Bulge Bracket’s There, But Businesses Are Growing Taste For Boutique

12 December, 2013

Vikram Gandhi, a senior banker who had worked for Credit Suisse and Morgan Stanley, has been appointed as a senior advisor to Green Hill & Co., a US-based boutique investment bank. Besides identifying the target assets in India for Green Hill’s global clients, Gandhi is also drawing up strategies to track Canadian Pension Plans’ investment opportunities in India. In an exclusive interview with VCCircle, Gandhi talks about the India plans for his newly established investment bank VSG Capital Advisors. Here are the excerpts from the interview.

India being an overbanked market in terms of i-banks offering advisory, what will be your specific strategy for growth?

Our strategy is slightly different from other full-fledge investment banks. We are an advisor to the Canadian Pension Plan Investment Board (CPPIB). The plan is to help set up social development funds, which will serve as a good platform for path-breaking social ideas and meet their funding needs. Personally, I am also associated with a US-based boutique investment bank called Green Hill. So there are a lot of opportunities and we are not directly competing with bulge bracket investment banks here.

What are your plans for CPPIB? A lot of private equity funds have invested in India, but many of them are yet to see successful exits. So what’s your game plan?

CPPIB has got around $150 billion of assets and not more than 10 per cent of it is in Asia. But it wants to opt for a greater Asia play, mainly in markets like India and China, and it has approached us. So we are trying to study the market and the investment opportunities available here. Since the Canadian Pension Plan is a long-term investor unlike other private equity investors, the idea is to invest in long-gestation projects in infrastructure and real estate, where long-term capital is not available. There is a clear mismatch between the demand and the supply of growth capital and hence, there is a huge opportunity waiting here. As the firm has a long-term plan and horizon, return on investments (RoI) is not an issue. We are studying the market now and if it does not turn out to be a profitable proposal, we may not pursue it further.

What are the risks involved?

A lot of decision-making in India is done at the bureaucratic level and there is a political overplay. Also, there have always been cycles which make exits through IPOs difficult. So there are a lot of risks involved but the positives are many. For instance, India is one of the countries witnessing good GDP growth. Then, Indians have higher purchasing power and there is the strong domestic consumption story. The demand for capital is also enormous, considering the kind of infrastructure facilities required over the next 10 years and with the right kind of investments, returns can be good. We also have to keep in mind that unlike other private equity investors, they are not very aggressive about returns and hence, the risks taken are limited as well.  

What will be your role at Green Hill?

Green Hill wanted to expand its presence in the Asian market and wanted us to help it think through its strategy in India, Singapore, Hong Kong and other markets. I have known the senior partners and the founder (Robert F. Greenhill) of the company for years (since my Morgan Stanley days) and that’s why they wanted to have me as the link between their global and Indian clients. I will be able to use my relationships with clients to help identify targets and sew deals. A lot of their MNC clients are now looking at the Indian market while there are many global Indian companies who are looking at acquiring companies in the USA. Therefore, Green Hill can play a meaningful role there. The firm felt that having a presence in India and Asia would be crucial and it chose us.

But how will you compete with the banks having huge balance sheets that can be put to use to get mandates?

The idea is not to create huge operations and franchisee here but to be opportunistic and catch some of them. Rather than using just one bulge bracket bank, clients are now asking for others with complementary skills to help piece together the entire deal. You will see transactions with more than one advisor and we want to be just there. India is at a stage where balance sheet and lending are still important. So our target is not league tables but to see where we have strong relationships and where we can add value.

At a time when most of the banks are struggling to cope with shrinking revenues, what is your revenue model going to be?

VSG Capital Advisors is a focused boutique bank where we are looking at unique opportunities that can be explored. The focus is to create affiliations and be the bridge, instead of becoming a full-fledged investment bank. We won’t have a huge team either as we don’t intend to have a massive structure. As a result, we won’t incur the cost to build a franchisee.


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Bulge Bracket’s There, But Businesses Are Growing Taste For Boutique

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