The investment banker could not be identified because he is yet to resign from his current position.
Sanju Verma, former executive director of HDFC Securities, along with a top investment banker have fully bought out Alchemy Shares & Stock Brokers, which was co-founded by big bull Rakesh Jhunjhunwala, in an all-cash deal inked on Tuesday.
The investment banker could not be identified because he is yet to resign from his current position.
The duo’s company, called Violet Arch Capital Advisors, is backed by one of India’s biggest and respected conglomerates and also by a top non-banking finance company that’s into infrastructure.
A boutique Wall Street investment bank will also be a stakeholder in the venture.
The acquisition runs counter to the trend in the broking business where volumes have taken a plunge. Globally, too, investment banks are scaling down operations.
Alchemy had announced shutting its institutional broking business on June 27.
Verma and partner approached Lashit Sanghvi, co-founder of Alchemy, after the announcement and “made an offer that was difficult to refuse”, sources said.
“Alchemy was making losses at the operating level and was offered a premium for the strength of its institutional empanelments and other legacy franchises and strengths.
Brokerages take a couple of years to get empanelled with institutions such as the Life Insurance Corporation which have massive equity dealings.
The bet at Violet Arch is that empanelments don’t disengage immediately after a brokerage goes belly-up. Violet Arch would revive these and also get heavily into investment banking and advisory, businesses where it sees great potential considering the kind of people running it,” said two sources familiar with the development.
The deal was sewn up in 45 days flat, one person said.
Sanghvi refused to comment, saying he’s attending a funeral.
Verma could not be reached for comment.
As the new managing director and CEO, Verma addressed a clutch of Alchemy staffers on Wednesday, assuring them of a brighter future.
Violet Arch will start with a significant capital base of Rs100 crore, “which leaves the company with ample stability for the next three years”, said a staffer at the brokerage who attended the introduction. He did not want to be identified.
But why is Violet Arch betting on broking in a bear hug?
“Their thesis is that this is a great time to buy because valuations are low and there is a a pool of broking talent available at a reasonable price,” said a market observer.
“ The problem with various teetering brokerages — and some that shut shop — is that they do not have the patience to ride out economic cycles. These guys are coming in very well-capitalised so they take that pressure out of the equation for a long, long time,” this person said.
Verma, who has been cited in Asiamoney listings, will head the securities business at Violet Arch while the unidentified investment banker-partner will handle mergers & acquisitions and other advisory activity.
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