The Hindu Business Line : IL&FS Investsmart drops on ‘unattractive’ deal

Mumbai, May 20 Investors’ interest at the IL&FS Investsmart (IIL) counter dropped on Tuesday, the first trading day after the announcement of the Rs 1,000-crore deal by banking major HSBC for 73 per cent stake in the company. Market participants said the HSBC offer for the firm was not attractive at Rs 200 a share.

Besides, there was also some profit booking seen, as the stock rose 20 per cent over the preceding week (May 9-16). IIL closed at Rs 191.95, lower by 3.45 per cent from the previous close of Rs 198.8 on the BSE, after a volatile trading session.

The stock touched a low of Rs 185.25 intra-day on the BSE, a drop of almost 7 per cent from its previous close, while its high was Rs 199.

Other financial services firms that have substantial stock-broking operations showed a mixed trend. Indiabulls Financial Services closed down by 4.14 per cent. On the other hand, the retail-focused Geojit Financial Services gained 3.45 per cent.

However, the top broking firms didn’t see much movement and closed almost flat with marginal gains: Edelweiss Capital (1.20 per cent); Motilal Oswal Financial Services (0.78 per cent); India Infoline (0.50 per cent); and Religare (0.06 per cent).

Among the losers were Emkay Shares & Stock Brokers (2.77 per cent); ICICI Bank and Kotak Mahindra Bank that have substantial earnings from their broking arms, closed lower by 1.43 per cent and 1.40 per cent respectively.

VALUE OPPORTUNITY

The fund managers, however, see value in the Indian financial services firms after the recent global sub-prime crisis. Mr Niek F. Molenaar, Managing Director of Netherlands-based Robeco Asset Management, who is on a visit to India, told Business Line: “The financial services sector will bring above-average returns, and the downside risk in the equity market is limited.”

“We have seen a lot. I think a lot of the real bad news have been priced in, almost 90 per cent of it,” Mr Molenaar said while talking about the recent credit crisis in the global market. “The Indian Financial Services sector has largely been unaffected by the global credit crisis due to its strong fundamentals. With increased operating and capital efficiency, this sector is poised to offer significant opportunities for long-term wealth creation for investors,” said Mr Ajay Bagga, Chief Executive Officer, Lotus India Mutual Fund.

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