Hindujas set to buy Networth Broking

Amas Bank, part of the Hinduja Group, is believed to be buying a majority stake in the Mumbai-based Networth Stock Broking, in a move that will likely pave the way for the group’s entry into India’s broking industry.

The deal would involve a stake sale by the promoters and issue of fresh shares to the Geneva-headquartered bank at roughly Rs 120-125 per share, said a source familiar with the development.

On Tuesday, trading in Networth shares was frozen at the upper-end of the 5% intra-day circuit filter at Rs 90.55. Over the past one week, the stock has gained over 20%, accompanied by a rise in trading volumes.

Amas will make an open offer to the minority shareholders at the same price that has been offered to the promoter group, the source said. Top Networth officials could not be reached for comments. An e-mail query to the broking house also did not elicit a response till the time of going to press.

Promoters and groups affiliated to them held 48.22% in Networth as on June 30. Chairman and managing director Suresh Jain, one of the promoters, holds 43.21%. Mr Jain had hiked his stake to 43.40% in March from 40.87% earlier following the conversion of 3.50 lakh warrants.

Further, many of Networth’s top brass have also been exercising their stock options to increase their stake in the company. Foreign institutions hold 11.2% in the broking house. The deal, which values Networth at roughly Rs 102 crore, would also involve infusion of debt by Amas, according to the source.

The debt infusion will enable the mid-sized broking house expand operations across the country. The brokerage, which has a 154-strong branch networth and offers retail broking, insurance and mutual fund distribution services, has a strong presence in South India.

Though the deal size comes nowhere close to the ones sealed in recent times, it indicates the interest of foreign financial companies to be a part of the fast-growing Indian financial services industry. BNP Paribas, which recently acquired 33% in Geojit Securities, valued the broking house at Rs 620 crore.

Amas, which is registered with the Swiss Federal Banking Commission, provides services including portfolio management, investment banking, structured and trade finance. The buyout of controlling stake in Networth will enable the Hinduja Group expand its financial services business in India. The Hinduja Group is a software-to-automobile-to-banking conglomerate and owns IndusInd Bank and companies like Ashok Leyland and Hinduja TMT.

(source: Economic Times)