News: Lehman setting up banking unit in India

(RTR 04/04/2006) Hong Kong - Lehman Brothers, a top Wall Street firm, is launching an investment banking unit in India this year, joining a host of competitors expanding in a fast-growing market for deals like mergers and IPOs.

Lehman, which worked on the first wave of overseas Indian listings in the mid-1990s, is moving in the same direction as Goldman Sachs and Merrill Lynch in a country where the economy is growing at more than 8 per cent a year.

"We're setting up investment banking now ... people will be on the ground this year," Charles Alexander, Lehman's head of Asia corporate finance in Hong Kong, told Reuters. "It's one of the big opportunities our senior management sees globally."

Lehman wound down its Indian operations in 1999 amid weak business growth and the Asian financial crisis.

The firm, which has an office in Mumbai, had been working on Indian deals mainly with bankers from places like Hong Kong, but the size of the market has become large enough to demand a bigger local presence.

The Indian sub-continent accounted for $6.1 billion in stock issuance in the first quarter of this year, up 32 per cent from the year-earlier period and bigger than markets like Australia and China, according to market data provider Dealogic.

Its mergers and acquisitions market was the fourth-biggest in Asia Pacific, excluding Japan, with about $6.3 billion worth of deals in the first quarter.

Last month, Lehman said it would add about 2,300 jobs in Asia and Europe, with most of these going to Asia.

GROWING RANKS

To get a bigger piece of that activity, Goldman and Merrill have changed the structures of their onshore operations.

Goldman has sold its stakes in two Indian joint ventures for $74 million to start its own investment banking and securities businesses there.

Goldman, which also plans $1 billion in Indian principal investments, joined up with partner Kotak Mahindra Bank Ltd. in 1992 but decided the time was ripe to go it alone.

Merrill paid about $500 million last year to increase its stake in its Indian joint venture, DSP Merrill Lynch, to 90 per cent from 40 per cent.

For more recent market entrants, the more independent model has proven popular as well.

Credit Suisse poached Morgan Stanley veteran Mihir Doshi this year to run its business in India, where it is relaunching its securities unit and building an M&A practice.

Australia's Macquarie Bank has also started up in the country and Britain's Barclays Plc. has been expanding its presence.

The market has speculated that Morgan Stanley, which operates two ventures with JM Financial Ltd., will be next to go independent but the investment bank has stood by its arrangement.

Lehman's Alexander, who spoke to Reuters last week, is no stranger to Indian joint ventures, having helped set up JPMorgan's foray with local partner ICICI Bank Ltd. in 1992.

JPMorgan decided to strike out on its own in 1998 and the US bank and its rival, Citigroup Inc., have had increasing success going against the joint ventures, which boast strong domestic networks for selling stock and bond offerings.

Lehman is planning a gradual roll-out of its services.

"The investment banking team will be first on the ground, fixed income and equities will be the next phase," Alexander said. "We'll do some transfers and we'll hire some people locally."