IDFC to buy 26% stake in custodian firm Orbis

IDFC to buy 26% stake in custodian firm Orbis

Mumbai: Infrastructure Development Finance Co. Ltd (IDFC) will purchase 26% of Gurgaon-based custodian Orbis Capital Ltd over the next two years for Rs22 crore, Atul Gupta, managing director, Orbis Capital, told Mint.

A custodian holds material assets such as share certificates and cash of investment firms’ clients.

IDFC and Orbis announced the deal in a media statement on Tuesday.

Orbis, which launched operations in April 2009, is India’s first privately-held custodian registered with the capital market regulator Securities and Exchange Board of India, or Sebi.

Gupta said that the stake sale was to get an institutional partner that had interests in financial services.

“They have an institutional brokerage, an asset management company (AMC) and also a private equity (fund), so this is a natural extension for them. It gives us synergy to move the business forward," Gupta said.

IDFC will hold 12.5% shares immediately, and add the rest over the next two years through conversion of zero coupon bonds. Gupta said the deal values Orbis at Rs11.50 per share.

Orbis Capital plans to expand custodial services beyond traditional clients such as mutual funds and foreign institutional investors to high net-worth individuals, non-resident Indians and private banking groups, Gupta said, adding that it is also planning a subsidiary in Singapore to serve private bankers with links to India.

A.S.V. Krishnan, equity analyst with Ambit Capital Pvt. Ltd, said the deal is a big one for Orbis but will have minimal impact on IDFC.

“It will help IDFC reduce costs marginally by using the custodian business for its AMC and brokerage. For Orbis, it means they have a big name when they go to a client," he said.