Press Release July 07, 2025 EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED Rating Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Non Convertible Debentures (NCD)	300.00	ACUITE A | Stable | Reaffirmed | Removed from Rating Watch	-
Total Outstanding	300.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

­Acuite has reaffirmed the long term rating of 'ACUITE A' (read as ACUITE A) on the Rs.300.00 Cr. Secured Guaranteed Non Convertible Debentures of Edelweiss Asset Reconstruction Company Limited (EARCL). The rating is removed from rating watch. The outlook is 'Stable'.    Rationale for the rating  To arrive at its rating, Acuité has considered the standalone business and financial risk profile of EARCL.   In June 2024, Acuite had placed the ratings of Edelweiss Financial Services Limited (EFSL) and Acuite-rated Edelweiss Group (‘Group’) entities on Rating Watch with Negative Implications on account of material supervisory concerns raised by Reserve Bank of India (RBI) as RBI had directed ECL Finance Ltd (ECLFL) to cease and desist, with immediate effect, from undertaking any structured transactions in respect of its wholesale exposures, other than repayment and/ or closure of accounts in its normal course of business, and Edelweiss Asset Reconstruction Company Limited (EARCL) to cease and desist from acquisition of financial assets including security receipts (SRs) and reorganising the existing SRs into senior and subordinate tranches. In December 2024, Acuite acknowledged the divestment of a 7.14 percent stake in Nuvama Wealth Management Limited by Edelweiss Financial Services for Rs 1,759 crore. Additionally, Acuite noted the RBI’s decision to lift the business restrictions previously imposed on ECLFL and EARCL. The Acuite team took cognizance of this development and was in the process of assessing the business and financial impact on the ARC business. Acuite would monitor the same for its implications on the operational and financial performance of the company along with impact on financial flexibility. Acuite removes the Rating Watch with Negative Implications on account of lifting up of the above restrictions by the RBI on the Edelweiss Group entities ECLFL and EARCL, on 17th December 2024 and submissions made to RBI on the remedial measures put in place by these companies to address the concerns of RBI and their commitment to ensure adherence to the regulatory guidelines at all times.       The reaffirmation of the ‘Acuite A’ rating, removal of the Rating Watch with Negative Implications, and assignment of stable outlook factors in EARCL’s strong parentage, established track record, high capital ratio and low gearing levels. The rating also considers the ARC industry cyclicality that could create volatility in EARCL’s earnings profile and uncertainty in recoveries.

About the company

Mumbai based, EARC was incorporated in October 2007 and registered with the RBI as an ARC in October 2009. The Edelweiss group currently holds 60% stake in EARC, with high-networth individuals (16%) and two foreign institutional investors (24%) holding the remaining stake.

About the Group

­Incorporated in 1995, Edelweiss is a SEBI-registered merchant banker with a presence across multiple businesses in the financial services space through its subsidiaries. Currently, the Group is engaged in retail lending, alternatives, asset management, life & general insurance, and asset reconstruction. the group has restructured the businesses into four verticals namely credit, insurance, asset management and asset reconstruction. The group is present across various financial services businesses, including loans to individuals, mortgage finance - loans against property and small-ticket housing loans, MSME finance, alternative and domestic asset management, and life and general insurance.

Unsupported Rating

­Not Applicable

Analytical Approach

To arrive at its rating, Acuité has considered the standalone business and financial risk profiles of EARCL.

Key Rating Drivers

Strength

­Strong parentage: Edelweiss Group’s established track record in financial services 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). As on March 31, 2025, the Edelweiss group held ~61% shareholding in EARCL through subsidiaries. CDPQ held ~20% equity shareholding as on March 31, 2025. Established track record of EARCL EARCL is a leader in the asset reconstruction industry in India. As on March 31, 2025, the AUM stood at Rs. 14,717 cr. The company observed decline in the AUM as compared with March 31, 2024 (Rs. 31,592 cr), due to business restrictions imposed by RBI (in May 2024) which were lifted in December 2024. The business restriction has not affected the recovery efforts and resolution of the existing portfolio to be managed by EARCL as the company recovered Rs 5,730 cr. in FY25. The company’s profitability remained healthy with Rs. 385.06 Cr. PAT generated in FY25 against Rs. 355.20 cr. in FY24. Return on capital employed stood at 8.07% at FY25, compared with 6.93% at FY24. With the business restrictions being lifted in Dec 2024, EARCL was able to resume acquisitions, which would help boost their AUM going forward. High capital and low gearing levels EARCL’s total capital adequacy ratio was high at 90.5% as on March 31, 2025 (regulatory requirement: 15%) compared with 60.4% as on March 31, 2024. As of March 31, 2025, the company’s net worth stood at Rs. 3,534.88 Cr. (March 31, 2024: 3,149.85 Cr). Gearing stood comfortable at 0.35x as on March 31, 2025 (0.63x as on March 31, 2024).

