French bank and financial services company, BNP Paribas on Thursday acquired domestic brokerage firm Sharekhan after nearly six months of negotiations on the deal that also attracted interest from private equity firms and banks like Warburg Pincus, Actis Capital, General Atlantic, and IndusInd Bank.
The valuation of the deal was not officially announced but analysts peg Sharekhan’s valuation at R2,200-2,300 crore and the deal they say is “win-win” for both the entities. Sharekhan will foray into BNP Paribas’ Personal Investors division that has 1.7 million clients in Europe.
BNP Paribas will get access to Sharekhan’s 1.2 million clients and can look to increase its retail broking operations at a time when the Indian financial services industry is expected to witness a turnaround driven by wide-ranging economic reforms. BNP will also absorb all of Sharekhan’s staff.
The Nifty has risen more than 40% since the start of 2014, largely over optimism tied to Prime Minister Narendra Modi’s government, elected by an overwhelming mandate last year on promises of economic reform.
As a result, retail investors’ cash market turnover in the first six months of CY15 has risen to a 7-year high. Domestic net inflows into equity mutual funds in June rose to the second-highest level ever, second only to January 2008 before the financial crisis took hold, data from the Association of Mutual Funds in India shows.
“The purchase of Sharekhan is a unique opportunity for us to build on our achievements in the Indian market and to further expand our business in India. Sharekhan will serve as a platform for the group’s strategy in India to offer a comprehensive range of products from pure brokerage to asset based investment services including mutual funds and savings products,” BNP Paribas India’s country head, Joris Dierckx said in a press statement.
The agreement marks the second acquisition by BNP Paribas in India. In 2007, the French banking and financial services company bought 34% of Geojit Securities and reincorporated the entity as Geojit BNP Paribas Financial Services that has about 7.5 lakh clients.
Shares of Geojit BNP Paribas Financial Services jumped more than 12% on the BSE on Thursday. More than 11.5 lakh shares exchanged hands on the BSE and NSE, 6.63 times the 1.73 lakh shares the 30-day average volume on both the exchanges.
Sharekhan (formerly known as SSKI Investor Services) was incorporated in 1995 and started offering broking services to non-institutional clients in 2000. Originally promoted by Shripal Morakhia and Shreyas Morakhia, Sharekhan raised equity from HSBC Private Equity, Intel Pacific and Carlyle in 2000. In April 2006, GA Global Investments invested in the company and also purchased the equity holding of Carlyle.
In 2007, CVCI, Samara Capital and IDFC acquired about 75% stake in Sharekhan. The new investors also acquired the stake owned by GA Global Investments, HSBC Private Equity, and the Morakhias. In February 2008, Baring Private Equity Asia IV Mauritius Holdings bought 12% stake in Sharekhan.