Dawnay Day International, the financial services unit of the UK-based Dawnay Day Group, has decided to sell its 50% stake in Dawnay Day AV, the joint venture financial services firm in India, after the turmoil in its global operations.
The firm was set up in 2005 by Alok Vajpeyi, a high profile investment banker with DSP Merrill Lynch Ltd.
The Indian venture offers stock broking, and sells mutual funds and insurance products of other firms. The firm is also exploring the possibility of setting up an asset management firm with a partner.
“We have decided to build business with a new partner,” said Vajpeyi, who owns 25% stake in the venture. “I am not going to sell my stake. I will stay with my team.”
The remainder 25% is owned by a trust of 1,700 employees working with the firm across 40 branches.
A senior executive of Dawnay Day AV, who didn’t want to named, said the firm is in talks with Hyderabad-based Karvy Stock Broking Ltd and a few other large private equity investors. “The business valuations are still under negotiation,” the same executive said.
At least two investment bankers, who did not wish to be named, said Vajpeyi, who is the vice-chairman and managing director of Dawnay Day AV, had talks with Karvy last year with a proposal to become a partner and expand the business.
Vajpeyi declined to comment on this beyond saying: “We are talking to a few partners.”
Bankers say Vajpeyi is looking at a valuation of Rs160 crore for the company. Investment bankers said Vajpeyi, who is leading the negotiations on behalf of the UK parent, is looking at a valuation of Rs160 crore for the company. This essentially means the prospective investor will have to shell out Rs80 crore for a 50% stake.
“In this market, it’s hard to find buyers and, more importantly, buyers who are willing to meet expectations of a seller,” said the chief executive of a Mumbai-based listed Indian brokerage, who didn’t want to be identified.
The chief executive of a large domestic brokerage said that the real estate book value of Dawnay Day AV Securities Pvt. Ltd, a subsidiary of Dawnay Day AV, is fairly good, but its equity broking and product distribution wings aren’t doing very well.
Dawnay Day AV Securities owns about 60,000 sq. ft of real estate in Mumbai. According to this person, its real estate could be valued at Rs170-180 crore.
However, the person said that the stake owned in Dawnay Day AV Analytics Pvt. Ltd, a financial research firm of the Indian joint venture, wouldn’t be put on the block.
Besides, it also runs Dawnay Day Hotels India Pvt. Ltd, a fully-owned subsidiary of Dawnay Day International. Mint couldn’t independently verify whether the UK firm will sell its hospitality venture that has announced plans to increase the business to 10 hotels by 2010 and triple it by 2015 with 4,000 rooms.
Dawnay Day had invested about $200 million (Rs840 crore today) in the hospitality business.
Dawnay Day’s financial services unit has recently come under the control of a UK government administrator.
Dawnay Day also appointed Allan Bloom, an Ernst and Young partner, to take a strategic review of business, including its hotel properties and retail chains.
Dawnay Day, of which Dawnay Day International is a subsidiary, began in 1928 and was later taken over by financial investor Guy Naggar of France. It manages $4 billion of assets and its net worth is at least $1.5 billion. Globally, the Dawnay Day Group operates some 900 firms, ranging from financial services to hotels.
Last week, The Financial Times first reported that Dawnay Day and Co.’s investment banking business was put on the block. It also sold its stake in Oxford airport last week following its plan to review its global businesses.
Source: Livemint