Delhi-based stock broking firm SMC Global Securities Ltd has received the green signal from market regulator SEBI for its public issue to raise as much as Rs 125 crore ($20 million) by offering stake to the public through a mix of fresh issue of shares and a part-exit by the US-listed ‘blank cheque’ company Millennium Investment & Acquisition Company Inc (earlier Millennium India Acquisition Company, Inc).
SMC Global, which is already listed in regional exchanges, is looking to go public in a national exchange and had got SEBI nod to go ahead with the issue in May 2013, but the virtual shut down of the primary market halted the plan. SMC Global thereafter decided to withdraw its proposed IPO (technically a FPO as it is listed on regional bourses) extending the proposed public float deadline to March 31, 2015.
The proposed issue would test the market appetite for stock brokers. Several of them had floated their IPOs during the bull run. However, with the stock market tanking in the wake of the global financial meltdown in 2008 had sunk their share prices.
However, the surge of foreign investment in the Indian stock market has pushed share prices to a new high this year. This is expected to boost fortunes of brokerages.
Late last year, SMC Global promoters had bought back 1 per cent stake from Millennium for Rs 8.5 crore ($1.3 million) valuing the firm at Rs 848 crore or $138 million. Millennium Investment has the right to sell another 1 per cent for Rs 14 crore which could value SMC Global at around Rs 1,400 crore. It currently holds 13 per cent stake and is offloading a part of it through the IPO.
The issue involves fresh issue of shares to raise Rs 107 crore and an offer for sale aggregating up to Rs 18 crore by Millennium Investment and Acquisition.
ICICI Securities and Elara Capital are the book running lead manager and co-book running lead manager, respectively, to the issue.
Millennium India Acquisition was among the handful of special purpose acquisition companies (SPAC) or a ‘blank cheque’ firm which raised public money in the US and Europe to invest in Indian assets during the bull run of 2005-07.
This particular investment was at the peak of the bull market in 2007 after which valuations of broking firms tanked.
Apart from Millennium India, South Africa’s financial services major Sanlam and media group Bennett, Coleman & Company Ltd (BCCL) are also shareholders in the firm.
Sanlam had invested in the company by picking 5 per cent stake in 2008 valuing it at Rs 3,100 crore ($670 million back then). It hiked its holding in mid-2011, valuing the broker at over Rs 1,260 crore ($280 million), reflecting the drop in value.
At that time SMC had also bought back Sanlam’s 50 per cent stake in wealth management venture for Rs 30 crore ($6.7 million) and 61 per cent in asset management unit for Rs 22.6 crore ($5 million). Both these transactions were done at Sanlam’s original investment cost.