Baring Private Equity acquires 12% in Sharekhan

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.

Merrill Lynch may pick 20% stake in Sharekhan

Private equity(PE) investor Citigroup Venture Capital (CVC) is diluting a part of its 75% stake in brokerage firm Sharekhan. Financial services major Merrill Lynch is said to be the front-runner to pick a minority stake even as other PE firms, including Baring Private Equity, are believed to be in the race.

The industry buzz is that the deal for 20% stake is valued at around Rs 300 crore. However, a source close to Sharekhan said CVC is looking to dilute its stake only by 10% and the deal value is close to $50 million or Rs 200 crore.

This will put Sharekhan’s total value at Rs 1,500-2,000 crore, a jump of around 100% in seven months. CVC along with IDFC had picked 85% in Sharekhan in May this year for Rs 650-700 crore, pegging the valuation at around Rs 800 crore.

Read more in The Economic Times article.

Baring's Open Offer Will Make It Majority Shareholder In JRG Sec

Baring Private Equity India will come up with an open offer for a 20 per cent additional stake from JRG Securities shareholders. Baring had recently acquired a 45 per cent stake in the Kochi-headquartered stock broking firm for $35 million. The open offer is mandatory if one acquires more than 15 per cent stake in a listed company.

If the open offer is successful, Baring will be the largest shareholder in the broking firm with 65 per cent stake. It may also be possible that the open offer is not subscribed fully. In any case, Baring is most likely to be the majority owner of a stock broking firm.

Earlier Citigroup Venture Capital International had reportedly acquired an 85 per cent stake in retail broking firm Sharekhan for Rs 470-480 crore (the company is yet to announce the deal officially).

Foreign retail brokerage majors eye stakes in Indian cos

Attracted by the tremendous potential and phenomenal growth achieved by Indian retail brokerage firms in recent times, a clutch of foreign majors are mulling an entry into the market.

Foreign majors such as the Citigroup, Societe Generale (SocGen), BNP Paribas, Standard & Chartered Bank and Australia-based Macquarie Bank are understood to be contemplating picking up equity stakes in Indian retail brokerages as an easy route to enter the market.

A buoyant stockmarket despite the odd hiccup combined with an increasing appetite for equities among investors, tech convenience of online trading and falling brokerage fees have proved to be the major growth drivers of the industry.

The potential of the Indian market was higlighted recently when nearly 19 suitors stepped forward to claim a stake in leading retail brokerage Sharekhan, amongst the top three such firms in the country.

Read more in The Economic Times article.

Citi, 3 others lead race for Sharekhan stake

Citigroup’s private equity arm Citigroup Venture Capital International, Baring Private Equity, TPG and 3i are the front-runners to acquire an equity stake in Sharekhan, the retail brokerage arm of the Mumbai-based SSKI group.

Some foreign and domestic banks have also expressed their interest in the brokerage firm, while existing private equity investors General Atlantic, Intel Capital and a group of funds advised by HSBC Pvt Equity India, which own about 48 per cent shares in Sharekhan, will look to sell either fully or partially in the current equity sale.

Intel, which owns 5 per cent, and HSBC-advised funds, which own close to 12.5 per cent, have been investors in Sharekhan for long. The other major shareholders are the Morakhias’ (promoters) with 37 per cent stake, while 300 employees together hold another 15 per cent.However, none of the employees would sell their stakes in the current round.

Sharekhan is valued at around Rs.800-850 crore. It is among the top five retail brokerage outfits in the country with over 100 branches across 150 cities.

Read more in The Business Standard article.

Citi, TPG place bids for 40% stake in Sharekhan

Private equity fund Texas Pacific Group (TPG) and global financial services major Citigroup have put in their bids to acquire nearly 40 per cent stake held by the promoters in Sharekhan. The bids peg the valuation of the retail brokerage firm at Rs 600-650 crore.The bidders were also open, the sources said, to acquiring the non-promoter holding. The employees, who hold over 15 per cent stake, may sell their stake as well.

Citigroup has been looking to enter the retail brokerage business in India. Other MNCs such as ABN-Amro and BNP Paribas have already forayed into retail broking. While ABN-Amro set up its own business, BNP Paribas picked up 33 per cent stake in the Kochi-based Geojit Financial Services.

Sharekhan is one of the top five retail brokerages with 120 branches and 3,300 employees. The brokerage firm, which plans to increase its branches to 500 in two years, may get into distribution of insurance and mutual fund products.

Sharekhan may sell 15% to PE players

Sharekhan, the retail broking arm of the Mumbai-based SSKI Group, is raising funds from private equity (PE)players to finance its expansion.A few private equity players have already started due diligence on Sharekhan, which may dilute close to 15 per cent stake. Shripal Morakhia, promoter of Sharekhan, said, “We are planning to dilute close to 15 per cent stake. This will result in a dilution of stakes of all existing shareholders.”

He, however, refused to divulge the amount the company was planning to raise.At present, the Morakhias hold 37 per cent stake in Sharekhan, while its employees hold 15 per cent and the rest is held by General Atlantic, Intel Capital and a group of funds advised by HSBC Pvt Equity India.

In April last year, General Atlantic invested about Rs 144 crore ( $31 million) in the company through a combination of primary and secondary investments through buying out the entire shareholding of First Carlyle Ventures.

Sharekhan is looking at expanding its presence in the country through organic growth. It is among the top five retail brokerage outfits in the country with over 100 branches across 150 cities.

List of Sharekhan's suitors gets longer

Sharekhan has got a queue of suitors, first it was JM Financial and then IDFC was believed to be in talks to buy out the brokerage firm. Now the buzz is that American online trading giant E*trade, and Goldman Sachs too have joined the list, with many in the broking industry claiming that E*trade is the frontrunner for the deal.

Interestingly, last year Sharekhan had seen a mass exodus when many of its employees joined IL&FS Investsmart where E*trade is a key investor.Sharekhan is only one of the many deals that the broking industry is looking to clinch.

Read more in The Moneycontrol article