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APRIL 8, 2007
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Mobile Security
Today, it is all about information and how the right information is sent to the right people at the right time and right place. Uncertainty about how to secure mobile phones in the face of increasing threats is slowing individual adoption of mobile applications. There are many facets of mobile security, including network intrusion, mobile viruses, spam and mobile phishing. Analysts expect big telecom companies to develop security solutions on various security platforms.

Rough Ride
These are competitive times for the Indian aviation industry. As salaries zoom, players are scrambling to find profits. Even the state-owned Indian is now seeking young airhostesses to take on the competition. It is planning to introduce a voluntary retirement scheme for airhostesses above 40 years. On an average, they draw a salary of Rs 5 lakh a year. The salaries of pilots, too, are soaring. According to industry estimates, the country needs over 3,000 pilots over the next five years.
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Business Today,  March 25, 2007

Wall Street On Dalal Street
Lured by the multi-billion dollar deals, the world's largest I-banks are launching, or expanding, their operations in India. But this time, they're going solo.
MD & CEO/Goldman Sachs (India) Securities
Investment banking is among the toughest businesses to be in; but it is also among the most rewarding. India has been a relatively late starter in this field, and for a long time, prior to 1991, a large part of it was restricted only to the capital markets. But that has changed dramatically over the last 15 months, courtesy some high voltage mergers and acquisitions (M&A) activity. According to Grant Thornton, in 2006, there were 480 M&A deals involving Indian companies; the total transaction value: $20.3 billion (Rs 89,320 crore). Sounds impressive? Then sample this: total M&As in the first two months of 2007 add up to more than $30 billion (1,32,000 crore), courtesy the Tata-Corus, Hindalco-Novelis and Vodafone-Hutchison Essar deals.

These numbers are reason enough for India to start blipping furiously on the radars of global investment banks. The number of big ticket M&As, they are convinced, will only grow in this country; and they all want a piece of the action. That is one of the reasons why several MNC I-banks are coming in solo, and those that have joint ventures with Indian partners, are pulling out of their tie-ups, to trod the solo path.



Organisation: Lehman Brothers Securities.

India Head: Tarun Jotwani, Chairman & CEO.

Prominent deals: Advisor to TA Associates' acquisition of a 4.5 per cent stake in Idea Cellular. Joint lead manager and bookrunner for Videocon Industries' $90-million (Rs 396 crore) convertible bond offering. Joint lead manager for Satyam Computer Services' $323-million (Rs 1,421.1 crore) sponsored ADS offering.

Staff strength: N.A.


Organisation: Macquarie India Advisory Services.

India Head: Varun Bajpai, Managing Director (Corporate Finance).

Prominent deals: Co-manager for Idea Cellular's Rs 2,125 crore public offering. Lead manager for MindTree Consulting's Rs 240-crore public offering.

Staff strength: 70.


Organisation: Goldman Sachs (India) Securities.

India Head: L. Brooks Entwistle, Managing Director & CEO.

Prominent deals: Advisor to Hutchison Telecommunications International (HTIL) on the sale of its Indian operations, Hutchison Essar, to Vodafone. Acquired a 5 per cent stake in National Stock Exchange (NSE). This deal is said to be worth around Rs 500 crore.

Staff strength: 75.


The company was earlier in JV with JM. After parting ways, Morgan Stanley will set up its own investment banking arm. Globally, it is focussed on five business areas-investment banking (including M&A advisory and capital markets), equity sales, trading and research, fixed income sales, trading and research, asset management and private equity and private wealth management. In India, Morgan Stanley has an equity sales and trading platform in place following the deal with JM. The company is expected to expand in the fixed income businesses and private wealth management segments as well.


The operation is headed by Mihir Doshi and the company will foray into broking and asset management over time. It is also targeting a presence in investment banking for which it has put together a team. This is Credit Suisse's second innings in India.

Goldman Sachs, for instance, parted ways with Kotak Mahindra, its erstwhile JV partner, early last year. "When we set up (independent) operations in March 2006, the idea was to build the business as quickly as possible. Our immediate focus was on getting licences for investment banking and equities," says L. Brooks Entwistle, Managing Director and CEO, Goldman Sachs India. Goldman Sachs is a big name globally and a large presence in a growing market like India was sine qua non. "We have to be here for our local and global clients. Today, we have a team with both global and local expertise," Entwistle says. It has already scored big-the Vodafone-Hutch deal (Goldman Sachs advised Hutchison Telecom International on it).

The robust earnings growth of the Indian corporate sector and its increasingly global ambitions are exactly the kind of stories that the pin-stripes on Wall Street like to hear. "The global aspirations of India's corporations, the country's rapidly growing capital markets and a further liberalisation of the Indian market will make the country an important player across all asset classes in the next five to seven years," says Tarun Jotwani, Chairman & CEO, Lehman Brothers India. Quite clearly, the story for most players will be spread across the spectrum and will not be restricted to just plain vanilla investment banking. Companies like Goldman Sachs have picked up stakes in the National Stock Exchange (NSE) and the National Commodity and Derivative Exchange (NCDEX), while Macquarie holds a minority stake in Idea Cellular. Commenting on Goldman's decision to pick up stakes in two of India's premier exchanges, Entwistle says: "Goldman has done this globally. It is a great way of adding value as an investor."


