We will enter fund management, PE, corporate finance in India

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Early in 2012, PhillipCapital bought the Indian unit of MF Global, a big player in the equity-derivatives and commodities segment. In an interview with Rajesh Abraham, Lim Hua Min, executive chairman, PhillipCapital explains the India strategy for the Singapore-based outfit. Excerpts:

Can you explain your strategy in India post the acquisition of MF Global Sify operations in India? Was India part of the overall scheme of things for PhilipCapital, or it just came with the global acquisition?

We have acquired only the India and Dubai business from MF Global. At PhilipCapital, we tend to look at tough times as an opportunity to buy and grow our business inorganically. Last year, the opportunity arose when MF Global went into trouble and we were keen on investing in MF Global’s India unit. There is always a streak of optimism in us. We tend to invest in times of recession, when valuations are more justified. This gives us more opportunities to pick and choose and manoeuvre better in terms of alliances. Today, it is not easy to raise capital from the banks, but we are one of the lucky companies to have enough capital to expand our network and grow the business. We look at the Indian investment as a very strategic investment for us because it allows us to keep moving in the direction of globalisation. First and foremost, we want to be an Asian outfit, and as an Asian outfit you cannot do without India. This year we have also bought into Turkey and Dubai. We also have a presence in London, Chicago and Paris that allows us to provide the global reach because investment today is very global, very fungible.

MF Global Sify was known for equity and commodity derivatives, mainly for high networth investors. Do you plan to retain it this way, or you plan to beef up business in institutional and retail broking as well?

When we acquired this Indian business, in many ways, it was more singular in its approach; more concentrated on the derivatives and institutional side and less focussed on the retail portion. But we are all embracing in our approach; we do not adopt the approach of ‘either-or’ but ‘and’. That means we want to cater to the institutional as well as retail clients. In terms of product range, it’s not just derivatives or cash equities but the whole range from fixed income, FX, mutual funds, private equity etc. In India, over a period of time we would like to get into the fund management, private equity and corporate finance space as well. We will try to provide clients with a comprehensive bouquet of solutions.

Will PhilipCapital invest further into Indian operations in coming months, either to open more branches or more business segments such as PMS (Portfolio Management Schemes), hedge fund-type funds or even other related business such as i-banking?

The first priority in front of the local management in India is to rebuild the business that was lost due to MF Global crisis. The impact was primarily seen in the Institutional side of the business hence there would be greater emphasis on re-establishing that franchise. At the same time, in parallel, work has started to find ways to scale the non-institutional business by increasing the scope of the product offering and looking for scale through alliances and/or partnerships. At PhillipCaptial, we are in a position where the capital is not in shortage so if the business in India requires additional investment, we will be most keen to look at it closely.

In terms of staff strength, what are your plans? Was there any retrenchment of staff post the takeover? What are your targets for the additional number of employees going forward?

We have acquired all the businesses in India from MF Global. At present, there is no retrenchments that have been carried out. We are more motivated to build the business here in challenging times than shrink it. We keep a keen eye on the bottomline but our larger goal is to expand.

Reports suggest PhilipCapital has retained the existing management. Is it correct and what is the rationale? What are the changes, if any, in the management structure (in terms of new people joining from the HQ into the board or to top management?

Yes, we have retained the previous management. We tend to give priority to the locals. Our priority is always localisation. But we also want to inject the global mindset. The global mindset is necessary because while there may be 1.2 billion people in this country, there are 7 billion worldwide.

What is your outlook for Indian stocks and the broking industry in respect to massive cut in operations by several broking outfits in India in the last 2-3 years?

Broking industry in general has been faced with the twin negatives of lower volumes on exchanges and continued pressure on commission rates. That being said, it is likely that if the global sentiments were to improve on the back of euro zone handling its imminent crisis better and US showing some signs of economic revival then the natural beneficiaries should be the emerging markets. Within the emerging markets, India stands out as an attractive investment destination as it is more internal with lesser global trade linkage. Given the stage of development that India is at present, there should be a natural advantage in investing in infrastructure and consumption themes here.

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