Hong Kong private equity firm PAG has struck its second India-related transaction as it inked an agreement to pick up a majority stake in Edelweiss Wealth Management for $300 million (Rs 2,200 crore).
The Asian alternative investment firm, which had roped in former KKR executive Nikhil Srivastava as managing director and head of its private equity division in India last year, said Thursday it is buying a 51% stake in Edelweiss Wealth Management, the second-largest non-bank wealth management business in India. PAG said it is bullish on India and expects to invest $1 billion in the next two to three years.
PAG will become a majority owner of the Edelweiss Wealth Management platform (EWM) of Edelweiss Global Investment Advisors. Edelweiss Global Investment Advisors also houses Edelweiss Asset Management, an alternatives and asset reconstruction platform, which is not part of the investment.
Edelweiss Global Investment Advisor had previously raised capital from US-based investment firm Kora Management and Sanaka Capital.
The company said it intends to demerge the wealth management business and list it on stock exchanges by March 2022.
Through its wealth management arm, the company offers managed products, fixed income and equities, advisory, and succession and estate planning.
The wealth management business, including capital markets, provides services to over 2,400 wealthy families as well as around 610,000 high-net-worth individuals and other affluent clients. The firm has grown its customer assets under advice with a 44% cumulative annualised growth rate, from Rs 18,500 crore in fiscal year 2014-15 to Rs 1.27 lakh crore in the first quarter of 2020-21, it said.
The firm said the Rs 3 lakh crore Indian wealth management industry has been expanding rapidly at a five-year cumulative annualised growth rate of 11.3% and has a growth trajectory of 12.5% per year to hit Rs 5.4 lakh crore by 2025.
Rashesh Shah, chairman and CEO at Edelweiss Group, said, “This investment endorses our core strategy of incubating businesses, building value and growing them into market leaders as they gradually move from inter-dependence to independence.”
Edelweiss as a group has been striking partnerships for its three different lines of business--credit, investment advisory and insurance. The group has already established partnerships for its credit and life insurance businesses, with a strategic investment of $250 million (around Rs 1800 crore) by Caisse de depot et placement du Quebec (CDPQ) in the former and Tokio Marine’s 49% holding in the latter.
Recently, Edelweiss also announced a partnership with South Korea-based Meritz Financial Group for the completion of the financing platform. It has also joined hands with Allianz Investment Management, which is a part of Allianz Group, for a private debt platform and with AJ Gallagher for the insurance advisory business.
Nikhil Srivastava, managing director and head of India private equity at PAG, said the investment firm was impressed with the company's depth of knowledge and experience, and strong management team.
PAG Asia Capital completed raising its third pan-Asian buyout fund, PAG Asia III, in November 2018, with $6 billion in capital commitments.
PAG had previously made one investment in India, according to VCCEdge, the data research arm of Mosaic Digital, which also operates VCCircle. It had, in 2010, acquired non-banking finance company Asia Pragati Capfin Pvt. Ltd from private equity and hedge fund firm Fortress Investment Group for an estimated Rs 130 crore.
A couple of years ago it swapped its stake in the firm with publicly listed U Gro as the latter bought the lending business of Asia Pragati. It currently owns around 20% stake in U Gro.