HSBC India has decided to acquire retail brokerage house IL&FS Investsmart Ltd in a bid to foray into retail broking business in the country. The UK banking major, after picking up 73.21% stake in Investsmart at an investment of $241.6 million, will make an open offer to acquire up to 20% of the remaining shares in the company.
HSBC will make the acquisition through its group subsidiaries, including HSBC Securities and Capital Markets (India) Pvt Ltd, the group?s securities arm in India.
HSBC proposes to acquire a 43.85% stake from E*Trade Mauritius Ltd?an indirectly wholly owned subsidiary of E*Trade Financial Corporation?and an additional 29.36% stake from Infrastructure Leasing and Financial Services Ltd. Both the companies will be paid Rs 200 per share for their respective stakes. In addition, HSBC India will pay the sum of $19.4 million to IL&FS towards a three-year non-compete agreement.
Naina Lal Kidwai, HSBC India CEO said, ?The acquisition is a perfect match as the move would enable us a foothold in the country?s retail broking business since HSBC Securities and Capital Markets primarily focuses on institutional business in India. We will benefit from an expanded institutional broking, equity capital markets and investment banking platform in a rapidly growing marketplace. Over a period, we aim to investment substantially in IL&FS Investsmart to promote its retail broking services across the country. However, we have no plans to merge HSBC Securities and Capital Markets with IL&FS Investsmart.??
IL&FS Investsmart will also be used as a distribution channel for the HSBC?s asset management and forthcoming insurance operations. Sandy Flockhart, group MD and CEO, HSBC Asia Pacific, said, ?With over 20 million retail investors, India has the world?s third largest investor base and its National and Bombay stock exchanges are respectively the third and fifth largest stock exchanges globally by transaction volume.?
With a market capitalisation of approximately $300 million, Investsmart is listed on the NSE and the BSE and its global depository shares are listed on the Luxembourg Stock Exchange.
