Rating Rationale

CRISIL has renewed and reaffirmed its 'CRISIL Fund Management Capability Level - 1' rating on the Edelweiss Infrastructure Yield Plus (EIYP; an alternate investment fund) of Edelweiss Alternative Asset Advisors Ltd. (EAAA), the investment manager. EAAA is a wholly owned subsidiary of Edelweiss Financial Services Ltd. (EFSL; 'CRISIL A1+'). Schemes rated 'CRISIL Fund Management Capability Level 1' are judged to possess 'highest' standards in fund management capability and investment processes.

The rating reflects the extensive experience of the fund investment committee's team in the alternative assets business, and of the investment and operating teams in the infrastructure space. It also reflects EAAA's robust investment management systems and processes, adequate client servicing practices and disclosures, and expected benefits from the Edelweiss group's institutional framework.

EIYP has a strong team across functions, with the investment management team and operating team comprising members with extensive experience in the infrastructure space. Furthermore, the fund investment committee (fund IC), comprises senior management of the Edelweiss group from various functions, including investment and risk management, with experience of more than two decades. The investment team has significant experience in the infrastructure space '18 years for the fund manager and more than a decade for the rest. The operating team, responsible for managing and operating the assets and bringing in operational efficiency, also comprises people with around 2 decades of experience in the infrastructure space. The members of the EIYP's fund IC have a proven track record of delivering healthy returns on other funds raised by EAAA. The members of the fund IC and the investment team would play a key role in the entire investment decision making process. However, given that this is the first infrastructure-focussed fund of the group, ability to scale up and provide attractive returns needs to be demonstrated. Further, any instability in, or exit from, the team, especially of senior members can pose significant risks to the investment management process.

EAAA has put in place all requisite procedures and mechanisms across deal origination, operations and exit stages to ensure that investments in portfolio companies are protected. Furthermore, the investment team, along with the risk management and legal and compliance teams, focuses on the identification of risks and their mitigant. EIYP is expected to follow a disciplined investment approach in line with its investment guidelines. The fund will seek to limit the risks involved in under-construction projects and will invest in (and manage) only operational assets with strong counterparties. The key target sectors for investment would be: roads and highways, renewable power, and power transmission. The fund intends to add value to the operating assets through better financing terms and improving operational efficiency, which would help to enhance the portfolio yield.

The investment team is supported in the technical, legal, and other forms of due diligence and monitoring process by external reputed third-party agencies as well as internal EAAA's teams. All investment proposals are finally approved by the fund IC.

The fund is expected to benefit from the institutional framework of the Edelweiss group. The group's extensive network of relationships is expected to help source investment opportunities and enable better financing terms for the assets acquired. The fund will also benefit from the group's robust and comprehensive risk management systems and the investment advisory board, comprising of eminent members from the infrastructure space.

EAAA, is in the alternative asset advisory business of the Edelweiss Group, and currently manages around 8 funds across sectors, with assets under management (AUM) of about INR 15,300 crores as of 30^th September 2018. It is a part of the Edelweiss Global Asset and Wealth Management business unit of the Edelweiss group, which, in turn, has around INR 1.4 lakh crores of assets under management as of 30^th September 2018.

EAAA has put in place relevant client servicing practices to ensure adequate client communication and disclosures. There are set timelines for the operations team for resolving investor queries/grievances, along with a defined escalation matrix. EAAA also ensures that disclosures are made with regard to the investment strategy, portfolio details, and performance to its investors at regular intervals as well as on a need-based basis.

About the Fund
EIYP is established as a trust under the provisions of the Indian Trusts Act, 1882. It has been registered with Securities and Exchange Board of India (SEBI) as a Category I AIF under the AIF Regulations for the purposes of carrying on the activity of an AIF and investing in infrastructure sector in the target markets in India. EIYP received its SEBI approval in January 2018 and targeted to raise INR 2,000 crores with a green shoe option of up to INR 4,500 crores. EIYP completed its base fund raise of INR 2,000 crores in May 2018 and has since exercised its green shoe option in order to continue fund raising. EIYP is expected to achieve its final close in CY19. The fund will be investing in infrastructure sector in the target markets in India. EAAA, the investment manager, has funds across various segments including real estate, distressed credit, and performing credit. ECap Equities Ltd. ('CRISIL A1+'), a private limited company, will act as the sponsor to the fund while Vistra ITCL (India) Ltd., has been appointed as a trustee to the fund.

EIYP seeks to primarily invest and own operating infrastructure assets with credible counterparties and low operational risks. In addition to long term yields, EIYP also intends to provide investors with capital gains by enhancing portfolio yields by improving financing terms and operational efficiency.