TD Teaming Up with India Broker-Dealer

Bank, said Tuesday that it plans to take a 49% stake in a broker-dealer based in Bombay.

TD Waterhouse has signed a memorandum of understanding with Tata Finance Securities Ltd. and expects to form a new company, Tata Finance/TD Waterhouse, in January, said Stephen D. McDonald, chief executive of the brokerage and bank vice chairman. Terms of the agreement were not disclosed, but Mr. McDonald said the deal is expected to close in December.

Tata Finance is a division of Tata Group, an Indian conglomerate with $8 billion in revenues and the parent of India's largest nonbank finance company. Tata Finance, which employs approximately 1,000 people, is a primary dealer for Indian government securities, Mr. McDonald said. However, Tata Finance/TD Waterhouse would introduce its particular brand of discount brokerage services to the Indian market, selling some of the 7,000 listed domestic equities and mutual funds over the phone and through Tata's 75 branches. The Indian mutual fund industry manages assets of approximately $25 billion.

Tata Financial/TD Waterhouse would be able to offer on-line trading within 18 to 24 months, Mr. McDonald said.

The Indian investment market is in the "very early stages" of development, Mr. McDonald said. But with a population of about one billion, "it's a very large market," he added.

TD Waterhouse will be competing against joint ventures involving U.S. firms such as Merrill Lynch & Co and Goldman Sachs Group. However, he added, "we believe we're the first players among the discount brokers."

According to a recent study from Cerulli Associates, a Boston consulting firm, the Indian subcontinent offers "vast" potential for mutual fund sales, given its population. However, the market is not without restrictions, including the fact that the bulk of fund assets are held in one complex, Unit Trust of India. TD Waterhouse has over two million active customer accounts in the United States, Britain, Hong Kong, and Australia.

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