Geojit exits commodities businesses for acquisition by BNP
24 May 2008
Geojit Financial Services has exited its commodities trading business, Geojit Commodities Ltd (GCL), to pave way for the proposed open offer by its joint venture partner BNP Paribas Securities Asia.
Geojit Financial Services will also surrender the membership held by the subsidiary in various commodity exchanges.
BNP Paribas has a 27.18 per cent stake in Geojit Financial Services, which it acquired in March 2007, for Rs147 crore. The exit from commodities business will help BNP Paribas get the Reserve Bank's approval for an open offer for Geojit Financial Services.
Geogit has already issued BNP Paribas warrants, convertible into equity shares in 18 months, which could take its stake to 34.35 per cent and the total investment to around Rs207 crore.
The subsidiary of the French banking giant BNP Paribas will pay Rs40 crore to Geojit as compensation for pulling out of the commodities business.
Geojit Financial Services has formed a 50:50 joint venture with BNP Paribas Securities Asia to cater to foreign institutional clients in India.
BNP Paribas said it would invest up to $2 million in this project and has approached the Securities and Exchange Board of India (Sebi) to seek regulatory approvals for an open offer.
GCL is mainly engaged in the commodities futures trading business and the present regulatory norms do not allow foreign investments in commodities trading in India.