Mumbai: Alok Vajpeyi, vice-chairman and managing director of Dawnay Day AV Financial Services, has sold his 25% stake in the company to private equity firm New Silk Route Advisors, according to two persons familiar with the deal.
The private equity firm, co-founded by former McKinsey chief Rajat Gupta, bought the entire company for about Rs200 crore, acquiring Dawnay Day International’s 50% stake in the Indian venture and the employee trust’s 25% holding as well.
Vajpeyi, who set up Dawnay Day AV in 2005 in a joint venture with Dawnay Day International, the financial services unit of UK-based Dawnay Day Group, would only say: “I cannot comment at this point.” A subsquent email sent to him remained unanswered.
Of the Rs200 crore, Rs80 crore will be used to retire a Dawnay Day AV loan from HSBC Holdings Plc., and another Rs80 crore will go towards repaying the preferential capital issued by Dawnay Day International.
Alok Vajpeyi, who had invested Rs2-5 crore three years ago for his 25% stake, will receive Rs21 crore, of which he will use Rs11 crore to retire debt taken in his name, and group chief executive and managing director, Arpit Agarwal, will get Rs5 crore.
Mint first reported on 25 July that Dawnay Day International planned to sell its 50% stake in the Indian venture following the turmoil in its global operations and was in talks with various potential buyers.
Earlier this month, The Economic Times reported that New Silk Route Advisors was ahead in the race for acquiring the UK firm’s 50% stake in the Indian operations.
Cashing in: Alok Vajpeyi, Dawnay Day vice-chairman and MD.
In July, investment bankers that Mint spoke to said Vajpeyi, who was leading the negotiations on behalf of the UK parent, was looking at a valuation of Rs160 crore for the company.
Meanwhile, Vajpeyi’s decision to sell his own stake has come as a surprise. “We have decided to build business with a new partner. I am not going to sell my stake. I will stay with my team,” the investment banker had told Mint in July.
Dawnay Day AV offers stock brokerage services, and sells mutual funds and insurance products of other firms. It also had plans to start an asset management company.
Dawnay Day AV Analytics Pvt. Ltd, a financial research firm of the Indian joint venture, and Dawnay Day Hotels India Pvt. Ltd, a fully owned subsidiary of Dawnay Day International, are not part of the current deal.
The same persons familiar with the development, who didn’t want to be named, said New Silk Route Advisors was not keen on the asset management business and hasbought only the stock brokerage and third-party distribution businesses.
These two businesses together were assessed at Rs40 crore, while the remaining Rs160 crore is the value of Dawnay Day AV’s 67,600 sq. ft of office space spread across two locations in Mumbai and one in Pune.
Of the proceeds, executive director Surabhi Gupta will receive Rs3 crore, while director of stock brokerage Seshadri Bharathan and chief technology officer C. Rangarajan will be paid Rs2 crore each. The remaining Rs7 crore is expected to be distributed among another 100 employees of Dawnay Day AV, based on “performance and loyalty”, the persons mentioned earlier said.
They added that B. Subramani, national sales head of brokerage at Dawnay Day AV, and Anurag Sharma, national sales head of distribution, quit the company earlier this month owing to differences on how money from the stake sale was being divided.
While Sharma has taken along some of the relationship managers who were reporting to him, personnel hired for the asset management business will be asked to leave, these persons added.
Mint couldn’t reach neither Subramani nor Sharma for comment and couldn’t independently confirm their actions.