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Morgan Stanley ties with JM Financial Group

Indian financial services giant JM Financial Group and Morgan Stanley-India has decided to combine their investment banking, and institutional equity sales and trading business in India through two entities -- JM Morgan Stanley Ltd and JM Morgan Stanley Securities Ltd.

A memorandum of understanding to this effect was signed last weekend and the new entities are likely to be operational by the start of the next financial year.

The decision to sign the MoU was announced on Monday at a joint press conference by JM Financial Group Nimesh N Kampani and Morgan Stanley-India President and Country Head Vikram Gandhi.

The chairman of both the new companies will be Kampani, while the vice-chairman will be Gandhi.

The move will benefit both and take on the competition which includes other joint Indian-foreign firms such as DSP-Merrill Lynch and Kotak-Goldman Sachs. For Morgan Stanley, India is the only other country after China where it has forged a joint venture.

JM Morgan Stanley Ltd, with J M Financial Group holding an equity interest of 51 per cent and Morgan Stanley-India holding 49 per cent will operate in the areas of investment banking, corporate finance, project finance retail distribution and fixed income securities.

While JM Morgan Stanley Securities Ltd with Morgan Stanley holding an equity interest of 51 per cent and JM Financial Group holding 49 per cent will operate in institutional equity sales trading and research.

The combined business will bring together one of the country's best investment banks and one of the world's largest and most renowned securities firm. The combined businesses will exclude other businesses of JM Financial and Morgan Stanley in India including JM financial's asset management arm and the asset management and global custody business of Morgan Stanley in India. Both the heads of companies have ruled out any job cuts.

This joint venture will combine the strong domestic franchise of JM Financial with the international experience and expertise of Morgan Stanley to form investment banking and security firms that will be ideally positioned to serve their Indian and international clients , said Kampani. By combining investment banking and institutional equity sales and trading businesses into companies that will have both domestic and international capabilities, JM Financial and Morgan Stanley are jointly positioned to meet clients' needs in a capital market environment which will be increasingly characterized by the convergence of international and domestic markets , he said.

Gandhi said, "The objective in combing our investment banking and securities businesses is to create the preeminent full-service investment bank in India, serving the capital raising needs of Indian companies and the investment needs of both Indian and international institutions.

The combination of investment banking and institutional equity sales and trading businesses has been driven by a desire on the part of both JM Financial and Morgan Stanley to position themselves to adapt to the rapidly developing and increasingly sophisticated capital market environment in India.

With India moving towards capital account convertibility, with the increasing institutionalisation of its domestic savings system and with the increasing efficiency of its capital market, the onshore and offshore markets for Indian securities will gradually converge, Kampani said, and added that in this environment, both domestic and international capabilities will be necessary to assist clients in meeting their financing and investment needs .

Gandhi further added this joint venture will position Morgan Stanley to participate in the huge opportunity that the further development of India's capital market represents. By combing out securities and investment banking business with a firm with the reputation for integrity and domestic expertise of JM Financial, Morgan Stanley will be able to better meet its clients' capital raising and investment needs.

Meanwhile, Credit Suisse First Boston has terminated its letter of understanding with JM Financial and Investment Consultancy Services Ltd.

CSFB's decision is a direct consequence of JM Financial decision to sign an MoU with Morgan Stanley.

CSFB Pacific region Chairman Stephan Stonefield said that the decision was prompted considering the developments in the Indian market and importance of this market to CSFB's overall businesses in the Asia Pacific region.

Hinting at strengthening the Indian operations, he said, "We are strengthening our onshore presence."

UNI