India Infoline and the London-based Marchmont Capital have entered into a strategic alliance to offer financial services to the small and medium enterprises in India.
As part of the deal, Indiainfoline, till now primarily catering to individual investors, will pay nearly Rs 1.25 crores (12.5 million) to acquire the four-year-old Indian arm of the merchant banker. The company is set to raise around Rs 200 crore (Rs 2 billion).
To raise funds for other expansions, particularly into commodity broking, the Board of Directors of the Mumbai-based financial services company have also approved issue of preferential shares worth Rs 20 crores (Rs 200 million) to Bennett Coleman & Co Ltd and convertible bonds worth Rs 80 crores (Rs 800 million) to DSP Merrill Lynch Capital.
While the BCCL deal has been approved at a premium of Rs 10 on today's closing price of Rs 160, the bonds will have a conversion price between Rs 141 and Rs 170 per share.
The BoD has also approved issue of 26 lakh (2.6 million) equity warrants, with a validity period of 18 month, to the promoters at Rs 170 per share which amounts to Rs 44 crore (Rs 440 million). All the deals, except the acquisition, will be put up for approval before shareholders on 26 January next year.
Five-year-old India Infoline, which had its first IPO in April this year, provides services like mutual funds distribution, life insurance agency, equities and commodities broking, portfolio management, home loans, personal loans, information and advice. It has around 100 branches and 60,000 customers, company said in an official communication.
"The company is aggressively looking at growth opportunities, both organic and inorganic. We need funds to fuel our growth..," said Nirmal Jain, CMD of the company. He said that the money that would be raised through the issue of shares, warrants and bonds will be used to extend the company's activities from the individual to the SMB segment.
"The company expects significant numbers of small and medium-sized companies to be turning to the capital markets and becoming involved in mergers and acquisitions. Targeting this segment is a logical extension of the company's existing services," pointed out Harshad Apte, associate vice president.As a result of the alliance and the merger with Marchmont India, the head of the latter, Ajit Menon, will head India Infoline's investment-banking division in India while Marchmont's London head Graham Sharp will help in the company's overseas ventures.