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HSBC To Acquire 73.21% Of IL&FS Investsmart In India

by Mary Swire, for, Hong Kong

21 May 2008

HSBC announced on Monday that through Group subsidiaries, it is to acquire 73.21% of IL&FS Investsmart Limited, a leading retail brokerage house in India.

Under the terms of the agreements, HSBC proposes to acquire a 43.85% stake from E*TRADE Mauritius Limited, an indirectly wholly-owned subsidiary of E*TRADE Financial Corporation, and an additional 29.36% from Infrastructure Leasing and Financial Services Limited (IL&FS). Both shareholders will receive a price of INR200 per share for their respective stakes, making a total consideration of INR10,225.5mn (approximately USD241.6mn).

In addition, IL&FS will be paid, as part of a three–year non-compete agreement, INR820.1mn (approximately USD19.4mn).

HSBC will also make an open offer to acquire up to 20% of the remaining shares in Investsmart.

Details of the open offer to Investsmart shareholders will be published in the Indian press and distributed to shareholders in accordance with local regulations.

Sandy Flockhart, Group Managing Director and Chief Executive Officer of HSBC Asia Pacific, exlained that:

"The acquisition of Investsmart is consistent with HSBC's stated strategy of investing primarily in faster growing emerging markets and India represents a high priority market for us."

"This investment is of strategic importance to HSBC as it gives us a foothold in one of the largest retail broking markets in the world. With over 20 million retail investors, India has the world's third largest investor base and its National and Bombay stock exchanges are respectively the third and fifth largest stock exchanges globally by transaction volume."

Stuart Gulliver, Chief Executive of Global Banking and Markets, added that:

"This acquisition fits with Global Banking and Markets emerging markets-led strategy and leverages HSBC's global distribution capabilities."

"We will benefit from an expanded institutional broking, equity capital markets and investment banking platform in a rapidly growing marketplace that offers great opportunity."

The agreement and open offer are subject to regulatory and other approvals.

With a market capitalisation of approximately USD300mn, Investsmart is listed on the National Stock Exchange and the Bombay Stock Exchange, and its Global Depository Shares are listed on the Luxembourg Stock Exchange.

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