India Infoline catapults into an uncharted territory

India Infoline has done a deal which is often unheard of in Indian corporate boardrooms. The result was everyone to see as the stock rocketed to its lifetime high of Rs. 669.00 up over 49% of its previous close (since the stock is in F&O, there are no circuit filters attached). Its FY07 results were also above street expectations, as revenue rose 95% to Rs 425 crore, and net profit up 54% to Rs 75.66 crore. The market share on the NSE was 2.4% through its online broking site 5paisa.com.

In a major blow to French investment bank CLSA, India’s largest foreign broking house, four of its top management team comprising of Director-Sales Asia region, India Head, head research operations and charge of sales in India, have quit and joined India Infoline. 2 officials receive warrants worth Rs. 110 crore each while other 2 get Rs. 88 crores warrants each, along with a combined sign-on bonus of Rs 44 crore. The company also approved raising Rs. 484 crores, and thus the 4 ex-CLSA official would hold 17% post-diluted equity.

CLSA is known for having among the best analysts in Asia-Pacific giving high-quality India centric research. The four officials poached were instrumental in making CLSA Securities a dominant player among institutional broking houses in the late 90s. Foreign investment banks usually hire from India, giving a chance to Indian to be a part of global firm and chart a career path, but the tides have turned and the ability of Indian companies to attract top-notch talent shows the strength in Indian economy and gives opportunities for Indian as well as foreign firms to rise.

India Infoline’s current products include equities, derivatives and commodities trading and portfolio management services, but in a bid to grow and strengthen itself, it is venturing into investment banking, institutional equities, asset management and expanding its international business. For this, it needed top-quality management and research strength, and thus offered ’shared ownership’ concept to professionals with an entrepreneurial zeal.

Last week, JP Morgan poached six new members for its equity and sales team from its rival firms such as Lehman Brothers, DSP Merrill and ICICI. Now, only future will tell how well the company performs under its growth path without putting a strain on its valuation and equity-dilution.