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Friday, November 25, 2011

Mid-sized investment banks such as Chicago's Lincoln Int, Japan's Mizuho, UK's Investec plan setting up arms in India

NEW DELHI: At a time when global investment banks, such as Bank of America, Merrill Lynch, UBS, Nomura and HSBC are downsizing their operations in India, a clutch of niche and medium sized I-Banks are entering the world's second fastest economy.

Nearly half a dozen new IBanks, such as Chicagobased Lincoln International, Japan's Mizuho, UK-based Investec and Espirito Santo of Portugal, are setting up operations in India either as a wholly-owned subsidiary or in partnership with Indian entities. "We are positive on the India opportunity and our sweet spot here is transactions below $200 million," said TN Giridhar, MD and CEO at the Lincoln International India office over an email response to ET.

UK-based investment bank Investec recently applied for a merchant banking license with the capital market regulator Sebi, while Japan's Mizuho International plans to start operations in India by the beginning of 2012, according to two persons familiar with the development.

Earlier this month, Espirito Santo entered into a joint venture agreement with the Burman family, promoters of Dabur India. "Those Ibanks, which have not yet ventured into India, are being pushed by their global clientele as India is aligned with the global market. In addition, they are looking at tapping small and medium sized Indian companies," chief executive of a foreign firm said requesting anonymity.

The average transaction size in India is not too big. In October the average deal size was $17.40 million for M&A and $14.29 million for private equity. For qualified institutional placement, it stood at $8.67, as per data collated by Grant Thornton. There were no deals with value over half a billion and only four which were valued at over $100 million. It is this small deal size that is making new players enter the country.

For instance Lincoln International typically focuses on mid-market transactions with deals below $500 million and plans to focus on the advisory business here.

"Some of the big boys have reduced their Indian operation as their overseas clients, which are large players, are fighting recession in their home country, be it the US or Europe. Therefore, it is unlikely that these corporations will look at any investment in India," said Sanjeev Krishan, executive director at PWC India. However, medium and small size Indian companies offer tremendous opportunities for I-Banks as they are looking for inward and outward investments, Krishan added.

An email sent to Mizuho did not elicit any response. But a person close to the investment bank said it plans to recruit a top executive to head its operation in India. Last month, Investec reportedly hired a four-member team from Motilal Oswal's investment banking team, which was led by executive director Sudhir Dash.

In contrast, industry watchers say Japanese I-banking major Nomura recently laid off six to seven executives in India, including its local investment banking head and the local equity capital markets head, while Bank of America-Merrill Lynch fired five members of its investment banking team.

Source: EconomicTimes


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