Big Four is a part of my history, and financial services is my future,” says Ashok Wadhwa, 47-year-old partner and chief executive officer of Ambit Corporate Finance Pte Ltd and head of the Ambit Group that comprises two other companies, India Value Fund and Ambit Capital. Wadhwa’s reference is to Ambit’s efforts to grow its private equity business, expand its investment banking operations and increase its presence in the investments advisory business—in short, become a financial services firm.
Wadhwa quit as the India head of audit firm Arthur Andersen (along with PricewaterhouseCoopers, Ernst & Young and KPMG, the firm was part of the Big Four of accounting) a decade ago to start Ambit. However, it is only in the past few months that his ambition of transforming Ambit into a financial services group has picked up momentum.
In June, Ambit got out of the audit and tax consulting operations, run through Ambit RSM Consulting, by selling the business to PwC. And in August, it sold Axis Risk Consulting Services Pvt. Ltd to Genpact Ltd.
According to Wadhwa, it was important that the company exit the audit business. Ambit has always been seen as a tax consultancy, despite its track record in the mergers and acquisitions (M&A) business. “Historically, we were seen as a cusp between consulting firm and investment banking. We grew on the back of consulting firm (Ambit RSM)…its time now for us to demonstrate that we are an investment bank and want to become a dominant player,” says Wadhwa.
Former employees of Ambit Group, who do not wish to be identified, say that Ambit Corporate Finance’s efforts to grow the investment banking business created some confusion in the market over the focus of the group: was it tax consulting or investment banking?
And people familiar with the developments at Ambit, who do not wish to be identified, say that the two firms, Ambit Corporate Finance and Ambit RSM Consulting, did not have too many common clients.
“An investment banking as well as tax and audit consulting set-up can offer perfect business synergies as the audit side will typically have long-term relationship with clients who can be served by the investment banking teams and vice versa,” says Harish H.V., partner (corporate finance), Grant Thornton, an audit firm.
Wadhwa says that the decision to sell the audit operations was driven by a desire to do what was right by each business. “After working together for nine years, we realized that it was now time to find natural destination for our businesses…we concluded that the future of RSM was to align with Big Four,” he adds.
Ambit also decided that the future of the investment banking business was to be a full-service investment bank. Ambit is expanding its investment banking operations to manage initial public offerings, qualified institutional placements and rights issues. The firm is currently handling five rights issues.
“We have reached a stage where the concept of niche players, mergers and acquisitions boutique firms are unreal if you want to be a part of the mainstream. Whether you are homegrown or global, if your competitor is a full-service bank, you have little choice,” says Wadhwa.
Many of Ambit’s investment banking rivals that started small, now offer multiple products.
Avendus Advisors, for instance, started off as a boutique investment bank focused on the information technology services business, but now offers equity, debt and syndicated products. The firm is also looking to offer institutional broking services.
Ambit Corporate Finance is also advising the government on the merger of Indian Airlines and Air India. In May this year, the firm advised the TV18 Group on its 50:50 joint venture (JV) with Viacom Inc. to create Viacom-18.
News agency Bloomberg’s league tables show that Ambit Corporate Finance’s market share in terms of number of deals struck has reduced marginally from 4.1% in the first six months of 2006 to 3.4% in the first six months of this year.
Ambit’s investment advisory business will include its private equity, broking, wealth management and distribution businesses. Ambit is one of the sponsors of the India Value Fund; it has now floated another private firm, Ambit Pragma Ventures Pvt. Ltd, which plans to raise a $120 million (Rs492 crore) fund in the first round and target investments in the $10-15 million range. Rajeev Agarwal has moved out from India Value Fund to head the new company.
Wadhwa says the two funds will complement each other. With its third fund of $400 million, India Value Fund, headed by Vishal Nevatia, has moved away from small and medium sized deal to medium and large sized ones, and is now targeting deals that are more than $25 million in size, he adds.
The Pragma fund will target early stage investments and India Value Fund will step in the second round, he adds.
Ambit’s broking business Ambit Capital (the business was launched in early 2006) has launched portfolio management services and plans to enter the business of distributing insurance products. And its three-way JV with Web 18—a division of Television Eighteen India Ltd—and Centurion Bank of Punjab Ltd will soon launch an online broking firm.
Ambit’s expansion plans come at a time when large global financial services firms, such as Lehman Brothers, Goldman Sachs, Morgan Stanley and Credit Suisse First Boston, have set up shop in the country.
Local companies such as Edelweiss Capital and Motilal Oswal Financial Services are also expanding their presence across various businesses.
“It’s difficult to say whether it’s too early or too late for anyone to enter in the financial services business at this point of time. If one had come six to seven years back, it wasn’t as competitive market as it is today. It’s a very competitive landscape today,” says Rashesh Shah, chief executive officer of Edelweiss Capital.
Wadhwa, however, is reputed to be very well networked with companies.
“With the strength of its (his) relationships, I am sure Ambit Corporate Finance will have a great start,” adds Shah.