NM Rothschild eyes M&A, govt advisory businesses
Eleven years after entering India, investment bank NM Rothschild & Sons is banking on the revival of mergers and acquisitions (M&As) and government advisory business.
With M&A volumes shrinking, the family-owned firm -- which provides investment banking, corporate banking and private banking services -- has already seen the revenue mix between M&A advisory and finance advisory, shift in favour of the latter. “In India, we are best known for M&A advisory. We have made a mark in providing financial advisory, which generates 50 per cent of the business,” said Nigel Higgins, co-head of global investment banking at NM Rothschild.
Higgins, who was in Mumbai, then added that thanks to the diverse business mix, Rothschild was better off compared with some of its peers.
Though the bank’s Managing Director for India Sanjay Bhandarkar said that there was more than what was brewing now, it could take anywhere between three and six months for deal closures to take place.
The disinvestment business, being chased by most global and domestic banks, might not be something that NM Rothschild could get into. While the investment bank opened a Delhi office earlier this year to generate more business from the government, the focus was more on advisory business than on being bankers for public issues. Public issues from a host of public sector companies are being planned to enable the government to bridge its fiscal deficit budgeted at 6.8 per cent of the gross domestic product (GDP) during 2009-10.
Higgins, however, said that while its Delhi office was to focus on the government and real estate sectors, more corporate activity in and around Delhi could provide more business opportunity.
Like most investment banks, NM Rothschild too expected 2009 to be a year of restructuring. But thanks to the revival of the capital market and better-than-expected performance, that opportunity did not arise.
M&As appeared to be the key growth driver for the bank as Higgins said that a large number of global companies were looking to India to push their overall growth rate.
"A lot of foreign investors are looking for the right investment opportunity here, since India has the second-fastest growth rate in the world. Even firms from China are interested," Higgins said.
Many foreign companies were buying minority stakes in well-structured Indian companies, even though they were small, he said.
“Though they have been looking at India for several years, a lot of companies did not come here because businesses were not available and valuations appeared to be too high,” he said.
In addition, Higgins said there could be consolidation in sectors such banking, telecommunications and aviation, where there are a large number of players. “India is a very different market since the growth engines are different. The challenge is to develop a wider manufacturing base. Consolidation in manufacturing does not happen till it is too developed,” he said.
Navin Wadhwani, managing director, NM Rothschild & Sons (India), added infrastructure financing was the other opportunity that the bank was working on since there was a large interest in that segment.