Mumbai: Monday blues took on a much deeper shade for India’s financial services professionals, as news of the Chapter 11 bankruptcy filing by Lehman Brothers Holdings Inc. and the $50 billion, all-stock sale of Merrill Lynch and Co. to Bank of America sent a deep shudder through the industry and equity markets.
“The fear of job loss is now real, even for those employees who had earlier brushed aside the speculation on Lehman going belly-up in the past as rumour,” said an employee at the back-office of Lehman, on condition of anonymity.
Uncertain times: Andrew Holland, a managing director of DSP Merrill Lynch Ltd, is moving to Ambit Capital Pvt. Ltd (Photo: Reuters). (Right) Tarun Jotwani remains chairman & CEO of Lehman Brothers India (Photo: Abhijit Bhatlekar/Mint).
A slow exodus has already begun, right at the top, with Andrew Holland, a managing director of DSP Merrill Lynch Ltd, moving to Ambit Capital Pvt. Ltd, part of local financial boutique Ambit Capital Ambit Holdings Pvt. Ltd, as chief executive of institutional equities and equity proprietary trading. Holland is taking with him two DSP Merrill Lynch employees, Vaibhav Sanghvi and Piyush Shah.
According to people in the Indian units of the two embattled firms and other investment banking and equity broking executives in Mumbai, a large number of employees at DSP Merrill Lynch and Lehman are already seeking jobs at local brokerages and banks.
“These two events will act as a reality check on India’s financial services space,” said an investment banker requesting anonymity.
Both companies have sizeable operations in India, although Lehman only started doing business in the country in January 2007.
Lehman, whose Indian operations are headed by Tarun Jotwani, has about 180 people at its tony Ceejay House, Worli, address in Mumbai, and another 700-800 at its back-office support services unit in the suburbs, with total India investments of about $2 billion. DSP Merrill Lynch employs about 600 people across equity broking, investment banking and wealth management, and manages more than $1 billion in private and direct equities.
Lehman’s Asia spokesperson Torie von Alt refused to comment on the future of its Indian employees, clients and investments through various arms in the country. “We are not commenting beyond the press release—full stop,” she said in an email.
Some DSP Merrill Lynch employees took cold comfort from the firesale to Bank of America, seeing it as an opportunity to be part of a larger global entity with a bigger balance sheet.
“Indeed there are synergies. While the acquisition gives Bank of America a ready-made investment banking and broking outfit, apart from (a) large global wealth management business, Merrill gets a strong funding pipeline, ” said a senior employee at the firm. “We are waiting to see how things shape up.”
Although most banks have been cutting jobs globally, Merrill Lynch, which has a 90% stake in its Indian venture, and Lehman Brothers India had been adding to their workforce.
When Merrill Lynch chairman and chief executive officer John A. Thain visited India in May 2008, Hemendra Kothari, chairman of DSP Merrill Lynch, who owns 10% of the firm, said the Indian entity had doubled its workforce and tripled revenue in the past two years. That, even as Merrill Lynch had globally slashed 4,000 jobs.
Kothari is travelling outside India and could not be reached for comments on the global developments at Merrill Lynch. Vishwavir Ahuja, country executive for Bank of America, declined comment on the acquisition.
While the purchase indeed gives Bank of America a ready-made investment banking and broking company apart from a large global wealth management business, the question doing the rounds is whether Bank of America would like to keep these businesses.
“Bank of America is an entity that has so far not focused on investment banking or broking. This leaves room for a lot of uncertainty and may see people move out from DSP-Merrill Lynch,” said the head of an investment banking firm on condition of anonymity.
Bank of America in October 2007 injected Rs328.2 crore into its Indian operations.
“A lot of uncertainty looms for some of the senior bankers at these organizations as the road map ahead is unclear,” said Vineet Suchanti, managing director of Keynote Corporate Services Ltd, a domestic mid-market investment bank and brokerage firm.
What is clear is that the pain has only just begun.
Ravi Krishnan and Anita Bhoir contributed to this story.