StanChart may hive off commodities biz

Standard Chartered Bank, which bought a 49 per cent stake in UTI Securities from Securities Trading Corporation of India early this year, is likely to hive off the commodities broking business into a separate company and put this division for sale.

This is a part of the wholesale restructuring exercise planned by the British bank, which plans to beef up the equity capital market business using the UTI Securities platform, according to sources.

Hiving off the commodities broking business and putting up this business for sale comes as a result of restrictions on foreign banks for commodities trading, according to sources.

More importantly, the commodities broking business contributes a minuscule of the UTI Securities revenue and it is not in line with Standard Chartered Bank's long-term game plan in the financial services segment, they add.

UTI Securities had started the commodity broking business only a year ago and has less than Rs 1 crore as revenue.

In one of the hotly contested deals, Standard Chartered Bank, one of the biggest foreign banks in the country, had bought a 49 per cent stake in UTI Securities for Rs 147 crore early this year.

Australia's Macquarie Bank, Kuwait's Global Investment House, Citigroup and France's Societe Generale had also shown interest in the broking entity during the bidding process.

STCI retains the remaining 51 per cent stake in the venture, but Standard Chartered Bank retains the option to increase the stake to 100 per cent by 2010 in UTI Securities.

It has the option to hike by 25.9 per cent to 74.9 per cent in 2008 at a fixed price, according to the agreement.

The total valuation in the final tranche is linked to the performance of UTI Securities, which would be between Rs 300 crore and Rs 350 crore.

Standard Chartered's entry into the retail equity broking business coincided with similar moves by a clutch of foreign banks in India including BNP Paribas, ABN-Amro, BankMuscat and E*Trade, among others.