STANDARD Chartered has entered into an agreement to acquire 49% stake
in UTI Securities from the Securities Trading Corporation of India
(STCI) with an option of increasing its stake to 100% over the next
three years. It has picked up the 49% stake at Rs 147 crore, valuing
UTI Securities at Rs 300 crore.
STCI had in February 2006 bought UTI Securities from the Specified Undertaking of the Unit Trust of India (SUUTI) for Rs 265 crore. According to StanChart India CEO Neeraj Swaroop, â€œWe have an option to acquire an extra 25.9% stake in 2008 at a fixed price. We also have an option to purchase the balance at a pre-determined formula in 2010. The move will help give our customers a wider product portfolio.â€
The last tranche of sale will be linked to the broking firmâ€™s profits at that point. However, sources said the maximum price for the whole 100% is being capped at Rs 350 crore. StanChart was unable to buy the majority stake now, as according to the purchase agreement with SUUTI, STCI can ot sell a majority stake for two years.
For StanChart, the move would help it to get into the broking space in India. Other foreign banks like ABN Amro and Citi have started own retail broking operations. Post acquisition, the board will now be reconstituted with three member from StanChart and four from STCI. There will also be one independent director. Though, there is an option to have one more independent director. Mr. Swaroop, StanChart regional head of consumer banking Murali M Natrajan and head of strategic initiative (South Asia) and country head subsidiaries PR Somasundaram would be joining the board.
UTI Securities will also be rebranded. The UTI name can be used by the entity only till January 2008. UTI Securities has 58,000 retail customers, 112 institutional clients and 41 branches. The companyâ€™s revenues last year stood at Rs 65 crore with profits at Rs 14 crore. StanChart is one of the biggest custodian banks in the country. It has over 2 million retail customers and a large SME and corporate banking base.
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