Weakness

ARC industry cyclicality could create volatility in EARCL’s earnings profile and uncertainty in recoveries   The asset reconstruction industry is subject to cyclicality which creates inherent volatility in the earnings profiles of ARCs. The ability of EARCL to procure assets at competitive pricing and the resolution time over those would play a major factor in the strength of the earning profile, owing to the nature of the industry. Given the nature of the assets, the recovery and the time frames for recoveries tend to be uncertain.

ESG Factors Relevant for Rating

­Edelweiss Group offers a bouquet of financial services to a diversified client base across domestic and global geographies. The Group has presence in segments such as retail credit (including agri-finance), wholesale lending, warehousing services, asset reconstruction, asset management and insurance business. Adoption and upkeep of strong business ethics is a sensitive material issue for the financial services business linked to capital markets to avoid fraud, insider trading and other anti-competitive behaviour. Other important governance issues relevant for the industry include management and board compensation, board independence as well as diversity, shareholder rights and role of audit committee. As regards the social factors, product or service quality has high materiality so as to minimise misinformation about the products to the customers and reduce reputational risks. For the industry, retention, and development of skilled manpower along with equal opportunity for employees is crucial. While data security is highly relevant due to company’s access to confidential client information, social initiatives such as enhancing financial literacy and improving financial inclusion are fairly important for the financial services sector. The material of environmental factors is low for this industry.   Edelweiss Group’s board comprises of seven directors with two women directors. Of the total eight directors, four are independent directors. The Group maintains adequate disclosures for business ethics which can be inferred from its policies relating to code of conduct, whistle blower protection and related party transactions. The Group has formed a Risk Committee with four out of five members being independent directors for among other things, identifying and evaluating risks and development, implementing and tracking risk management efforts. All the members of Audit Committee are independent directors. For redressal of grievances of the security holders, it has constituted a Stakeholders’ Relationship Committee. The Group also has a committee for appointment, remuneration and performance evaluation of the Board. On the social aspect, the Group has taken development and training initiatives towards career development of its employees. The Group has put in place data privacy policy to ensure adequate safeguards for collection, storage and processing of personal and sensitive information and data of customers and third parties. Further, the Group has set up EdelGive foundation, a grant-making foundation which is funding and supporting the growth of small to mid-sized grassroots NGOs committed to empowering vulnerable children, women, and communities. Over the last 13 years, EdelGive has supported over 150 organizations across 111 districts in 14 states of India.

Rating Sensitivity

Movement in earnings profile Trajectory of fresh acquisitions and recoveries Changes in the regulatory environment

Liquidity Position

Adequate

EARCL’s liquidity profile is adequate. As on 31st March 2025, EARCL’s cash and bank balances available were Rs. 1,395 Cr, as against total borrowings of Rs. 1,236 Cr, thus resulting in a zero  net-debt position.

Outlook: Stable

­

Other Factors affecting Rating

­None

Key Financials - Standalone / Originator

­ Particulars Unit FY 25 (Actual) FY 24 (Actual) Total Assets Rs. Cr. 4973.92 5301.82 Total Income* Rs. Cr. 644.80 622.93 PAT Rs. Cr. 385.06 355.20 Net Worth Rs. Cr. 3534.88 3149.85 Return on Average Assets (RoAA) (%) 7.49 6.32 Return on Average Net Worth (RoNW) (%) 11.52 11.95 Total Debt/Tangible Net Worth(Gearing) Times 0.35 0.63 *Total income equals to Total Income net off interest expense

Status of non-cooperation with previous CRA (if applicable):

­Not Applicable

Any other information

­None

Applicable Criteria

• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Asset Reconstruction Companies: https://www.acuite.in/view-rating-criteria-85.htm • Banks And Financial Institutions: https://www.acuite.in/view-rating-criteria-45.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm

Note on complexity levels of the rated instrument

­In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.

