IDBI Capital to sell 26% stake

S Muhnot

IDBI Capital, a wholly owned subsidiary of IDBI Ltd, is planning to sell 26 per cent stake to a strategic foreign partner to boost its institutional broking business.

Sources said the company, which is into stock broking, internet trading, merchant banking and private equity, has held informal talks with foreign players and is finalising a merchant banker for the deal.

"A lot of M&A deals are happening in the broking space and we are not immune to this activity in the future. In case, if any strategic partner comes along with major FII business, we may look at it," said S Muhnot managing director & CEO of IDBI Capital.

Sources said IDBI Capital could command a valuation of more than 4-5 times its net worth of Rs 350 crore. They also do not rule out the possibility of a higher stake sale (up to 49 per cent) depending on the valuation.

Bear Stearns, the biggest debt player in the US and the Australia-based Macquarie, who are keen on entering the Indian market, are two contenders for the stake purchase, said sources.

IDBI Capital is also into retail broking through its internet portal, corporate advisory and debt arranging & underwriting. It has a turnover of more than Rs 10,000 crore a year in the broking business. Last month, IDBI Capital increased its private equity corpus to Rs 150 crore.

The move to attract a strategic partner comes at a time when the domestic broking industry is attracting a slew of players through the mergers and acquisition route.

The US-based Lehman Brothers is learnt to have bought out the institutional broking business of Brics Securities. JM Financial, after its split with Morgan Stanley, acquired 60 per cent stake in ASK Securities, an institutional broking firm.

IDFC also recently hiked its stake in SSKI and Citigroup's private equity arm CVCI bought a majority stake in Sharekhan, the retail broking arm of the Mumbai-based SSKI Group.

Early this month private equity investor Baring picked up a majority stake in JRG Securities, a Kochi-based firm.

Banking and financial services is the most active space in India, with private equity accounting for 75.9 per cent of the M&A deals, according to Thomson Financial.