Petrodollars flow into brokerages

Oman firm’s stake buy in Almondz one among a slew of deals

MUMBAI: There’s no dearth of petrodollars and they are increasingly flowing into Indian brokerages.

On Thursday, BSE-listed Almondz Global Securities announced that it has made a preferential allotment of 14.99% to Oman-based private equity firm Al Anwar Holdings.

The stake, bought at Rs 85 a share, gives Almondz an enterprise valuation of Rs 232 crore.

“Though they are financial investors, our impression is that they are here for the longer term, wanting to partner with us and gain a strong foothold in the Indian market,” said Vinay Mehta, managing director and chief executive officer of Almondz Global Securities.

This is just one in many transactions that have taken place this year, involving a Gulf-based investor and an Indian stock broking unit.

In April, BankMuscat, again from Oman, and with assets of over $7.7 billion, had acquired 43% in the holding company of the Mangal Keshav Group, primarily into equity broking.

“Since we had a presence in commercial banking in India through our investment in Centurion Bank of Punjab (21% stake), we were exploring opportunities in other segments of the financial services sector.

Mangal Keshav would be our vehicle for exposure to the growing Indian securities market,” AbdulMalik bin Abdullah Al Khalili, chairman of BankMuscat had told a financial daily then.

This fund infusion from Gulf-based investors is being used by Indian brokerages primarily to expand local branch network and meet working capital requirements.

For example, when BankMuscat took a stake in Mangal Keshav, the latter had 20 branches and 220 franchisees with a client base of 35,000.

Today, according to Paresh N Bhagat, chairman of managing director of Mangal Keshav Securities, his branch network has expanded to 40 and franchisees to 380.

“Currently we have 24 branches across 18 centres. We hope to take this up to 200 centres over the next 18 months,” adds Mehta of Almondz Global Securities, when asked what he hopes to do with the funds.

Even smaller broking firms, such as Kochi-based Select Securities, have seen fund infusions from the cash-rich Gulf.

In May this year, the Doha Bank of Qatar bought a 49% equity stake in the company for an undisclosed sum.

Local broking firms are also looking to piggyback on their Gulf partners to open their account in the Gulf region.

“I would say that more than 50% of Gulf NRIs’ savings are channelled towards India,” says K Venkitesh, national head of distribution at Geojit Financial Services. This being the case, it would make ample sense for these local broking outfits to reach out to the Indian diaspora in these countries.

Geojit has a long-going relationship with Barjeel of UAE.

Operating as Barjeel Geojit Securities, it has been catering to the needs of the NRI investor since 2001. “We are also in the process of partnering with Aloula of Saudi Arabia,” said Venkitesh.

Meanwhile, Bhagat of Mangal Keshav says that though his partnership with BankMuscat is flourishing, his branch opening plans in the Gulf have not gone according to plan.

“When we got the investment, we thought we would expand rapidly into the region. But unfortunately, we haven’t been able to find enough people with the right expertise who are willing to settle down in the Gulf and help us set up,” he said.

Therefore, he has only been able to open one branch in Muscat, as opposed to the initial plans of covering the whole of Oman, Saudi Arabia, Bahrain and UAE.

The price paid for the latest transaction - that of Al Anwar Holdings buying into Almondz - was arrived at by taking into account the valuation of the equity broking arm of the group, Almondz Capital Markets Pvt Ltd, which will get merged into Almondz Global Securities (AGS) in the next couple of months.

AGS is currently involved only in investment banking and third-party distribution of financial products.