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E*Trade to sell its 44 per cent stake in IL&FS Investmart
| Rel Cap, Aditya Birla in race to buy 44% stake from E*Trade. |
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| Anil Ambani-promoted Reliance Capital, the Aditya Birla group, Religare Securities, Indiabulls and private equity investors ICICI Ventures and Barings India Private Equity are in the race to acquire a significant stake in Mumbai-based IL&FS Investsmart. |
| The development comes after E*Trade, the US-based discount broking firm, which holds a 44 per cent stake in the Indian brokerage house, has decided to sell its holding following heavy losses in the sub-prime credit turmoil in the United States. IL&FS Investsmart, a listed entity, currently has a market capitalisation of Rs 1,200 crore. |
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| Sources said that apart from private equity investors all others are keen on entering as strategic partners. They are evaluating this option to expand their presence in the booming broking segment in India. |
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| Early this year, E*Trade Financial Corporation had said that they had been hit by the sub-prime crisis in the United States. In order to concentrate on their core business, they are looking at monetising their holdings in the Indian venture. |
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| Last November, E*Trade Chief Executive Officer Mitchell H Caplan lost his job due to heavy losses incurred as a result of exposures to sub-prime mortgage loans. |
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| According to sources, along with E*Trade, the other strategic partner in IL&FS Investsmart, Softbank Asia Infrastructure Fund (SAIF), is looking at divesting its 10 per cent equity in the Indian broking outfit. This means the strategic partners (or private equity players) can buy a majority stake of 54 per cent in IL&FS Investsmart. |
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| ICICI Ventures and Barings India are already investors in the financial services segment, with their investments in Karvy Stock Broking and JRG Securities — both are south-based brokerage houses, which have a good retail presence. |
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| Although valuations could not be ascertained, IL&FS Investsmart has properties with old lease, which can also act as an incentive for attracting premium to the market price, sources said. |
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| Infrastructure Leasing & Financial Service (IL&FS), its original promoter, holds about 30 per cent stake in the company and the rest is held by the public. |
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| E*Trade, America’s fourth largest online broking firm, took a controlling stake in IL&FS Investsmart in 2006. |
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| The keen interest shown by domestic and foreign brokerage houses follows the massive potential for retail broking business in India. |
Source: Business Standard
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