Citi pvt equity arm buys Sharekhan for Rs 480 cr

Citigroup's private equity arm Citigroup Venture Capital International (CVCI) has acquired 85 per cent stake in retail brokerage Sharekhan for about Rs 470-480 crore, buying out 37 per cent stake held by the promoters Morakhias and 48 per cent held by a clutch of private equity funds, led by General Atlantic.

The deal is likely to be signed this week. CVCI is pumping in another Rs 200 crore into the company by subscribing to a fresh issue of shares, constituting 15 per cent of the equity capital.

The stake sale values Sharekhan, the retail broking arm of the SSKI Group, at about Rs 650 crore, a source close to the development said.

Though the acquisition by CVCI is considered a pure private equity investment, sources said this may lead to Citigroup's formal entry into retail stock broking in India as the former would have the option to sell its stake to the US banking major at a later date, the source said.

MAPE Advisory was the advisor for Sharekhan in the stake sale.

About 300 employees, who account for about 15 per cent stake in Sharekhan, continue to retain their stakes. But their stake will come down, in percentage terms, following the expansion of share capital through the fresh equity issue. "There will not be any change in management. The company will use Rs 200 crore to expand the operations," the source said

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 the company, are using the opportunity to exit their investments.

Private equity funds Baring Private Equity, TPG and 3i were also in the race for buying the stakes in Sharekhan.

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 at 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.