It is not easy to take an investment banker out for a drink, especially if the person is Pramit Jhaveri, who believes firmly in the philosophy of keeping his mouth shut as “loose lips sink ships”. We first met in 2000 when he took over as head of investment banking at Citibank. Soon after, I watched him playing tennis with George Bush Sr at Bombay Gymkhana at a bank event.
Jhaveri commits to an evening out only after I assure him we will not discuss any deals-in-progress. “I am not one who brags about his deals over a drink. Investment banking is all about client confidentiality and trust. Only after a deal is done do you have bragging rights,” Jhaveri says.
The hint is quite clear: Don’t look for any news.
Before we can settle down in a quiet corner of Opium Den at Hilton Towers in Mumbai, the waiter pours cold water on our plans, literally. It’s a dry day, thanks to the Bombay Municipal Corporation elections. Jhaveri, known for his networking and relationship management skills, tries every trick to get us a glass of wine—white or red—or a single malt, but the waiter is firm. No one drinks on a dry day, not even a foreigner, we’re told. So, we settle for nimbu pani, sweet and sour.
The first thing I want to pick his brains about is the price the Tatas are paying for European steelmaker Corus. Munching masala peanuts, Jhaveri states the obvious, “The Tatas have delivered a message to the world that Indian corporations need to be taken very seriously.”
Isn’t that a diplomatic answer, I ask. “I am not being diplomatic,” Jhaveri counters. “This is an incredibly bold and aggressive move by the Tatas. Whether they are paying more or less, time will tell.”
Jhaveri comes from a family of jewellers. His father, a second-generation businessman, was a jewellery manufacturer and diamond trader. But before Pramit could complete his education, the joint family had split and the business closed down.
“In a sense, finance was in my blood. I was a campus recruitment and did not think twice before accepting the Citibank offer as it had glamour,” Jhaveri says, sipping his fresh lime water. His first salary back in 1987 was Rs3,100. It’s the perfect chance to ask how much he earns now. “Well, it’s something you don’t talk about openly. It’s not a state secret and the industry has a reasonable sense of who gets how much,” he says, choosing every word. He also dislikes the term, dealmaker. “There is no individual deal-maker any more. Very few deals can be done by one individual. They are all done by institutions. Globally, individual dealmakers have no space. The domestic investment banks will possibly adopt the same model,” he says.
Taking the cue, I ask him whether so many investment banks can survive in India. Over the last one year, at least four global investment banks have set up shop—UBS, Goldman Sachs, Lehman Brothers and CSFB. Is there so much business?
Jhaveri’s take on this is simple. Indeed, the business is growing. In 2000, India accounted for about 2% of total Asian business. Now, this has gone up to about 15%. The market is growing by 50% every year.
But costs have also been growing. Five years back, the cost of Indian operations was at a significant discount in comparison to Hong Kong and Singapore, which is no longer the case and but now the cost advantage does not exist any more as prices of people and real estate have been growing phenomenally. On the other hand, investment bankers’ fees are being squeezed.
So, do we see a shakeout in the industry? “Wait for three years,” says Jhaveri laconically. To generate revenue, investment bankers must look for other routes such as leverage financing and structured financing, he feels. Citibank has been doing this very aggressively. The first such deal was KKR’s $900 million (about Rs3,940 crore) buyout of Flextronics in the software space and General Atlantic Partners’ buyout of GE Caps’ business processing unit, Genpact.
Citi investment banking has been particularly aggressive in foreign currency convertibles and equity raising. It topped the equity and debt league tables in 2006 and was placed third for the M&A deals. In 2003, it handled only two equity issues. In the next three years between 2004 and 2006, the number of such issues rose to 55. “Things are happening very fast. It’s just like a fast train, stopping at stations very briefly. If we don’t jump on, we’ll miss the train,” Jhaveri says, highlighting the scorching pace of investment banking activities in India.
I want to know his recipe for success. “I am a relationship man. Once we do a deal for a company, I try to make sure that we are involved in all future deals. Five years ago, we did a small $40 million private placement for UTI Bank; since then, we have done all its issues—GDR, overseas bond, foreign currency borrowing. Ditto with Tata Motors and Bajaj Hindustan. I enter into a relationship and carry it forward.”
Jhaveri makes it a point to squeeze in short family holidays through the year, to places like Thailand, Switzerland and South Africa. He is also an avid art collector. “We have restrictions on investing in shares. I put my money in mutual funds and real estate but my passion is collecting Husain and Souza. Art is a better performing asset class than equity,” he says.
He also has an eye for jewellery. If he was not an investment banker, he would have been a jeweller, he says. “I love intricate jewellery designs. On my wife’s 40th birthday, I gifted her a lovely necklace,” he says. His wife, too, was an investment banker with DSP Merrill Lynch. She quit her job as two investment bankers from rival institutions cannot live under one roof. “I make phone calls at midnight and early mornings to the US. These calls are extremely sensitive. You can’t have another investment banker in your bedroom,” he says.
Does she regret quitting an exciting career, I ask Jhaveri we get up to leave. “Not at all. She is the actual art collector. The yield on her investment is much more than what I earn.”