In 1997, when a string of South-East Asian economies hurtled into a tailspin after their currencies collapsed, a 49-year-old Korean, Park Hyeon Joo, chucked a cushy job at Dongwon Securities to start out on his own. Braving the storm, Park Hyeon set up an asset management company called Mirae, which means “the future” in Korean. And what a future it has proved to be: Mirae emerged from the turmoil to become one of the world’s largest investors in Asian equities, with offices in Hong Kong, Singapore, United Kingdom, India and Vietnam.With the dark prospect of a recession staring most global economies in the face, the current crisis pales in comparison with that of 1997 in terms of its reach, if not intensity. Whilst the Wall Street crisis may not derail the long-term India growth story, it’s surely going to cast its shadow on Dalal Street in the nearer term. But, like Park Hyeon Joo, a clutch of entrepreneurs in the Indian financial services space isn’t letting the sub-prime triggered woes alter their growth ambitions.
Sid Khanna, the torch-bearer of management consulting in India in the ’90s, and the man who built the India operations of Accenture (formerly Arthur Andersen), now heads India Equity Partners, a private equity firm. He says there is a long-term structural shift of faster growth towards India, China and other Asian economies. “Investors and global funds that have long-term commitments to their investors—for example, pension funds in the US, the UK and Europe—are looking at high-growth economies for better returns,” adds Khanna. Over the next 5-10 years, the domestic savings pattern is also expected to undergo a change in India—from traditional avenues like bank deposits and postal savings to market securities.
|Industry: Mutual Funds|
Scenario: Thirty four players have combined assets under management of around Rs 5,45,000 crore. The top four players (Reliance, HDFC, ICICI Prudential and UTI Mutual Fund) manage half of those assets
Prominent new players: Indiabulls, Axis Bank, ASK Group, HDIL, Bajaj Allianz, Edelweiss, Bharti Axa Focus Area:The new players plan to focus on product innovations and improving service standards. Will introduce new asset classes such as gold, real estate and overseas equity
Says Sameer Kamdar, CEO & Managing Partner, ASK Investment Holdings: “The AMC (asset management company) space may look crowded in the short term due to the entry of several new players, but over the long term, there will be a large market for everybody to participate in.” Proof of this lies in the growth in assets under management (AUM) of the industry— of over 30 per cent in the last six years. A recent Dun & Bradstreet study projects growth of over 28 per cent between 2008-09 and 2011-12. “We expect the industry to mature. It’s a long-term business for us,” says Rujan Panjwani, President, Edelweiss Asset Management, whose twin liquid schemes mobilised over Rs 900 crore in September ’07.
|Industry: General Insurance|
Scenario: There are eight players in the private sector general insurance that generates premiums of over Rs 11,000 crore every year. The market is dominated by ICICI Lombard and Bajaj Allianz, while Reliance General Insurance has moved up fast to the third slot. The top three players have a 70 per cent share in the gross premium
Prominent new players: Rajan Raheja Group-QBE Insurance Group, Unitech Group, Shriram General Insurance, SBI General Insurance, Dabur India, Future Generali, Apollo DKV Insurance, Universal Sompo General Insurance Co. and Bharti Axa General Insurance
Focus area: Following detariffing last January, the rate war in motor insurance, which contributes the most in terms of premiums, has just begun. Health insurance is another big area for new players to explore
|Industry: Life Insurance|
Scenario: There are currently 15 companies in the private sector life insurance industry who collect annual premiums of over Rs 30,000 crore. The top two players—ICICI Prudential Life and Bajaj Allianz Life Insurance—dominate the market with a premium share of over 40 per cent. The existing players have been mainly hawking ULIPs that account for more than 80 per cent of the annual premium collection
Prominent new players: Fortis-IDBI, Future Generali, Religare-Aegon, Canara-HSBC-OBC Life Insurance, DLF Pramerica Life Insurance Company
Focus area: The traditional endowment and term plans are not marketed aggressively by the private sector players as buoyant stock markets attracted investors to ULIPs. But when markets cool down, demand for endowment products picks up
|Industry: Investment Banking|
Scenario: There are over a dozen players in investment banking, focussing on advisory services or fee-based services. There is no great use of balance sheet
Prominent new players: Anil Dhirubhai Ambani Group, HDFC Bank, Motilal Oswal, Edelweiss, India Infoline, Almondz Global Securities, Religare
Focus area: Fee-based services like loan syndication, M&A and restructuring advisory services
The corporate sector will emerge leaner and fitter once the dust settles,” believes Shirish Saraf, President, Samena Capital, a special situation fund. Ajay Relan, who recently quit Citi’s private equity arm to start CX Advisors, is looking at a fund size of close to a billion dollars. Today, Indian companies offer a good investment opportunity in every stage of evolution of a company, right from early-stage to growth to late-stage to PIPE (private investment in public equity) to buyout.
|Industry: Private equity|
Scenario: There are over 300 players in the Indian private equity space, who collectively did deals worth $17-18 billion last year. The industry is dominated by big foreign players like Warburg Pincus, Blackstone, Temasek, Chrysalis Capital, Actis and a few Indian players like ICICI Ventures
Prominent new players: Morgan Stanley Private Equity, Axis Private Equity, YES Bank Private Equity, Reliance ADA and foreign players like Apollo Global Management, Morgan Stanley Private Equity, Bain Capital etc.
Focus area: There are opportunities galore in the latestage and buyout space. The SME sector also offers a big opportunity for PE players. The other big opportunity is in large infrastructure projects in roads, ports and airports
Meanwhile, even as the Wall Street banks lose their place in the sun in the West, they are still in growth mode in India (see Hello, Dalal Street, page 120). Domestic I-banks also see the current churn as a good opportunity to grow. “In India, investment banking is a very different concept at this stage,” says Ashutosh Maheshvari, CEO, Motilal Oswal Investment Advisors. The woes of the global I-banks have also provided their domestic counterparts with an opportunity to poach some experienced hands.
Ashok Wadhwa, CEO& MD, Ambit Corporate Finance, recently hired Nikhil Puri, a former Managing Director of Bear Stearns in US, and Andrew Holland, till recently Managing Director of Proprietary Trading at DSP Merrill Lynch, to build his institutional equities and investment banking operations.
Also, just as ICICI Bank did in the past, IDBI Bank and HDFC Bank, too, have taken the plunge into Ibanking. Says Harish Engineer, Executive Director, HDFC Bank: “I believe it is better to start investment banking operations by arranging debt rather than equity, especially in the current context.” The recent blood-letting on Wall Street will hopefully ensure that for the desi I-banks, proprietary trading and balance sheet risk-taking are too hot to touch.