Edelweiss announces pact with CDPQ for Rs 5,000 crore investment

MUMBAI; Non-banking finance company Edelweiss Group will sell 20% stake in its asset reconstruction company Edelweiss Asset Reconstruction Co by issuing convertible preference shares for an undisclosed amount to the $255 billion Canadian pension fund Caisse de dépot Et placement du Québec (CDPQ) as it expects banks to offload an increased amount of bad assets in the next few years.

ET had reported CDPQ’s plan to acquire stake in Edelweiss ARC in its October 3 edition.

CDPQ which already has between $1.3 billion to $1.5 billion invested in Indian companies in sectors like energy, real estate and logistics will also put in up to $700 million in the next four years to buy bad loans from banks, said Michael Sabia, president and CEO CDPQ.

“This partnership gives us access to capital. We will look to merge our skills with their capital and also provide value added services with the help of CDPQ executives who have specialised capabilities,” said Rashesh Shah, chairman Edelweiss Group.

With Rs 30,000 crore of assets under management, Edelweiss ARC is the largest in India. Shah expects banks to offload up to Rs 40,000 crore of bad assets in the next four years of which his company will likely corner 25% to 30%.

With this stake sale CDPQ will become the largest foreign investor in Edelweiss ARC. Edelweiss group owns 60% of the company, while other investors own 16%. Swedish insurance company Gamla Livforsakrings AB SEB Trygg Liv also owns 4% in the company.

“There are changes in the global economy that induce investors like us to shift towards countries like India. We want to create value by working on the assets by ourselves. This investment is only an initial commitment. We want to invest in the real economy and build infrastructure,” Sabia said.