[KH explains] Why Mirae Asset bets big on expanding presence in India

India, world’s fifth-largest economy, emerges as counterweight to China’s dominance in global supply chain

Mirae Asset Financial Group's headquarters in central Seoul (Newsis)

India, the world’s fifth-largest economy, is one of the strategic markets where South Korea’s Mirae Asset Financial Group has poured considerable resources into expanding its presence. Amid industry-wide efforts to de-risk from China more recently, industry watchers say Mirae Asset’s years-long investment could pay off “soon.”

Over the past years, the Korean financial giant has been making bold investments in the fast-growing country, broadening its portfolio from shares and funds to real estate properties.

Mirae Asset Global Investments’ Indian unit is the No. 9 investment firm in the country running nearly 23 trillion won ($17.2 billion), roughly 10 percent of its total assets under management worth 288 trillion won as of July.

The figure is also 20 percent of the firm’s 120 trillion won assets controlled overseas, the third-largest after that of the US and Canada.

"The Indian subsidiary started with 50 billion won in capital. It stayed in the market even after the global financial crisis in 2008 when most international investment firms pulled out," said an official from the firm’s Indian unit, referring to its launch back in 2006. "As a front-runner in the market, we will work to develop expertise and capability."

On Wednesday, the firm announced a fresh 28-billion-won investment in an Amazon distribution center in the Mumbai region through a private equity fund. This is the second investment of its kind following the first one worth 21 billion won made in a distribution center near the Amazon facility.

The firm said the demand for distribution centers will rapidly increase in India in line with the nation’s soaring domestic consumption, hinting at more investments in related facilities, including commercial real estate properties in business districts.

The photo shows Amazon's fulfillment center in Mumbai, India. Mirae Asset Global Investments' subsidary in India made a 28 billion won investment in the center through a private equity fund.

Since its Indian launch in 2018, Mirae Asset Securities, the finance group’s brokerage, has also been seeking a bigger presence through mergers and acquisitions.

Earlier this month, there was a report that the firm was in talks to acquire Sharekhan, India’s ninth-largest brokerage, in a deal worth about 400 billion won. Even though the firm declined to confirm the report, industry sources say the firm seems to be gearing up to increase its share in India’s retail brokerage market. The acquisition will wrap up in October if it goes as planned.

As part of the move, the local unit conducted a paid-in capital increase worth 200 billion won in April in an effort to expand its brokerage business.

The firm also plans to start trading services for Indian stocks. Currently, Korean investors cannot make direct investments in the Indian stock market as they are allowed to trade through exchange-traded funds or ETFs only. If proceeds as planned, it will become the first foreign brokerage firm to allow individual investors to trade Indian stocks directly.

“Related talks are underway, but the exact timeline has not yet been confirmed,” an official from Mirae Asset Securities said.

The Indian stock market has been expanding at a rapid pace. The S&P BSE Sensex, India’s most tracked bellwether index, has increased by 15 times over the past two decades.

The latest Indian push comes as part of Mirae Asset Chairman Park Hyeon-joo’s vision to widen the territory of the group’s overseas business. With strong belief in global expansion, Park also helms the post as the firm’s global strategy officer.

"India is a country with an unlimited potential for growth, considering its fervor for education, the people’s high self-esteem and the English-friendly business environment,” Park said at an event held in Mumbai earlier this year. “Mirae Asset, which has been investing heavily in the country, will work to grow together with India.”

Park’s vision is likely to see momentum as India plays a bigger role in the global supply chain as a counterweight to China’s dominance.

S&P Global's projection shows that India's gross domestic production will grow by a yearly average of 6.8 percent between 2022 to 2027. It will become the No. 3 economy in the world by 2030, surpassing those of Germany and Japan.

“India is definitely a fast-growing nation. It has met the momentum in growth and its government knows it. It is trying to take full advantage of the opportunity,” said Kim Mi-su, a professor at the Institute of Indian Studies of Hankuk University of Foreign Studies.

But she remained cautious about the sustainability of the rapid growth, citing lingering challenges such as a lack of infrastructure, toughening regulations and uncertainties surrounding the diplomatic relations between Korea and India.

“We will have to wait and see how India tackles these challenges to continue its growth momentum.”

By Im Eun-byel(silverstar@heraldcorp.com)