Escorts Net Profit Skids 32% To Rs 110 Crore

Non-bank finance company HSBC Securities India Holding Pvt Ltd, a subsidiary of global banking major HSBC, proposes to raise Rs 55 crore through a redeemable preference issue exclusively to the Netherlands-based parent company HSBC Investment Bank Holding BV.

The proceeds, along with the Rs 18 crore mobilised through internal accruals, will be used to finance an expansion plan drawn up by HSBC envisaging a foray into asset management and dealing in government securities.

The bank will set up two subsidiaries under HSBC Securities for the proposed forays.

The subsidiary for asset management activities will be set up with a capitalisation of Rs 18 crore, which will be generated internally by the NBFC (non-bank finance company) venture.

The subsidiary for the stock broking activities_mainly a primary dealership for dealing in government securities_will be set up with a minimum capitalisation of Rs 55 crore.

The NBFC venture of HSBC, which is only 75 per cent owned by HSBC, however, proposes to raise this entire fund through the redeemable preference issue exclusively to the parent company.

According to official sources, the finance ministry has sought more time for clearing the preference issue plan because of the existing foreign equity cap of 75 per cent in the NBFC sector.

HSBC, however, says that the preference issue exclusively to the parent company will not alter the holding pattern between HSBC and its domestic partner in the NBFC venture.

According to HSBC, though the investments required for the new subsidiary for stock broking activities will be made by the foreign partner, HSBC Investment Bank, the subsidiary will directly be under the existing venture and hence the issue of having 100 per cent stake does not arise. The Rs 55 crore preference issue is needed to meet the minimum net-owned funds requirement for primary dealers in government securities as stipulated under the Securities and Exchanges Board of India (Sebi) guidelines. The proposed redeemable preference shares will carry an interest rate of nine per cent per annum. The NBFC venture of the bank is into equity trading in secondary markets and advisory services. The venture's proposed foray into asset management activities may see the launch of mutual funds and dedicated funds from its stable.