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MUMBAI: Top buyout firms such as Blackstone, TPG, KKR, Carlyle, Apax Partners among others are in talks to buy a substantial minority stake in Edelweiss’ franchise and advisory businesses, people close to the situation said.
The business, which comprises wealth and asset management, asset reconstruction and credit funds, is being valued at Rs 12-15,000 crore which is close to Edelweiss’ Monday market cap of about Rs 16,000 crore.
The firm plans to sell about 20-25% in the business called Edelweiss Global Wealth and Asset Management (GWAM), these people said.
The sale could happen through a combination of primary capital infusion or a secondary stake sale or a combination of both.
A deal is expected to be reached some time in January.
The interest shown by some of these large bulge-bracket funds comes at a time when the non-banking financial services industry is facing a cash crunch with banks and mutual funds restricting lending due to fears of bad debt and default.
Edelweiss, like other firms has cut back lending to some sections of the company though it has not had any trouble in raising money for its needs.
Edelweiss Financial Services, the main holding company, has three main businesses, credit, franchise and advisory and insurance.
While insurance and credit are already separate companies, the transaction, if and when it happens, will see the creation of a third firm majority owned by Edelweiss but also with outside investors.
Emails sent to Edelweiss Finance and other individual investors and KKR's PR agency remained unanswered until publication of this report.
Spokesperson with TPG and Blackstone declined to comment.
Edelweiss’ wealth management business is one of the fastest growing in the industry with assets under management of Rs 96,000 crore and has grown at a compounded rate of 62% since 2011/12.
The alternative assets business has grown 10 times since 2014/15 and is now worth Rs 20,000 crore.
"Wealth management is one of the core sectors where PE funds are very much keen on.
The successful investments made by PE funds in firms such as IIFL Wealth and ASK Group also increased the demand for the sector," said a Mumbai based investment banker.
In 2015, US based PE fund General Atlantic (GA) had acquired about 22 per cent stake in IIFL Wealth Management for Rs 1120 crore.
In June this year, a clutch of investors including General Atlantic, Ward Ferry Management, Amansa Capital and Steadview Capital bought another another 5% stake in IIFL Wealth for Rs 746 crore.
US-based private equity firm Advent International entered into wealth management space in India by acquiring about 40% stake in ASK Group, an investment and wealth management company, for around $130 million in 2016.
In April this year, the Renuka Ramnath-led PE firm Multiples Alternate Asset Management invested about Rs.73 crore to acquire a minority stake in Mumbai based Sanctum Wealth Management.
The financial services sector garnered the highest share of PE/VC investments in first half of 2018, with $4.2 billion invested across 74 deals, the highest ever half-yearly PE/VC investment into the sector, according to the latest EY-IVCA report.
