In a related move, HSBC B&K is in talks with the Hongkong Bank and the British Bank of the Middle East, both part of the HSBC group, to forge an alliance for tapping the private client business on the back of the growth of the depository in the country. The aim is to tap the vast non-resident Indian (NRI) base in the Middle East in addition to high networth individuals based abroad. Although chief executive officer of HSBC B&K, Fergus Fleming declined to reveal the exact amount of returns that the broking outfit would offer the incoming shareholders, he confirmed that an incentive was on the cards.

"There will be some form of an incentive for the incoming shareholders and it is being worked out. We expect the various modalities to be worked out in the next few weeks," said Fleming. HSBC B&K chairmanN Gidwani was not available for comment. Sources said that the incentive is primarily being offered to attract the six to eight high networth Indian individuals who have been identified as of now. It is felt that since the broking business is not one which generates profits for quite sometime it may not be possible for the shareholders to receive good dividends on their investments for sometime.

At the same time, these individuals unlike the HSBC group will not have the financial muscle to withstand losses for a long period of time. "In a bid to attract investors in the company an 18 per cent annual return is being considered as an incentive", said a source.

The Indian partner, Batlivala & Karani, of the Morarkas, had recently snapped ties with HSBC. As per the agreement, HSBC will arrange for a group of shareholders who would buy out the shareholding of the Morarkas.

On the future plans of the venture, Fleming said that the firm plans to get into private client business. "We are depository participantswith the National Securities Depository Ltd (NSDL). In the absence of paper it is possible for us to service high networth individuals. Talks are on with the Hongkong Bank and British Bank to see how we can provide service to clients of the banks especially the NRIs", said Fleming.

According to him, focus would continue to be on the top 7-8 FIIs operating in India which account for 70-80 per cent of the total inflows into India.

"We are also planning to change the manner in which research is provided to our clients by providing them first hand information on what is going on in a company which is gathered through visits to plants and interaction with top management rather than just doling out sheets of paper giving out figures. This is what clients want", said Fleming.