Baring Private Equity Partners (India) Ltd is taking complete control of Kochi-based brokerage firm JRG Securities. The private equity firm has recast the broker's management, with original promoter managers stepping down from executive positions and the company board. Baring has appointed Gaurav Soni, currently CFO of JRG, as a Managing Director. Soni was earlier with Ernst & Young.
Baring had acquired management control of JRG Securities with a majority stake of 46% in October 2007.
JRG has applied to stock exchanges for declassification of the promoter group, the company said in a filing to BSE. This would mean that now Duckworth Ltd, a wholly owned subsidiary of Baring, would now be the only promoter firm.
The original promoters like Regi Jacob, Giby Mathew, Jiji Antony would cease to be classified as promoters. The firm has appointed Pradeep Mallick, former chairman of CII Western Region, as an independent director. The other independent directors on company board are T M Venkataraman (ex-chairman of Dhanalakshmi Bank) and lawyer BR Menon. Baring chief Rahul Bhasin is the chairman.
The original promoters have also stepped down from their executive posts and will now have one seat on the board. Jacob has stepped down as the managing director, but he will continue to be on the board. Mathew has also stepped down has an executive director, while Antony had moved out of the board when Baring invested.
"One of the things we are doing now is getting a complete set of management professionals," Munish Dayal, Partner at Baring, told VCCircle. JRG has also hired eight management executives from IIMs and FMS this year to professionalise the broking firm.
Warrants Out, Open Market In
Baring had also subscribed to 1.33 crore warrants in the firm at the time of stake acquisition. These warrants, which were to be converted at Rs 48 per unit for a share, expired on April 29, 2009. The stock closed at Rs 27.5 today. Baring is not looking at another warrants issue in the immediate future, said Dayal, who also sits on the board of JRG.
On the other hand Baring has picked up an additional 2% stake in the firm through open markets since December last year. When asked if Baring plans to continue increasing its stake in JRG through open markets, Dayal said: "Whatever opportunity possible, we will increase our stake, whether it is infusion of more capital or secondary markets."
Revenue Diversification
Brokerages around the country, once a favourite sector among PE investors, have suffered due to the equity market meltdown. Though it's also hit, JRG has is undertaking expansion of its revenue streams. JRG plans to be a diversified financial services company instead of just an equity brokerage, said Dayal. It also has a wealth management arm.
Besides equity broking, JRG has built up broking business in commodity and insurance in last one year. It has also incorporated an NBFC which provides services like margin finance and loans against shares, said Dayal. Another offering just started is gold loans - loans to buy gold.
JRG is now looking to expand the reach of these product offerings. The company targets retail investors in South India and parts of Maharashtra. JRG has also built up online trading platform, I Trade, and plans to invest there also. "It is among the best internet broking products in the market," claims Dayal.