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The sale process of leading brokerage firm Sharekhan has seen interest from multiple investors. A clutch of private equity investors including Actis and Warburg Pincus, two Indian banks, and a foreign strategic investor have joined the race to acquire Sharekhan, a Mumbai-based firm with one million clients. According to people in the know, Citi Venture Capital International (CVCI), the venture capital arm of Citi, which was sold to Rohatyn Group last year, has appointed Citi to scout for a potential buyer. Citi is learnt to have quoted a price of $350-$400 million (Rs 2,100-2,400 crore) for Sharekhan. Although CVCI had put the Sharekhan stake on the block about two years ago, the deal did not materialise owing to bad market condition.
Currently, CVCI holds a little less than 50 per cent stake in Sharekhan, Samara Capital's India B Holdings has 33 per cent and the rest is held by IDFC and Baring Private Equity Asia.
Spokespersons from Actis and Warburg Pincus said the company would not comment on speculations, while an email sent to Sharekhan did not elicit any reply till the time of going to press.
"Though a couple of banks have shown interest, it is unlikely that a deal would be signed. It needs RBI clearance and the same will create an indefinite delay in closing the transaction," said a person close to the transaction.
Sharekhan (formerly known as SSKI Investor Services) was incorporated in 1995, and started offering broking services to non-institutional clients in 2000. Originally promoted by Shripal Morakhia and Shreyas Morakhia, Sharekhan raised equity from HSBC Private Equity, Intel Pacific Inc and Carlyle in 2000. In April 2006, GA Global Investments invested in the company and also purchased the equity holding of Carlyle.
In 2007, CVCI, Samara Capital and IDFC Limited acquired about 75 per cent stake in Sharekhan. The new investors also acquired the stake owned by GA Global Investments, HSBC Private Equity, and the Morakhias. In February 2008, Baring Private Equity Asia IV Mauritius Holdings bought 12 per cent stake in Sharekhan.
The overall equity brokerage revenue pool is estimated to be Rs 9,600-9,800 crore for FY14, according to a recent ICRA Research report.
Sharekhan, one of the top five retail brokerages in India, has its strength in the online space since it was originally launched as an online trading portal in February 2000.
Online trading accounts for 35-40 per cent of retail volumes, according to the ICRA report.
Its website claims around a million customers with 1,529 outlets across 450 cities. It also has a presence in the United Arab Emirates and Oman. In addition to broking, it offers portfolio management and distribution of mutual funds and insurance products.
Motilal Oswal, one of the few listed companies that deriving a significant portion of revenues from broking, reported a 61 per cent rise in the December 2014 quarter over the year-ago quarter. Average monthly volumes have gone up from Rs 2.33 lakh crore in May 2014 to Rs 3.6 lakh crore in February 2015.
Brokerages with PE stakes include Anand Rathi Securities, JRG Securities, Prabhudas Lilladher, Angel Broking, and Karvy Stock Broking. Year 2007 witnessed some of the largest deals in broking space, where 14 deals took place for a total investment of $661.7 million. US major Carlyle holds a nine per cent stake in leading broking firm India Infoline.
