DKW taps FIPB to wind up broking operations in India

New Delhi, Dec 9: Dresdner Kleinwort Warserstein Securities India Ltd (DKW) has approached the Foreign Investment Promotion Board (FIPB) to close down its stock broking operations in the country and reduce its share capital to Rs 3.85 crore from Rs 37 crore.

In an application to FIPB, the company said that the Dresdner Kleinwort Warserstein group has taken the decision to close down its stock broking business in India, along with closure of similar outfits in other Asian nations as part of the strategic review of its Asia Pacific business.

The company stopped stock broking business from August this year and has already notified the NSE and BSE.

DKW would utilise excess funds under its possession to reduce its share capital.

The foreign outfit would reduce the face value of its equity shares to Rs 3 from Rs 10 and preference shares to Rs 1 each from the present Rs 100.The company has already filed a petition in the Bombay High Court in accordance with the scheme under Section 100 of the Companies Act, 1956.

The move comes in the wake of an exodus by foreign broking outfits, including that of BNP Paribas and Indo-Suez WI Carr Securities.

DKW is also seeking to be exempted from minimum capitalisation norms for NBFCs as it is no longer engaged in stock broking activities.
The government is currently pondering the question whether post-closure of stock broking activities, DKW would still fall on the NBFC route, and if so, whether it would attract minimum capitalisation norms under the fund-based, or non-fund based category.

The department of economic affairs under the ministry of finance had earlier rejected the proposal on the ground that reduction in capital base would go against current capitalisation norms.

But, the Secretariate of Industrial Approval (SIA) suggested that the issue in question was not limited to reduction of capital base, rather on post-closure complexities. Hence, it should be viewed while keeping in mind the entire perspective.

The other issue being considered is whether the company should be asked to surrender the foreign collaboration (FC) approval, or allowed security broking and dealings in the secondary market and the distribution of different financial products in the primary market, as distinct from stock broking.

— PTI