Mumbai: HSBC said on Saturday it will acquire 73.21% of Indian brokerage IL&FS Investsmart in an all-cash deal for $261 million to boost its presence in the growing domestic market.
Foreign banks and companies have been queuing up to open shop in India to tap into rising savings of a growing middle class and lured by the country’s attractive fees and a booming economy.
“This investment is of strategic importance to HSBC as it gives us a foothold in one of the largest retail broking markets in the world,” Sandy Flockhart, chief executive officer of HSBC Asia Pacific, said in a statement.
HSBS said it will also pay Mumbai-based IL&FS an additional $19.4 million as part of a three-year non-compete agreement and will soon make an open offer to acquire up to 20% of the remaining shares.
HSBC’s open offer is subject to regulatory and other approval, the e-mailed statement said.
Mumbai-based IL&FS Investsmart has 2,000 employees and provides various financial services such as equity and commodity broking, investment banking and fund distribution to 138,000 customers in 133 cities.
HSBC, via its subsidiaries, will acquire 43.85% from E*Trade Mauritius Limited, a unit of US online brokerage firm E*Trade Financial Corp and a 29.36% from Infrastructure Leasing and Financial Services (IL&FS) for $241.6 million or Rs200 per share, it said in a statement.
The stock ended up 3.8% at Rs198.80 on Friday in a Mumbai market that gained 0.5%.
IL&FS Investsmart said last month that a major shareholder is considering selling its stake in the company.
Since its announcement on April 11, IL&FS’s shares have surged nearly 50%. The firm’s 2007/08 net profit fell 59% to Rs155.8 million.
Goldman Sachs broke off a venture with India’s Kotak Mahindra Group in 2006 to launch a variety of financial services businesses including a brokerage and French bank BNP Paribas formed an equal venture with local brokerage Geojit Financial Services Ltd. in 2007.