Another local brokerage bites the dust – Standard Chartered laps up UTI Securities

London based and emerging markets focused bank Standard Chartered Plc. has acquired 49% stake in Securities Trading Corporation of India (STCI) owned UTI Securities, having 170 branches across India, for Rs. 140 crores valuing the company at Rs. 285 crores. Stanchart would increase its stake to 74% next year and the remaining 26% in 2009.

UTI securities was acquired by STCI, a primary dealer in Government securities corporate bonds, from the erstwhile Unit Trust of India for Rs 265 crore in February 2006 and was allowed to use the UTI brand for two years. Standard Chartered is returning to retail stock broking in Asia for the first time in more than a decade.

Standard Chartered joins a list of foreign players, including Citigroup, Merrill Lynch and BNP Paribas that have invested in India’s fast-growth brokerage sector as the stock market booms. The country’s stock market has risen nearly sevenfold over the past 5 years, having market-cap of about $900bn today, thus attracting the attention of foreign brokerages. India also has around 83,000 millionaires with combined wealth of $290 billion, and there is an apparent surge in prosperity among India’s emerging middle class.

Inorder to complement the private banking business, Standard Chartered has been investing heavily in its wealth management business, which it sees central to its efforts to boost organic growth. Sources say that UTI Securiteis’ existing wealth management business, catering to individuals with investable assets of below $1 million, is growing strongly. Thus this would health Stanchart to expand services for wealthy customers in India, a fast-growing private banking market.

Stanchart could now provide broking services to its clients, and provide a separate platform for distribution of Mutual Funds and other investment products of different fund houses.  This would augment the existing activities of merchant banking, portfolio management, underwriting IPOs and advisory services.