Mumbai: Subhash Chandra, owner of the Essel group, has exited from Centrum Capital Ltd, a listed financial services firm that offers project finance, investment banking, wealth management and brokerage services.
Chandra, who is believed to have picked up about 14% stake in Centrum through a preferential offer in late 2006 or early 2007, sold his stake in the stock market in tranches in March.
At an average price of Rs1,304 per share of Centrum in March on the Bombay Stock Exchange, Chandra could have realized some Rs111 crore for his stake. Chandra’s acquisition price is not known though one person familiar with the transaction said, “he has made good money.”
Essel group chairman Subhash Chandra could have realized some Rs111 crore from his Centrum stake sale
Shares of Centrum, which used to be known as Centrum Finance, closed at Rs850 a share on the Bombay Stock Exchange. Their 52-week high was Rs1,670 a share.
Chandra, who is also chairman of Zee Entertainment Enterprises Ltd, was not available for comment.
Following Chandra’s exit, Indivision Fund of the Future Group, which owns thePantaloon and Big Bazaar chain of retail stores, acquired a 14.9% stake in Centrum, initially by buying 10% through a preferential allotment and later by buying shares from the stock market.
Chandir Gidwani, vice-chairman of Centrum and the promoter of the Mumbai-based financial services group, said these two are independent and there is no connection between Chandra’s exit and the $2 billion Indivision Fund buying a stake.
Kishore Biyani-promoted Future Capital Holdings Ltd, the financial services arm of the Future group, also picked up 50.1% stake each in two of Centrum Capital’s subsidiaries, Centrum Direct, a full fledged money changing and travel related business firm, and Centrum Wealth Managers Ltd, which offers retail and online brokerage, portfolio management and distribution of mutual funds and insurance products.
The other two subsidiaries of the group are Centrum Broking Pvt. Ltd, which does institutional brokerage services, and Centrum Realty and Infrastructure Services Ltd, which offers advisory and project management services forrealty.
“There is tremendous business synergy between our retail business and that of Future Capital Holdings. We plan to increase the number of branches of Centram Direct from 100 to 500 and our customer base from one million to five million in one year,” Gidwani said.
Centrum Capital, at one point of time, was keen to expand its retail business by buying out Ratnakar Bank Ltd, an old private bank in Maharashtra. However, it did not get the regulator’s nod for this deal. It continues to hold about 5% stake in the bank and under the current norms, no single entity can hold more than 10% stake in a commercial bank.
“We don’t run after transactions. Our driving force is building relationships with middle-level firms. We identify good credible promoters and hand-hold them through the life cycle of their companies,” said Gidwani who holds about 40% stake in Centrum Capital.
Large corporate groups with loads of cash have been trying to get a foothold in the financial services sector. Financial services provider Reliance Capital Ltd of the Anil Dhirubhai Ambani Group is among those aggressively expanding mutual fund and brokerage business.
The Tata group has revived its non-banking finance business and wants to offer a complete range of financial services, from brokerage to consumer finance. The Aditya Birla group recently appointed Ajay Srinivasan, former AsiaPac head of Prudential Plc., to give a push to its financial services business.
“There is no reason why conglomerates such as the Tatas, Birlas and the Reliance group that have a variety of businesses should not enter this sector as it deals with their suppliers, dealers and a host of others in their business supply chain,” said Saurabh Tripathi, partner and director of consultant Boston Consulting Group. According to him, every financial services offering in India has typically posted annual growth of 25-30%.
Meanwhile, people familiar with Chandra’s thinking said the media baron initially bought the Centrum stake through trading companies to enter financial services.