Is the sub-prime problem in the US behind us?

We've managed to escape it and that is a great achievement since we can't afford it - the US markets still can, as they're a mature market. Recall, that a lot of Asian countries went through this kind of set-back in the past and they are yet to recover. Our problem would be a lot more acute as we're not a 10 or 20-company country. There are too many companies that need funds for growth and with a limited debt market, it is bank lending that is crucial. If such a thing had happened in India, international banks would also have clamped down on India. The RBI and Sebi have done a terrific job. They are cautious and are looking at things on a case-by-case basis - this is understandable.

Your comments on the P-Note curbs.

It's been discounted by the market. Sebi had promised quick FII registration and FII applications are being processed very quickly - all our clients have done that. So, there may have been some short-term pain; in the long run, the policy is a great one since Sebi is saying hedge funds are welcome as long as they register and are willing to be regulated and monitored - that's not the case in many other markets and all of our clients have said they are willing to come in and be registered. So, Sebi is cleaning up the markets which was needed and it is also doing it at a time when India is so attractive, especially when the US is slowing down and hedge fund investors are asking fund managers to invest in India.

What are UBS' India plans?

Globally we have three businesses - asset management, investment banking and wealth management. We are already here on the investment banking side and our desire is to double our business in the next 12 months. We research over 100 companies and do all the activities on the investment banking side - cross border M&As, IPOs, GDRs, etc.

On the wealth management and the traditional banking side, we are awaiting approvals from RBI for the branch licence. If we get that, we will be able to offer that service as well which is a large part of the UBS business globally. We have reviewed the NBFC option but we would like to wait for the branch licence. On the AMC side, we are awaiting regulatory approvals (UBS has acquired Standard Chartered Bank's mutual fund business in India).

Are there more opportunities in M&A or in IPOs?

Probably both, given that the Indian industry currently needs so much growth capital, and more importantly our debt markets aren't so well developed. So, traditionally, companies need bank capital and of course they need equity raisings in terms of QIPs (qualified institutional placements) or FCCBs (foreign currency convertible bonds). So, as far as equity market activity is concerned, I think it is huge and it will just get even larger.

Also for M&A deals, we need M&A financing, we need capital so that the kind of activity is large. It will keep growing larger. We would probably not reach the scale of China, but India is also growing. In June last year, India raised about $12 billion of capital which was unheard of even two years ago. I think cross-border M&As will acquire even more momentum.

Indian entrepreneurs who made global acquisitions are bullish since they've achieved margin expansions which were even higher than what they'd originally anticipated, and global managements have accepted Indian shareholders very well. On the other hand, inbound acquisitions will also rise and global acquirers also feel that they can learn a lot from the way Indian companies keep costs low and margins high, despite consumers being price sensitive.

All bankers are competing for the same pie...

It is a competitive pie and it is no different from how it is globally. Basically, what you are seeing is a bit of a churn at this point in comparison to the situation 3 or 4 years ago. At that point i-banking was very closely held by few domestic firms because it was a closed economy. We did IPO in India and a few M&A deals. What you are seeing now is the desire of the Indian companies to be the next global multinationals.

To achieve this goal, there are these guys who are aligning themselves to global banks; the domestic mid-caps are aligning themselves with the boutique i-banks and even if you look at the US or other countries like China, this is exactly how businesses are done. Where there is enough business for everyone, the top four or five global banks will capture the top 8 to 10 per cent of the market. In the next three or four years, it will become clear as to who the top 4-5 banks in India are.