BNP Paribas buys 34.4% stake in broking firm Geojit Financial Services

BNP Paribas, the French banking giant has bought 34.35% in Geojit Financial Services for about Rs. 207 crores ($47 mn). The deal at Rs 26 per share is a combination of equity shares and warrants that could be converted into shares. The bank will also make an open offer to the shareholders of Geojit for another 20% in the company.

With its entry into the retail broking space, BNP has completed another leg of its financial services business in India. BNP already has presence in the life insurance sector through SBI Life Insurance and in the asset management business through Sundaram BNP Paribas Mutual Fund. Riding on Geojit’s experience in Indian stock market, BNP is now considering entry into institutional broking business.

In October, Geojit’s board had approved issuance of up to 79.6 mn shares (of Re. 1 face value) to BNP Paribas. The financial services firm has now issued 56.8 mn shares to BNP Paribas at Rs. 26 per share. It has also issued 22.8 mn warrants to the bank, which would be converted to as many shares at the same price in 18 months.

The post-deal open offer, expected in a few days, could increase BNP Paribas’s stake in Geojit to over 50%. The company’s name will be changed to ‘Geojit BNP Paribas Financial Services’ and three members nominated by the French bank will join Geojit’s board. The current management will continue to be in charge of the company.

Read The Times of India article.

BankMuscat buys stake in domestic brokerage Mangal Keshav

Oman’s largest listed company, BankMuscat, is buying 43% stake in brokerage firm Mangal Keshav for an undisclosed sum. This acquisition makes BankMuscat the single-largest investor in the Indian financial services and securities sector from the Sultanate. The financial due diligence on behalf of BankMuscat was done by PriceWaterhouse Coopers India, while the legal due diligence was done by Amarchand Mangaldas. The transaction is expected to be completed in first quarter of 2007.

The Mangal Keshav Group was set up in 1939 and is one of the oldest brokerage houses in India. It is present in securities trading, commodities trading, insurance broking and IPO / mutual fund distribution space. The group is one of the top 20 brokers in the country by market share and is a member of all leading equity and commodity exchanges. It is also a member of the Dubai Gold & Commodities Exchange and has an office in Dubai.

As per Morgan Stanley research, the Indian equity markets is seeing one of the strongest rallies and trading volumes are expected to double to $3.2 trn in 2010 from about $1.6 trn currently. Morgan Stanley projects the Indian brokerage business to grow to $3.9 bn by 2015. Several leading international banks such as Citigroup, BNP, ABN-AMRO, etc. have announced their foray in the securities business in India.

Read the article in Business Standard.

Texas Pacific pulls out of investing in SpiceJet

Private equity giant Texas Pacific Group is pulling out of its $30 mn investment in low-cost airline SpiceJet. Reasons cited are as varied as differences over valuation to the US-based fund having expressed its inability to participate in this round of fund-raising by the low-cost carrier as its top management was busy with an ongoing $11 bn deal for buying out Australian airline, Qantas, by a consortium of private equity players.

In its current round of fund raising, SpiceJet has raised around Rs. 300 crores by divesting around 25% stake, giving the company a valuation of around Rs. 1200 crores. The Tata Group, through two of its investment arms, is picking up 7% stake for Rs. 75 crores. Existing shareholder, Istithmar, Dubai government’s private equity arm, is putting in another $25 mn for increasing its stake from 3% to 11%. BNP Paribas will invest $15 mn for a 4% equity stake, while Goldman Sachs is picking up 1.5% stake for around $5 mn. A clutch of small investors will hold another 4% stake between them.

The company is holding its EGM on Thursday to ratify the preferential allotments. The shares were offered at an average price of Rs. 51.36 per share. After this round of dilution, the stake of the promoters including those of the UK-based Kansagra family, director Ajay Singh and associates, will come down from around 18% to 15%.

Read more in The Economic Times article.