The agency has also reaffirmed its rating on the commercial paper of the company at “CARE A1+”.

CARE Ratings said that the ratings derive strength from the diversified business profile of the Edelweiss group resulting in income diversification across credit, asset management, asset reconstruction, alternative asset investments and insurance businesses, adequate capitalisation, run-down in the wholesale credit book and demonstrated ability of the group to monetize the stake in its different businesses to shore up networth in case of need.

The ratings also take note of the strong intention of the group to monetize investments in some of its businesses going forward, in case of need, and the ability of the group to mobilize debt funds by way of non-convertible debentures (NCDs) to support business growth and through WCDL / CBLO to maintain adequate liquidity. The liquidity remains adequate however, there is uncertainty on timeliness and quantum of inflows due to higher exposure to stressed assets.

The ratings continue to be constrained by asset quality risks with GS3 assets of the credit businesses at 10.51% of the total advances as on March 31,2023 (June 30, 2023: 12.27%) as compared to 7.12% of the total advances as of March 31, 2022. On a consolidated level, the proportion of GS3 assets also increased to 59% as on March 31, 2023 as against 52% as on March 31, 2022; similarly, proportion of net stage 3 assets also increased during FY23.

In respect of the credit business, the outstanding security receipts (SR) book declined from Rs 5,497 crore [29% of the total assets] as on 31 March 2022 against Rs 3,102 crore [16% of the total assets] as on 31 March 2023 (30 June 2023: Rs 3619 crore).

EFSL (consolidated) reported improved profitability in various businesses during FY23 with major profits coming from asset reconstruction and alternative assets management. On a consolidated basis, EFSL reported profit after tax (PAT) [including share of associates] of Rs 406 crore in FY23 [Q1 FY24: Rs 78 crore] as compared to Rs 212 crore in FY22.

However, the company's earnings profile at the consolidated level continues to remain volatile on account of significant income being generated through fair value gains & from discontinued businesses/non-recurring activities.

The net interest income continues to remain impacted mainly on account of substantial run down in the credit book and liquidity buffers maintained and significant amount of security receipts (SRs)/AIF held which are generating relatively low/negligible yields.

Edelweiss Financial Services is registered as a Category I Merchant Banker with SEBI and is the holding company of the Edelweiss Group. The company on a standalone basis is primarily engaged in investment banking services and provides development, managerial and financial support to the businesses of the Edelweiss group entities. The Edelweiss Group offers a range of products and services, spanning varied asset classes and diversified consumer segments.

The scrip tumbled 4.69% to currently trade at Rs 66.65 on the BSE.