(Repeats Tuesday's story, no changes to text)
By Sumeet Chatterjee and Devidutta Tripathy
HONG KONG/MUMBAI, March 21 Investment banking
business in India should be enjoying bumper fees after a record
year of dealmaking. It's not, and big banks blame in-house teams
of advisers that have proliferated as the country's top
family-owned conglomerates tighten their grip.
This week's $23 billion tie-up between Idea Cellular
, controlled by the Aditya Birla Group, and the Indian
business of Vodafone Group, is the latest example of a
trend that is squeezing major international investment banks.
Many are struggling in a market that has long been
difficult, thanks to messy deals, paltry fees and local
Bankers had been circling both sides of the telecoms
mega-merger since it was first mooted late last year, when
competition in the sector accelerated dramatically. In India,
deals worth more than $1 billion are rare.
In the event, Vodafone hired six advisers: Morgan Stanley,
Robey Warshaw, Bank of America Merrill Lynch, Kotak Investment
Banking, Rothschild and UBS.
Idea hired none.
Instead of tapping bankers, the Aditya Birla Group relied on
their in-house team, which includes Saurabh Agrawal, a former
South Asia head of corporate finance at Standard Chartered, whom
it hired last year as head of corporate strategy, and former
Morgan Stanley banker Ashish Adukia, who joined nearly three
Earlier this year, it also hired Ankur Dalwani, a former
managing director at Jefferies in India, according to a source
familiar with the move.
"Investment banking is monthly tracking of revenue that
you've made, investment banking in corporate is monthly tracking
of ideas that you have generated. That's the difference," Adukia
said in an emailed comment.
The trend, say bankers, is about bringing back control for
Indian tycoons behind some of its biggest companies. One source
with direct knowledge of this deal said Birla took a direct role
in the deal, assisted by Agrawal.
"In some cases, the company in the middle of a transaction
won't even copy the bank advising on the deal when sending mails
finalizing the details. It's all about keeping control of each
and every decision," said one banker who has worked with big
Indian conglomerates, including Birla.
"Increasingly you will see the large companies roping in
external advisers only in those cases where they can't bridge
the gap. It will mainly involve the markets where they have no
presence or no knowledge."
DOING IT YOURSELF
Birla and Idea did not immediately respond to requests for
comment on the decision to leave out advisers, although one
separate source familiar with the deal said the company felt its
team to be "adequately equipped".
Elsewhere in India's corporate landscape, high-profile
banker appointments have proliferated.
Bank of America dealmaker Ankur Verma joined Tata Group's
holding company last month. Former RBS and CIMB banker Viral
Gathani last year joined Vedanta Resources as head of
corporate finance strategy.
A Tata spokesman said Verma will have diverse
responsibilities. Gathani did not respond to a request for
Large western companies also assemble in-house M&A experts,
but they mostly continue to use external advisers while
executing large takeovers, and in-house teams in the United
States and Europe tend to be modest in size.
Asia, led by China and increasingly India, is challenging
The pain of losing top talent and fees is acutely felt in
markets like India, already one of the industry's toughest
regions, where many have pulled back or out altogether.
Compliance demands are rising and competition for talent is
increasing, but fees are going in the opposite direction.
Indian companies struck a record $72 billion in M&A deals
last year, doubling from the previous year. However, total fees
for investment banking, including M&A, debt and equity, declined
to $463 million last year from $491 million a year ago, and was
sharply lower than $682 million in 2014.
Bankers said many Indian companies no longer wanted
deal-specific advisory services, but were looking for advice
across due diligence, M&A, debt and equity raising, and did not
want to deal with multiple banks for corporate finance services.
"The corporates think they can have a much better control
over a transaction if they keep it close to themselves, and can
avoid any conflict situation that some of the foreign banks
may have," said one M&A banker with a U.S. bank.
India Inc's bet is not without risks, especially for more
complex international deals, or where companies require
considerable fundraising. But for many, that's not yet.
"Most of the top Indian corporates are very cash rich and
they don't need balance sheet support, so they would say why
waste a few million dollars on purely advisory services?" said
one of the bankers with a foreign bank in Mumbai.
"They can get two, three bankers at a fraction of that
cost," he said, referring to their annual salary.
(Reporting by Sumeet Chatterjee in HONG KONG and Devidutta
Tripathy in MUMBAI; Writing by Anshuman Daga; Editing by Clara
Ferreira Marques and Mike Collett-White)