When Adani Group stocks came under pressure last year following the Hindenburg Research report, Florida-based GQG Partners took a $1.87 billion bet in three group companies.
The decision was against the grain — the cumulative value of the conglomerate’s stocks had fallen by more than $150 billion at one point — but GQG’s confidence capital helped soothe nerves.
Unknown to many, Jefferies was busy playing matchmaker behind the scenes.
As sole broker on India’s largest block trade — GQG’s $1.1-billion stake purchase in Adani Power as part of the larger investment — this was a breakout moment for Wall Street’s “challenger” investment bank here in India. When most other advisors were pulling back, Jefferies chose to pull out all the stops for its client.
“I saw at a very early age how fragile companies can be,” Richard Handler, chief executive of Jefferies for 24 years, told ET during his recent, maiden trip to the country. He’s upbeat about India, as he says, “It's hard to be here and not be excited — the human capital and smarts of the population as well as leadership of the conglomerates.”
“I saw at an early age how you can always see the best in people and the worst in people in times of strife,” said Handler of Jefferies. “Everyone is your best friend when you're on top of the world. But you can only judge who's really with you when you are in a period of dislocation.”
Perhaps this had something to do with surviving “a horrendous false attack in 2011” by what he once described “as a corrupt and incompetent rating agency analyst.”
At 62, Handler is one of the longest surviving Wall Street corner office occupants. As he put it, “I always give people the benefit of doubt. And when you do your own work and come to conclusions, it’s much easier then to go back to your principles of empathy and partnership.”
The Jefferies growth story too has had its twists, growing rapidly through acquisitions of boutique firms in the 2000s and then itself getting merged into secretive investment platform Leucadia National in 2012. (Leucadia National is now known as Jefferies Financial Group.) This came after bear attacks following the collapse of brokerage MF Global, sparking doubts about Jefferies’ own exposure to the eurozone debt crisis.
“We were a challenger the day I walked in the door, and we’ll be one for many decades into the future,” Handler said.
Jefferies has plenty of room to make bold bets. While peers have been reducing their workforce, it has been bulking up. It has added 21 managing directors in investment banking since the start of its 2023 fiscal year, with senior recruits predominantly coming from European firms Barclays and Credit Suisse, including in India, with the aim to diversify beyond being just a top equities house.
This is where a stronger global alliance with Sumitomo Mitsui Banking Corporation (SMBC) comes in. This collaboration, still in its early days, will help Jefferies and SMBC work together to advise and lend to investment-grade companies globally. Having already teamed up on cross-border mergers and acquisitions as well as leveraged finance, this will be a force multiplier for the debt underwriting business catering to larger companies, which have historically worked with the likes of Goldman Sachs and JPMorgan Chase.
“SMBC is a remarkably strong global bank. They have a fortress of a balance sheet. Jefferies, on the other hand, has a great set of super high-quality industry expert investment bankers in all verticals,” said Handler. “We have a full service — sales, trading, research, both equity and fixed income. And we have the capability of working with SMBC to bring those services to clients and do transactions for our clients.”
It’s taken “two decades” to enter the top 10 list of M&A outfits, first in the US and then Europe, Handler said. “These last five years have given us the opportunity to go truly global throughout Asia, Canada and parts of South America,” he said. “A trading business helps you reach clients. We methodically complement that with research and then, banking. Once you bring all the products and services together, you become full service.”
For India, Handler’s message to the team has been: “You are in the right country at the right time.”
He said India is following a progression similar to the US, which will make the financial markets more robust. “There will be increased transparency, improved technology, thorough regulatory oversight, a strong legal system and real accountability to shareholders,” he said. “All this takes time, but is coming, and you have many of those pieces in place already. I think it will just get more sophisticated, more ingrained and more institutionalized.”
By Arijit Barman
https://economictimes.indiatimes.com/epaper/delhicapital/2024/mar/21/et-front/hard-to-be-in-india-not-be-excited/articleshow/108658512.cms
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