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Stock broker SMC files for $20M public float, ‘blank cheque’ investor to part-exit

21 October, 2014

Delhi-based stock broking firm SMC Global Securities Ltd has re-filed its draft red herring prospectus (DRHP) with 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, whcih is already listed in regional exchanges, was 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.

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.

FPO snapshot

– Public issue to raise Rs 125 crore

– 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.

Use of FPO proceeds

– Rs 30 crore for margin maintenance with stock exchanges.

– Investments into subsidiaries, namely Moneywise Financial Services Private Limited (Rs 45 crore), and SMC Capitals Limited (Rs 5 crore).

Investors

Millennium India had invested Rs 164 crore in two SMC group firms—SMC Global and SAM Global Securities, in 2007, of which Rs 136 crore went to SMC Global. Pursuant to the merger of the two firms, it got more shares of SMC and its acquisition cost is pegged at Rs 103 a share.

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.

Business

The Delhi-based brokerage house is promoted by Subhash Aggarwal and Mahesh Gupta and has a presence in businesses like brokerage, investment banking, wealth management, distribution of third party financial products, research, financing, depository services, insurance broking and clearing services to corporates.

As of September 30, 2014, the company had a network of 50 branches including an overseas office in Dubai, UAE and 2,443 registered sub-brokers and authorized persons with a pan-India presence.

Financials

For FY14, SMC Global reported revenues of Rs 292.45 crore, up marginally from Rs 291.37 crore in FY13. Its profit grew to Rs 22.6 crore from Rs 19.8 crore during the same period. Brokerage and trading & commission based services derive almost equal halves of the company’s total revenues with the advisory services unit being a small part of the firm. 

(Edited by Joby Puthuparampil Johnson)


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Stock broker SMC files for $20M public float, ‘blank cheque’ investor to part-exit

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