Domestic i-banks sharpen strategy amid downturn
Domestic i-banks sharpen strategy amid downturn
Mumbai: When Wharton MBA Praveen Chakravarty joined Anand Rathi Financial Services Ltd 10 months ago as chief executive of investment banking and institutional equities, his priority was to enhance the company’s presence in mid-market i-banking and build its institutional business.
The i-bank now has 16 mandates, including domestic and cross-border mergers and acquisitions (M&As). Unlike a typical boutique i-bank, the mid-market focused team will not participate in raising private equity (PE) capital for companies.
“We will be in the capital markets business,” Chakravarty said. “There are over 3,000 portfolio companies of PE funds. Majority of the portfolios are four-five years old. All of these have to see some kind of new fund raising rounds… IPOs (initial public offerings), strategic alliances.”
Amid all the doom and gloom in the financial markets, some domestic i-banks like Anand Rathi are using the economic downturn to diversify their business strategies, adding new practices, focusing on new sectors and geographies, and hiring domain experts. The idea is to become a one-stop shop for meeting all the financial needs of their clients.
The banks are hoping the downturn will be temporary and things will begin to improve by the year-end.
Anand Rathi, for instance, will focus on sectors such as telecom, business services, healthcare, and new segments including e-governance education, digital media and micro payments. The presence of domain experts will be one of its key differentiators, said Chakravarty, a former managing director of BNP Paribas Securities India Pvt. Ltd.
“People are tired of bankers who have no domain knowledge,” Chakravarty said.
For its healthcare practice, Anand Rathi has hired a doctor who has worked with hospitals like Apollo Hospitals Enterprise Ltd and Fortis Healthcare Ltd and is an MBA from the Indian School of Business (ISB) in Hyderabad.
For its cross-border transactions practice, it has hired Anil Kakani, formerly senior advisor for India at the US treasury department, as an executive director.
“The timing of strengthening our i-banking initiative is right… M&A opportunities are ample and the Indian market is growing deeper,” Chakravarty said.
The effort comes at a time when capital markets have run dry, the IPO window has virtually closed and deal momentum has slowed. A lethargic deal market and high operational costs have forced some global i-banks to scale down their presence, reduce headcount and cap expenses in India.
Bank of America Corp. (BofA), Japan-based brokerage Nomura Holdings Inc., Credit Suisse Securities (India) Pvt. Ltd, UBS Securities India Pvt. Ltd and Barclays Capital have reduced their i-banking teams in India, according to previous Mint reports.
Lodha Capital Markets is increasing its cross-border focus and setting its sights on countries as diverse as Poland and Korea.
“We are aggressively looking to hire people at both partner and associate levels,” said Siddharth Bafna, partner and head of corporate finance and transaction services practice at Lodha and Co.
“We have been more of an east- and west India-focused boutique bank but are now looking to add to our team to also service south Indian and north Indian markets,” Bafna said.
Mumbai-based Ladderup Corporate Advisory Pvt. Ltd, which has investment banking, wealth management, insurance, project finance and growth-stage investing practices, is now starting a merchant banking practice.
“We had a licence for it for over two years. Now, we can be co-lead manager for IPOs,” said Sunil Goyal, managing director and chief executive, Ladderup.
Any IPO requires as long as six to eight months of preparation, and Ladderup can assist companies in the run-up to initial share sales and other fund-raising efforts such as preferential and rights issues, said Goyal.
Bangalore-based boutique investment bank Viedea Capital Advisors (P) Ltd, which has so far focused on series A (the first round of funding) and venture capital deals, has started a growth (deals above $10 million) and private equity funding practice.
The practice is a natural progression for an i-bank to increase its offerings in line with the requirements of its clients, said the company’s director Deepak Srinath.
“A lot of companies that we raised series A for have now grown and are at a stage where they are looking for growth and private equity funding,” he said.
Viedea’s other new areas of focus include M&As and facilitation of debt funding.
“We want to be a one-point shop for our clients for all their funding and financing requirements,” Srinath said.
For its growth and PE practice, Viedea will have a sectoral approach and will focus on information technology (IT) and IT-enabled services, healthcare and logistics.
The new initiatives by domestic mid-size i-banks reflect their increasing confidence in their own acumen and Indian markets. It won’t be easy for them to execute large deals, particularly in the absence of cross-border ties and balance-sheet support for funding leveraged buyouts.
Global banks aren’t likely to suffer a dent in their business because of the competition, said an executive at a global i-bank that specializes in cross-border M&As.
“People like us will continue to have an edge in terms of global networks, reach and execution,” said the official, who declined to be named.
deepti.c@livemint.com
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Business NewsCompaniesDomestic i-banks sharpen strategy amid downturn
First Published:11 Jun 2012, 11:05 PM IST
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