Edelweiss Financial Services Ltd Tuesday said its non-bank 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 (AMC).
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 on Monday.
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 securitization. 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.
Liquidity continues to be a challenge for all NBFCs. ECL interest payments worth ₹4,000 crore is under moratorium which is equivalent to nearly 75% of the loan book.
“We have been grappling with liquidity over the last 18 months. We slowly reduced our borrowing and increased liquidity..In March, we were okay; then covid happened. Because of the one-way moratorium to NBFCs, we offered the moratorium to our customers," Shah said.
Edelweiss Financial Services reduced its total borrowing to ₹33,000 crore as on 31 March from ₹50,000 crore a year ago. The company is looking to reduce borrowing further to ₹25,000 crore over the next three years.
Edelweiss group is also looking at fresh capital infusion across its businesses, including lending, Shah said. It plans to raise ₹1,000-1,500 crore in Edelweiss Global Investment Advisors (EGIA).