The 56-year-old chairman of Merrill Lynch International, Kevan Watts, is relieved that he is relocating to Hong Kong. Over the past year, he has visited the Asian region almost 20 times and it’s been exhausting. But at the same time, he’s excited about the move as it will help him track the Asian markets more closely. India has assumed greater importance for the global financial powerhouse ever since it increased its stake from 40% to 90% in its joint venture with DSP in December 2005. His foreign peers like Goldman Sachs and Morgan Stanley followed Merill Lynch by breaking away from their Indian partners and are all set to ramp up their business in India.
In an exclusive interview with Mint’s Rana Rosen and Rachna Monga, Watts spoke about various issues. Excerpts:
It’s been a year since you increased your stake in the Indian venture. What’s been the progress?
The change has been on expected lines. The main purpose of increasing the stake was to enable us to invest in the business more easily. With only 40% of the return (Merill Lynch stake in the joint venture), it was inhibiting our ability to invest. We have expanded various businesses and transferred people from other markets in the fixed income and structured finance and equity-capital markets. Also, private clients advisory is an area that we see growing fast. Since our business remains the same, we are not really going through a period of reconstruction. We are operating in an environment in which our competitors are all getting very interested about India.
Given the entry of your rivals in the Indian market, how do you think the investment banking industry will shape up?
It is going to continue to be very competitive. The presence of global investment banks and their capital, forget Merrill Lynch for a moment, is important for India. We can enable Indian entrepreneurs to achieve things they couldn’t otherwise achieve.
Do you see the M&A valuations coming down if the market goes through a downturn?
The process of acquiring abroad or acquiring domestically is normally a volatile period for the stocks of those companies. This isn’t an Indian phenomenon. Shareholders are excited and then they are worried. You often see share prices—not always—but you do see share prices under some pressure following acquisitions.
Last year you sold your asset- management business to BlackRock. How does this deal affect the Indian mutual-fund operations?
What we have done with our asset management business globally is to merge it into BlackRock. So, we now own a little under 50% of BlackRock. I am not sure if we have yet resolved issues with the DSP Merrill Lynch Fund Managers, the Indian fund arm. In the case of our joint venture in asset management in India, Hemendra (Kothari) has the controlling position. It’s up to him what he does with that.
What has been the contribution of Hemendra Kothari on your international board?
He’s my vice-chairman and I am on his board in India. His Indian experience has been helpful as international clients are interested in India. There have been occasions where his presence has been valuable in educating clients about India. As he and I move forward working together, I would expect him to widen his bandwidth on our international business. I expect him to spend more time with me as I relocate to Hong Kong.