HSBC Holdings Plc plans to buy 73.2% of IL&FS Investsmart Ltd, an Indian brokerage, for 10.03 billion rupees ($235 million) to tap the world's second fastest growing major economy.Europe's largest bank by market value will acquire 43.85% from a Mauritius-based unit of E*Trade Financial Corp and the rest from the Indian brokerage's founder, Infrastructure Leasing and Financial Services Ltd, for 200 rupees ($4.7) a share, Bloomberg News reported.
“India presents a huge scope for its large savings to be invested in equities, debt and commodities,” said Dipak Acharya, who helps manage the equivalent of $22 million as a fund manager at BOB Asset Management Co in Mumbai.
Economic growth that has averaged 8.7% since 2003 is boosting incomes of individuals and companies in India, fueling investment in shares, bonds and mutual funds.
Asia's third-biggest economy has more than 20 million retail investors and the country's two main stock exchanges are the world's third and fifth-largest by transaction volume, said Sandy Flockhart, HSBC's chief executive officer for Asia Pacific.
“This investment is of strategic importance to HSBC as it gives us a foothold in one of the largest retail broking markets in the world,” Flockhart said.
HSBC will also make an offer to buy an additional 20% from other shareholders.
The number of Indians with financial assets of more than $1 million rose 20% last year to about 100,000, according to a survey by Merrill Lynch & Co and Cap Gemini SA. “Good revenue can be generated by tapping affluent Indians locally and overseas,”' said Acharya. “Just about 4% of India's savings goes into equities.”
The National Stock Exchange has terminals spread across 1,486 locations in India.
The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, has climbed sixfold in the five years through 2007, according to data compiled by Bloomberg.
HSBC also plans to sell life insurance in the South Asian country through a joint venture with state-run Canara Bank and Oriental Bank of Commerce.
The United Kingdom bank's profit increased 17% in the second half of the year ended December as growing business in emerging markets helped it offset United States subprime losses. (Xinhua)