Lehman seen close to buying 51% in Brics Sec

Lehman Brothers, one of the biggest global financial services providers, is in advanced stages of picking up a 51% controlling stake in local securities firm Brics Securities. The Wall Street major will scale up its stake in the Mumbai-based brokerage firm to 100% over the next three years, if the deal goes through, according to sources close to the development. They said Lehman is picking up a stake in Brics Securities which is the financial services arm of the JV Gokal Group. It was created in October 2003, following the acquisition and rechristening of Birla Sun Life Securities — joint venture between the Aditya Birla Group and Sunlife Group of Canada. The Mumbai-based brokerage has a retail and private client business. It offers portfolio management services, besides distributing third-party products. It also has an NBFC licence, which currently does lending against shares, albeit in a small way and a commodities broking business. However, sources said this business would not be a part of the deal. Brics focuses mainly on institutional broking which makes up for a bulk of its revenues. Lehman Brothers, however, declined to comment on the transaction. Currently, employees of Brics have a stake of close to 15% in the company. Key staffers of the company have been seeking a higher share in the deal. However, the deal is being structured in a way that the employees will get part of the profits now, and will stand to rake the benefits over the next three years. An in-principle approval between both firms for the buyout is said to have been reached, sources quoted above said. The transaction size of the deal is likely to be much less than Rs 200 crore reported earlier. Recent deal valuations for brokerage deals include Rs 150 crore by IDFC for an additional 33% stake in SSKI which valued the firm at Rs 456 crore and the JM Financial and ASK deal where JM paid Rs 58.14 crore for a 60% stake in the institutional brokerage. The proposed arrangement envisages the acquirer-fixing targets to be achieved by the firm in the course of the next three years. Foreign players have been targeting existing brokerages not only for the client base, but also for the existing talent pool. With a host of international majors looking at expanding operations in the country, there has been shortage of experienced professionals in the financial sector. Lehman, which entered the country late last year, already has a merchant banking licence and a primary dealership.