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Bank Muscat begins divesting stake in Indian brokerage firm

February 11, 2014

Times News Service

Muscat:Bank Muscat yesterday said the bank has started the process of exiting its investment in Mangal Keshav Securities Limited (MKSL), a brokerage company in India.

The exit is through buyback of shares (by the company) and is expected to be substantially completed in 2014, said the bank in a stock market filing.

According to earlier reports, Bank Muscat's decision to divest its stake in Mangal Keshav was due to a fall in Indian rupee value and dull business prospects in the retail segment of India's securities market.

The first tranche of buyback, accounting for about 48 per cent of the total shares held by the bank, has been completed and as a result the shareholding of the bank in MKSL has reduced from 45.7 per cent to 30.4 per cent.

The bank has already taken the full impairment loss of OMR2.7 million in its 2013 profit and loss account against this investment. The cumulative foreign exchange loss of OMR3.3 million accounted in equity as of December, 2013, will be transferred to profit and loss on exit from the investment.

Although the Indian brokerage house has been making profit, the fall in Indian rupee value against rial eroded the actual return on investment in dollar terms.

When Bank Muscat bought a stake in Mangal Keshav way back in 2007, the Indian capital market was booming. However, the overall activity in the securities market came down in the aftermath of global financial crisis since 2008. Although the market volumes recovered, it is more of an institutional driven rally and the retail participation is relatively low.

Mangal Keshav, one of the oldest brokerage firms in India, is engaged in the equities and derivatives market for retail and institutional customers in India. The group is also engaged in distribution of mutual fund, insurance and initial public offerings, according to the company's website.

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Source: Times of Oman

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