Jefferies Financial Group anticipates a rise in investment banking fees in India over the next few years, driven by an increase in deal numbers, according to the country head. This growth is set to enhance the U.S. bank’s prospects in India, where it has already seen a significant surge in market share in 2023.

What to know? As global investment banks shift their focus to India for revenue generation in Asia, due to a slowdown in dealmaking activities in China caused by economic downturns and regulatory uncertainties, India emerges as a promising market. However, earning profits in India has been challenging for Western banks, mainly because deals are typically smaller and advisory fees for mergers, acquisitions, and capital raisings are lower than in other major markets.

Aashish Agarwal, Jefferies India head, told Reuters that Indian markets have matured, with higher fees resulting from the complexity and number of deals. He noted that companies are willing to pay for value, with newer Indian firms, especially those owned by private equity, being more open to paying fees. For large mergers, a fee of 2% to 2.5% of the deal value is considered decent, up from 1.5% or less a few years ago.

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Agarwal believes India could become the most profitable market for foreign banks in terms of margins. Jefferies, having expanded its India investment banking team and increased its market share in equity capital markets (ECM) and mergers and acquisitions (M&A), is well-positioned to benefit from this surge in fee income.

Currently, Jefferies leads the India ECM tables with nearly an 11% market share, a significant jump from seventh place last year, according to LSEG data. It also improved its standing in India M&A, moving up from 20th to 11th place.

Foothold in India: In India, Jefferies has advised on significant deals, including fundraising for billionaire Gautam Adani’s Adani Group. The bank’s recent expansion in India and other regions contrasts with some Wall Street peers focusing on expense control due to slowing economies.

Jefferies recently moved into a larger office in Mumbai, spanning 16,500 square feet and overlooking the Arabian Sea. The Mumbai office employs about 100 people across various divisions, many hired from local and global investment banks in recent years.

Besides India, Jefferies has expanded its presence in Israel, Brazil, Dubai, and Canada, reflecting its global growth strategy.

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