Global online trading giant E*Trade Financial plans to sell its 40-odd per cent stake in Indian broking firm IL&FS Investsmart Ltd, sources told VC Circle. The NYSE-listed online broking company is reeling badly from the subprime crisis in the US, and the sell-off move in India is to at least partially offset the losses caused by the subprime worries.
The sources added that a bunch of private equity funds and strategic investors are in the race to pick up E*Trade’s stake. The names include usual suspects like Carlyle, Texas Pacific Group, and Blackstone. The sources added that Goldman Sachs and Lehman Brothers could also be in the reckoning, although they are also affected by the subprime crisis in the US.
E*Trade is the largest shareholder in IL&FS Investsmart with 40-odd per cent, while IL&FS holds about 29 per cent. Private equity fund SAIF Partners holds 12 per cent. E*Trade’s average acquisition cost of stake in IL&FS Investsmart is not known although their initial entry in the company was at Rs 50 a share, which went up substantially in the subsequent stake acquisitions. In October-November 2006, the company had acquired 20 per cent stake for Rs 290 crore (at Rs 210 a share), while the earlier stake had come at much lower price.
It’s not just E*Trade divesting stakes in India to offset the subrpime losses. Citi Venture Capital International recently sold a 40 per cent of its stake in Emaar MGF prior to the real estate firm’s IPO in a move to shore up capital for the parent Citigroup. Citi Venture’s India chief Ajay Relan was also quoted as saying: “It makes sense to sell proprietary investments when the parent company is in need of capital.”
General Electric is also selling a strategic stake (probably majority) in its Indian personal finance provider GE Money.

Posted on 01/31/08, 10:23 AM
in: Capital Markets, Deals, Mergers & Acquisitions, Private Equity
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