Edelweiss Pivots To 'Quality Before Growth' As It Eyes 18-25% Growth Rate Over Next Three Years

Edelweiss Financial Services Ltd. is shifting its strategy to prioritise quality over growth as it aims for an 18-25% growth rate over the next three years, according to its top executive.

“Quality comes first. Earlier, we prioritized growth alongside quality, but now we focus on quality before growth,” Rashesh Shah, Chairman, Edelweiss Group told NDTV Profit in an interview.

A good financial services company in India has an organic growth potential of 18-20% available, according to Shah. "Our intention is to grow at 18-25%...This growth range is achievable, and we are happy operating within it," he said. The asset management business is growing at 30% annually and insurance at 40%, Shah added.

The company is moving away from its wholesale lending business, focusing on building a robust micro, small, and medium enterprises credit portfolio while expanding its asset management and insurance segments, he said.

Over the past four years, Edelweiss has significantly reduced its wholesale book by 80%, reallocating resources to scale up its MSME lending, the chairman said. “Strategically, it is no longer beneficial to maintain a wholesale business. MSMEs offer better opportunities to create a high-quality portfolio.”

The company aims for ECL Finance to become a significant player in MSME credit. “While the RBI order on the wholesale book temporarily paused our efforts, we are now confident about the MSME business taking off,” the chairman added.

The Reserve Bank of India lifted business restrictions on ECL Finance Ltd. and Edelweiss Asset Reconstruction Co. on Tuesday. It had imposed the restrictions on both companies belonging to the Edelweiss Group in May.

Edelweiss is also expanding its retail Asset Reconstruction Company business and expects its contribution, alongside its credit business. “In 2018, ARC and credit made up 85-90% of profits. Now, asset management is expected to contribute 50-55%, and insurance 20%,” Shah said.

With a long-term view, Shah sees India’s financial system growing from 1-2% of the global market to 5% by 2030-35. “If you maintain quality, growth becomes easier, and in the long term, you win,” he added.