Standard Chartered Plc (STAN) plans to increase takeover financing for Indian companies as it seeks to gain ground in mergers advisory in emerging markets on rivals weakened by Europe’s credit crisis.
“As the world goes through this turmoil, banks like ours which do have the capability and a strong balance sheet see that as an opportunity,” to lend for acquisitions, Neeraj Swaroop, the U.K. bank’s outgoing chief executive officer for India and South Asia, said in an interview in Mumbai yesterday.
Standard Chartered funded deals including Aditya Birla Group’s $875 million acquisition of Columbian Chemicals Co. in January to help defend its No. 3 position in Indian mergers advisory this year, data compiled by Bloomberg show. The London- based bank ranks 43rd globally among arrangers of takeovers.
Banks that offer financing to gain advisory credit distort the rankings among takeover arrangers, said Uday Kotak, the billionaire owner of rival Kotak Mahindra Bank Ltd. (KMB) Kotak did not specifically name Standard Chartered. The Mumbai-based firm, which is 21st in arranging mergers involving Indian companies this year, runs financing operations independently of advisory, he said.
“An advisory league table is about what value has been added by a banker and you don’t mix it with financing,” Kotak said in an interview in Mumbai on Dec. 12.
The value of mergers involving Indian companies has slumped 42 percent this year to $37.4 billion, according to Bloomberg data. Inbound purchases are outpacing acquisitions abroad for the first time in at least a decade, the data show.
Barclays Plc, State Bank of India (SBIN) and Standard Chartered advised on, and were among the financiers for, New Delhi based Bharti Airtel Ltd.’s $9 billion acquisition of Kuwait’s Mobile Telecommunications Co.’s African operations.
Standard Chartered wants to offer a “whole solution” to clients in India, including domestic and offshore financing, advisory, and transaction banking, Swaroop said. The bank assesses the overall return on capital it can achieve on each client when deciding whether to extend takeover loans, he said.
Swaroop, who joined Standard Chartered as India CEO from domestic rival HDFC Bank Ltd. (HDFCB) in 2005, will move to Singapore next year to run the company’s Southeast Asian operations.
Standard Chartered got over 70 percent of its pretax profit from Asia last year, as CEO Peter Sands expanded in emerging markets while European rivals sought to fend off contagion from the sovereign debt crisis. It is the largest foreign bank in India by number of branches, and the country was Standard Chartered’s third-largest profit generator in the first half, behind Hong Kong and Singapore.
The bank’s profit in India before taxes for the first half of 2011 fell 39 percent to $378 million, amid increased competition and rising interest rates in India, Bloomberg data show. Swaroop said he expects earnings to rise in 2012 as profits increase at the wholesale bank.
Standard Chartered bolstered its position in India with acquisitions, including the purchase of the South Asian and Middle Eastern operations of Melbourne-based ANZ Grindlays Bank Ltd., in 2000, which made it the biggest foreign lender in India, Pakistan, Sri Lanka and Bangladesh. It bought the banking unit of American Express Co. for about $860 million in 2007, adding branch licenses in markets including India and Taiwan.
Standard Chartered, the only foreign company to list (STAN) its shares in India, had 1.06 trillion rupees ($19 billion) of assets in India as of March 31. Swaroop said the company plans to add “a few hundred people” at its local consumer and wholesale banking operations next year.
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