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Global financial services group BNP Paribas has announced it is acquiring retail brokerage firm Sharekhan. While the company did not respond to a request seeking the deal’s valuation, a source estimated it at about Rs 2,000 crore.
On Thursday, BNP announced it had entered into an agreement to acquire the brokerage firm, subject to regulatory approvals. “BNP Paribas announces an agreement has been reached with the company’s shareholders for BNP Paribas to acquire the entire stake in Sharekhan .... Sharekhan will join BNP Paribas’ personal investors division, a key player in retail brokerage and digital banking services, with 1.7 million clients in Europe,” said a BNP note.
The brokerage house was on the block for some time and many suitors, including private equity firms, were said to be in the running. At one point, the list of potential buyers included private equity firms Actis and Warburg Pincus, besides a few Indian banks.
According to the release, Sharekhan accounts for seven per cent of the market, or 1.2 million clients.
It is one of the few pure-play brokerage houses in the country; most others have diversified into lending, asset management and other businesses.
Joris Dierckx, head of BNP Paribas India, said the acquisition would help expand the group’s footprint in the country. “Sharekhan will serve as a platform for the group’s strategy in India to offer a comprehensive range of products, from pure brokerage to asset-based investment services, including mutual funds and savings products. The purchase of Sharekhan is a unique opportunity for us to build on our achievements in the Indian market and further expand our business in India,” he said.
Sharekhan, formerly SSKI Investor Services, was incorporated in 1995. Promoted by Shripal Morakhia and Shreyas Morakhia, it started offering broking services to non-institutional clients in 2000. The same year, it raised capital from the likes of HSBC Private Equity, Carlyle and Intel Pacific Inc. A subsequent round of funding saw GA Global Investments picking up stake in the brokerage house.
The heady days of 2007 saw CVCI, Samara Capital and IDFC Ltd picking up a majority stake (75 per cent) in the firm. These entities bought out the stake held by GA Global Investments, HSBC Private Equity and the Morakhias.
In February 2008, Baring Private Equity Asia IV Mauritius Holdings picked up 12 per cent stake in Sharekhan.
The latest change in ownership comes amid brokerage revenues heading north. The Sensex has consistently hit new highs, touching a record high of 30,024.74 in March. Volumes, too, have risen. According to ratings agency ICRA, broking revenue has increased 20-25 per cent in 2014-15, based on its April 2015 study of 15 firms. The study, ‘Indian Brokerage Industry’, was authored by Karthik Srinivasan, Vibha Batra, Viral K Shah and Saurabh Dhole.
“According to data obtained from the exchanges, 32-34 per cent of overall volumes currently originate from internet/mobiles/tablet platforms. This phenomenon is expected to have a lasting impact on the manner in which the sector evolves, with much of the incremental client addition for larger brokers being ‘online clients’,” the study said.
Sharekhan has largely relied on the online route for dealing with customers. “If they (BNP) leverage the model, the company can do very well,” said the head of a domestic brokerage house.
MAJOR DEALS IN THE BROKERAGE SPACE
- BNP Paribas buys Sharekhan for Rs 2,000 crore
- Edelweiss buys Anagram Capital for Rs 164 crore in 2010
- Aditya Birla Financial Services acquires Apollo Sindhoori Capital Investments for Rs 350 crore in 2009
- In 2007, BNP Paribas buys into Geojit for Rs 147 crore; subsequently, the firm is renamed BNP Geojit Paribas Financial Services
- BRIC Securities buys Birla Sun Life Securities for Rs 18 crore in 2003
