Mumbai: It may have been hit hard by the ongoing credit crisis in the US but Lehman Brothers Holdings Inc. is betting big on India.
The publicly traded investment bank sees tremendous opportunity for private equity (PE) deals in Indian markets in the next 6-12 months even as the outlook for the Bombay Stock Exchange’s benchmark Sensex index continues to remain uncertain. Sensex has lost around 24% since 10 January when it hit its lifetime high of 21,206.77. The index closed at 16153.66 on Tuesday.
“We are at a stage in this particular business where we are in the virtuous cycle of seeding and harvesting. Having harvested some parts of our portfolio in December and January, and successfully managed the public part of our portfolio through the market drop of the last three months, we look forward to reloading over the next few quarters of this year,” said Tarun Jotwani, chairman and chief executive of Lehman Brothers India, in an exclusive interview with Mint on Monday.
The market meltdown does not seem to have unnerved Lehman and there is no change in its strategy for investment in growth capital. Even though BSE’s Mid-Cap Index (a grouping of firms with mid-sized or medium market capitalization) is down 40% from its January highs, a sharper fall than the Sensex, Lehman is convinced that the underlying growth story is intact and that there will be continued need for capital.
“We are now starting to see some excellent investing opportunities, at both the project level and company level,” Jotwani said. “We anticipate margin compression and a slowdown in earnings growth overall, yet the best of the mid-caps with strong business models will sustain their high growth in Ebitda (earning before interest, tax, depreciation and amortization) over the next few years,” he added.
Growth story: Lehman Brothers India CEO Tarun Jotwani says India can play a big role in global capital markets in the next 5-10 years. (Abhijit Bhatlekar / Mint )
Lehman started its India operations in January 2007 out of two rooms in a five-star hotel in south Mumbai, moving out the beds and replacing them with tables and chairs. It said its revenues in the first year itself was something that it would have been happy to achieve in four years. And, in the first quarter of the current year, it said that it has crossed the target for the entire year.
Lehman follows a December-November financial year.
The firm has deployed around $2 billion (Rs8,000 crore) in India and is preparing to raise its first dedicated India fund this year. “It will be for real estate, and a companion to our Global Real Estate Fund,” Jotwani said.
Lehman manages several global private equity funds with allocations for India. The proposed fund will be “large enough to give us significant firepower in a sector that is experiencing a capital crunch, but small enough and flexible enough to allow us to build a highly discerning, top quality portfolio,” Jotwani added.
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