Hard to be in India & not be excited: Jefferies CEO

Last March when ports-to-cement billionaire Gautam Adani had his back against the wall following a short seller takedown on his conglomerate, Florida based GQG Partners took a $1.87 bet across three group companies. The investment decision to back the battered Adani Group stocks following Hindenburg Research’s scathing indictment was cutting against the grain — the cumulative value of the ports-to-power conglomerate’s stocks had nosedived more than $150 billion at one point — but GQG’s confidence capital at the nick of time helped soothe nerves while simultaneously raising eyebrows over the gumption of GQG’s founding chairman Rajiv Jain.

Unknown to many, behind the scenes Jefferies was busy playing the match maker. Being the sole broker on India’s largest block trade (GQG’s $1.1 billion into Adani Power, as part of the larger $1.87 billion) thus became the breakout moment for Wall Street’s “challenger” investment bank Jefferies. When most other advisors were pulling back, Jefferies chose to pull out all stops for their client.

“I saw at a very early age how fragile companies can be,” said Richard Handler, CEO of Jefferies investment bank for 24 years, in an exclusive interaction in ET, during his recent maiden trip to the country. “I also saw at an early age how you can always see the best in people and the worst in people in times of strife. Everyone is your best friend when you’re on top of the world. But you can only judge who’s really with you when you are in a period of dislocation.”

Perhaps being at the centre of and then surviving a “a horrendous false attack in 2011” by what Handler himself once described “as a corrupt and incompetent rating agency analyst” compassion comes naturally to him and his firm. “I always give the people the benefit of the doubt. And when you do your own work and come to conclusions, it’s much easier, then to go back to your principles of empathy and partnership.”

Jefferies’ own growth story too has had its own twists and turns. Growing rapidly through acquisitions of boutique firms in 2000s and then itself getting merged into secretive investment Leucadia National in 2012, after it faced Bear attacks following the collapse of a competing broker dealer MF global, sparked a doubt about the bank’s own exposure to the eurozone debt crisis, still keeps Handler humble.

And finally on a personal note – old mates even allude to him being the shortest person in high school and getting rejected from every sports team and bullied around have over the years certainly made him a dogged fan of the underdog.

“We were a challenger the day I walked into the door and we’ll be one for many decades into the future.”

THE CHALLENGER

Jefferies therefore has plenty of room to make bold bets. When peers have been culling their workforces. Jefferies has been busy bulking up. It has added 21 managing directors in investment banking since the start of its 2023 fiscal year, with senior recruits predominantly coming from European firms Barclays and Credit Suisse, including in India with the aim to diversify beyond just a top notch equities house.

And that is exactly where consolidating the global alliance with Sumitomo Mitsui Banking Corporation (SMBC) inked earlier this January in which Japan’s 2nd largest bank trebled down on the firm, comes in. This world wide collaboration, still in its early days, will help Jefferies and SMBC to work together to advise and lend to investment-grade companies globally. Having already teamed up on cross-border mergers and acquisitions as well as leveraged finance, the effort now is to try to multiply the firepower for debt underwriting business for larger companies, which have historically worked with the likes of Goldman Sachs and JPMorgan Chase.

A sidebar: Warren Buffet dumped both the Wall Street bellwether post pandemic and picked up the Jefferies stock in 2022, albeit a small quantum.

“SMBC is a remarkably strong global bank. They have a fortress of a balance sheet. Jefferies, on the other hand, has a great set of super high quality industry expert investment bankers in all verticals. We have a full service, sales, trading, research, both equity, fixed income (read debt) and converts. And we have the capability of working with SMBC to bring those services to clients and do transactions for our clients,” said Handler, 62, one of the longest surviving Wall Street corner office occupants.

It’s taken “two decades” to finally be part of the top 10 elite M&A sweepstakes first in the US and then Europe, admits Handler. “These last five years have given us the opportunity to go truly global throughout Asia, Canada, and parts of South America. A trading business helps you reach clients. We methodically complement that with research and then banking. Once you bring all the products and services together, you become full service.”

INDIA: RIGHT TIME, RIGHT PLACE

Handler is irrepressibly upbeat about what he saw in India. “It’s hard to be here and not be excited. The human capital and the smarts of the population as well as the leadership of the conglomerates.” His message to the team therefore has been – “you are in the right country at the right time.”

A booming capital markets and domestic consumption, a new credit-cycle, backed by stable policies add to that charm.

Drawing parallels with the United States, Handler argues India is following a similar progression which will make our financial markets more robust.

There’ll be increased transparency, improved technology, thorough regulatory oversight, a strong legal system and real accountability to shareholders. All this takes time, but is coming, and you have many of those pieces in place already. I think it will just get more sophisticated, more ingrained and more institutionalized.”

Interest rates have plateaued, “especially as long as inflation is under control, which appears to be going in the right direction.” So sellers are becoming more realistic on their sale price. And buyers, especially private equity sitting on over a trillion dollars of dry powder are more aggressive. “M&A is picking up, transactions are occurring.”

In India Jefferies are mandated to sell manufacturing companies, sold shadow banks, helped clients raise over $11 billion in equity capital markets since January 2022, via IPOs, QIPs or headline grabbing block trades.

The pace Handler admits though won’t be that of 2021 when money was free, the world subsidized and stimulus everywhere.

What has made Handler stand out and be counted in the vaunted, yet sharp elbowed hustle of deal making is his own idiosyncrasies or offbeat, even simple approach to life. Friend of fellow New Jersey icon Bruce Springsteen, Handler reportedly once took his mom to a client meeting. He would rather do fun and fusty activities with billionaire CEO clients in tow, which may even include a dance off with Macklemore or perhaps even a mini trampoline exercise session, before signing off on a deal mandate with them.

STANDING OUT IN THE STREET

Unlike his crusty colleagues from the Street, he’s a mini-instagram celebrity too who still sends counterintuitive digital homilies to his next generation trader and banking brethren. One such was about remembering one’s career through the 1st first mini bar. Or a simple post that champions kindness, respect for all and mentorship. While flying to Sydney recently, he ran an “ask me anything” session on Instagram, taking questions from random punters to fill in the flying time. On rare occasions, an occasional post would also get misconstrued but Handler grins and bears it. You can push him, but he only gets prickly one ties him down to associate him with the phrase “high finance.” That is a no go for this devoted acolyte of junk bond guru Micheal Milken even if he has a seat on the trading desk, wears two colourful wristbands and loves to stay relaxed underpinning success on the value of teamwork.

“So, I might be the longest serving CEO, but the consistency and the talent and the loyalty and the ownership mentality of all my partners is really why I’m able to stick around so long.”

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