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'Investment banking set for big growth in India'

He might be low profile, but that's more to do with the hectic traveling he does and the time he spends on global deals. Otherwise, once back in his Bombay office, Udayan Bose, managing director of Lazard plc, is a man who does not mind talking straight from the heart.

Yes, he loves the M&A (mergers and acquisitions) markets and is all ears. Yes, he knows you win some, you lose some. Yes, he knows India has it but stumbles too often. In an interview with Sourav Mukherjee of NetScribes, Bose talks about the market he treads and what India needs to do pretty fast.

Where is investment banking headed in India?

The next three to five years should see a very good growth phase for investment banks in India. The eighties and nineties saw a mushrooming of small finance companies, all calling themselves merchant banks. Sebi then went on to give Category I merchant banking licences to 500-odd such companies, who did all sorts of things for survival.

Today, the good news is that consolidation has taken place. The small companies have shut down, merged or disappeared. The serious players are the ones left behind. The business has changed from "whatever business I can get" to serious M&A business, corporate restructuring, strategic analysis of business activity (portfolio review), private equity, medium-term debt and, of course, privatisation work, which is advising either the buy side or the sell side (government).

Therefore, I am very optimistic about investment banking in India. But, like everything else in India, we will take two steps forward, slow down, take a step backwards and then move again. But we will move!

What is the outlook for New Economy industries in India? Are they globally scalable?

This needs to be looked at in the context of what is happening within India and outside India. Within India, the move towards IT, though gathering pace, still leaves a lot of ground uncovered, and we have a long way to go. Looking outside, Indian companies have been star performers in helping foreign corporates scale up IT preparedness.

New Economy industries will also see a clear demarcation between the top tier companies and the second and third rung companies. The current global meltdown would accelerate the demarcation process.

We have already seen global scales by top tier companies (such as Infosys and Wipro) and possibly a few more may follow.

This is clearly a winning sector and even the reduced growth envisaged in the current year would still mean strong absolute numbers as compared to the low growth in the larger Old Economy.

How serious are Indian entrepreneurs about global presence now that barriers are coming down?

But for a few that you can count on the fingers of one hand, most Indian industrialists do not think global. They may talk global, but do not act so.

You will still hear clamours for protection under some garb or the other. Since 1992, when the first bell rang warning of the global days ahead, very few industrial houses have adjusted their production patterns or even their businesses for global competition. This is one reason why many of the so-called pivotal stocks, as they were called till the '80s, are today in the doldrums.

Only in the IT sector have we seen global size, style and standard of corporate governance. Of course, the other exception has been Reliance, which is undoubtedly global, not only in one Jamnagar or one Hazira, they are global in the way they think. That is what is missing in India.

What is Lazard's strategy in India and how big is India in its overall gameplan?

Lazard is an international investment bank, particularly strong in the US, the UK, France, Germany and Italy with its presence in 11 other countries. It aims to be a local investment bank wherever it is located and provide service to its international clients as well as to its domestic clients. Therefore, we are seen and known as an American investment bank in the US, a British bank in London and an Indian bank in India and so on.

Our strategy in India is exactly the same as it is around the world -- focus on corporate finance, privatisation, corporate restructuring and structured finance. Our belief has been, for several years now, that corporate finance and M&A will become very large in the days to come.

How big is India in the overall game plan? To Lazard, India has a significant locational advantage. Look at it from a strategic point of view. Most Western investors want to invest either in China or India, and apart from a presence in Hong Kong, we are not there in China.

On the other hand, we have a strong presence in Bombay and Delhi with as many as six Indian partners looking after our Indian business. So India is important, but the typical fee size on an Indian deal tends to be small and, therefore, our Indian profit, while very healthy from an Indian point of view, would appear small in a global currency. And this is true not just for us, but also for all the international merchant banks present in India.

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