Best bank:
HDFC Bank
Best equity house:
DSP Merrill Lynch
Best debt house:
ABN AMRO
Best M&A house:
DSP Merrill Lynch
In India the public-sector banks are going head to head with the private banks. And they are being soundly beaten. Emerging over the past five years, private banks such as HDFC Bank have proved themselves lighter on their feet and more in tune with what customers need.
Gone are the days when the well-established – some would say staid – public banks could sit around earning easy money from regulated lending rates that assured them of cushy margins. And as the more sophisticated financial players migrate to the capital markets for funding, instead of turning to the banks and their traditional loan products, the threat of total disintermediation for India’s public-sector banks looms. There seems confusion as to whether they will survive.
Following its merger with Times Bank in February 2000, HDFC Bank is leading by example. It was a merger that added value immediately. Over the past year the customer base has increased and its network has expanded from 111 branches to 131, covering 53 cities, up from 34. This may not seem much in a country the size of India but, by not falling into the trap of expanding a distribution network over the entire country, the bank’s financial fundamentals remain solid.
HDFC Bank’s asset quality remains high with its net non-performing loans ratio at a very respectable 0.8%, its revenues rose 60.4% and net profits increased 75% this year. The bank’s technology is also further down the track than rivals’. It offers what it calls AAA banking: anywhere, anytime, anyhow. The channels of service available include phone banking, internet banking, and mobile banking.
Competitors are scrambling to jump on the bandwagon. The bank’s management is also highly regarded. Analysts claim that it is very capable of spotting new openings in the market and when it does, it is likely to aggressively grab its chance. An example of this is the bank’s salary account. Facilities include zero balance, free international debit cards and free depositary services.
The theme running through India’s equity markets is, according to those on the ground, meltdown. With a significant proportion of listings in the technology, media and telecoms sectors, India was always going to take a hit when technology fell out of favour. But the downward trend can’t just be blamed on global phenomena. Political exposés and a stock market scam haven’t helped.
On March 2 2001, the Bombay Stock Exchange slumped 4% in 30 minutes. Foul play and insider trading were suspected. Within a few days, Anand Rathi, the president of the stock market, resigned and 10 brokerages were barred from trading. CSFB was one of the higher-profile casualties caught up in the melée. This kind of environment, has, according to one banker, sorted the men from the boys. And it’s the 15-year-old partnership of DSP Merrill Lynch – Merrill Lynch owns 40% of the venture – that has been bucking the trend to take the title of best equity house. During the past 12 months its business has been one of firsts. In April this year, Dr Reddy’s Laboratories became the first Asian pharmaceutical company to list in New York. In a deal worth $133 million and in poor market conditions the issue was four times oversubscribed. In the after market it is one of the best-performing issues globally this year, up around 60% over the offer price. DSP Merrill followed this up in May with the first accelerated Asian ADR for Satyam Computer Services.
On the M&A side, DSP Merrill also comes up trumps. Over the past 12 months they have been involved in nine transactions in different sectors. These range from Bank of Madura Ltd’s merger with ICICI Bank, to the SSI’s $64 million acquisition of Albion Orion, the largest cross-border acquisition by an Indian IT services company.
India’s debt capital markets are maturing in terms of credit perception and secondary market trading. Interest rates that have been artificially managed by the central bank are to some extent being left to market forces. ABN AMRO India Private Limited wins the award for best debt house.
It is strong in both syndicated loans and bonds. Deals have included bringing not only experienced companies to the market but also novices. Reliance Petro Chemicals is one such corporate with its Rs10 billion ($200 million) issue. From May to December 2000 ABN AMRO was the top arranger of debt by all companies in India by number of issues, with 82 to its name. It was also highly innovative.
It was sole arranger for GE Capital with the first French auction in India.
