Veteran Dalal Street broker seeks to sell stake

An old-school brokerage which remained in private hands even as its peers took the listing route is now looking to sell a partial stake in its business and has held preliminary discussions with potential buyers.

KR Choksey Shares and Securities has been in touch with domestic and foreign brokerages in relation to the matter, according to sources.

Among others, it has held talks with a diversified financial services company and another brokerage promoted by a large corporate entity in the past few months.

A foreign firm looking to establish a foothold in India has also been doing the rounds.

The company denied talks of divestment.

"We have not been in touch with anyone for a stake sale,” said Deven Choksey, managing director at K R Choksey Securities.

“This is not a market in which consolidation can occur. This is not an industry where people have developed their own niche, nobody offers differentiation. Everyone has a trading desk, an advisory and so on,” he added.

The deal could be held up due to valuation issues, according to sources. Although exact figures sought by KR Choksey could not be determined, valuations have been muted for the segment as a whole due to lower profitability.

The brokerage industry has been under pressure as participants shifted towards the derivatives market, especially options, which is a less profitable segment for brokerages. Derivatives accounted for 89.88% of the average daily turnover on exchanges in May, from 70.6% two years ago.    

Brokerage profits have been hit despite average daily volumes rising from `8,6918 crore to Rs.1.31 lakh crore over the last two years.

KR Choksey, which was founded in 1979, has memberships in the National Stock Exchange and the Bombay Stock Exchange in avenues like equity trading and derivatives trading. It also has commodities trading memberships in commodity exchanges. The company is present in 175 locations spread across 70 cities, according to its website.

The company has expressed an interest in setting up joint ventures in India and abroad. It has also announced plans to enhance its institutional desk and launch an initial public offer.