Canadian pension fund Caisse de depot et placement du Quebec (CDPQ) will pick up a 20 percent stake in Edelweiss Asset Reconstruction Company Ltd., a subsidiary of Rashesh Shah-promoted Edelweis as Group, the two companies said in a joint statement.
"The agreement includes target investments by CDPQ of Rs 5,000 crore over four years that will provide Edelweiss Group with capital to invest in stressed assets and private debt opportunities in India," the two companies said.
The investment will be in the form of compulsorily convertible preference shares, which will be converted into equity over three years, said Rashesh Shah, chairman and chief executive officer of the Edelweiss Group. The deal, subject to regulatory approval is expected to be completed within the next three months, he said.
The companies did not disclose the valuation at which the stake sale has been closed.
“In the initial time period, right now, we’re committing to invest $300 million (around Rs 2,000 crore),” said Michael Sabia, president and chief executive officer of CDPQ. “Over time as the opportunities present themselves, that number could easily grow to $600-700 million. The $300 million that we’re investing today, that is largely an investment to fund acquisitions of stressed assets and a small investment to acquire 20 percent of the subsidiary of Edelweiss that is responsible for asset reconstruction.”
Jointly, CDPQ and Edelweiss Asset Reconstruction Company plan to invest Rs 12,000-14,000 crore into private debt and to restructure stressed assets.
In addition to CDPQ’s proposed 20 percent stake, the other shareholders in Edelweiss ARC will be a Scandinavian insurance company with a 4 percent stake, and 16 percent will be held by Indian investors and the balance by the Edelweiss Group.
Edelweiss ARC, with Rs 30,000 crore in assets under management, is the country’s largest reconstruction company.
Recent reforms, like the Bankruptcy Act have the potential to transform the pace of reconstruction and resolution in India’s stressed and distressed market thus creating a much larger opportunity. We are pleased to partner with CDPQ, one of the largest and most respected pension fund management companies in the world, to help finance, restructure and grow financially viable businesses in India.Rashesh Shah, Chairman and CEO, Edelweiss Group
Shares of Edelweiss Financial Services Ltd. closed nearly 9 percent higher at Rs 122.90 on the Bombay Stock Exchange.
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