Edelweiss’ NBFC arm sells sticky loans worth Rs 4000 crore to global funds

MUMBAI: ECL Finance, the non-banking finance arm of the Edelweiss Group, has sold about Rs 4,000 crore of sticky corporate loans to global asset buyers in what would be the first such large transaction in India since the lockdown began.

US-based Farallon Capital and Singapore-based SSG Capital are said to be the two investors that purchased the assets at 25% haircuts, two people with direct knowledge of the matter told ET.

“Those are sticky loans given mostly to builders with the NBFC not receiving regular repayments,” said one of the persons cited above. Investors have offered 75 cents to a dollar, the person said.

Builders have had their credit lines blocked the past year. The shutdown has intensified their problem.

“The market dislocation of nearly two years, coupled with Covid19, has accelerated our stated strategy to bring down the corporate book, transfer assets to a fund format and remain capital light,” said an Edelweiss spokesperson.

Farallon and SSG did not reply to ET’s queries

Farallon is a San Francisco-based investment firm with $29 billion in assets under management; SSG takes interest in distressed assets in India.

ECL Finance had a corporate loan book of about Rs 11,000 crore. Following the latest asset sale, it has now reduced to Rs 7,000 crore.

“The company aims to exit the entire wholesale book, which is a major drag on their performance,” said a senior executive aware of Edelweiss transactions.

Since June 17, shares of Edelweiss Financial Services surged about 46 percent to close at Rs 60.55 apiece Thursday. During the same period, the Sensex climbed 7%.

Rating company CRISIL graded ECL Finance as AA-(Negative Outlook).

“The outlook revision factors in the increased stress in the Edelweiss group's loan book, particularly the wholesale book, which has also impacted the group's overall earnings profile,” CRISIL said on May 25.

The latest sale of the wholesale portfolio should have a positive impact on the rating grade as CRISIL monitors the progress in sell-down of wholesale assets and the group’s ability to raise fresh funding.

The group earlier announced another transaction of $425 million between Edelweiss Alternative Asset Advisors (EAAA) and Meritz Financial Group (a South Korean financial services conglomerate), of which one tranche has already been concluded.