Small cap stock falls 17% after RBI imposed restriction on two of its businesses

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Small cap stock falls 17% after RBI imposed restriction on two of its businesses
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The shares of financial service provider fell around 17 percent after the Reserve Bank of India imposed immediate limitations on two of its businesses on Wednesday.

With a market capitalization of Rs 6,355.04 crore, the shares of Edelweiss Financial Services Ltd. (NS: EDEL ) were trading at Rs 67.29 per share, decreasing around 13.12 percent as compared to the previous closing price of Rs 77.45 apiece.

According to the company filing, the Reserve Bank of India imposed immediate limitations on its two businesses, Edelweiss Asset Reconstruction Company Limited and Edelweiss Financial Services Ltd. on Wednesday, however, according to the RBI guidelines, ECL Finance has been instructed to cease and desist from doing any structured transactions other than account repayment or closure in the normal course of business.

Furthermore, Edelweiss ARC has also been told to stop acquiring financial assets, including security receipts and reorganising existing Security Receipts (SRs) into senior and subordinate tranches.

In response, Edelweiss ARC stated that they had taken note of the RBI’s guidance and will take appropriate corrective action. It also stated that there will be no significant impact on the company’s resolution and recovery operations.

Looking into Edelweiss Financial Services ‘s financial performance, revenue decreased by 1.4 percent from Rs 3,012 crore in Q3 FY23 to Rs 2,967 crore in Q3 FY24. During the same period, net profit increased by 18 percent, from Rs 172 crore to Rs 203 crore.

The company’s profitability measures show an incline in return on equity (RoE) from 3.23 percent in FY 21-22 to 6.11 percent in FY 22-23, while, during the same period return on capital employed (RoCE) increased from 9.99 percent to 10 23 percent. In contrast, the net profit margin (NPM) was 0 percent in fiscal year 22-23.

Edelweiss Financial Services Limited is an India-based diversified financial services company that offers a wide range of financial products and services to a diverse clientele that includes corporations, organizations, and individuals. The Company’s business segments include agency, capital, insurance, asset reconstruction, and treasury.

Written by:- Abhishek Singh

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The post Small cap stock falls 17% after RBI imposed restriction on two of its businesses appeared first on Trade Brains.

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