Infrastructure Leasing and Financial Services (IL&FS) is in tentative talks to sell a controlling stake in its capital markets arm. The infrastructure developer and financier is looking for Rs 600 crore for its 80% stake in IL&FS Securities Services, which offers derivatives clearing and settlement services to as many as 1,000 stock brokers. Among those contacted for the sale are said to be US based funds services and investment management giant State Street Corporation and the growth capital arm of private equity fund Carlyle. Avendus Capital is authorized to arrange a possible sale.
On the talks of the sale, IL and FS share price surged over 12% intraday and traded at the intraday high of Rs. 49.45 on the NSE.
Japan’s Orix Corporation, a shareholder in the parent company, holds about 5% stake in the securities services business. Croupier Prive, a US-based fund, has a 5% stake. The outstanding shares are held by the IL&FS Employee Welfare Trust.
The sale is not certain yet and the company has denied commenting on speculation. Orix declined to comment and Croupier Prive could not be reached for comment. The proposed sale is in accordance with the IL&FS strategy to divest non-core assets and ‘recycle’ capital into its core infrastructure business. IL&FS sold its fiduciary services business housed in IL&FS Trust Co. to Hong Kong’s Vistra Group for an undisclosed sum earlier this year. IL&FS Securities Services reported the revenue of approximately Rs 320 crore and profit before tax of Rs 70 crore in the year to March.
Meanwhile, the stock closed at Rs. 47.10 with the rise of 6.19%
The bulk of the revenue was extracted from clearing and settlement of derivative trades, though it also provides other services including electronic storage and safekeeping of securities, securities lending and borrowing and loans against shares to its customers. It has a revenue-sharing understanding with its parent for the lending business.
Average daily turnover in equity futures and options segment on NSE amounted to over Rs 2 lakh crore in FY15. Fees for clearing and settlement services are connected to the value of transactions processed. IL&FS recently announced it would raise Rs 5,000 crore through various group entities via rupee denominated bonds over the next six months.
IL and FS is one of the top 500 shares for the quarter by Dynamic Levels. For the details on the stock, visit IL and FS share price history page on the website of Dynamic Levels.
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