The acquisition of stake, which adds to the string of big deals in the Indian stock broking industry this year, values the company at Rs 1,760 crore (Rs 17.60 billion), said sources close to the development.
A late evening press release issued by Karvy said the new investment by ICICI Ventures and Baring Private Equity would be through acquisition of the existing stake held by the Pacific Century Group and additional issue of new shares by the company.
MAPE Advisory Group acted as the exclusive financial advisor to Karvy and its shareholders, the release said.
Pacific Century had bought nearly 20 per cent stake in Karvy about two years ago. Sources said the Pacific Century Group sold 10 per cent stake to the new investors.
C Parthasarathy, chairman of Karvy Stock Broking, said: "We are very pleased to be associated with investors of such a high pedigree. Our relation with ICICI Ventures and Baring Private Equity Asia will surely help us to further strengthen our position."
Renuka Ramnath, managing director and CEO of ICICI Ventures, said: "The potential of the financial services sector needs little emphasis or comment. We believe that in investing in Karvy we have picked a player that has the right elements to address this tremendous opportunity."
The stock broking industry has recently seen a slew of such deals. These include IFC's 12.5 per cent stake acquisition in Angel Broking for Rs 150 crore (Rs 1.5 billion), BNP Paribas' purchase of 33 per cent stake in Geojit Financial Services for Rs 206 crore (Rs 2.06 billion) and Baring Private Equity Asia's purchase of 45 per cent stake in JRG Securities for Rs 143.5 crore (Rs 1.43 billion).
In March, Fortune Financial sold 22 per cent stake to a group of UK investors for Rs 22 crore (Rs 220 million).
Brokerages such as India Infoline, Motilal Oswal and Indiabulls commands an earnings multiple of 50 times and above, reflecting the future earnings potential in the ventures, said analysts.
Karvy Stock Broking, a member of the National Stock Exchange and Bombay Stock Exchange, has over 580 offices covering over 350 cities/towns, including offices at Dubai and New York.
KSBL, besides offering broking services to over 350,000 retail investors, also has a private client desk to cater to high net worth individuals and corporates and an institutional desk to service various financial institutions - both domestic and foreign.
It offers trading both on the cash and derivatives segment and does an average daily turnover of about Rs 1500 crore (Rs 15 billion), positioning the company amongst the top brokers in the country.
KSBL also has a well-qualified research team based out of Mumbai and Hyderabad. It is a key player in the wholesale debt market segment of the NSE.
It is also a leading distributor of various investment products including IPOs, mutual funds, debt, tax saving instruments etc. and has positioned itself as a "personal finance advisor" under the brand name "The Finapolis".
Big Contracts
Recent deals in the brokerage space
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IFC bought 12.5% in Angel Broking for Rs 150 cr
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BNP Paribas bought 33% in Geojit Financial Services for Rs 206 cr
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Baring Private Equity Asia bought 45% in JRG Securities for Rs 143.5 cr
- Fortune Financial sold 22% stake to a group of UK investors for Rs 22 cr
