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Vikram Pandit to buy stake in JM Financial,lead banking foray

Nimesh Kampani's JM Financial is joining hands with former Citibank CEO to promote a bank.

Written by ENS Economic Bureau | Mumbai | Published: May 17, 2013 2:55:15 am

Nimesh Kampani’s JM Financial is joining hands with former Citibank chief executive Vikram Pandit to promote a bank.

JM,a leading investment bank,on Thursday announced that India-born Pandit,who quit as Citigroup CEO in October 2012,and former Morgan Stanley official Hari Aiyar will make a strategic investment in JM Financial with potential additional investments in its non-banking finance company (NBFC),proposed commercial bank and a joint distressed asset fund.

The board of directors of JM Financial at its meeting held in Mumbai has decided to make an application for a banking licence in accordance with the terms of the regulations and guidelines issued by the Reserve Bank of India.

JM Financial will nominate Pandit as the non-executive chairman of the proposed bank. Pandit and Aiyar will have the right to purchase shares up to the amount prescribed by the RBI in this entity.

Pandit,who nursed Citigroup back to health during his five-year tenure,and Aiyar will make a strategic investment of 3 per cent equity stake in JM Financial through issue of warrants.

“I continue to believe in the long-term growth prospects of India. I have known Nimesh and JM Financial for over two decades and believe that,given the opportunity,JM Financial can provide the banking and financial services that the country needs,” Pandit said.

Kampani,a veteran in the Indian capital market segment said: “JM Financial and Vikram Pandit have known and worked with each other extensively for many years since the early days of the growth of financial services in India. We … are confident that the proposed association will create strong domestic financial services businesses with global best practices and reach. We are very excited to have Vikram as a strategic investor.”

“It’s a coup of sorts for the JM group to rope in the former Citigroup CEO. JM-Pandit-Aiyar combine is going to be a strong contender for the banking licence,” said a banking source.

The board of JM has also approved expansion of the lending and financing businesses of JM Financial by issuance of $100 million of capital to global funds raised and managed by a firm led by Pandit. JM Financial will nominate Pandit as the non-executive chairman of the NBFC. It has also decided to set up a distressed asset fund jointly by JM Financial and Vikram Pandit’s firm with an initial target capitalisation of $100 million.

Of late,deals in the financial services space where company’s are pinning their hopes for a banking licence has witnessed a spike. Only last week,Piramal Enterprises bought a 10 per cent stake in Shriram Transport Finance Company for Rs 1,652 crore from private equity player TPG.

While Shriram Group is one of the companies that is aspiring for a banking licence,Piramal’s investment in Shriram Transport may prove to be a hit if the Shriram Group gets a banking licence.

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