'Ambit wants to be a full-service financial firm'

BANKER SPEAKS/ Ashok Wadhwa, partner and CEO, Ambit Corporate Finance

After selling the advisory services business, Ashok Wadhwa, partner and CEO, Ambit Corporate Finance, recently announced that he wanted to grow Ambit into a full-service investment bank. Ambit may consider private equity for funding growth and also list the company at some point to provide liquidity to its Esop holders.

In an interview with Anita Bhoir and Reena Zachariah, Wadhwa said there was a lot of scope in the wealth management segment as banks were not doing enough to serve the rapidly growing middle class. Excerpts:

What is the reason for restructuring?

When I quit Arthur Anderson in 1997, I wanted to implement a business model to build an organisation housing a strong advisory arm along with a boutique investment bank. We built Ambit RSM, where RSM grew into a strong tax advisory and consulting business, while Ambit shaped up into a strong boutique investment bank.

In 2002-03, we formed a private equity arm, GW Capital, following which we started considering independent visions for RSM and Ambit. It fructified in 2007 when we sold RSM to PWC. We now want to build Ambit into a full-service financial institution.

How will Ambit carve out a space for itself in a highly competitive merchant banking segment?

Our entrepreneurial spirit distinguishes us from the big banks. In most of the mature markets, we have banks with investment banking divisions, but that has not prevented independent investment banks from flourishing.

Today, you need to be a full-service investment bank and be valid in asset management, wealth management, institutional brokerage and private equity. There is room for everybody to succeed.

Corporate finance is an idea and a relationship-driven business. We have access to the decision makers. Our domain will be to cater to the middle segment. There is a lot of scope in the middle market segment. As long as we have relationships and ideas, we can sustain.

What are the challenges that you foresee, going forward?

The biggest challenge will be to build the institutional brokerage business. Institutional sales are a relationship-driven business. Having a global partner will be good. However, all global companies want a majority equity stake. That's the problem. Small firms will need to ask themselves if they want to be independent and focus on retail groups or also be in the institutional brokerage segment.

We have built the institutional business and will now focus on wealth management. Should there be a global firm that is prepared to accept a minority stake, we could consider an alliance. Our independence is more valuable to us. Ambit will focus on retail investors. The classic middle class investor hesitates to approach a bank. Our concept of service is far more suited to them.

In the wealth management segment, commercial banks have an advantage as they have a client base. However, they have not been able to adequately service their customers.

What are the different sectors that Ambit will focus on in the M&A segment?

There are five to six different sectors we are looking at. Banking and financial services, media and entertainment, engineering, auto components and logistics are the sectors we would primarily focus on. We will continue to see a lot of activity in the banking and financial services segment, with the banking sector looking to raise fresh capital.

What are the gaps that you see in your business?

Clearly, we need to strengthen our institutional broking and wealth management businesses. Currently, we don't do any lending business. We will need to raise capital to do so. Unlike all our competitors, we don't run a proprietary business. We will clearly need to raise capital in the near future. Right now, we are adequately capitalised.

As a promoter, I am willing to invest more capital. We could also go for private equity. A decent amount of our stock is deployed as employee stock options. The employees will expect good returns, sooner or later.