­Acuite has adopted a consolidated approach on Edelweiss Financial Services Limited (EFSL) along with its subsidiaries and associates collectively referred to as ‘Edelweiss group’ (refer Annexure 2 for list of entities). The approach is driven by common promoters, shared brand name, and significant operational & financial synergies between the companies. Acuite has rated secured NCDs as well as perpetual NCDs issued by Edelweiss group companies. It is pertinent to note that, Unsecured Subordinated Non-Convertible Debentures (i.e. Perpetual NCDs) are rated at a lower level vis-à-vis the regular secured debt instruments. This is in view of the significant loss absorption characteristics associated with these perpetual instruments. The issuer may be required to skip/defer the coupon/interest payment in case of certain events such as decline in CAR below regulatory thresholds. 

­Strong parentage
Edelweiss Group is promoted by Mr. Rashesh Shah and Mr. Venkat Ramaswamy, who are seasoned professionals in the financial services industry with over three decades of experience. The promoters are supported by experienced professionals who are into financing, wealth, and asset management businesses. The group has a diverse business profile in financial services with presence in segments such as retail credit, wholesale lending, asset reconstruction, asset management and insurance business. The various verticals of the group as mentioned above are now under the following broad categories i.e. Credit (retail and corporate), Asset Management, Asset Reconstruction and Insurance (life and general).

Diversified funding (debt & equity) profile with reducing debt
The group’s financial flexibility is supported by its demonstrated ability to mobilise resources from a diversified set of lenders & investors comprising domestic banks, institutional investors and lenders, foreign investors, and domestic retail investors, amongst others. The Group has attracted investments from reputed international investors such as CDPQ (Caisse de Dépôt et Placement du Québec), and PAG Asia. In the past, the Group also raised capital from KORA Management and Sanaka Capital. As on March 31, 2025, borrowings stood at Rs. 18,004.34 Cr vs Rs. 20,358.30 cr for March 31, 2024. The Group had consolidated loan book of Rs. 12,221.30 Cr. as on March 31, 2025 as against Rs. 14,804.03 Cr. as on March 31, 2024. Acuité expects the Group to continue to benefit from diversified funding mix across domestic banks, Institutional investors and lenders, foreign investors and domestic retail investors amongst others.

Adequate liquidity buffer and reduced gearing levels
As on March 31, 2025 the Group's net worth stood at Rs. 5,918.17 Cr. (Rs. 6,049.29 Cr. as on March 31st, 2024). Concurrently, capital adequacy of the NBFC business (ECL Finance Ltd) stood at 32.9 percent and HFC stood at 33.6 percent as on March 31, 2025. The Group had total liquidity of Rs 4,255 Cr. (including overnight liquidable assets of Rs 3,424 Cr.) as on March 31, 2025. Overall gearing (Debt/Equity) for the Group was at 3.04x as on March 31, 2025, a reduction from 3.36x at March 31, 2024.

Edelweiss Group’s strategic intent on re-building its retail loan franchise with focus on the co-origination model, should keep it asset-light and provide granularity to the loan portfolio
The Group has been attempting to gradually increase its exposure to the retail segment and has entered into deals with multiple banks for lending under the co-origination model. It has taken several steps to reduce its exposure to the wholesale segment and reorient the portfolio toward small and mid-corporate lending segments. Besides the fund-based activities, Edelweiss Group also has an established franchise in asset management. Acuité believes Edelweiss group’s established position in financial services and diversified range of fee and fund-based product offerings will continue to support its business risk profile.

Growth in the Group’s Mutual Fund business, Alternative assets AUM, and growth in number of policies issued by the insurance business
As on March 31, 2025, the Edelweiss Group had mutual fund assets under management of about Rs. 1,41,800 Cr. (up ~11.6% from ~Rs. 1,27,000 Cr. on March 31, 2024). The Group’s Alternative Assets business, EAAA India Alternatives Ltd (EAAA) also registered a PAT of Rs. 230 Cr. on March 31, 2025 (Rs. 175 Cr. on March 31, 2024) and total AUM of Rs. 59,640 Cr. (up ~9% from Rs. 54,680 Cr. at March 31, 2024).
The Group’s General Insurance business (Zuno General Insurance) issued 6 lakh policies in the year, up 38% YoY. The Group’s Life Insurance business reported a Gross premium of Rs. 2,086 Cr. in FY25, up ~8% YoY. While both the insurance businesses reported net losses during FY25, the Edelweiss Group management expects them to breakeven over the next two fiscals. 

­Continued pressure on asset quality, though FY25 delinquency ratios improved y-o-y  
The decline in the Group’s overall loan book continued; overall loans were down ~17.4% during FY25 (driven by the reduction in wholesale loans in the ECL Finance NBFC). Overall asset quality indicators remained elevated at FY25, albeit improved from FY24. The Group’s Gross stage 3 assets were reported at 7.93% on March 31, 2025, compared with Gross stage 3 assets 13.00% on March 31, 2024. The Net Stage 3 assets stood at 2.67% at FY25, compared with 2.25% at FY24.
 The group’s wholesale segment mostly comprises exposures to real estate developers for their projects. The cash flows of these realtors and the quality of these exposures is linked to the revival in the real estate cycle. The Group has already initiated steps to prune its exposure to the wholesale segment through various initiatives such as slowing down fresh sanctions and sell down of existing assets to dedicated funds and ARCs. Acuité believes that the Group’s ability to significantly improve - and sustain the improvement in - overall asset quality over the near-to-medium term will remain a key rating sensitivity.

Moderate overall earnings profile
The Group reported a consolidated profit after tax of Rs. 535.82 Cr. in FY2025 as against Rs. 528.05 Cr. in FY2024, which had improved against Rs. 405.56 Cr. in FY2023. The earnings profile continued some dependency on fair value gains from asset revaluation and sale of businesses. That said, the Group’s overall ROAA upticked to 1.32% in FY25, as against 1.25% in FY24. The RoAA had continuously been lower than 1.00% for the three fiscals prior to FY2024. Acuité also takes note of measures taken by the Group to rationalize cost and improve profitability including co-lending model for building the retail portfolio and focus on non-fund business streams. Acuité believes that the Group’s ability to sustain improvement in earnings profile from the regular course of business in the current operating environment (coupled with the intense competition in the retail segment), will be a key rating monitorable.