Anand Rathi scouts for foreign tieups in i-banking, broking

End-to-end financial services outfit Anand Rathi is scouting for foreign tieups for its investment banking and broking businesses. While the firm is in talks with some leading US firms for investment banking, a separate tieup for its broking operations is also next on the agenda.

In an interview toEntrepreneur,Rathi said: "The past four years have been tough for the markets. What we have done over the past four years is revisit our strategies and redefine it wherever necessary. One thing we decided is we need global tieups for global business. Being standalone for Indian entities is very tough. Kotak could do it because earlier they had Goldman Sachs."

Rathi said his firm was on the lookout for strong tieups now for the investment banking and broking operations. While there are reports that the firm is in talks with major US middle-market investment bank Piper Jaffray for an alliance, Rathi said he was talking to a few leading names, but no alliance has been firmed up as yet. "We are talking to a few big names. Nothing is final. We will take a call soon," he said.

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On a possible broking alliance, he said: "We are looking for a firm preferably in the US because only US broking firms really have the global reach."

On investment banking, Rathi said: "For us, from day one, mid-market has been the mainstay. We have never tried to compete on the bigger ones for two reasons. One, we can't compete there easily and, two, you don't get so much money in those deals. You also need a very strong balance sheet for the big deals."

The Minneapolis-headquartered Piper Jaffray is a leading middle market investment bank and asset management firm serving clients in the US and elsewhere. It has offices across the United States and in Hong Kong, London and Zurich.

Explaining the Anand Rathi Group's business philosophy, Rathi said: "Ours is more a continuing relationship rather than a transaction-related business. For Emami, we did the IPO, the QIP and the acquisitions. For J Kumar as well. We have continuing relationships. We give them a lot of business advice which not many people can do." Rathi was Emami's advisor in the deal to acquire Zandu.

Rathi said the Rs 300 crore firm, which was planning a listing in 2008, is now in no hurry to do so, with the markets turning choppy. "But you have to do a listing at some point, because we have an investor." In 2007, Citigroup Venture Capital International took a 20 percent equity in the company.

Rathi said the tieups will serve to prepare the firm for bigger business once the markets pick up. "We will be ready with a global reach and are now preparing the organisation for the eventual pickup in business," he said.

He said the firm was close to a broking tieup earlier, but the markets turned adverse thereafter and the deal did not go through. "US firms have also become very cautious," he said.

Market not for short-term players

Commenting on the current market turmoil, Rathi said: "I am bullish on the markets. I think the present situation, despite the problems, is a good opportunity. Let the Sensex fall even below 14,000. That is not really a big problem."

Rathi added: "What is wrong with this market is that people have become short-term players. This market is not meant for short-term people. If you have three-six months' money, you should not bring the money in. If you have three-, five-, 10-years' money then come into this market. If someone has a three-year view, I think it's a great opportunity. Even earlier, whenever short-term gains have happened, who knew what would happen? When the Sensex touched 9,000 did anyone guess it will be 18,000 in a year's time?"

Rathi said the steep decline in the rupee was a problem, but also presented an opportunity for foreign investors. "The overall handling of the situation by the government could have been much better. Even in this situation, at these prices, your foreign exchange reserves are going to come down. From where will the banks buy the money? By not releasing foreign exchange what is the good thing you're doing? For a foreigner it's a great opportunity. You're bringing in money at Rs 55, and after two years it will again be Rs 45 and below. So in two years you get a 20 percent margin in currency alone, and 30-40 percent minimum profit in equities. I see a foreign investor making 50-60 percent in two years. So that's a very good return."