Investment banking JV bullish on PH midcaps

MANILA, Philippines–Mid-sized publicly listed firms—as well as those that have yet to go public—face attractive prospects even if the local equities market was to face a downturn because many of them remain undervalued and under-appreciated by investors.

As such, the partners of the newly formed joint venture between India-based Religare Capital Markets and Manila-based FSG Capital believe local stocks would continue to attract foreign and local investors for both primary and secondary issues.

“For sure, you will see funds cycling out of the large caps and moving into the midcaps if the market enters a downturn,” FSG Capital chair and president Mark Frondoso said. “We see that as an opportunity for us in the equities business.”

The new partnership between FSG and Religare, which was sealed Thursday in Makati City, aims to provide investment banking services to mid-sized companies—both listed and unlisted—which may want to raise funds through the capital markets.

The group says they are aiming to address the needs of a small but lucrative niche market that remains underserved by larger investment banking firms and banking giants.

“Markets in the Philippines and around the region are somewhat toppish, I agree,” said Religare CEO Sutha Kandiah. “But we are here for the long term and we want to build relationships with these midcap firms. We’re committed to the Philippine market.”

On Thursday, Religare, a corporate finance and equity capital markets investment bank for fast-growing companies in the Asian region, recently signed a memorandum of agreement with FSG for the provision of investment Banking services.

RCM, which is an Asia-focused institutional equities and investment banking platform and a part of the diversified financial services group Religare Enterprises Limited, received its business representative license from the Securities and Exchange Commission last January 2013.

RCM said the partnership deepens its capabilities and presence in the Philippines off the back of its track record of successful transactions in the Philippines.

Its transactions include acting as joint global coordinator, international bookrunner, international lead manager for Travellers International Hotel Group Inc.’s $474-million initial public offering; joint placement agent for Philweb Corp.’s $50-million offering; co-bookrunner for the $155-million placement of shares in Puregold Price Club Inc.’s share capital; and international co-lead manager for the $65.3-million qualified public offering of STI Education.

RCM is also in the syndicate for the proposed follow-on offering of Global Ferronickel Holdings Inc.

FSG Capital is led by Frondoso, who was formerly the head of Morgan Stanley’s representative office in the Philippines and, before this, an associate director of Barclays Capital based in Hong Kong.

Through FSG Capital and related entities, he acquired the Philippine distressed assets business of Standard Bank of South Africa in 2014 and is also the Philippine partner of Home Credit B.V., a leading global mass market consumer finance provider. He also serves as chair of the investment committee of the Philippine Public School Teachers Association which has more than 160,000 members and a director of the Asian Aerospace Corp.

“My relationship with Sutha spans nearly a decade, and with Religare Capital Markets since 2010,” Frondoso said. “The decision to partner with Religare Capital Markets is the result of a common passion for excellence that is bound by the principles of merit, discipline and efficiency.”