CLSA India operations hit as Citic tightens grip, India-China ties sour

Parent Citic seeks to take full control of the Hong Kong-based brokerage

CLSA India is yet to make a mark on the investment banking league tables this year. Sources say the restructuring exercise undertaken by parent Citic Securities coupled with worsening ties between India and China have hurt operations.

State-owned Citic is looking to tighten its grip on the Hong Kong-based brokerage by taking full control of key divisions.

“Citic Securities has decided to integrate CLSA’s corporate finance and capital markets business into its own, to reflect its strategy and market positioning. All other CLSA businesses continue to operate as CLSA,” said a CLSA spokesperson.

According to Bloomberg data, over Rs 90,000 crore worth of equity share sales have happened domestically across 32 issuances this year. Of this, CLSA has failed to bag even a single mandate. Over the last three years, CLSA, an investment bank registered with Sebi, has worked on average five deals a year. The bank has never made it to the top 10 of the league tables, however, has worked on share sales of some marquee companies.

CLSA saw exodus of about a dozen senior executives in India. Industry players said this has impacted deal-making, which is a very “people centric” business. Globally as well CLSA has seen large exodus amid the restructuring exercise undertaken by Citic, China’s biggest brokerage.

CLSA became state-owned Citic’s wholly-owned subsidiary in 2013. Since 2016, Citic’s international operations have been conducted under the brand name of CLSA. Now with China’s growing dominance, Citic is pushing ahead with its own identity.

Market players said the strategy could backfire in India.

“The overall sentiment towards China is at the lowest due to flare up in tensions at the border. Also, the government and Sebi enacting a stricter framework when investments from China. As a result, there is little value a China-focused investment bank can add at the moment. Most companies want to stay clear,” said an investment banker.

Typically, a company appoints multiple banks to cover investors across all geographies while conducting a share sale. Market players said over the past few years, CLSA was appointed as banker by many companies to attract investments from mainland China as well as Hong Kong.

However, earlier this year, the government increased the scrutiny of investments coming from China, Hong and other neighboring countries.

Besides Citic, Haitong Securities is another major Chinese brokerage with operations in India. Shanghai-based firm got a foothold in India by acquiring Espírito Santo's domestic business.

However, both Haitong as well as Citic haven’t scaled up their India operations in a big way and it may continue to be so given the current acrimonious environment between India and China.