HSBC's retail broking unit to exit merchant banking business

HSBC Holdings’ retail broking unit said it would stop merchant banking operations to focus on securities services for retail and corporate clients.

The unit of HSBC InvestDirect (India) plans to surrender its merchant banking license to the Securities & Exchange Board of India (Sebi), according to a statement today on the Bombay Stock Exchange (BSE). The broking business continued to operate in cash and futures and options segments on the nation’s main equity bourses, it said.

HSBC InvestDirect, formerly known as IL&FS Investsmart, in January decided to discontinue its institutional equities broking and insurance broking businesses. HSBC also plans to delist shares of HSBC InvestDirect, and a tender offer for publicly held shares ended earlier this month. HSBC Holdings bought a 93.9 per cent stake in IL&FS Investsmart for Rs 1,310 crore ($281 million) in 2008 as it sought to tap the market for brokerage services in the world’s fastest growing major economy after China. It renamed the brokerage in August 2009.

Its net profit stood at Rs 27.50 lakh for the quarter ended March 2010. Shares of HSBC InvestDirect, which had gained 59 per cent this year, traded at Rs 393.25 in Mumbai today.