Rating History

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook 26 Dec 2024 Proposed Secured Guaranteed Redeemable NCD Long Term 203.00 ACUITE A (Reaffirmed (Rating Watch with Negative Implications)) Secured Guaranteed Redeemable NCD Long Term 6.00 ACUITE A (Reaffirmed (Rating Watch with Negative Implications)) Secured Guaranteed Redeemable NCD Long Term 3.50 ACUITE A (Reaffirmed (Rating Watch with Negative Implications)) Secured Guaranteed Redeemable NCD Long Term 5.00 ACUITE A (Reaffirmed (Rating Watch with Negative Implications)) Secured Guaranteed Redeemable NCD Long Term 10.00 ACUITE A (Reaffirmed (Rating Watch with Negative Implications)) Secured Guaranteed Redeemable NCD Long Term 26.50 ACUITE A (Reaffirmed (Rating Watch with Negative Implications)) Secured Guaranteed Redeemable NCD Long Term 36.00 ACUITE A (Reaffirmed (Rating Watch with Negative Implications)) Secured Guaranteed Redeemable NCD Long Term 10.00 ACUITE A (Reaffirmed (Rating Watch with Negative Implications)) 07 Jun 2024 Secured Guaranteed Redeemable NCD Long Term 6.00 ACUITE A (CE) (Downgraded (Rating Watch with Negative Implications) from ACUITE A+ (CE) | Stable) Proposed Secured Guaranteed Redeemable NCD Long Term 203.00 ACUITE A (CE) (Downgraded (Rating Watch with Negative Implications) from ACUITE A+ (CE) | Stable) Secured Guaranteed Redeemable NCD Long Term 3.50 ACUITE A (CE) (Downgraded (Rating Watch with Negative Implications) from ACUITE A+ (CE) | Stable) Secured Guaranteed Redeemable NCD Long Term 5.00 ACUITE A (CE) (Downgraded (Rating Watch with Negative Implications) from ACUITE A+ (CE) | Stable) Secured Guaranteed Redeemable NCD Long Term 10.00 ACUITE A (CE) (Downgraded (Rating Watch with Negative Implications) from ACUITE A+ (CE) | Stable) Secured Guaranteed Redeemable NCD Long Term 26.50 ACUITE A (CE) (Downgraded (Rating Watch with Negative Implications) from ACUITE A+ (CE) | Stable) Secured Guaranteed Redeemable NCD Long Term 36.00 ACUITE A (CE) (Downgraded (Rating Watch with Negative Implications) from ACUITE A+ (CE) | Stable) Secured Guaranteed Redeemable NCD Long Term 10.00 ACUITE A (CE) (Downgraded (Rating Watch with Negative Implications) from ACUITE A+ (CE) | Stable) 03 Aug 2023 Secured Guaranteed Redeemable NCD Long Term 6.00 ACUITE A+ (CE) | Stable (Downgraded (Negative to Stable) from ACUITE AA- (CE) | Negative) Proposed Secured Guaranteed Redeemable NCD Long Term 203.00 ACUITE A+ (CE) | Stable (Downgraded (Negative to Stable) from ACUITE AA- (CE) | Negative) Secured Guaranteed Redeemable NCD Long Term 3.50 ACUITE A+ (CE) | Stable (Downgraded (Negative to Stable) from ACUITE AA- (CE) | Negative) Secured Guaranteed Redeemable NCD Long Term 5.00 ACUITE A+ (CE) | Stable (Downgraded (Negative to Stable) from ACUITE AA- (CE) | Negative) Secured Guaranteed Redeemable NCD Long Term 10.00 ACUITE A+ (CE) | Stable (Downgraded (Negative to Stable) from ACUITE AA- (CE) | Negative) Secured Guaranteed Redeemable NCD Long Term 26.50 ACUITE A+ (CE) | Stable (Downgraded (Negative to Stable) from ACUITE AA- (CE) | Negative) Secured Guaranteed Redeemable NCD Long Term 36.00 ACUITE A+ (CE) | Stable (Downgraded (Negative to Stable) from ACUITE AA- (CE) | Negative) Secured Guaranteed Redeemable NCD Long Term 10.00 ACUITE A+ (CE) | Stable (Downgraded (Negative to Stable) from ACUITE AA- (CE) | Negative) 05 Aug 2022 Proposed Secured Guaranteed Redeemable NCD Long Term 203.00 ACUITE AA- (CE) | Negative (Downgraded from ACUITE AA (CE) | Negative) Secured Guaranteed Redeemable NCD Long Term 3.50 ACUITE AA- (CE) | Negative (Downgraded from ACUITE AA (CE) | Negative) Secured Guaranteed Redeemable NCD Long Term 5.00 ACUITE AA- (CE) | Negative (Downgraded from ACUITE AA (CE) | Negative) Secured Guaranteed Redeemable NCD Long Term 10.00 ACUITE AA- (CE) | Negative (Downgraded from ACUITE AA (CE) | Negative) Secured Guaranteed Redeemable NCD Long Term 26.50 ACUITE AA- (CE) | Negative (Downgraded from ACUITE AA (CE) | Negative) Secured Guaranteed Redeemable NCD Long Term 36.00 ACUITE AA- (CE) | Negative (Downgraded from ACUITE AA (CE) | Negative) Secured Guaranteed Redeemable NCD Long Term 10.00 ACUITE AA- (CE) | Negative (Downgraded from ACUITE AA (CE) | Negative) Secured Guaranteed Redeemable NCD Long Term 6.00 ACUITE AA- (CE) | Negative (Downgraded from ACUITE AA (CE) | Negative) 04 Feb 2022 Secured Guaranteed Redeemable NCD Long Term 10.00 ACUITE AA (CE) | Negative (Reaffirmed) Secured Guaranteed Redeemable NCD Long Term 36.00 ACUITE AA (CE) | Negative (Reaffirmed) Secured Guaranteed Redeemable NCD Long Term 26.50 ACUITE AA (CE) | Negative (Reaffirmed) Secured Guaranteed Redeemable NCD Long Term 10.00 ACUITE AA (CE) | Negative (Reaffirmed) Secured Guaranteed Redeemable NCD Long Term 5.00 ACUITE AA (CE) | Negative (Reaffirmed) Secured Guaranteed Redeemable NCD Long Term 3.50 ACUITE AA (CE) | Negative (Reaffirmed) Proposed Secured Guaranteed Redeemable NCD Long Term 203.00 ACUITE AA (CE) | Negative (Reaffirmed) Secured Guaranteed Redeemable NCD Long Term 6.00 ACUITE AA (CE) | Negative (Reaffirmed) 04 Jan 2022 Secured Guaranteed Redeemable NCD Long Term 10.00 ACUITE AA (CE) | Negative (Reaffirmed) Secured Guaranteed Redeemable NCD Long Term 36.00 ACUITE AA (CE) | Negative (Reaffirmed) Secured Guaranteed Redeemable NCD Long Term 26.50 ACUITE AA (CE) | Negative (Reaffirmed) Secured Guaranteed Redeemable NCD Long Term 10.00 ACUITE AA (CE) | Negative (Reaffirmed) Secured Guaranteed Redeemable NCD Long Term 5.00 ACUITE AA (CE) | Negative (Reaffirmed) Secured Guaranteed Redeemable NCD Long Term 3.50 ACUITE AA (CE) | Negative (Reaffirmed) Proposed Secured Guaranteed Redeemable NCD Long Term 203.00 ACUITE AA (CE) | Negative (Reaffirmed) Secured Guaranteed Redeemable NCD Long Term 6.00 ACUITE AA (CE) | Negative (Reaffirmed)

