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Feb, 23 2018

Federal Bank To Get 26% Stake In Equirus Capital

The Bank had agreed upon to merge investment banking arm of Enam Securities in a deal valued at a little over Rs 2,000 crore in 2010.

Private-sector lender Federal Bank has confirmed its interests in buying 26% stake in privately held investment bank Equirus Capital Pvt. Ltd for an unrevealed amount so as to surpass the traditional banking ideas and create additional revenue streams.

In a joint statement the two companies said, the “strategic” minority stake will help Kochi-based Federal Bank offer wealth management services to its high net worth and NRI (non-resident Indian) clients, financial solutions for capital markets, structured finance, capital market products, advisory, and others.

The statement further read the transaction would help shore up non-interest earnings for Federal Bank.

An analyst at a domestic brokerage wishing his name to be hidden said, “The thought process (for Federal Bank) is around diversifying. They’re seeing it from the perspective of value-unlocking and potential in the securities business. But it will take a lot of time before the transaction happens as contours of the deal are still not available,” The move comes at a time when large Indian lenders such as Yes Bank, Axis Bank, Kotak Mahindra Bank, and State Bank of India have spruced up their investment banking divisions to go head to head with foreign investment banks.”

The Bank had agreed upon to merge investment banking arm of Enam Securities in a deal valued at a little over Rs 2,000 crore in 2010. In 2012, the deal size was reduced to almost one-third by the lender to reflect changed market conditions, bringing down the value of the all-stock transaction to Rs 1,396 crore.

Commenting on the move of Federal Bank, its executive director Ganesh Sankaran said, “With a shift in client preferences, our foray into investment banking will help us participate in opportunities and instruments beyond traditional banking products.”

Ajay Garg, managing director and founder of Equirus Capital said, “With this relationship, we intend to expand our product offerings in debt, and leverage on Federal Bank’s extensive network and client base to enhance each of our business lines.”

Equirus Capital has so far handled 135 transactions worth $3.2 billion (Rs 20,801 crore) across mergers and acquisitions, private equity, initial public offerings, institutional placement, and structured financing. Besides, the company also offers depository services, portfolio management and research, apart from equity broking.

Emerging in 1931 as Travancore Federal Bank, the lender was renamed Federal Bank in 1947. The bank currently has 1,252 branches and 1,679 ATMs (automated teller machines) across the country.

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