported that Nuvama Wealth, controlled by PAG -- one of Asia's largest Alternative Investment Fund (AIFs), a wealth management platform for affluent, HNI, and UHNI segments, constituted 80% of market wealth. Nuvama Wealth Management, having demerged from Edelweiss Financial Services, had its shares listed and approved for trading on both the BSE and the National Stock Exchange.

In February, shareholders of Edelweiss approved the demerger proposal, followed by approval from other authorities such as the National Company Law Tribunal and stock exchanges.

After the listing, Nuvama Wealth was predominantly controlled by PAG, which owned a controlling stake at 56%, while Edelweiss retained a 14% share. Shareholders of Edelweiss Financial Services collectively possessed 30% of the paid-up share capital. In recognition of the demerger, Nuvama Wealth distributed 1.05 crore shares to Edelweiss Financial Services shareholders in proportion to their holdings.

In 2020, PAG picked up a stake in the wealth management business of Edelweiss, known as Edelweiss Wealth Management, and the company announced the demerger and subsequent listing of its wealth management business.