HSBC buys majority stake in IL&FS arm

Special Correspondent

Deal is valued at over Rs. 1,000 crore

To make open offer to buy up 20% of remaining shares

Signs non-compete agreement with IL&FS

MUMBAI: HSBC, through its group subsidiaries, is to acquire 73.21 per cent of IL&FS Investsmart Limited (Investsmart), the broking arm of Infrastructure Leasing and Financial Services Limited (IL&FS).

Under the terms of the agreements, HSBC proposes to acquire a 43.85 per cent stake from E*Trade Mauritius Limited, an indirectly wholly-owned subsidiary of E*Trage Financial Corporation, and an additional 29.36 per cent from Infrastructure Leasing and Financial Services Limited (IL&FS). Both shareholders will receive a price of Rs. 200 per share for their respective stakes, making a total consideration of Rs. 1,002.55 crore (about $241.6 million).

In addition, IL&FS will be paid, as part of a three-year non-compete agreement, Rs. 82.01 crore (about $19.4 million).

HSBC will also make an open offer to acquire up to 20 per cent of the remaining shares in Investsmart. “Details of the open offer to Investsmart shareholders will be published in the Indian press and distributed to shareholders in accordance with local regulations,” stated a release issued by HSBC on Saturday.

Sandy Flockhart, Group Managing Director and Chief Executive Officer of HSBC Asia Pacific, said: “The acquisition of Investsmart is consistent with HSBC’s stated strategy of investing primarily in faster growing emerging markets and India represents a high priority market for us. This investment is of strategic importance to HSBC as it gives us a foothold in one of the largest retail broking markets in the world. With over 20 million retail investors, India has the world’s third largest investor base and the National and Bombay stock exchanges are respectively the third and fifth largest stock exchanges globally by transaction volume.”

Stuart Gulliver, Chief Executive of Global Banking and Markets, said: “This acquisition fits with Global Banking and Markets emerging markets-led strategy and leverages HSBC’s global distribution capabilities. We will benefit from an expanded institutional broking, equity capital markets and investment banking platform in a rapidly growing marketplace that offers great opportunity.”

Naina Lal Kidwai, Group General Manager and Chief Executive Officer, HSBC in India, added: “Investsmart’s retail brokerage business will be a great addition to our offering in India and Investsmart’s local expertise and strong management team will play a key role in strengthening our service proposition in India.”

HSBC will be making the acquisition through group subsidiaries, including HSBC Securities and Capital Markets (India) Private Limited, the group’s securities arm in India. The agreement and open offer are subject to regulatory and other approvals.