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Mumbai, May 17 The HSBC group has acquired 73.21 per cent stake in the listed retail broking firm IL&FS Investsmart Ltd (IIL) in an all cash deal for Rs 1,084.5. crore ($261 million).

The price also includes Rs 82 crore ($19.4 million) paid as part of a three-year non-compete agreement.

The foreign bank, which paid Rs 200 per share, will also make an open offer to acquire up to 20 per cent of the remaining shares in Investsmart. The open offer price will be announced on Tuesday.

Ms Naina Lal Kidwai, Group General Manger and CEO, HSBC in India, “We got a good deal here. We paid 1.9 times price to book value, which is much lower compared to the recent deal of UTI Securities at 5.4 times price to book and that of Geojit Financials at 12.8 times price to book value.”

The stock market seems to have got wind of the deal a while ago as IIL’s share price moved up by more than 20 per in the last one week. It rose from Rs 164 on May 9 to Rs 198.80 on May 16.

Mr Tarun Kataria, Chairman, HSBC Securities and Capital Markets Ltd, said: “The acquisition will bring to us a retail brokerage business, an on-line broking platform, a mid-cap corporate and investment banking business and a mid-cap research business.” This will go well with our institutional broking business, he said.

Set up in 1997, IIL has a network of 300 offices across the country. It has 1.5 lakh equity and over 10,000 commodity customers and 130 institutional clients.

For HSBC, the acquisition offers the opportunity to expand its retail reach. The bank currently has 47 branches in India and is present in 26 locations.

HSBC is the third foreign bank to have acquired a retail broking business in India in the recent past. French bank BNP Paribas acquired Geojit Securities, and Standard Chartered Bank bought 49 per cent of UTI Securities, both last year.

Under the terms of the agreement, HSBC will acquire 43.85 per cent stake in IIL from E*Trade Mauritius Ltd, an indirect wholly owned subsidiary of E*Trade Financial Corporation and an additional 29.36 per cent stake from Infrastructure Leasing and Financial Services Ltd.

HSBC is expected to change the name of the broking firm once the regulatory approvals are received. IIL will have to sell its commodity business to obtain RBI approval as banks or its subsidiaries in India are not allowed to do commodity business.

More Stories on : Financial Services | Mergers & Acquisitions | Foreign Institutional Investors

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