Avendus-KKR deal reopens old trend: i-banks diversification

Mumbai: Just sealed Avendus-KKR deal reopens an old trend in the pure play investment banking sector, which was dominated by deal-makers, Nimesh Kampani, Vallabh Bansali, Hemendra Kothari and Uday Kotak till late 90s, who either exited the business or turned full-service financial players.

While some of these pioneering biggies, Kothari and Bansali, quit the space after selling DSP Merrill Lynch to Merril Lynch in 2005 and Enam Securities to Axis Bank in 2010, respectively, Kotak and Kampani became full-service financial players with focus on credit business.

Kotak has even entered into the banking sector.

What was notable about them, however, was that these maverick i-bankers cut deals for cash-rich large business houses riding on their long relationship with the promoters.

But even after the economic boom post-liberalisation, there was no boom in the pure play i-banking space in the country, instead the entrenched players who entered as brokerages-cum-i-bankers such as Centrum Group, Edelweiss Group, IIFL Group, Motilal Oswal, Kotak Mahindra, IndiaBulls etc, soon chose to expand their balance sheets and turned diversified financial services operators.

However, as market leaders diversified, there was also a trend of new pure play i-bankers entering the scene with the economic boom that started in the early 2000. These string of boutique i-banks primarily focused on niche areas and scripted success stories.

They include Avendus Capital, Mape Advisory, Equirus Capital, Singhi Advisors, O3 Capital and Kriscore Financial Advisory, and became a force to reckon with in the growing investment banking industry by focusing on mid-market deals.

Since the late 1990s and early 2000, many brokerages began to diversify and became financial services firms to minimise risks.

And JM Financial, Centrum Capital, Edelweiss, IIFL and Motilal Oswal, among others are of the latter lot.

It can be recalled that yesterday global private equity major KKR and Avendus Capital had said the latter would raise its stake in the homegrown financial adviser to 70 percent from existing 10 percent for an undisclosed sum.

KKR would be buying out Eastgate Capital and Americorp Ventures, early investors in Avendus through the deal. The existing management team of Avendus, which has a strong focus on mid-market firms, led by co-founders Ranu Vohra, Gaurav Deepak and Kaushal Aggarwal, would continue to manage the day-to-day operations and its growth into new businesses.

The deal, which is a first of its kind in the domestic i-banking where a PE player has taken over an i-banker, is a win-win for both as the KKR money will widen Avendus' credit business, while the deal will also help KKR increase its fledgling NBFC business here.