MUMBAI: US online brokerage, E*Trade Financial Corp. has picked up an additional 5% stake in IL&FS Investsmart India through a recently concluded open offer. The stake was picked up by E*Trade Mauritius, a 100% subsidiary of the company. With the 27% in IL&FS Investsmart already owned by E*Trade Mauritius and the holding of associate companies, this gives the US brokerage a 45% stake in the Indian online broker.
Though company officials refused to comment on the extent of shares mopped up through the open offer,,, industry sources said that “the offer managed to garner about a 5% stake”.
E*Trade’s top officials are likely to come down to Mumbai in April to finalize future plans for the Indian brokerage, said investment banking sources.
The relationship between E*Trade and IL&FS dates back to 2004, but it was only in October last year that the former decided to exercise its right to convert the warrants it held into equity. That gave it a 27% stake in IL&FS Investsmart and in keeping with Indian stockmarket regulations, the company announced an open offer to acquire up to 20% of the company’s equity held by public shareholders.
The open offer, which opened on 25 January and closed on 13 February, was priced at Rs210 a share.
Shares if IL&FS Investsmart closed at Rs197.95 on 15 February, lower than the price of the open offer. During the offer period, the share price had touched a high of Rs208.60.
IL&FS Investsmart has a market capitalization of around Rs1400 crore. For the quarter ended 31 December 2006, the company reported a net profit of Rs8.19 crore on income of Rs19.46 crore.
India has been identified as an important market for E*Trade. In January, in an interview to Knowledge@Wharton, an online resource of the University of Pennsylvania’s Wharton school of business, E*Trade chief executive officer Mitchell Caplan said, “E*Trade is eagerly eyeing the corner of the world with the most potential new ‘drivers’—the emerging markets of India and China, where economic growth and the popularity of the Internet have created demand for financial services.”
E*Trade has also been focusing on mortgages and the distribution of financial products, areas that are of interest to fast-growing Indian retail financial services firms such as India Infoline, and India Bulls