Standard Chartered Bank Mauritius has decided to exercise the option to raise its stake in UTI Securities to 74 per cent and is also conducting a rebranding exercise for the financial services company.
Last year, the London-headquartered bank had bought a 49 per cent stake in UTI Securities from the Securities Trading Corporation of India for Rs 147 crore. The bank retains the option to raise the stake to 74 per cent this year and the remaining shares by 2010.
"We hope to increase our stake, in line with the agreement, by the end of the year," Neeraj Swaroop, Standard Chartered Regional Chief Executive, India & South Asia, told Business Standard.
UTI Securities was valued between Rs 300 crore and Rs 350 crore, but given the current market volatility, the valuation may not have increased. Both parties are close to completing the formalities. Standard Chartered has already nominated its nominees on the board.
In line with the current foreign investment norms, the bank will also pump in $50 million as additional capital over and above the amount to be paid for the purchase of additional stake.
While the company has been renamed Standard Chartered-STCI Capital Markets to reflect the change in ownership, the retail brand is called Standard Chartered Wealth Managers. The company will be ready to launch its "3-in-1 account" (trading, demat and savings account) by mid-September.
In its earlier avatar, the company offered online broking, offline broking, distribution, investment banking, fixed income and institutional broking. "We are re-orienting the entire team," said P R Somasundaram, managing director, Standard Chartered-STCI Capital Markets. The company in its new avatar has strengthened the risk management platform significantly and has also expanded the team from seven members to 30 members.
Standard Chartered-STCI Capital markets may also look at setting up a non- banking financial company or tying up with one to offer loans against shares. The company is also readying to offer currency futures, which begins on August 29.
The company will also focus on mid-market clients through its investment banking division and is in the process of expanding the research team for both institutional and retail broking business. However, the company has decided to go slow on the portfolio management services-side of the business for the present.
As for the commodities business of UTI Securities, the company has retained all the people even though it has been sold to STCI as part of the regulatory condition of RBI when it approved the 49 per cent stake.
"We retain the capability, if the policy were to turn favourable to foreign investment," said Somasundaram. Current Reserve Bank of India guidelines do not permit foreign entities to venture into commodity broking.