The Hongkong and Shanghai Banking Corporation has acquired a 73.21 per cent stake in IL&FS Investsmart, a leading retail brokerage house in India, for a consideration of Rs 1,110 crore ($261 million).
HSBC has acquired the stake from E*Trade Mauritius ( 43.85 per cent) and an additional 29.36 per cent stake from IL&FS. In addition, HSBC has paid a non- compete fee of Rs 82.45 crore ($19.4 million) for a three-year period to IL&FS.
"The timing for us was great in clinching this deal. We have picked it up at an attractive price," said Naina Lal Kidwai, group general manager and chief executive officer, HSBC in India.
HSBC will also make an open offer to acquire up to 20 per cent of the remaining shares in Investsmart.
Softbank Asia Infrastructure Fund continues to hold about 10 per cent equity in the Indian broking outfit.
If HSBC fails to get a good response to the open offer, it might look at delisting Investsmart, which has a market capitalisation of close to Rs 1,275 crore ($300 million).
"We have a large institutional business and Investsmart's retail brokerage business will be a great addition to our offering in India," added Kidwai. She, however, said the commodities business of Investsmart is unlikely to cause any problems in securing regulatory approvals as this acquisition has been made through HSBC Securities and Capital Markets (India) and not through the bank.
Earlier this year, E*Trade Financial Corporation had said that it had been hit by the sub-prime crisis in the United States. In order to concentrate on its core business, it was looking to monetise its holding in the Indian venture.
Sources said IL&FS is involved in several businesses and was keen on exiting this venture.
A few months ago, IL&FS had put its broking arm on the block and several domestic and foreign brokerage houses had evinced interest in acquiring it, including the Aditya Birla group, Indiabulls and Religare Securities.
