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'Downturn an opportunity to capture Indian market'

Q&A: Narayan Ramachandran

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Priya Nadkarni Mumbai
Last Updated : Jan 29 2013 | 2:34 AM IST

On September 21, Morgan Stanley ceased to exist as an investment bank after its application to become a bank holding company was approved. The firm will convert its Utah industrial bank to a national bank. On September 22, Morgan Stanley announced that the world’s second largest bank holding company, Mitsubishi UFJ, would pick up a 20 per cent stake in the company.

MUFJ has a commercial banking licence in India and has three branches in the country. In this interview with Priya Nadkarni, Morgan Stanley India’s CEO and Country Head Narayan Ramachandran speaks about the firm’s plans in India and whether they would change with the slowdown in the global financial markets.

How do the recent changes at Morgan Stanley worldwide affect the firm’s India operations?

In India, our businesses are overseen by different regulators. So in that sense, there is no direct implication. The fact that we are now a bank holding company in the US does not change anything for us in India.

Would Morgan Stanley India look at leveraging the strategic investment that the Japanese bank has in the company?

One of the potential things that we may do if it is strategically appealing, is apply to RBI for a banking licence, which we could have done even if we had not become a bank holding company in the US.

We would want to do as much as we can. Discussions are on at the global level on how we can add value to each other in Asia that includes India. MUFJ brings a vast commercial banking expertise and we bring expertise in the capital markets segment.

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How does the crisis affect your business in India?

We have doubled in terms of employee strength across all our businesses in India, over the last 18 months. We have a well-established institutional equity brokerage business. Then we have stepped up the momentum in the asset management business. We have a full scale investment banking division as well as a fixed income business—both for clients and a proprietary business.

We are using the non-banking finance company licence for our fixed income and wealth management businesses. We acquired an NBFC last year which is capitalised at $ 100 million currently. We aim to grow this.

India is going through a slowdown. If growth slows from 9 to 7 per cent, you have to slow down a little. In a strategic sense, our plan for India remains unchanged while in a tactical sense, we are going one step slower.

How does the slowdown affect your private equity business?

We have advisory teams for private equity, investments in real estate and infrastructure in India. Currently, we are extremely choosy about the prices that we want to pay for deals. However, this is one area, we expect that will be the most active and first to recover once the economy gathers pace. 

Some months ago, you had said that there will be a bull market in India next year. Do you still believe that?

I am a believer in the long term bull market. Strategically speaking, nothing has changed. Even today, India should grow at 7 to 7.5 per cent on a trend basis with earnings growth on the index at 15 per cent.

This is only a cyclical downturn and has given a once-in-a lifetime opportunity of capturing the Indian market for those who could not get in earlier. Having said that, we have to be prudent in these times. Last week was the toughest week in terms of liquidity. So, the very latest policy measures are tactical and short term in nature.

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First Published: Oct 17 2008 | 12:00 AM IST

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