Merrill Lynch may pick 20 percent stake in Sharekhan

By SiliconIndia   |   Monday, 24 December 2007, 08:00 Hrs
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New Delhi: Citigroup Venture Capital (CVC), a private equity (PE) investor, is diluting a part of its 75 percent stake in brokerage firm Sharekhan. Financial service company Merrill Lynch is said to be the front-runner to pick a minority stake (20 percent) even as other PE firms, including Baring Private Equity, are believed to be in the race, reported The Economic Times.

The industry buzz is that the deal for 20 percent stake is valued at around $750 million. However, a source close to Sharekhan said CVC is looking to dilute its stake only by 10 percent and the deal value is close to $50 million.

This will put Sharekhan’s total value between $375 million and $500 million, a jump of around 100 percent in seven months. CVC along with IDFC had picked 85 percent in Sharekhan in May this year for $162.5 million to $175 million, pegging the valuation at around Rs 800 crore.

According to a reliable source, Merrill Lynch is close to picking 20 percent equity in Sharekhan by buying shares from CVC as well as a preferential allotment, which will bring down the equity holding of all investors proportionately.

However, a source close to Sharekhan said only CVC will dilute stake by 10 percent bringing down its holding to 65 oercent.

CVC and IDFC together had acquired 37 percent equity owned by Sharekhan promoter Shripal Morakhia while 48 percent was acquired from other shareholders such as General Atlantic, Intel Capital and some funds advised by HSBC Private Equity India. Management employees, who held 15 percent of equity before the CVC deal, continue to hold on to their shares.

CVC India managing director Ajay Relan confirmed that his firm is looking to bring in new external investors, but declined to comment on the valuation or the possible investors.

Baring Private Equity Partners (India) managing partner Rahul Bhasin declined to confirm or deny whether Baring is in negotiations to pick a stake in Sharekhan. Incidentally, Baring already has exposure in the sector through JRG Securities. It had picked a 44.8 percent stake in the Kochi-based brokerage firm for $35 million or about $35 million early this year.

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