Hopeful of garnering M&A deals, say analysts.

Tania Kishore Jaleel

Mumbai, Feb. 10 Investment banking giants are collapsing around the world and revenues from such activities are shrinking drastically for Indian broking houses. But these have not dissuaded two foreign institutions from announcing plans of starting investment banking operations in the country.

Last week, the US-based Jeffries Group announced that it has received licence from SEBI to set up its merchant banking business here. On Thursday, Japanese bank Nomura announced the launch if its on-shore investment banking and equity trading operations here.

Analysts said Indian market seems to be attractive to these organisations despite the slump.

“These sort of firms seems to be sniffing around and waiting till the end of the year to see if something good might turn up. At the moment they seem to be looking at business development rather than revenue hunting,” said Mr Saurabh Mukherjea, Head of Indian Equities at Noble.

Mr Devesh Kumar, Managing Director at Centrum Broking, said as the Indian economy is growing much faster than most other countries, cross-border M&A opportunities look good in India.

M&A numbers

According to global consultancy firm Grant Thornton’s annual Dealtracker, the number of M&A deals announced in 2008 fell to 445 from 676 in 2007. The value of these deals fell from $51.11 billion in 2007 to $30.72 billion in 2008. Telecom, pharma and health care, banking and financial services and IT& ITeS were the leaders as far as sectoral values were concerned during the year.

In the primary market, there were 95 public offerings in 2007 raking in Rs 45,137 crore. This fell to 36 IPOs in 2008, and the amount mobilised fell to Rs 16,927 crore.

Jefferies will offer investment baking services to mid-sized and growing clients. The company said it would also be involved in working with financial sponsors and companies regarding buybacks of heavily discounted foreign currency convertible bonds.

Nomura has acquired memberships on the NSE and BSE and will provide its global institutional clients access to the Indian markets. The bank will initially focus on sales and trading of equities, futures and options. The firm is also seeking regulatory approval for offering direct market access in the second quarter of this year.

The edge

Jefferies India Country Head and Managing Director Mr Sidharth Punshi said they are “looking at deals but the closure of these deals will take some time.” He added that at this point most of his competitors are “distracted”, which gives Jefferies the “upper-hand”.

Nomura in October last year had taken onboard most of the employees at Lehman Brothers, and that accounts for the timing of their entry here.

(This article was published in the Business Line print edition dated February 11, 2009)
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