Edelweiss to get investor for mortgage unit

Edelweiss Financial Services (EFS) is likely to bring a strategic minority stake (26%) investor into its subsidiary Edelweiss Housing Finance (EHF) after a year. The investor could be an overseas player from the evolved mortgage product markets in Western economies.

The idea is to take such an investor’s help to introduce similar products for Edelweiss in the Indian market, said Rashesh Shah, chairman and CEO of the Edelweiss Group.

Shah said Edelweiss has been approached by quite a few people for partnering in housing finance. But the company does not want to bring in a partner only for money. Edelweiss would look for a strategic partner that can bring value to the existing business.

He said, internationally, housing finance has been a very solid business, and the mortgage business has been quite advanced in the Western economies. The same thing is going to happen in India. That is, specialised mortgage products will be introduced in India.

Housing finance companies are now being allowed to borrow globally, he said. All these are the values that a strategic partner can bring in. We would not like to give a large stake, something like 26%, similar to our insurance venture model which is working so well for us.

Shah was speaking on the sidelines of a press conference to announce the launching of group’s life insurance operations in Kolkata.

EHF started operating in 2010 and has since created a portfolio of Rs1,500 crore. Within the next 12 months, another Rs1,000 crore are likely to get added, giving the company the minimum threshold asset size of Rs2,500 crore, which would trigger the need to bring in a strategic partner.

EHF has identified loans for affordable housing of ticket size of less than Rs25 lakh as its focus area.

We plan to put in about Rs100 crore of capital every year in this business.This infusion can support Rs1,000 crore of asset growth every year, said Shah.

EHF is offering the small ticket housing loans currently only in Tamil Nadu where it is seeing much growth. We plan to expand to other states within the next 5-6 months, Shah said.

Edelweiss is also keen on securing a banking licence. We are a large financial services company having presence in the NBFC (non-banking finance company) segment, housing finance, commodities and insurance. We are keen to be in as many financial sectors as possible and we are fairly well capitalised with a base of Rs3,000 crore. But it’s too early to say (whether Edelweiss would become a bank). Let the guidelines to come, said Shah.

Edelweiss Tokio Life Insurance, a joint venture between Edelweiss and Tokio Marine Holdings, plans to invest about Rs950 crore over the next six years. Its current paid-up capital is Rs550 crore. Shah more or less ruled out venturing into general insurance business.

Everybody comes and approaches us (to partner in general insurance) but we have not finalised anything. It is an exciting market but currently there is no plan. We currently want to stabilise our current businesses like housing finance and life insurance.

http://www.dnaindia.com/money/report_edelweiss-to-get-investor-for-mortgage-unit_1780353