­­Acuité has reaffirmed its long-term rating of ‘ACUITE A+' (read as ACUITE A Plus) on the Rs.3851.62 Cr. non convertible debentures of EDELWEISS FINANCIAL SERVICES LIMITED. The rating is removed from rating watch. The outlook is 'Stable'.
Acuité has withdrawn the long-term rating on the Rs. 548.38 Cr. Non-Convertible Debentures facilities without assigning rating as the instrument is fully repaid of EDELWEISS FINANCIAL SERVICES LIMITED. The rating is being withdrawn on account of the request received from the company and the redemption certificate sent by the depository to the company, as per Acuité’s policy on withdrawal of ratings as applicable to the respective facility/instrument.­
­Acuité has assigned its short-term rating of ‘ACUITE A1+' (read as ACUITE A one Plus) on the Rs.500.00 Cr. commercial paper of EDELWEISS FINANCIAL SERVICES LIMITED. 

Rationale for the rating:
Acuite has adopted a consolidated approach on Edelweiss Financial Services Limited (EFSL) along with its subsidiaries and associates collectively referred to as ‘Edelweiss Group’ (‘Group’). The approach is driven by common promoters, shared brand name, and significant operational & financial synergies between the companies.

In June 2024, Acuite had placed the ratings of Edelweiss Financial Services Ltd (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 (in May 2024) 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.

Based on 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, RBI lifted the aforementioned restrictions placed on ECLFL and EARCL, with effect from 17^th December 2024.

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 EARCL’s 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 removal of the above restrictions by RBI on the Edelweiss Group entities in December 2024.  

Additionally, Acuite notes the news of the scheme of amalgamation between two Edelweiss Group entities viz. Edelweiss Retail Finance Limited (ERFL) (Transferor Company) and ECL Finance Limited (ECLFL) (Transferee Company). Acuite takes cognizance of this development and will monitor the business and financial impact on the overall Group.
The assignment of the Stable Outlook factors in Edelweiss Group’s established track record in financial services, adequate capitalisation, and comfortable liquidity profile. The rating considers the Group’s strategic intent to build the fee-based-income franchise, and on the lending side, to focus on re-building the retail loan franchise with emphasis on the co-origination model, which will likely keep it asset-light and provide additional granularity to the loan portfolio. The rating also factors in the growth in the Group’s Mutual Fund business, alternative assets AUM, and the growth in number of policies issued by the insurance business. Acuite also notes that the insurance business is expected to take around two more years before turning profitable. The rating also takes into consideration the group’s reducing debt and demonstrated resource-raising ability. Acuite believes demonstrating sustainable improvement in profitability from the regular course of business operations and revenue streams in the evolving operating environment, coupled with sustained improvement in asset quality, would remain key rating monitorables.

Acuite notes the significant improvement in the Group’s PBT for FY25 at Rs 802 cr against Rs 437 cr for FY24. That said, the Group’s earning profile is also supported by fair value gains from asset revaluation and sale of businesses. Further, the ARC business continues to contribute a high share of the overall Group PBT, at around 66% for FY25.  
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 13.00% on March 31, 2024. The Net Stage 3 assets stood at 2.67% at FY25, compared with 2.25% at FY24. The management continues to focus primarily on fee-based businesses, therefore, there has been a consistent decline in the Group’s overall loan book, particularly its wholesale book which is concentrated towards real estate assets.  

Based on Income Recognition and Asset Classification (IRAC) loan norms and reassessed expected credit loss (ECL), EFSL had re-valued security receipts (SRs), resulting in a provision incurred through other comprehensive income in the financial statement. Accordingly, ECL Finance had a markdown in the value of SRs on its balance sheet to the extent of ~Rs 1,100 cr as on March 31, 2025. The resultant impact on ECLFL’s networth was ~Rs 1,000 cr, resulting in a provision incurred through other comprehensive income in the financial statement. However, with the conversion of CCDs of ~Rs. 1,040 cr during FY25, the overall net worth of Edel Group stood at Rs. 5,918.17 Cr. (Rs. 6,049.29 Cr. as on March 31st, 2024).