Citigroup Venture Capital (CVC) is believed to have bought 85% stake in retail brokerage Sharekhan for roughly Rs 650 crore, according to officials involved in the transaction. The private equity arm of Citigroup is said to have bought the stake from Sharekhan’s promoters and a few other investors.
The final structure of the deal will be announced on Monday, a top company official told ET, while declining to divulge details.
Sharekhan’s promoter Shripal Morakhia said: “We are still working on some finer details of the deal. I cannot confirm whether it is CVC or not…..All I can say is that the post-money valuation is at around Rs 800 crore.” Post-money valuation refers to value of an entity after it gets outside funds or its latest capital injection. Mape Advisory is Sharekhan’s advisor in the deal.
The four-year old bull run in the stock market has boosted the performance of retail stock broking companies, making them attractive to foreign broking houses wanting to set up shop in India and also to strategic investors like private equity funds.
In 2006, BNP Paribas paid Rs 207 crore to buy a 33% stake in retail broking house Geojit Securities, valuing the brokerage at around Rs 620 crore.
In the last few years, private equity players have picked up stakes in brokerages such as Motilal Oswal, Edelweiss and Anand Rathi Securities. Sharekhan, one of the top retail brokerages in India, has presence across across 150 cities with over 100 branches and 310 franchises.
As part of the deal, Morakhia, who holds 37% in Sharekhan, will offload his entire stake. Other shareholders such as General Atlantic, Intel Capital and some funds advised by HSBC Private Equity India, which together hold 48%, are selling their entire stake to CVC. Employee shareholding stands at around 15%.
The top management and other employees of Sharekhan are likely to get retention bonuses, which is an attempt to retain talent. The four-year bull run in equities has resulted in a rise in demand for experienced professionals in the brokerage industry leading to higher salaries and bonuses.
Source : Economic Times