The Hindu Business Line : Security broking firms witness churn in ownership

Mumbai April 4 There has been a churn in the ownership structure of many prominent stock broking companies; while some foreign brokerages have picked up or hiked stake in Indian outfits, there are others who have exited.

The ASK Group is the latest to see some action with Raymond James Financial of the US selling out to its joint venture partner ASK Investment and Financial Consultants.

"Raymond James was a passive partner in the joint venture and did not have a presence in emerging markets, which is where our interest lies. Therefore, we thought that it would be better for us to buy them out," said Mr Asit Koticha, Managing Director, ASK Raymond James.

Similarly, the Kotak Mahindra group and Goldman Sachs, the US-based investment banking and securities firm, went their separate ways, ending their 10-year relationship in March 2006.

Goldman Sachs sold its 25 per cent stake each in Kotak Mahindra Capital Company Ltd (for Rs 210 crore) and Kotak Mahindra Securities Ltd (Rs 123 crore).

Following the exit from the joint ventures, Goldman Sachs had announced plans to start its own investment banking, asset management, and securities businesses in India.

"The interest in India is huge, foreign partners are opting out of joint ventures so that they can come to India on their own," said Mr Koticha.

In February this year, Morgan Stanley announced the 100 per cent take over of security business from its erstwhile joint venture partner JM Financial Ltd.

In sharp contrast, Citigroup Venture Capital International, the private equity arm of Citigroup Inc, recently bought 19.9 per cent in Anand Rathi Securities Ltd for an undisclosed sum.

"This deal is a purely financial one. The money will be used to grow all our businesses, namely our wealth management, institutional brokerage and retail brokerage arms," said Mr Amit Rathi, Managing Director, Anand Rathi Securities.

The French banking group BNP Paribas also picked up a 33.35 per cent equity stake in the Kerala-based retail broking firm Geojit Financial Services for Rs 207 crore. "Geojit also intends to use the BNP Paribas network in 85 countries to serve the NRI community. BNP Paribas is also the largest online broker in Europe. This provides us a lot of opportunities, " said Mr CJ George, Managing Director, Geojit Financial Services Ltd.

"We also have plans to get software work outsourced to our 100 percent owned subsidiary Geojit Technologies Ltd from BNP Paribas. Immediately, Geojit is starting an institutional brokerage business along with BNP," he added.

The US-based E*Trade Financial Corporation through its subsidiary E*Trade Mauritius Ltd, has established an operational partnership with IL&FS Investsmart Ltd to expand global trading opportunities for retail and institutional customers.

Late last year, E*Trade made a tender offer to increase its ownership in Investsmart. Currently, ownership stands in the range of mid-to-high 30 per cent with a goal to reach approximately 50 per cent, said company sources.

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