Investment bankers exit India

Fund manager and investment bankers who were in a hurry to get into India from early nineties are leaving the country. Some making news and others doing their best to avoid adverse publicity.

The economic liberalization and the opening up of the Indian market started from early nineties. The country was then projected as one of the best business destinations, second only to China. A huge growing market was the star attraction. Added to it was the changes in the government policies which encouraged foreign investment.

For fund managers attraction was the rate of returns - unheard in the developed markets. All dreams did not come true. Some foreign funds lost large sums. Reviews started, seasoned Indian players accused them of spoiling the market. Lack of understanding of the dynamics of the Indian markets was the main reason. Some of the foreign funds even went to the extend of thinking that they could control segments of the Indian market through sheer money power. Took positions for quick short term gains and lost.

Added to all these were the uncertainty in political leadership. To be fair one has to call it lack of political leadership. Economic reforms did bring in attractive growth rates in the initial years, but this could not be sustained. Last three years saw the economy moving into a difficult situation. Domestic players are finding it difficult to survive and overseas outfits especially in investment and merchant banking are packing their bag and baggage.

Latest on this line is Lehman Brothers winding up its Indian operations. This US investment bank which started operations in India five years back is citing economic downturn in Asia and poor business in the country for its exit form India.

Lehman Brothers entered India five years ago through a tie-up with SBI Capital Markets, the merchant banking arm of State Bank of India (SBI). Lehman Brothers had handled some major disinvestment programs of Public Sector Undertakings (PSUs) as lead and co-lead managers of their Global Depository Receipts. The actual trouble started when SBI Caps decided last year to go it alone in the merchant banking activities. As per the tie-up agreement which got aborted later, Lehman Brothers was to assist SBI Caps in the overseas issues emerging from India with the SBI Caps involving in the domestic debt and equity issues. US investment banker, JP Morgan had pulled out recently from its joint venture with ICICI Securities. JP Morgen decided to exit from the equity business and is now operating only in the debt market as a separate entity.

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