13th June 2024

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Jefferies sees rising investment banking fee prospects in India after bumper 2023 -December 21, 2023 at 01:58 am EST

* India head says fee sizes have risen in last two years

* Bank is No.1 IPO adviser in India this year-LSEG data

* Jefferies has expanded in India and other countries in

MUMBAI, Dec 21 (Reuters) – Jefferies Financial Group
expects investment banking fees in India to rise in the
next couple of years as the number of deals grows, its country
head said, bolstering the prospects for the U.S. bank in a
country where its market share surged in 2023.

Global investment banks are increasingly targeting India to
generate revenues in Asia as dealmaking activities in China,
which has long been an engine of growth for them, slow sharply
due to an economic downturn and regulatory uncertainties.

Making money in the South Asian nation, however, has long
been a challenge for Western investment banks because most deal
sizes tend to be smaller and advisory fees for mergers and
acquisitions (M&A) and capital raisings much lower than in most
other large markets.

“Indian markets have come of age. The last two years, we are
seeing higher fees because of the complexity of deals and sheer
number,” Jefferies India head Aashish Agarwal told Reuters in an
interview. “If you are adding value, people are willing to pay.”

Newer Indian companies like those owned by private equity
firms are often more receptive to paying fees, he said, adding
for a large merger 2% to 2.5% of the deal value would be a
“decent number.”

While that range is lower than the U.S., where companies pay
as much as 5% to 6%, it has risen from 1.5% or even less a
couple of years ago.

“I won’t be surprised if India can be the most profitable
market, by margins, for foreign (banks),” Agarwal said.

A surge in fee income should augur well for Jefferies which
has expended its India investment banking team and boosted its
market share in equity capital markets (ECM) and M&A over the
past year.

Jefferies is No.1 in the India ECM tables this year, with
nearly 11% market share, jumping from seventh last year,
according to LSEG data, outranking local and international
rivals like Kotak and Morgan Stanley. The U.S.
bank stood at No.11 in India M&A, up from 20th last year, the
data showed.

In India, the New York-based investment bank advised on
deals including raising billions of dollars for billionaire
Gautam Adani’s Adani Group after a brutal short-seller attack in
January this year.

Jefferies’ recent expansion of headcount in India, Hong
Kong, and elsewhere in the region and beyond is in sharp
contrast with some of its Wall Street peers, which have been
focusing on controlling expenses given slowing economies.

Jefferies in October moved into a new, larger office in the
country’s financial capital Mumbai – a 16,500 square feet (1532
square metres) facility in the southern part of the city
overlooking the Arabian Sea.

At the Mumbai office, Jefferies employs about 100 people
across investment banking, equities and sales, many of them
hired from local and global investment banks over the last
couple of years.

Besides India, the bank in recent months has opened offices
in Israel and Brazil and beefed up its investment banking
presence in Dubai. Jefferies also set up an investment banking
and capital markets unit in Canada this month.
(Reporting by M. Sriram; Editing by Sumeet Chatterjee and Jamie