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Annexure - Details of instruments rated

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating Not Applicable Not avl. / Not appl. Proposed Secured Guaranteed Redeemable NCD Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 203.00 Complex ACUITE A | Stable | Reaffirmed | Removed from Rating Watch Not Applicable INE015L07618 Secured Guaranteed Redeemable NCD 26 Jun 2019 9.90 08 Dec 2028 3.50 Complex ACUITE A | Stable | Reaffirmed | Removed from Rating Watch Not Applicable INE015L07618 Secured Guaranteed Redeemable NCD 24 Jan 2020 9.90 08 Dec 2028 5.00 Complex ACUITE A | Stable | Reaffirmed | Removed from Rating Watch Not Applicable INE015L07618 Secured Guaranteed Redeemable NCD 13 Dec 2018 9.90 08 Dec 2028 10.00 Complex ACUITE A | Stable | Reaffirmed | Removed from Rating Watch Not Applicable INE015L07618 Secured Guaranteed Redeemable NCD 21 Dec 2018 9.90 08 Dec 2028 26.50 Complex ACUITE A | Stable | Reaffirmed | Removed from Rating Watch Not Applicable INE015L07618 Secured Guaranteed Redeemable NCD 04 Jan 2019 9.90 08 Dec 2028 36.00 Complex ACUITE A | Stable | Reaffirmed | Removed from Rating Watch Not Applicable INE015L07618 Secured Guaranteed Redeemable NCD 27 Mar 2019 9.90 08 Dec 2028 10.00 Complex ACUITE A | Stable | Reaffirmed | Removed from Rating Watch Not Applicable INE015L07618 Secured Guaranteed Redeemable NCD 15 Apr 2019 9.90 08 Dec 2028 6.00 Complex ACUITE A | Stable | Reaffirmed | Removed from Rating Watch

Contacts

Mohit Jain Chief Analytical Officer - Rating Operations Cyrus Dadabhoy Senior Vice President - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

­Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai. Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating. Note: None of the Directors on the Board of Acuité Ratings & Research Limited are members of any rating committee and therefore do not participate in discussions regarding the rating of any entity.