Baring Private Equity has pipped financial services giant Merrill Lynch to acquire a 12% stake in Mumbai-based brokerage firm Sharekhan in a deal worth Rs 240 crore.This deal values the brokerage company at Rs 2,000 crore. The transaction is through a mix of secondary sale by the largest shareholder of the brokerage firm Citigroup Venture Capital (CVC) and additional infusion of funds into the company’s capital.
Last year, CVC along with IDFC had invested around Rs 650 crore to pick 85% stake in Sharekhan. This translates into valuation upside of more than 125% in ten months. CVC owns 75% in Sharekhan while IDFC holds 10% and the management and employees hold the remaining 15%.
Last year, CVC and IDFC together had acquired 37% equity owned by Sharekhan promoter Shripal Morakhia while 48% was acquired from other shareholders including GE, Intel Capital and some funds advised by HSBC PE India.CVC was believed to be keen on diluting its stake in Sharekhan due to some regulatory issues. CVC, part of banking major Citigroup, had a significant majority stake in the brokerage firm.A private equity firm holding substantial equity stake in an unlisted company would be classified as a promoter. If that company goes public, the PE firm’s shares would have a lock-in period and cannot exit for a certain period. This could be one reason why CVC intends to dilute its stake, though it could not be verified independently.
Read more in
The Economic Times article.
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