After months of negotiations and speculation the deal is finally through. Aditya Birla Group has picked up 56% stake in Chennai-based Apollo Sindhoori Capital Investments (ASCIL) for $45.5 million (Rs 199 crore). The stake has been bought from the Reddy family, who are also promoters of Apollo Hospitals. The Reddy family is exiting from ASCIL as a part of its strategy to divest its interests in non-core businesses, but will continue to hold 10% stake in the entity. Also the deal will trigger an open offer, in which Aditya Birla Group Stands to acquire 20% more stake, taking its holding to 76%.
The AB Group is paying a price of Rs 64 per share for this deal, which is a 21% premium over ASCIL’s closing price of Rs 52.9 yesterday. The open offer is expected to be around Rs 68 per share.
The deal marks big bang entry of Aditya Birla group into the broking business. ASCIL brings a network of 760 branches, out of which 190 it owns and other 570 are franchisees. It also brings 10 years experience in the broking business and over 150,000 clients. AB Group, with its financial muscle, can also infuse more capital to expand the brokerage operations.
The deal marks an re-entry of AB Group in the brokerage business. Birlas had exited the stockbroking business by selling their stake in Birla Sun Life Securities, a joint venture between the Aditya Birla group and the Sun Life Group of Canada to the JV Gokal Group. This company was renamed as Brics Securities, which was sold to Lehman Brothers in 2007.
The acquisition of Apollo Sindhoori fits in very well with the groups plan of building $10 billion financial services empire. The group is plan is planning everything under the sun for this business- from stock broking to consumer finance, from life and non-life insurance to private equity.
Last year the group appointed Ajay Srinivasan as Chief Executive to spearhead the financial services arm. Since then the AB Group has built up a team for its financial services. It has hired Ajay Kakar, as Chief Marketing Officer from Reliance Capital. Then it has also hired Pankaj Razdan, who was with ICICI Pru Asset Management, as Deputy CEO for financial services and G V Gopalakrishnan as COO, who was earlier in HDFC Bank.