The global financial calamity had just hit and banks were reining in ambitions. But not BMO, which saw India as a long-term play
When BMO Nesbitt Burns Inc. pressed ahead with plans to open an investment banking office in Mumbai last year, the timing could not have been worse.
Lehman Brothers had just collapsed and the global financial system was engulfed in a full-blown crisis. Investment banks around the world were retrenching while BMO was branching out into the notoriously challenging Indian market.
One year later, however, BMO executives believe the poor timing, was in fact, a blessing.
“Many of our competitors in Canada and around the world were staggered at our launch in India 12 months ago. The Indians applauded it. They saw an investor that was taking a long-term view and saw the structural strengths of India to take advantage of," says Michael Rayfield, vice-chairman of investment and corporate banking at the firm.
“We had people wrapping their arms around us. When others were exiting the market, here we were coming in."
India's roaring economic growth, budding corporate sector and rapidly rising list of billionaires had already attracted a rush of Wall Street and European brokerage firms to Mumbai. But it can also be a confusing and exceedingly challenging market to penetrate. So as the first Canadian investment bank in India, BMO's brass did plenty of homework before setting up shop.
They came up with a plan to demonstrate an enduring commitment to the South Asian nation, which had enjoyed gross domestic product increases of more than 9 per cent for three successive years until 2008, when growth slipped to 6.7 per cent. BMO struck a partnership agreement with Ernst & Young's India unit, which had already established a presence in the country.
As well, they chose to limit the number of business sectors that they would try to break into. While India “needs everything," Mr. Rayfield says, BMO decided to focus on the industries it knows best, including mining, oil and gas, as well as food and agriculture.
“Our biggest challenge has been trying to curb that enthusiasm … a knee-jerk reaction, getting out of this sector and into that sector, would be frowned upon and would actually be a pall over your entire strategy. We decided we had to know what we were doing before we went in," he says.
The foray into India is part of the investment bank's strategy to seek out new growth opportunities to offset slowing business in other markets. While the United States and Europe are still struggling with an economic recovery, India's economy is expanding fast and attracting plenty of foreign capital for its companies. India's bellwether stock index, the Sensex, has surged by nearly 100 per cent since March, and while many Western governments are still trying to stimulate growth, India's central bank is now worried about inflation.
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