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Vikram Pandit to lead JM Financial's non-banking financial company

MUMBAI: Vikram Pandit, the former chief executive of Citigroup who was ousted after losing a power struggle with the bank's chairman last year, will lead a proposed bank that his long-time friend and ace rainmaker Nimesh Kampani of JM Financial

 

 

 

 

 

 

 

BSE 16.14 % plans to set up. Global funds raised and managed by Pandit will also invest up to $200 million in the JM Group's various businesses, the Mumbai-based company said in a statement.

Pandit, 56, will acquire 50% stake in JM's non-banking financial company (NBFC) and buy 3% stake in the parent company, it said.

Pandit led Citigroup from December 2007, successfully steering the bank through the depths of the 2008 finance crisis before resigning under dramatic circumstances on October 16, 2012, as he had lost the confidence of his board. He was earlier with Morgan Stanley, where he was president and chief operating officer of the investment banking business. 

JM Financial, a financial services company, will nominate Pandit to the position of non-executive chairman of the proposed bank, if it were to obtain a licence from RBI, as well as its NBFC. Pandit and Hari Aiyar, a colleague of Pandit from his 
Morgan Stanley days, will have the right to purchase shares up to the amount prescribed by RBI in the proposed bank, JM Financial said. ET NOW broke the story on Thursday evening. 

The 

 

 

 

 

 

 

 

Reserve Bank of India

 

 

 

 

 

 

 

 

 

 is in the process of issuing new banking licences for the first time in a decade. JM will be one among many aspirants and there is no certainty that it will be successful. However, RBI is said to be keen to grant one or two banking licences to banks helmed by professionals and Pandit's induction may help JM's chances. 

The central bank will form a committee later this year to scrutinise the applications and a decision will be based on the recommendations of the committee. RBI has made it clear that even if an applicant qualifies, it is not bound to issue a licence.

"Vikram Pandit's investment in the NBFC will help JM Financial, an NBFC, in two ways. One, it gives credibility to gain licence from the Reserve Bank as Pandit is credited with steering Citigroup out of crisis. Two, it can easily attract strong talent with Pandit as co-promoter," said the head of financial services at a global consulting firm. JM Finance will grow its lending and financing businesses by issuance of $100 million of capital to global funds raised and managed by a firm led by Pandit, the company said. JM Financial, whose businesses include investment banking, institutional equity sales, trading, research and broking, private and corporate wealth management and equity broking, will nominate Pandit as the non-executive chairman of the NBFC. 

The Mumbai-born banker will also team up with 
JM Financial to set up a distressed asset fund with an initial capital of $100 million, the statement said. 

The deal is the culmination of a relationship that started more than a decade ago when the former Citigroup CEO was at Morgan Stanley, where he was the chief operating officer of the investment banking unit. After leaving Morgan Stanley, Pandit's fund Old Lane, which was launched in 2006 with about $4 billion in initial investment, had invested along with JM in India. 

Pandit was exploring the possibility of investing in India ever since he had moved out of Citigroup, said people familiar with the matter. He started negotiations with Kampani four months ago. JM Financial had parted ways with 

 

 

 

Morgan Stanley

 

 

 

 

 

 

 

 

 

 

 

 

 

 in 2007, ending a nine-year-old alliance. 

"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," the press release quoted Pandit as saying. 

JM's alliance with Pandit will not be limited to banking and it will straddle the entire financial services business. "He is a complete complement for our long-term strategic goals," said a senior official close to JM who did not want to be quoted. 

Pandit's former partner in Morgan Stanley and Old Lane, Hari Aiyar, will work closely with JM to expand the financial services business. The initial thrust will be to ramp up the NBFC business with a turnover of 600 crore and later foray into infrastructure lending in a major way. "We are confident that the proposed association will create strong domestic financial services businesses with global best practices and reach, "said Kampani.