The Hindu Business Line : Foreign players bullish on retail broking

Major forays
Merrill Lynch bought local partner's stake in the Indian venture DSP-Merrill Lynch.
Goldman Sachs parted ways with domestic partner Kotak Mahindra and announced $1 billion worth investments for the wealth management business in India.

Mumbai , June 3

Eyeing a share of the lucrative retail stock broking pie, top foreign brokerage firms are looking to enter the Indian retail market either by setting up own network of branches or acquiring equity stakes in local outfits.

With a mere 2 per cent of household income now invested in the stock markets, the overseas players see a big opportunity in tapping the potential, said sources in broking business.

"The retail broking space may also see some takeovers in the near future," said head of a retail broking firm.

ABN-AMRO became the first international bank to enter the retail broking business in India recently when they announced setting up of 15 branches. Other foreign brokerages, including Merrill Lynch, Deutsche Securities and Citibank, have big plans for this segment, sources said.

Domestic brokerage outfits such as Indiabulls Financial Services, which recently de-merged its real estate business from the stock broking activities, is seen as target for acquisition by foreign players, sources said. Deutsche Securities has recently picked up 2.56 per cent stake in Indiabulls Financial Services, while Merrill Lynch owns about 2.47 per cent stake.

In a strategic move, Merrill Lynch recently bought 9 per cent stake held by Intel Capital in another domestic brokerage outfit, India Infoline. The foreign broking firm also subscribed to India Infoline's optionally convertible debentures, making their total stake in the local company to about 13 per cent.

"The sheer expertise of Merrill and the tremendous value they bring in will benefit the company," Mr Harshad Apte, Associate Vice-President, India Infoline, told Business Line recently. But he did not comment on the possibility of a takeover or a further dilution of stake to Merrill Lynch. Citigroup, another player that has big plans for India in the wealth management and institutional-cum-retail broking space, has bought 5 per cent stake in India Infoline.

Recent deals

That foreign brokerages are bullish on India is evident from their recent deals. Merrill Lynch bought local partner's stake in the Indian venture DSP-Merrill Lynch, while another US-based leading investment bank-cum-brokerage Goldman Sachs parted ways with domestic partner Kotak Mahindra and announced $1-billion worth investments for the wealth management business in India.

Another leading investment bank and brokerage firm Morgan Stanley, which has a joint venture in India with JM Financial, is also looking for major forays into the retail broking space. Top company officials told Business Line that the company would expand its presence to 24 cities in the country this year from 18 cities.

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