Before storied global investment banks set up shop in India, it was the 3Ks—Nimesh Kampani, Hemendra Kothari and Uday Kotak—two stockbrokers and an entrepreneur who spotted the opportunity and ruled the Mumbai corporate finance market. With Nimesh Kampani, 70, the founder of JM Financial deciding to hang up his boots it’s the end of an era when deals were won on the strength of personal relationships built over years. Kampani for his part worked with several business groups including the Tatas advising them on both acquisitions as also fund-raising propositions; other marquee deals that he worked on included the Birla-Tata-AT&T merger. But with deal sizes becoming bigger over the years, advisory mandates have been won on the back of the ability to write cheques; at the very least investment bankers need to be able to syndicate loans for the proposed acquisition. Moreover, given many of the buyouts are cross-border purchases, familiarity with the overseas markets is called for. Which is why most deals are done by global investments banks that have global reach and relationships. Even when it comes to large IPOs (Initial Public Offerings) or equity placements of any kind, it is the foreign brokerages that win the mandates since they alone have the ability to place shares with large institutions. Typically, local brokerages have been roped into these issues for their access to retail customers.
While a few home-grown merchant bankers have tried to partner with global firms these alliances haven’t really worked out; Kothari sold-out to Merrill Lynch in 2005, Kotak and Goldman Sachs went their different ways in 2006, while Kampani split with Morgan Stanley in 2007. Others like Vallabh Bhansali cashed out and those that remain have been focussing pretty much on the home market, building up a retail and HNI franchise. These outfits are more like Non-Banking Financial Companies that offer loan products and have forayed into spaces such as mutual funds and insurance. Indeed, running a boutique outfit, in a highly competitive market, is perhaps not an option these days which is probably why most players are leveraging their resources by offering a range of debt and equity products. JM Financial has built up a strong franchise but it’s going to take a lot of hard work to be able to stay in the game.