JP Morgan is set to expand the capital base of its Indian operation by 50 per cent over the next two years as Wall Street banks continue to ramp up their presence in Asia’s second-fastest growing large economy.
Kalpana Morparia, the bank’s new India chief executive, said on Tuesday that JPMorgan planned to inject about $500m in additional capital on top of its existing base of $1bn to help sustain its rapid growth in the country.
Even though capital market activity in Mumbai has slowed sharply, JPMorgan’s senior management remained bullish on India’s long-term prospects and capital was not a “constraint”, said Ms Morparia. “We just need to do more of what we are doing in the investment banking space and the several other businesses that we are scaling up.”
Bulge-bracket investment banks have been rapidly ramping up their presence in India to take advantage of the increasing sophistication of its markets and a growing trend among domestic corporates towards doing cross-border deals.
While those such as JPMorgan, Citigroup, Deutsche Bank and Merrill Lynch are building up their existing operations, an increasing number of Wall Street banks are either rebuilding their franchises after dissolving former joint ventures or building up from scratch.
New equity issuance in India’s stock market has stalled but merger and acquisition activity remains firm.
Outbound acquisitions by Indian companies of foreign targets reached $18.4bn in the eight months ending in August, down only 4 per cent on a year earlier, according to figures from Dealogic.
Ms Morparia, a former joint managing director of ICICI Bank, India’s largest private-sector bank, started work at JPMorgan last week with responsibility for 400 staff in the Indian banking operation and 11,000 in the group’s global services centre, which performs tasks for its business units worldwide.
She said she estimated that India’s investment pipeline – the amount of money corporates were planning to invest in capital expenditure and new projects such as power plants, factories and roads – was about Rs1,700bn ($38bn) annually.
However, while there were no signs of any projects being cancelled, the downturn in the stock market and a sharp increase in interest rates was making capital-raising more difficult.
Companies had a firm pipeline for investments in place until the middle of next year, but beyond that the picture was “hazy” as managers waited to see whether capital markets would reopen and interest rates would come down before committing to new projects.
“If you’d asked me six months ago, I would have said fixed capital formation of 35 per cent of gross domestic product [annually] was a given. I’m not so sure today,” Ms Morparia said.
In spite of the slowdown, she saw opportunities for JPMorgan across the spectrum of investment banking in areas from helping companies manage currency and interest rate risk, advisory work, wealth management and corporate finance.
Published by Financial Times London
