Stock, commodity and currency broking services company Angel Broking Ltd has received regulatory approval to float an initial public offering (IPO). The clearance comes shortly after the Mumbai-based broking firm settled a case with the capital markets watchdog.
The Securities and Exchange Board of India (SEBI) issued final observations on Angel Broking’s IPO proposal on 26 July, according to information on the regulator’s website.
Angel Broking, which counts the World Bank’s private-sector investment arm International Finance Corporation (IFC) as its backer, is the 18th company to receive regulatory clearance this year to float an IPO. SEBI had approved 72 IPO proposals last year and 46 in 2017.
The company had filed for its IPO on September 5 last year. However, it was facing hurdles for alleged violation of the code of conduct for stock brokers. Angel Broking allegedly misuse and failed to settle active clients’ funds and didn’t settle accounts of inactive clients during September and October 2016.
Angel Broking settled the case with SEBI by paying Rs 32 lakh in fine through the consent mechanism. Under SEBI’s consent mechanism, a person or a company can settle minor market infractions by paying a monetary penalty, without admitting or denying the findings of fact and conclusions of law. The case was settled on July 22.
IFC is looking to partially exit its 12-year investment in Angel Broking via the IPO.
The IPO comprises a fresh issue of shares worth Rs 300 crore and an offer for sale of an equal amount by the company’s promoters and IFC, which will pare one-third of its stake.
Angel Broking’s total IPO size is Rs 600 crore ($84 million) for a roughly 24% stake dilution on a post-issue basis, according to its draft red herring prospectus). This values the company at an estimated Rs 2,500 crore.
VCCircle had reported in April about Angel Broking's IPO plans and shortlisting of merchant bankers.
IFC had picked up a 12.5% stake in Angel Broking in 2007 for Rs 150 crore. The deal valued Angel Broking at Rs 1,200 crore then. Angel Broking used the funds for branch expansion and starting insurance distribution, according to a 2007 Mint report.
IFC now holds 12.92 million shares, or a 17.96% stake, in the company, as per the draft prospectus.
An IPO and a subsequent listing will see Angel Broking join listed peers such as Edelweiss Financial Services Ltd, Motilal Oswal Financial Services, JM Financial Holdings, IIFL Holdings Ltd, Centrum Capital and Emkay Global Financial Services Ltd.
ICICI Securities, Edelweiss Financial Services, and SBI Capital Markets are the merchant bankers managing Angel Broking’s IPO.
In March, ICICI Securities launched its maiden public offering but received a weak response from retail investors and wealthy individuals. This forced ICICI Bank Ltd, the parent company, to trim the issue size. The broking firm made a disappointing debut with its shares falling 14% from the issue price.
Angel Broking was established by Dinesh Thakkar in 1987 as a stock broking firm before being incorporated as a financial services company in 1997. Thakkar, in his individual capacity and also with his family members, owns about 50% stake in the company.
The firm is a member of the BSE, National Stock Exchange, Metropolitan Stock Exchange of India Ltd, and commodity bourses Multi Commodity Exchange and National Commodity and Derivatives Exchange.
It offers equity and commodity broking services besides providing currency trading services, wealth management and portfolio management among a host of financial markets solutions.
The Mumbai-based company operates through nearly 11,000 sub-brokers across 110 branches in 1,800 cities and towns in India. The firm caters to over 11 lakh active clients.