Beleaguered discount brokerage E*Trade says it is selling its stake in Indian firm IL&FS Investsmart to HSBC, in a deal that is expected to raise $145 million.
E*Trade's wholly owned subsidiary E*Trade Mauritius has signed a definitive agreement with the HSBC to sell all of its 43.85% stake in the Indian brokerage for Rs200 per share. E*Trade says the sale will yield approximately $145 million of proceeds and result in a pre-tax gain of approximately $20 to $30 million.
Donald Layton, chairman and CEO, E*Trade says the sale is "part of our previously-announced plans to efficiently monetise our non-core assets to re-build our capital position".
The struggling broker said in January it would dispose of non-core assets and cut costs by $360 million during the year after posting a massive fourth quarter net loss of $1.7 billion compared with net income of $176.9 million a year earlier.
In addition to the E*Trade stake, HSBC says it will acquire an additional 29.36% shareholding in the Indian unit from Infrastructure Leasing and Financial Services Limited, which founded the business.
HSBC will also make an open offer to acquire up to 20% of the remaining shares in Investsmart.
Sandy Flockhart, group MD and CEO, HSBC Asia Pacific, says the acquisition of Investsmart is consistent with the stated strategy of investing primarily in faster growing emerging markets.
"India represents a high priority market for us. This investment is of strategic importance to HSBC as it gives us a foothold in one of the largest retail broking markets in the world," adds Flockhart.