ICICI, Reliance Cap look at $3.5 bn brokerage buy

ICICI, Reliance Cap look at $3.5 bn brokerage buy
BS Reporter / Mumbai March 11, 2011, 0:44 IST
ICICI Bank, the country’s largest private sector lender, and the Anil Ambani Group are looking at CLSA and Cheuvreux, the broking franchises of French financial conglomerate Credit Agricole, according to international media reports. Both franchises put together may be valued at $3.5 billion.

French paper La Tribune said a deal would be likely if Credit Agricole’s partnership talks with Citic Securities, China’s largest securities firm by market cap, failed.

In December, Citic and Credit Agricole’s Corporate & Investment Bank extended the deadline for exclusive talks for a 50:50 joint venture to June 30 from December 31. In May, the two had signed a memorandum of understanding to merge their global equity businesses.
Credit Agricole, however, maintained that talks with Citic were progressing well but the two sides were yet to reach an agreement. A spokeswoman for Credit Agricole, France’s third-biggest listed bank, said it did not comment on rumours and speculation. Both ICICI Bank and Reliance Capital spokespersons said, “We do not comment on speculative reports.”

Citic, too, maintained the talks were on. “The negotiations are progressing well. An agreement is yet to be reached. It’s inconvenient for the company to disclose any information at this moment,” Joyce Ho, the director of corporate relations at Citic Securities, told international news agencies.

It is still not clear if both the franchises will be sold together or in parts and if the potential Indian suitors will only be interested in CSLA Asia.

CLSA Asia-Pacific Markets is one of Asia’s leading independent brokerage and investment group which provides equity broking, capital market, merger and acquisition, and asset management services to global corporate and institutional clients. Analysts estimate CLSA’s India top line at Rs 400 crore, with a profit before tax of Rs 200 crore. India contributes 30-35 per cent of CLSA’s total revenue.

Cheuvreux, a subsidiary of the Credit Agricole Group, is a leading European equity broker.

ICICI Securities, the broking arm of ICICI Bank, is one of the largest equity broking houses in the country. In 2009-10 (April-March), ICICI Securities handled 16 issues, which raised Rs 23,000 crore, or 23 per cent of the aggregate funds raised that year. Besides India, the company has offices in Singapore, Oman and the US.

Reliance Capital, a non-banking finance company, had a net worth of Rs 8,126 crore ($2 billion) and assets of Rs 30,393 crore ($7 billion) as on December 31, 2010.

Analysts, however, said growth in the secondary broking business was under pressure, with competition and reduction in the fee pool. “With exchange-traded funds expanding operations and direct market access catching on, the commission has come down an average of 20-30 bps to 5-10 bps for foreign brokerages,” said a senior executive of a foreign brokerage.

ICICI Bank shares closed at Rs 1,014.55 on National Stock Exchange on Thursday, down 2.1 per cent. Reliance Capital closed at Rs 528.10 on NSE, up 4.5 per cent from yesterday’s close.