Citi, 3 others lead race for Sharekhan stake

Citigroup's private equity arm Citigroup Venture Capital International, Baring Private Equity, TPG and 3i are the front-runners to acquire an equity stake in Sharekhan, the retail brokerage arm of the Mumbai-based SSKI group.

Some foreign and domestic banks have also expressed their interest in the brokerage firm, while existing private equity investors General Atlantic, Intel Capital and a group of funds advised by HSBC Pvt Equity India, which own about 48 per cent shares in Sharekhan, will look to sell either fully or partially in the current equity sale.

A source close to the development said: "We require Rs 200-300 crore for our expansion and the present private equity players are planning to exit. We would be issuing fresh shares and are interested in roping in only one PE firm and not any strategic alliance."

It is also learnt that none of the employees would sell their stakes in the current round. "The current share issuance will also be a combination of primary and secondary investments."

General Atlantic bought close to 30 per cent stake in Sharekhan through a combination of primary and secondary investment in April 2006. First Carlyle Ventures (The Carlyle Group) had sold its entire shareholding in the company during that time to General Atlantic.

Intel, which owns 5 per cent, and HSBC-advised funds, which own close to 12.5 per cent, have been investors in Sharekhan for long. The other major shareholders are the Morakhias' (promoters) with 37 per cent stake, while 300 employees together hold another 15 per cent.

It is learnt that consultancy major Ernst & Young did the due diligence for TPG and Baring Private Equity.

According to market players, Sharekhan is valued at around Rs.800-850 crore. It is among the top five retail brokerage outfits in the country with over 100 branches across 150 cities.

Nimesh Kampani's JM Financial, which had expressed its interest in Sharekhan, has opted out, saying the valuation was too high for its comfort.

Recently, Citigroup Venture Capital bought 19.97 per cent stake in Anand Rathi Securities. while Motilal Oswal Financial Services placed 9.48 per cent stake with New Vernon Private Equity and Bessemer Venture Partners.

The London-based Greater Pacific Capital bought 20 per cent stake in Edelweiss Capital in 2005. The other deals include BankMuscat's purchase of 43 per cent in the Mumbai-based Mangal Keshav Group.