Hemendra Kothari may sell stake in DSP Merril Lynch

Hemendra Kothari, 62, the doyen of investment banking in India, may soon call it a day from DSP Merril Lynch. Kothari, chairman of DSP Merril Lynch, is in an advanced stage of negotiations to sell his 10 per cent stake to Bank of America which took over Merril Lynch in a $50 billion transaction last year.

Kothari, who sold his 50 per cent stake to Merril Lynch for half-a-billion dollars in December 2005, is expected to exercise the put option -- a contract giving the owner the right to sell a specified amount of an underlying security at a specified price within a specified time -- to sell his residual stake of around 10 per cent.

“Kothari is contemplating to exercise his put option. If all goes well, it may happen before March 31,” said an investment banker close to the transaction.

When contacted by Financial Chronicle, Kothari declined to comment. Mona Kwatra, vice-president, marketing & communications, and spokesperson of Merril Lynch, also declined to comment.

With the rupee depreciating by 14.5 per cent since December 2005, the value of Kothari's stake stands to gain by the same magnitude. While in December 2005, with one US dollar translating into Rs 45.4, the 50 per cent stake fetched Kothari Rs 2,270 crore ($500 million).This would mean that a 10 per cent stake in December 2005 would have brought in Rs 454 crore ($100 million).

At present, with one dollar at Rs 52, his 10 per cent stake will be valued at Rs 520 crore, a gain of Rs 66 crore.

DSP Merill Lynch has about 600 employees in India. Even after ceding the majority control, Kothari remained the face of the investment banking firm which went through testing times after Merril Lynch was brought to its knees due to losses emerging from the sub-prime crisis. “He was part of every big-ticket M&A transaction in India. He created many star investment bankers and brokers,” said a former DSP Merril Lynch official, requesting to be anonymous.
Once he ends his 25-year old association with DSP Merril Lynch, Kothari will pay more attention to the joint venture asset management business—DSP BlackRock. Kothari’s daughter, Aditi Kothari, is part of the management team that runs the asset management business. DSP tied up with BlackRock in January 2008.

Bank of America is now integrating its operations with DSP Merril Lynch. On March 4, Jayanti Bajpai was appointed as the Asia-Pacific head of the integrated entity as part of the restructuring