NEW DELHI: Morgan Stanley, the world’s third biggest US securities firm by market value, and its Indian partner ended an alliance in the world’s second fastest growing major economy, following a similar break up by Goldman Sachs.
Morgan Stanley will pay $445 million (Rs1,968 crore) for JM Financial’s 49% stake in the joint venture’s institutional equity broking business, according to an e-mailed statement. JM Financial will buy Morgan Stanley’s 49% stake in the joint venture’s investment banking unit, equity broking and fixed income and wealth management businesses at a book value of about $20 million, according to the statement.
“It is now the right time for Morgan Stanley to develop a wholly-owned full service India platform,” Hans Schuettler, Chief Executive Officer, Morgan Stanley Asia said in the statement.
Morgan Stanley joins Goldman Sachs Group in separating from their local partners as they seek a bigger share of the record income from merger advisory, stock underwriting and brokerage fees in India. Fees from underwriting stock and equity-linked bond sales jumped 39% last year to about $341 million, according to data compiled by Bloomberg.
By building out its investment banking, capital markets, fixed income and private wealth management platforms in India, Morgan Stanley will create “an integrated platform that reflects all the businesses the firm conducts globally, Schuettler said.
“JM Financial group will immediately build up their own institutional equity broking and research business,” said Nimes Kampani, chairman of Mumbai-based JM Financial Group.
Merrill Lynch in December 2005 paid $500 million to acquire stake in DSP Merrill Lynch and Goldman ended a decade old relationship with billionaire Uday Kotak.
India’s benchmark 30-stock Sensex index of the Bombay Stock Exchange has more than doubled over the past two years and the total turnover on the Bombay and National stock exchanges has risen 43% over the past year to $2.8 billion. India’s economy is poised to expand 9.2% in the year to March.
New York-based Morgan Stanley set up two joint ventures on 6 April 1999, owning 51% of JM Morgan Stanley Securities Ltd. that focuses on equity sales for institutional clients and research for clients in India and overseas. The other venture helps companies raise money and trades in equity and debt.
Morgan Stanley and JM Financial operate separate mutual fund businesses in India.
Morgan Stanley manages Rs30 billion under one plan that was set up in 1994 and JM Financial has Rs37.21 billion in equity and debt as of 31 December, according to data compiled by Bloomberg.