HSBC Holdings Plc, Europe's largest bank by market capitalisation, has just announced that it will buy a 73.21-per cent stake in Indian brokerage house IL&FS Investmart for $241.6 million or around Rs1000 crore.
The offer is at Rs200 per share, a price almost at par with IL&FS's share price at close of trading yesterday.
HSBC said it will acquire 43.85 per cent from a Mauritius-based unit of E*Trade Financial Corp. and the rest from the Indian brokerage's founder, Infrastructure Leasing and Financial Services Ltd. As per SEBI rules, it will also make an additional offer for 20 per cent stock to other shareholders. HSBC will also pay IL&FS $19.4 million or Rs82 crore as part of a three-year non-compete agreement.
HSBC's interest in tapping into the market of growing number of Indian investors is part of its expansion strategy in the world's fastest growing major economy after China. There is also huge potential for further growth, considering only 4 per cent of the country's savings is currently invested in equities.
Economic growth that has averaged 8.7 per cent since 2003 is boosting incomes of individuals and companies in India, fueling investment in shares, bonds and mutual funds. Asia's third- biggest economy has more than 20 million retail investors and the country's two main stock exchanges are the world's third and fifth-largest by transaction volume, said Sandy Flockhart, HSBC's CEO for Asia Pacific.
''This investment is of strategic importance to HSBC as it gives us a foothold in one of the largest retail broking markets in the world,'' she added.
HSBC has seen a turnaround in recent times as it profit increased 17 per cent in the second half of the year ended December, as growing business in emerging markets helped it offset sub-prime losses in the US.
IL&FS Investmart shares ended 3.78 per cent up at Rs198.80 on the Bombay Stock Exchange yesterday.