Edelweiss Financial Services offers investors returns of almost 11%; stock jumps 8%

Edelweiss Financial Services shares soared 7.78 percent in trade on October 4 to hit an intraday high of Rs 67.9 per equity share. The financial services firm is set to raise Rs 200 crore by issuing NCDs, with a maximum attainable yield of 10.66 percent per annum.

The issue of secured redeemable non-convertible debentures, with face value of Rs 1,000, includes the base issue of up to Rs 100 crore, with a green shoe option of up to Rs 100 crore, according to a filing with the exchanges. The issue is scheduled to open on October 6 and will close on October 19. It also has various tenure options, ranging from 24 months, 36 months, 60 months to 120 months with annual, monthly and cumulative interest options.

The effective annual yield for the NCDs ranges from 8.94 percent to 10.46 percent per annum. Investors who hold bonds previously issued by the company are eligible for an additional incentive of 0.20 percent per annum. Therefore, the maximum return that can be attained by investors is 10.66 percent. In comparison, SBI offers an interest rate of 7 percent for its 2-year fixed deposits.

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The NCDs on offer have been rated AA-/Negative by CRISIL. At least 75 percent of the funds raised will be used to repay/prepay interest and principal of existing borrowings, while the remainder is set to be used for general corporate purposes.

At 1.30 p.m., Edelweiss Financial Services was trading at Rs 65.4 on NSE, up 3.81 percent as the broader markets continued to face pressure.
Edelweiss Financial Services began operations as an investment banking firm and through its subsidiaries, the company has diversified its businesses to include credit, asset management, asset reconstruction, insurance and wealth management businesses.

Shareholding pattern, technical view

Edelweiss Financial Services shares have risen 9.4 percent over the past year, compared to Nifty 50’s run of 14.9 percent. However, according to Trendlyne data, the stock underperformed its sector by 29.27 percent in the past year. In trade, the stock sees low volatility, with its one-year beta at 0.87, but is currently in the overbought zone, as indicated by its RSI of 75.9.

As of June 2023, promoters held a 32.8 percent stake in the BFSI company, while DIIs, specifically LIC, and FIIs owned 2.6 and 31.4 percent respectively. The public held a 28.5 percent stake in the firm.

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