Carlyle/India Infoline

Carlyle ups stake in India Infoline

US private equity firm Carlyle increases its stake in Indian broker India Infoline to 9% and negotiates a board seat.

The Carlyle Group has increased its stake in India Infoline Group to 9% through secondary-market purchases. The US private equity firm did not disclose how much it has paid for the shares.

A Carlyle spokesperson confirmed that Carlyle had been accumulating shares since the summer. Based on the market price at which India Infoline shares have traded on the stock exchange this year, Carlyle would have shelled out around $50 million.

Devinjit Singh, Carlyle

India Infoline is a Mumbai-based retail and institutional brokerage that was founded by two professionals, Nirmal Jain and R Venkatraman in the 1990s. It has twice won FinanceAsia’s best country broker award, in 2008 and then again this year. It offers broking services to more than a million clients, through over 3,000 locations across 500 Indian cities. India InfoLine also has offices in Colombo, Dubai, New York and Singapore. It was the first Indian broker to become a broking member of the Colombo and Singapore exchanges. India Infoline also has three subsidiaries in the business of credit and finance, wealth management and global advisory services.

"Carlyle is a marquee name and one of the largest global private equity funds," said Jain to FinanceAsia yesterday. "It will help us due to its network and relationships. The investment enhances our credibility and is a vote of confidence in our business model."
Carlyle has five major investments in the financial services industry in the region, including one in the Housing Development Finance Corporation (HDFC), India’s leading housing finance company. Carlyle invested $650 million in HDFC in 2007 to buy a 5.6% stake in HDFC at a price of Rs1,730 per share.

“[India Infoline] has built a leadership franchise with a nationwide distribution network in equity brokerage, insurance distribution and wealth management,” said Devinjit Singh, managing director of Carlyle in a written statement. “We are particularly impressed by their ability to attract and groom management talent.”

Singh refers to an interesting competitive advantage India Infoline enjoys: the ability to entice people through offering shared ownership. In 2008 India Infoline lured on board four senior CLSA bankers, offering them an ownership stake in the Indian firm and a mandate to strengthen its offering. Apart from an $11 million sign-on bonus, the four got warrants that when exercised would have increased India Infoline’s equity base by up to 15%.

Carlyle will have the right to nominate one director on India Infoline’s board. A Carlyle spokesperson clarified that a Carlyle managing director, Sunil Kaul, will be joining the board.

Earlier this year Rajeev Gupta, who was the head of Carlyle’s buyout team for India, resigned. He had been with Carlyle since 2005. At the time some media speculated that Gupta was frustrated by the slow pace of private-equity investing in India. The only deal Carlyle closed during Gupta’s tenure was the investment in HDFC. But other media have reported that Gupta will be joining Hemendra Kothari in an entrepreneurial venture. Kothari was the joint-venture partner of Merrill Lynch in India and then he exited his stake to the US investment bank for $500 million in 2005. Gupta was head of investment banking for Merrill Lynch in India when he resigned to join Carlyle and has a long working history with Kothari.

A Carlyle spokesperson clarified that Gupta has not been replaced. Singh, who joined Carlyle in 2008 from Citi, is based in Mumbai. Kaul, who also joined Carlyle in 2008 from Citi, focuses on Carlyle’s investments in financial services companies, based out of Singapore. Carlyle did not work with an adviser on the investment, it said.

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