Mumbai: Kotak Mahindra Capital Co. Ltd, the investment banking arm of Kotak Mahindra Bank Ltd, has formed an alliance with Japan’s Sumitomo Mitsui Banking Corp. (SMBC) and SMBC Nikko Securities Inc. to tap the growing number of merger and acquisition (M&A) transactions involving Japanese companies in India.
“Japan is a priority market for cross-border M&As with India, and the growing relationship and synergies between the two countries will only continue to get stronger,” T.V. Raghunath, managing director and chief executive of Kotak Investment Banking, said in a statement.
In the last five years, there have been as many as 107 transactions involving Japanese companies in India, with disclosed deal value of $10.6 billion, of which 103 deals were inbound, according to estimates of consulting firm Ernst and Young Pvt. Ltd.
Daiichi Sankyo Co. Ltd’s acquisition of Ranbaxy Laboratories Ltd for $4.6 billion in 2008 is the largest Indo-Japanese M%A transaction.
In 2012, Japanese companies ranked third in terms of deals in India (by value), with the biggest being the Mitsui Sumitomo Insurance Co. Ltd’s purchase of 26% stake in Max New York Life Insurance Co., a joint venture between Max India Ltd and US-based New York Life Insurance Co., for Rs.2,731 crore in an all-cash transaction.
The alliance with the Japanese companies doesn’t involve any equity participation by the Japanese firms, said Shanti Ekambaram, president, corporate and investment banking, Kotak Mahindra Bank. Kotak Mahindra Capital’s alliance with SMBC and SMBC Nikko Securities comes after the Indian investment bank ended a partnership with Japan’s GCA Savvian Corp., an independent investment bank. The partnership had worked on six merger and acquisition deals, including Japanese stationery and furniture products firm Kokuyo Co. Ltd’s acquisition of Indian stationery company Camlin Ltd in 2011.
Kotak Mahindra Capital’s other global alliances include an exclusive partnership with Evercore Partners, a New York-based investment banking advisory.
“The need for such alliances is huge. For Indian i-banks, there is no option but to have such strategic alliances or lose business to global banks,” said Deepak Srinath, director, Allegro Capital Advisors, adding that Indian clients are increasingly looking for global investors and strategic alliances.
“It is difficult to set up an office overseas and create a network from scratch,” Srinath said.
Such partnerships also help the Indian bank work with clients of the foreign partner on deals in India.
In an independent development, Kotak Mahindra Group is raising an infrastructure fund with SMBC and Canadian real estate company Brookfield Asset Management.
“Fund raising is under way; we can’t give specifics right now,” said Raghunath, adding that there is significant interest in infrastructure funding.