The formation of partnership between JM Financial and Morgan Stanley is yet another indication of the consolidation taking place in financial services.

JM Financial, led by one of the Indian markets' most respected investment bankers, has an excellent distribution network. The company has also stayed out of fund-based activities, with the result that the misfortunes affecting the country's non-banking financial sector have left it relatively unscathed. But looking ahead, JM Financial obviously realised that it would be left behind if it didn't have an international partner. One reason is that its rivals have already tied up with foreign firms. The more important reason is that with plenty of business from divestments and privatisations round the corner, a tie-up will create an organisation which will have both domestic as well as international placing power, a factor crucial for success in the "beauty parades". In fact, most of the lucrative action in the markets will be in the privatisation sweepstakes, and financial clout as well as distribution will be important.

Morgan Stanley also needs JM's local clout, a fact brought out by the 49 per cent stake it has been willing to accept in the investment banking arm.

After all, JM has spent decades building up its network, and duplicating it cannot be done overnight. With banks and FIs offering a package deal to clients, investment bankers need financial banking if they are to land plum assignments. The only way to get the funds is through equity, since banks do not lend to investment bankers. It is usually a fact of life, however, that, in the end, the party with the money calls the shots.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.