As primary market activity picks up pace in India, investment banks are looking to expand their teams to capture the key role of regulatory compliance on initial public offerings, according to people familiar with the matter.
Boutique advisory firms and international lenders including Avendus Capital Pvt, Moelis & Co, Rothschild & Co, Societe Generale SA and BNP Paribas SA are said to be exploring options to build out or enhance their "left-lead" equity capital market capabilities, the people said, asking not to be identified because the plans are private and exploratory.
Two firms currently limited to ancillary sectors such as wealth management are also said to be looking to build out merchant banking capabilities through direct hiring of left-lead personnel, Mint has learnt. Left-lead managers are called so from their names running in the top-left corner of issue prospectuses or advertisements.
In India's equity capital markets, the left-lead bookrunning manager directly engages with the Securities and Exchange Board of India (Sebi). Responsibilities include preparing the draft red herring prospectus, handling legal correspondence, representing the issuer in query sessions with regulators following the document filing and valuing the offer once all stakeholders are consulted.
Firms that previously were limited to syndicating and distributing shares are expanding operations to secure main mandates as market activity increases.
“Issuers prioritize the bank that manages the regulatory process directly with Sebi," said a senior banker at a foreign institution, who asked not to be identified discussing internal strategy. “Sub-syndication roles carry lower fee margins, and so we are looking to establish a domestic execution desk to win primary mandates.”
"Left-lead capabilities are becoming an increasingly important consideration for clients when selecting investment banks," said Ruchi Thakkar, associate partner at Native, an executive hiring firm, who specializes in capital markets recruitments. “This is driving a growing recognition that a strong ECM (equity capital markets) execution team can be a deal puller – influencing clients, bringing in mandates, and driving execution. A strong left-lead execution team is therefore becoming a key differentiator for platforms looking to build and scale their investment banking franchises.”
Currently in India, left-lead roles are undertaken by the local units of bulge bracket banks including JPMorgan Chase & Co, Goldman Sachs and Morgan Stanley, or by the merchant banking arms of major domestic banks. Establishing a left-lead desk requires hiring local deal-execution professionals capable of managing regulatory compliance in Mumbai and have past experience interacting with Sebi.
Dealing with Sebi
Merchant banking is inherently a lean business with small teams and left-lead capabilities are usually built out by bringing in two or three top talents at executive roles in rival banks.
Mizuho-backed Avendus Capital is looking to expand its ECM team from the current 10 members as it looks to build left-lead expertise. The firm may hire three or four more professionals over the next six months, managing director and head of ECM Gaurav Sood told Mint on 3 September.
“Drafting filing documents and responding to regulatory queries requires dedicated personnel on the ground who have prior experience dealing with Sebi queries,” said an advisory executive who requested anonymity to discuss operational requirements. “This interface cannot be managed from our regional hubs.”
On 2 September, a unit of Nithin Kamath's Zerodha Broking Ltd, India's second-largest broker, secured a merchant banking licence from Sebi, which allows the firm to manage IPOs and other capital market transactions. Now, Zerodha Corporate Advisors Ltd, as the unit is called, is looking to expand its core team of six personnel to hire left-lead bankers to directly manage issues on its own, Mint has learnt.
Emails sent to Avendus, Moelis, BNP Paribas and Zerodha did not elicit responses until publishing time. Societe Generale and Rothschild declined to comment.
Flurry of IPOs
Peak XV and TVS Capital-backed wealth and asset management platform Neo Group is also looking to expand its merchant banking suite. Mint reported on 3 August that the group had hired veteran banker Vikas Khattar to lead its investment banking business.
The push for left-lead talent coincides with sustained activity in India's primary equity market, touted as the world's busiest IPO market, where a flurry of launches is expected to make this another record year for stock market debuts.
As of early September, shares worth ₹75,000 crore were sold in 58 mainboard IPOs, with SBI Funds Management Ltd and Manipal Health Enterprises Ltd being the largest offers, according to data from Prime Database.
As listing gains continue to draw retail investors, the upcoming mega IPOs of Jio Platforms Ltd and the National Stock Exchange of India Ltd are expected to be marquee liquidity events.