Standard Chartered Plc, ranked 14th among merger advisers in India last year, has climbed to number two by financing takeovers in the world’s second-fastest growing major market for acquisitions.
The UK bank, the first foreign company to sell shares in India, has advised on $22 billion of deals, second only to Morgan Stanley, in the nation’s busiest year for takeovers since 2007, according to data compiled by Bloomberg.
Eight of the 10 largest acquisitions in India this year are cash transactions, compared with only one of the top 10 global deals, underscoring the need to provide financing to win clients. Standard Chartered funded the nation’s two biggest takeovers, by billionaires Anil Agarwal and Sunil Mittal, helping to cement India as the lender’s most profitable market.
“In India, M&A is to a great extent dependant on balance sheet support,” Abizer Diwanji, head of financial services at KPMG India, said in an interview from Mumbai. “You will see more and more banks putting their balance sheet to work.”
Indian companies led by Mittal’s Bharti Airtel have announced $58.4 billion of transactions this year, on course to surpass 2007’s record $69.2 billion, driven by cross-border takeovers that are also set for an all-time high. The tripling in deal volume from last year makes India the fastest growing after Mexico among the Group of 20 nations, the data show.
Standard Chartered overtook Goldman Sachs Group Inc and JPMorgan Chase & Co, the two largest global takeover advisers, in India this year. New York-based Goldman Sachs is ranked No. 10 in the Asian nation, while JPMorgan is 12th.
India’s acquisition spree contrasts with a slowdown in global deals. Mergers worldwide are on course to decline for a third year, with $1.35 trillion of transactions, down 56 per cent from the first eight months of 2007. In the US, the world’s largest market, volumes dropped 63 per cent to $577 billion, while Europe saw a 68 per cent decline to $489 billion.
“While the M&A activity in the US and Europe has been weak, it’s been quite busy in this part of the world,” Prahlad Shantigram, global head for mergers and acquisitions at Standard Chartered, said in a telephone interview. “For strong stories, the bank will look at financing.”
Standard Chartered may provide $4 billion to fund the acquisition of a controlling stake in Cairn India by Agarwal’s Vedanta Resources Plc, two people with knowledge of the matter said on August 16. Credit Suisse Group AG and Goldman Sachs are also financing the bid, according to a company statement.
The London-based bank has focused on cross-border deals in oil and gas, metals and mining and telecom, Shantigram said.
There may be “a couple more large deals” in those sectors this year, he said. “It’s been a good year for us so far.”
Cross-border deals
Cross-border mergers in India have climbed to $50.7 billion this year, surpassing the combined takeover volumes for the previous two years. The deal flow has almost matched the $51.9 billion in the first eight months of 2007, which saw a record $58.9 billion of such deals.
Standard Chartered raised $530.7 million in May, becoming the first overseas bank to sell shares in the nation. The lender, which traces its history in India back to 1858, was the only one of the nation’s three biggest foreign commercial banks to expand credit in the year ended March 31.
“We are trying to change the game, at least in our core markets like India,” Jaspal Singh Bindra, chief executive officer of Standard Chartered Asia, said by telephone from Hong Kong. “The days are gone when you can come into India just on the back of your big-bulge status.”
Expanding credit
Standard Chartered’s loan book expanded 11 per cent to Rs 41,550 crore last financial year, while HSBC Holdings’s advances shrank to Rs 23,470 crore and Citigroup Inc’s loans decreased to Rs 36,660 crore.
HSBC, ranked No. 6 in India M&A after part funding Bharti’s transaction, planned to offer financing to win more deals, said Naina Lal Kidwai, HSBC’s India country head.
“We expect customers whom we fund to also reward us with the events-business, as in investment banking,” Kidwai said in an interview on August 24. The lender planned to play a bigger role in providing advisory services and helping raise funds for acquisitions by clients, she said. “That would be a very important part of the way we work.”
May rise
Standard Chartered’s league table ranking may rise in India as the bank is advising Emirates Telecom Corp, the United Arab Emirates’ biggest phone company, according to two people with direct knowledge of the matter.
Jamal Al-Jarwan, chief executive officer for international investments at the Abu Dhabi-based operator, on September 6 said the company is considering investing in Idea Cellular Rajat Mukarji, a spokesman at Mumbai-based Idea, declined to comment.
Standard Chartered, India’s largest overseas bank by branches, earned almost twice as much in the nation as UK rival HSBC in the first half as India overtook Hong Kong to become its most profitable market.
The lender has reported eight years of profit growth even as financial institutions worldwide racked up $1.8 trillion of losses and writedowns during the financial crisis.
“We were around in the last two to three years when things were difficult,” Standard Chartered’s Bindra said. “People think you have done difficult markets, difficult structures in difficult periods, then you tick most of the boxes.”