Till a few years ago, the Indian investment banking scenario was dominated by players such as JM Morgan Stanley, DSP Merrill Lynch, Kotak Mahindra Capital and Enam. The solo entry of the world's largest I-banks into India will now force their Indian counterparts to focus mostly on the domestic M&A segment and the capital market. Vishal Kampani (R), Director, JM Financial Group, points out that his company remains a strong player in the domestic market and he brushes aside suggestions of MNCs enjoying an advantage over firms such as his in cross-border M&A deals. "That is nobody's monopoly, and we could look at having alliances as an option," says Kampani.

He has a point. India, though an attractive market, is not the easiest place to do business in. The recipe for success depends heavily on relationships with clients and an understanding of the local market. "We are also looking at having alliances for cross-border deals and we will take one country at a time," says Falguni Nayar (L), Managing Director, Kotak Mahindra Capital Company (KMCC), adding: "India is our strength and no one knows India as well as we do." According to Enam Financial Consultants' Chairman Vallabh Bhansali, it is important to play to ones' strengths. "At Enam, we think our strength lies in an understanding what we do with respect to markets and business," he says. On the issue of cross-border deals and acquisition financing, he says: "It is always subject to a cycle."

Goldman Sachs and Morgan Stanley have been in India for a while (through JVs with Kotak Mahindra and the Kampanis of JM Group), but the story is quite different for Macquarie. The Australian bank has been here for 18 months and has already established itself in the country. It is currently representing Tata Power on its $1-billion (Rs 4,400 crore)-plus buyout of the Indonesia-based Bumi Resources. Macquarie's expertise in the infrastructure space was the clincher when it came to winning the mandate. "Over time, we want to mark out our presence in both domestic and cross-border M&As, QIBs and also be a principal," says Varun Bajpai, Managing Director (Corporate Finance), Macquarie India Advisory Services.

MD/Macquarie India Advisory Services
Driving their foray into the country is the special skills that these MNC I-banks bring. "As they contemplate cross-border transactions, Indian clients require ideas flows, structuring skills and stronger balance sheets," says Frank Hancock, Managing Director (Corporate Finance), ABN Amro Asia. "Today, foreign banks bring to the table advantages like global relationships and global access to corporates," points out Manisha Girotra, Managing Director and Chairperson (India), UBS Securities. Her firm has been involved in the Vodafone-Hutch and Hindalco-Novelis deals.

Meanwhile, Credit Suisse, the Zurich-based investment bank, will soon restart its asset management and broking businesses in India and it is also planning a presence in investment banking and private banking. Paul Calello, Credit Suisse's CEO (Asia Pacific Region), had said earlier that the bank will kick off its operations once it gets its approvals. And Morgan Stanley, which has just parted ways with JM, will also begin its solo run in India shortly. Says Hans Scheuttler, Morgan Stanley's CEO (Asia): "Increasingly, banks now have to invest their own capital and take on the associated risks. We are also increasingly coming to a situation where larger portions of our profits are coming from returns on this invested capital. And this is actually a demonstration of our increasing commitment to the Indian market."

Foreign investment banks are now big players in acquisition financing. Examples: Credit Suisse and ABN Amro helped bankroll Tata Steel's acquisition of Corus and Hindalco's buyout of Novelis. There is also a contrarian point of view here. "Acquisition financing is an important aspect of our business, though it must be said that your financiers are not necessarily your best advisors. In huge M&A deals, we suggest to clients that we only arrange the financing," says Bajpai. In short, there are different hats that investment banks need to wear.

The fact that investment banks themselves pick up stakes in companies they advise, or in those their clients target, has come in for debate. There is an obvious conflict of interest here, but Bajpai defends this practice, saying that the investment team works behind a Chinese (fire) wall and there are very high levels of confidentiality. Entwistle adds: "We can invest alongside our clients. In an auction process, we make sure that we bid with them and not against them."

Head of Equity (India)/Macquarie Securities
Chairman & CEO/Lehman Brothers India
For now, the investment banking space looks action-packed and no one is ruling out the entry of banks from Japan and other parts of the world. The focus for all banks without exception is to bag more business in India and sustain the flow of new products. "Over the next one year, we should be able to offer products related to derivatives, property business and wealth management," says Macquarie Securities' Head of Equity (India), Stuart Smythe. Macquarie also intends to be a big player in the infrastructure space and expects to do a lot of work in that over the next five years. "This will include roads, ports, and airports, to name a few. We will be an active principal in the space," adds Bajpai.

Lehman Brothers is not too far behind and is positioning itself as the investment bank of choice for India Inc. "We will offer a broad range of products, including debt and equity issuance, M&A advisory services, leveraged finance, structured finance, hybrid products, derivatives, and risk solutions," says Jotwani.

These are exciting times for these I-banks. And if reports of Reliance, Ranbaxy, M&A and others planning mega-acquisitions across the world prove correct, and there's no reason to believe that they aren't, the optimism of these players will have been justified.

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