Veterans script a new plot in shadow banking, raise Rs 4,000 cr in equity

In 2005, Jaspal Singh Bindra cut a cheque of $3.3 billion for Standard Chartered Bank’s purchase of Korea First Bank. “Nowadays, I chase investors for Rs 50-100 crore,” says the Centrum Group's executive chairman, and former group executive director at the UK-based bank. It’s not as bad as he puts it — the firm is in talks with Morgan Stanley Private Equity to offload a 20 per cent stake in Centrum’s housing finance arm, valuing it at over Rs  1,000 crore. But surely, a global banker’s business card opens more doors than the head of a shadow banking firm.

“I have very fond and satisfying memories of my previous life as a banker, with no regrets. I have a new business card and take great pride in what it stands for, towards building an admired and respected company”, notes Gunit Chadha, founder of APAC Financial Services, and the former Asia Pacific chief executive officer (CEO) of Deutsche Bank. He got Multiples — the private equity (PE) firm headed by Renuka Ramnath — to invest 37 per cent in APAC, a month after the blowout at Infrastructure Leasing & Financial (IL&FS).

Forget the obituaries to the shadow banking sector for a bit. A clutch of veterans (besides Singh and Chadha) — Vimal Bhandari of Arka Fincap, Bhupinder Singh of InCred, Shachindra Nath of UGRO Capital, and Gaurav Gupta of Adani Finserve, have close to Rs 4,000 crore riding on them. It is the biggest ever pool of capital to back professionals in this space even as some of the established players are being put through the wringer.

Heeding Proximo

What sets this crowd apart is that it has taken the character Antonius Proximo’s advice to Maximus Decimus in the ‘Gladiator’: “I was the best because the crowd loved me. Win the crowd. You will win your freedom”.

Says Nath, executive chairman and managing director (MD) at UGRO Capital: “I am not like Jaspal or Gunit who had the privilege of batting on big banking platforms. I am from a small town, the son of school teachers, and had to sweat it out”. As Religare’s Enterprises’ chief executive officer in a past avatar, he became famous as the gladiator who blew the loudest whistle! And can now rightfully trumpet the Rs 950 crore raised from PEs — ADV Partners, NewQuest Capital Partners, Indgrowth Capital and PAG (formerly the Pacific Alliance Group) and a few family offices — the biggest ever fundraising by a professional in the business till date. It boils down to reputation.

Of the lot, Bhandari of Arka Fincap is a veteran of a different kind – a life spent only in the world of non-banking financial companies (NBFCs). He was identified by HDFC chairman, Deepak Parekh, among the handful who would draft a blueprint for IDFC when it was set up in 1997. And had a long stint at IL&FS before it hit the headlines, and had gone on to helm IndoStar Capital fuelled by Everstone and Goldman Sachs. He now has got Atul Kirloskar’s Rs 1,000-crore backing.

“The major difference in the NBFCs promoted by us is that the management comes from a lending background, and the sector’s understanding, especially of risk, is good”, says the executive vice-chairman and CEO of Arka Fincap. And, debunks any suggestion that NBFCs will roll over and die: “There is no intrinsic weakness in the model per se as it meets an important need of the borrowers. It all depends on the business model and how you go about it”. And Chadha seconds Bhandari: “There is nothing wrong with the NBFC business model. I believe that it is governance that matters — you can’t slip up on that front”. And, he adds helpfully: “It is wrong to say that NBFCs will not have a stable funding base. If you mess up, even a bank’s CASA (current and savings accounts) can be affected”. And yes, we have an example of that too!

The other side of aisle

Gupta, the CEO of Adani Finserve, and Bhupinder Singh of InCred are the i-bankers in the fray. “The downside, Gupta says: “I am not traveling to fancy locations, and have been downgraded by all airlines, but it is a nice trade-off!” — a reference to his past as the MD of Macquarie Capital in India, and the frequent-flier miles earned earlier with Nomura, Lehman, Rothschild and Arthur Andersen. So, what’s the upside on this side of the aisle? “I wanted to be an entrepreneur and was fortunate when Gautambhai (Gautam Adani) gave me the opportunity to build the financial services vertical for the Group”.

As for Bhupinder Singh – the founder and group-CEO of InCred – he spent 16 years at Deutsche Bank, the final corner room being that of the bank’s co-head of i-banking banking and securities in Asia Pacific, looking after $3 billion in top-line. “From a personal perspective, after having lived abroad for the better part of my working life, I had a desire to contribute to my country in my own small way, specifically creating employment opportunities and bringing in global best practices, particularly in the area of risk management”, he says.

Ask Bhandari to crystal gaze on the years ahead, and he tells you: ‘It could be that some (of us) may aspire for a universal banking licence. Remember that corporate houses cannot aspire for one now. Who knows, some players may even get acquired by banks. The industry landscape is changing due to technology, regulation, and customer needs”. 

For Bhupinder Singh, the big relief from his days at Deutsche Bank is that he doesn’t have to move the kids from one country to another, separating them from their school and friends. “I am very pleased with how quickly they’ve adapted and formed strong friendships out here. In fact, the transition has been so smooth that my wife is now a regular cyclist on Mumbai streets!”

Yes, it may be a new life – but you have to keep pedalling like Lance Armstrong.