- Edelweiss Financial Services share price plummeted by 17% in early trade on the BSE following RBI’s business restrictions on two of its group entities.
- The stock opened at ₹64, down from its previous close of ₹77.45, but later recovered slightly to trade 12.20% lower at ₹68 around 9:30 am.
- “The two firms had acted in concert by entering into a series of structured transactions for evergreening stressed exposures,” the RBI stated.
RBI’s restrictions on Edelweiss Financial Services cause significant stock price drop.
RBI Imposes Restrictions on Edelweiss Group Entities
The Reserve Bank of India (RBI) has imposed business restrictions on ECL Finance Ltd and Edelweiss Asset Reconstruction Co. Ltd (EARCL), two entities under the Edelweiss Group. This action has led to a significant drop in Edelweiss Financial Services’ share price, which fell by as much as 17% in the opening trade on the BSE. The stock opened at ₹64, down from its previous close of ₹77.45, and later traded at ₹68, marking a 12.20% decline.
Details of the RBI’s Action
According to the RBI, the restrictions were imposed because the two firms engaged in a series of structured transactions aimed at evergreening stressed exposures of ECL, using the platform of EARCL and connected alternative investment funds. This activity was deemed to circumvent applicable regulations. The RBI also found incorrect valuations of security receipts in both ECL and Edelweiss Asset Reconstruction Co. Ltd.
Impact on Edelweiss Financial Services
In response to the RBI’s order, Edelweiss Financial Services issued a statement assuring stakeholders that the company is committed to maintaining transparency and upholding high standards of corporate governance. The company stated that there would be no material impact on its resolution and recovery efforts and that it is taking immediate steps to address the RBI’s concerns. Additionally, Edelweiss Financial Services mentioned that it had already passed a board resolution to discontinue its wholesale exposure business in the last financial year, which was disclosed in its financial statements for the period ending March 31, 2024.
Conclusion
The RBI’s restrictions on ECL Finance Ltd and Edelweiss Asset Reconstruction Co. Ltd have led to a significant drop in Edelweiss Financial Services’ share price. However, the company has assured stakeholders that it is taking steps to address the concerns raised by the RBI and that there will be no material impact on its ongoing operations. Investors are advised to monitor the situation closely as Edelweiss Financial Services works to align its operations with regulatory expectations.
