The Hindu Business Line : Hong Kong co to acquire 20% stake in Karvy Broking

The Rs 83-crore deal is the first investment of PCG in the Indian financial services arena. The private equity deal was syndicated by MAPE Advisory Group.

KSBL, a member of NSE and BSE, has an average daily stock market turnover of around Rs 500-crore. It has a network of 363 offices covering 248 cities and towns spread across the country and overseas - Dubai and New York.

Apart from offering broking services to over 2.5-lakh retail investors, KSBL also has a private client desk to cater to the high net worth individuals and corporates and also an institutional desk to service various financial institutions, both domestic and foreign.

"We have estimated that KSBL needs close to Rs 100 crore funds for working capital and expansion. By placing 20 per cent of KSBL's fresh equity with the Hong Kong group, we will raise Rs 83 crore funds. The balance will come from internal accruals.

"We plan to expand our network to around 550 offices by the current fiscal-end and double our daily average stock market turnover to over Rs 1,000 crore," the Karvy group Chairman, Mr C. Parthasarathy, told Business Line.

"We have set a target of emerging as the India's premier financial services adviser, especially in the retail segment. We plan to strengthen our institutional and investment banking operations. We have also drawn up plans for commodity and insurance broking businesses," he said.

Stating that KSBL expects to be comfortable with the existing funds position, including Rs 83 crore from PCG, at least for the next one-and-a-half to two years, Mr Parthasarathy said the company might consider tapping the capital market with its initial public offering (IPO) in the next 2-3 years for additional funds. Though PCG is a typical long-term investor, the IPO might provide it an exit route, he said.

Having recorded a topline of Rs 177 crore for the fiscal 2004-05, the highest by an Indian stock broking company, KSBL has set a target of achieving at least 40 per cent growth during the current fiscal.

Aimed at de-risking its business from the capital market volatilities, Karvy proposes to significantly strengthen its commodity and insurance broking operations, mutual fund distribution and investment banking activities.

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