Mirae Asset to enter broking, investment banking

At a time when foreign financial firms are scaling down in India, Mirae Asset Global Investments is ramping up its presence.

The South Korean firm, which operates a mutual fund business in India, is setting up its broking and investment banking units. Mirae Asset is also launching an alternative investment fund (AIF) aimed at domestic high net-worth individuals, and a $400-500 million real estate fund focussed on investing in commercial leased properties.

The broking and real estate units will be run as separate entities, while the AIF will be launched under the umbrella of the domestic fund management unit. Mirae Asset Global Investments’ global assets total over $100 billion, with interests spanning asset management, broking, investment banking and alternative investments.

According to sources, Mirae Asset had been in talks with several leading domestic brokers for a majority stake for about a year now, but the talks did not materialise as most Indian promoters were reluctant to cede control. The exact quantum of investment for setting up the broking and investment business could not be ascertained.

Broking has been a tricky terrain for foreign players. For instance, HSBC had bought a majority stake in IL&FS Investsmart in 2008 to create HSBC Invest-Direct but had to shut shop in 2013. Similarly, Standard Chartered Bank, which bought 100 per cent into UTI Securities in 2010, scaled down its operations subsequently.

“The expansion demonstrates the group’s long-term commitment towards India,” said a person, on condition of anonymity. “Their entry into broking and investment banking, however, seems puzzling. Broking is a dying business with cut-throat margins, while investment banking is cluttered with well-entrenched players.”

An email sent to Mirae Asset to explain the rationale behind its expansion plans did not get a response.

The AIF space has seen significant interest from mutual funds in the past few months. For instance, Franklin Templeton recently appointed S Naganath, former chief investment officer at DSP Blackrock MF, to head its AIF division. Reliance AIF Asset Management raised its first equity-focused AIF earlier last year.

The firm cites favourable demographics, infrastructure build-out, progressive governance and improved health care as among reasons for being bullish on India. “Roads and railways are among the investments offering the highest gross domestic product multipliers. Rising income, growing middle class and an ageing population present huge opportunities…” says a note put out by the firm on its global website.

Mirae Asset has been present in India as a foreign institutional investor (FII) since 2004. In November 2007, it set up its mutual fund operations with seed capital of $50 million. Despite teething troubles owing to the global financial crisis, Mirae Asset MF’s assets have grown about 25 times to ~134.6 billion at the end of December 2017 from ~5.3 billion five years ago.

On a global consolidated basis, Mirae Asset Global Investments manages more than $1.5 billion in Indian equities and $250 million in Indian fixed income instruments as of December 31, 2016.