India Inc Must Focus On Strengthening Business, Not Earnings: Edelweiss’ Rashesh Shah

In a year of pandemic-induced lockdowns, volatile market and disrupted supply chains, Rashesh Shah said Corporate India should spend the next three quarters focusing on strengthening businesses rather than worrying about earnings.

Even for his own businesses, the chairman and chief executive officer at Edelweiss Group said he would not like to hazard a guess on earnings. Instead, the remaining of the financial year 2020-21 needs to be spent on fixing cost structures, assessing strategies and investing in technology.

Shah expects the global pandemic to stabilise by March 2021, by when a vaccine should be ready. Once that happens, earnings will again take the centre stage for companies, he told BloombergQuint in an interview.

To be sure, the market has already stabilised to an extent. Between March and May the country had both Covid-19 cases and panic around the virus. While cases are still rising, the panic has turned into a calm due to humankind’s forward-looking nature, Shah said.

Another reason for the calm, he said, could be the liquidity injected in global and Indian markets. It is the first and necessary step of a recovery cycle.

“In the short term, liquidity works. In the medium term, you need consumption to come back, and in the long term you need investments to come back,” Shah said. “Investments will only come when there is consumption demand, and consumption will only come when there is enough liquidity.”

The next step for the government and the Reserve Bank of India is to introduce a stimulus to revive demand by cutting taxes and putting money in the hands of people, he said. That will eventually lead to investments, guided by reforms and better ease of doing business.

Edelweiss’ Way Ahead

The Edelweiss Group on Thursday sold a controlling 51% stake in India’s second-largest wealth management business vertical to private equity firm PAG Partners for Rs 2,200 crore.

The transaction, Shah said, is part of the group's planned demerger and subsequent listing of the business. “Once we get it listed, we can distribute the shares among the shareholders of Edelweiss. It's like awarding the shareholders with the shares of this new entity,” he said.

Having already started the process of attaining approvals, Shah expects the wealth management business to be listed within the next 18 months. He expects to work similarly with the other businesses within the group to eventually make them “independent entities”.

“We will be guided more by value creation rather than control,” he said.