Edelweiss Financial Services Ltd has agreed to acquire Religare Enterprises Ltd’s retail broking business, the two companies said on Wednesday.
Mumbai-based Edelweiss said in a stock-exchange filing its wealth management unit will buy Religare Securities Ltd, Religare Commodities Ltd as well as depository participant services.
Separately, in an investor presentation, Edelweiss said the actual payout is likely to be around Rs 250 crore ($39 million). It said that it has agreed to pay a premium of Rs 125 crore over the adjustable tangible net worth of the target assets. The net worth is estimated at Rs 125 crore.
Edelweiss is acquiring the business through its entities Edelweiss Broking Ltd and Edelweiss Comtrade Ltd, Religare said in a disclosure.
The announcement comes more than six months after VCCircle reported that Edelweiss was the frontrunner to purchase Religare Securities.
Edelweiss said it will take on the pan-India distribution of around 1,250 points of presence including over 90 branches, more than 1 million clients and the employees of Religare Securities and Religare Commodities.
The acquisition is subject to receipt of requisite regulatory clearances and fulfillment of certain terms and conditions. The deal is expected to be completed by 15 March 2018.
“The complementary nature of Religare’s business to our wealth management platform made for an attractive choice, as it expands our offering and supports our growth plans,” said Nitin Jain, CEO, Global Wealth and Asset Management, Edelweiss Group.
“The acquisition of Religare’s business helps us expand our geographical reach and distribution footprint, while almost trebling our client base,” said Rahul Jain, head of Personal Wealth Advisory at Edelweiss Global Wealth Management.
In 2016-17, Religare’s retail broking business posted revenue of Rs 412 crore. The business contributed about 10.7% to the consolidated revenue of Religare Enterprises.
Financial conglomerate Edelweiss group offers loans to companies and individuals as well as mortgage finance and a range of services including commodity and stock broking, corporate finance, wealth management, financial products distribution and alternative asset management.
In a bid to expand its retail brokerage business, Edelweiss had acquired Ahmedabad-based brokerage firm Anagram Capital for Rs 164 crore in an all-cash deal in 2010.
Religare Enterprises, controlled by brothers Malvinder and Shivinder Singh, has sold many of its units and businesses over the past two years.
The divestments are a part of its consolidation and restructuring strategy, under which the diversified financial services company has wrapped up its global operations and aiming to focus on the India businesses. The promoters are separately also trying to bring investors for its other flagship business, the hospital chain Fortis.
Earlier this year, as first reported by VCCircle, Religare had sold its wealth management business to Mumbai-based Anand Rathi Group.
More recently, it sold unit Religare Health Insurance Company Ltd to a consortium of investors led by private equity firm True North Managers LLP. It also wound down its investment banking division, Religare Capital Markets Ltd.
In April 2016, Religare had said it would sell its US private equity and venture capital management arm Northgate Capital to London- and Dubai-based private investment firm The Capital Partnership (TCP). The same month, it had also exited Landmark Partners, another US-headquartered private equity fund house.
In August last year, Religare sold its real estate private equity arm, Cerestra Advisors Ltd, to TCP for an undisclosed amount.
In November 2015, it sold a majority stake in its Indian asset management joint venture, Religare Invesco Asset Management Company, to foreign partner Invesco Ltd.
Besides, Religare sold its stake in the life insurance joint venture with Bennett Coleman and Co Ltd, the media conglomerate better known as the Times Group, and foreign partner Aegon.
It is also engaged in talks to sell its core business of lending. As reported by VCCircle, Religare Finvest, the NBFC arm of Religare, had received bids from its peers such as Clix Capital, Edelweiss Financial Services Ltd, JM Financial and Essel Finance for a potential acquisition. The NBFC had also elicited interest from bigwigs in the private equity space, such as Standard Chartered PE, TPG and Actis.
Retail broking industry
The retail broking industry in India is highly fragmented, featuring several national players, including some private banks’ arms, besides a host of sub-brokers. The larger players in the business include ICICI Direct, Sharekhan, Angel Broking, Motilal Oswal, Edelweiss, IIFL, Asit C Mehta, Anand Rathi, Kotak Securities, HDFC Securities, Reliance Money, Indiabulls and Karvy.
The rise in stock markets, following the victory of the Narendra Modi-led BJP in general elections three years ago, buoyed the prospects of stock-brokers.
Last year French banking major BNP Paribas completed a deal to buy Sharekhan.
*This article has been updated to include the estimated deal value.