Can 1K yield $500 million? Of course it can, if the K stands for Hemendra Kothari who struck a deal with Merrill Lynch to sell 47 per cent stake in his company for that amount. Five years back in November 1999, he was instrumental in brokering a path-breaking Rs 499 crore all-cash deal when Satyam Infoway bought out Internet startup India World. That deal generated widespread scepticism on over-pricing of the Internet startup. This time, no one is complaining about Kothari's own deal.
Fifty-nine year old Kothari represents the fourth generation of a family of prominent stockbrokers. He was, in fact, the president of the Bombay Stock Exchange in 1991.
"Giving an international identity to a family-run broking firm is no joke. Kothari did not only attract Merrill to pick up a stake in his firm but held on to his stake for a decade, grew it and finally left on his own term," says a senior banker who has seen him from close quarters.
DSP Merrill Lynch has been a rare venture for Merrill as it was holding a minority stake and sharing the name of the Indian partner. No where in the world it has done so. Kothari founded DSP Financial Consultants in 1975 which became DSP Merrill Lynch Ltd in 1995.
DSP Merrill Vice Chairman and Managing Director Shitin Desai, who broke the news of the deal in Mumbai on Thursday, has been Kothari's friend from his Sydenham College days. His other close friend is HDFC Chairman Deepak Parekh who also studied at the same college.
Merrill Lynch first picked up a 8.33 per cent stake in his firm in 1996 and soon raised it to 40 per cent. Kothari's relationship with Merrill goes back to mid-1980s when the US brokerage house helped DSP mobilise money for Unit Trust of India's India Fund. One of his Wharton-educated daughters was employed by Merrill in the US.
"His deal making ability is well known but not too many people know his relation management skill. He has a very informal way of communicating, cracking jokes and breaking all hierarchical barriers," says a DSP Merrill Lynch insider.
No wonder, his firm has been associated with many of the first-of-its-kind deals in India. For instance, it was the advisor to the first recast deal for a state-owned power utility (Orissa Power) and brokered the first hostile takeover in the cements business (India Cements' take over of Rassi). In a dog-eat-dog investment banking world, Kothari has detractors too.
For instance, a senior investment banker feels that Kothari is a legendary broker but not a great dealmaker. Another investment banker wonders why has he sold his stake now when the entire world has been chasing the India story. "This is the time to buy India and not sell," he quips.
Various theories have been doing rounds. While a section of the industry says that Kothari has been under pressure from Merrill to sell his stake (otherwise Merrill would have opened its own shop independently), others say his wife's sudden death early this year prompted his decision.
All said and done, he has sold his stake at his own terms. In 1995, Merrill reportedly bought 40 per cent stake in the firm at $30 million. Today, it is paying $500 million for a 50 per cent stake.
Kothari is keeping his next plan close to his chest. While he will remain as the chairman of the company, he will probably spend some more of his time and money in charities and trusts which the Kothari family has been running for several generations.
He is also passionate about wild life. Along with Ajay and Urvi Piramal he has set up the Wildlife Conservation Trust (WCT) which is dedicated to raising awareness for environment and wildlife conservation and protecting the Tadoba Tiger Reserve in Vidharba and the Sanjay Gandhi National Park in Mumbai.
A day after landing in Mumbai from New York where he struck the deal, Kothari told a news channel that he is "alive and kicking" and has a lot of work to do. Clearly, the legendary dealmaker has no plans of slowing down.
