Merrill Lynch eyes stake in Infoline arm

The US-based brokerage and investment bank Merrill Lynch, which recently hiked its stake in India Infoline to 14.10 per cent, is learnt to have initiated talks with the latter for acquiring a significant stake in its subsidiary"�India Infoline Distribution Co Ltd (IILD).

Sources close to the development said Merrill Lynch is likely to pick up upto 26 per cent in the distribution business of India Infoline for over Rs 150 crore.

Though R Venkatraman, director, India Infoline, denied any such talks with Merrill Lynch. A Merrill Lynch official declined to comment.

The New York-based bank with about $1.6 trillion of assets under management, plans to enter into the mortgage business, and for this new line of business the company is planning a tie-up with India Infoline.

Market players said such a move by Merrill Lynch would create tremendous synergies with India Infoline as it has a wide retail network of over 200 branches. In December 2006, India Infoline sold its stake in the subsidiary Khambhat Investment & Trading Co Pvt Ltd, a non-banking finance company, to Merrill Lynch.

IILD, apart from the distribution of financial products such as mutual funds, IPOs and fixed deposits, also distributes mortgages and loan products.

Merrill is among several foreign players, which are aggressively expanding in India. The French banking major BNP Paribas recently picked up 33.35 per cent stake in Kochi-based brokerage Geojit Financial Services.

The bank also has plans to enter into asset financing and housing finance. Similarly, leading global online brokerage E-Trade Financial acquired a controlling stake in IL&FS Investsmart last year.

Merrill is vying with Morgan Stanley, Goldman, Lehman Brothers, UBS AG, Credit Suisse and other private banks to manage wealth created in India.

The bank has been expanding its private banking business since it increased its stake in DSP Financial Consultants to 90 percent for which it paid Hemendra Kothari $500 million.

Last year, Goldman Sachs ended its 10 -year alliance with Kotak Mahindra while Morgan Stanley ended its joint venture with Nimesh Kampani by paying $425 million to buy out its joint venture with JM Financial to build its own business in India.