Carlyle will be invited to join Board, says IIFL's Jain

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India Infoline (IIFL) today announced that the Carlyle Group, one of the largest global asset managers, has acquired 9% stake in the company via secondary market purchases. "Carlyle has become a key institutional shareholder in IIFL and will be invited to join IIFL's board, subject to necessary approvals," said IIFL chairman Nirmal Jain in an exclusive interview to CNBC-TV18. "We are happy that Carlyle has shown faith in IIFL and hope to leverage our relationship with them to grow and expand our international and institutional plans," he adds.

However, Jain specifies that this does not mean that they have any plans to offload stake in any other businesses. "We have no plans to split businesses at this point, and we are not in talks with any private equity players," he said.

The deal size has not been disclosed by Carlyle, but Jain says that Carlyle is free to pick up more stake from the secondary market.

Below is an edited transcript of his interview with Elan Dutta. Also watch the accompanying video.

Q: Could you run us through the contours of the deal first?

A: Carlyle has decided to invest in IIFL, and the stake was bought from the secondary market. It's a very reputed name and we are very happy to note that they have become a significant shareholder and then partner in our group. We have agreed to give them one board seat and that's basically the deal.

Q: But there was a lot of talk that you would be looking at offloading stake other businesses as well. Could you run us through your plans, what's going on at this point?

A: No. If you really noticed, we never had any plans to offload our stake in any of the businesses. Even in the case of Carlyle, IIFL has done nothing. The company has neither diluted nor got the money. IIFL is a listed company and anybody can buy on the stock exchange. That's exactly what they have done, an open market operation.

Of course now that they acquired a significant stake, we are happy to give them a board seat. They obviously have a very good reputation in the financial sector as well as private equity investment. In fact, they are one of the largest, if not the largest alternate asset managers in the world.

In India, other than us I think the only other significant investment they have is in HDFC Ltd. So it's a very good name to be associated with. They bring a lot of expertise in global financial sector and we feel very happy that they can help us in our plans to set up shop internationally.

So I think their association would be good and so we are very pleased to have one of their representatives on our board. But, this will be taken up in next board meeting. They have nominated a board member and our board has to approve. Subject to all other regulatory approvals, we will take one member on the board.

Q: So you are denying talks of you eventually selling out, right?

A: I think I denied that earlier, and I deny that again. We never had any plans to sell the stake, sell the business or dilute and at this point in time there is none.

Q: Are you in talks with any other PE players?

A: No, no, no. Not at all.

Q: Also if you could just run us through the synergies of the deal. You mentioned expansion in foreign shores so if you could share your plans with us?

A: See, private equity investors typically invest for long-term. If they pick up a stake, they hold it for long-term and that gives it price stability and long-term association.

Carlyle is a very big fund and so they bring very good networking in the financial community worldwide. We really don't know how that will help but we know that once we have association, it gives us access to a number of large financial institutions with which you can do business. If they want to invest in India then we can offer them our broking and equity advisory services and when we have offices outside then they can help in getting more clients.

Q: Right. Going ahead would you be open to giving a higher stake to Carlyle?

A: No. As I said that they can acquire as much stake from the market as they wish. I think the current regulations don't allow private equity investors to go beyond 15% unless they are willing to make an open offer and these regulations are also changing. From 22nd October SEBI has allowed them to up to 25%.

So we have no plans to make a primary offering or dilute promoter's stake or anybody's stake for that matter. But anybody can buy from the secondary market; it's a free market. We are happy because Carlyle is a good name and is a great private equity fund, so if they have bought it so it's always a good association.

Q: At what price has Carlyle picked up the stake could you share that with us?

A: No they haven't disclosed that to us also.

Q: What kind of expertise do you expect Carlyle to bring to the table?

A: Their understanding of financial sector, not only within India but maybe more globally is significantly stronger. Secondly the person on the board will also have very good experience in financial sector. So we get expertise and experience which is very valuable.

Q: There has also been a buzz about you going ahead and splitting the business. Is there any truth in this?

A: No I don't think, again a completely baseless rumor.