StanChart-UTI deal on Monday

UK-headquartered Standard Chartered Bank is set to become the third foreign player to enter the Indian retail stock brokerage business by buying a 49 per cent stake in UTI Securities for Rs 140-150 crore.

UTI Securities is currently fully-owned by Securities Trading Corporation of India (STCI). Sources said an agreement would be signed between the two parties in the coming week, probably on Monday.

The stake price values UTI Securities at Rs 300-325 crore. STCI, a primary dealer in government securities, had bought the entire UTI Securities stake for Rs 265 crore last year from Specified Undertaking of UTI, the trading arm spun off from the financial institution UTI in 2001-02.

The deal with Specified Undertaking of UTI requires STCI to have a minimum lock-in of its 51 per cent stake in UTI Securities for three years.

Sources said Standard Chartered also had the option to buy an additional stake in UTI Securities next year. There would also be Standard Chartered representatives on the UTI Securities board.

When contacted, G Narayanan, managing director, STCI said, "We will be reaching some kind of an understanding with a strategic partner by next week," but declined to give details. A Standard Chartered spokesman declined to comment.

Recent months have seen E*Trade, the fourth largest online brokerage in the US, acquiring a controlling stake in IL&FS Investsmart while France's BNP Paribas bought 33 per cent in another retail brokerage, Geojit Financial Services.

ABN-AMRO became the first international bank to enter the retail brokerage space in India when it set up a wholly-owned subsidiary last year.

Standard Chartered has over 2 million customers now and through this joint venture, it would be able to offer an additional product to its customers, most of whom trade with other institutions.

Globally, too, Standard Chartered had good relations with hedge funds and foreign institutional investors so it would be able to share its foreign clients with UTI Sec, sources said.

Kuwait-based Global Investment House and Australia's Macquarie Bank were the other two big contenders for UTI Securities.

Citigroup and France's Societe Generale, who had initially evinced interest, opted out of the race mid-way.