Pandit Returns to Banking Via India

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Vikram Pandit

Vikram Pandit, the former Citigroup chief executive who was ousted last year, has returned to banking by investing in an Indian financial services group that hopes to launch a new lender.

Mr. Pandit, who left Citigroup in October, and Hari Aiyar, another Indian executive, are acquiring a 3 percent equity stake in JM Financial and launching a $100 million fund to invest in distressed assets, the Indian company announced on Thursday.

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A person familiar with the situation said the move was only one part of Mr. Pandit's plan to build a portfolio of investments in the U.S. and India.

"We share similar values and are confident that the proposed association will create strong domestic financial services businesses with global best practices and reach," said Nimesh Kampani, chairman of JM Financial. "We are very excited to have Vikram as a strategic investor."

It is the first public sign of Mr. Pandit's intentions since he was asked to resign as chief executive of Citi by its chairman, Mike O'Neill, in October. The pair clashed over strategy and Mr. Pandit was replaced by Mike Corbat.

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"I continue to believe in the long term growth prospects of India," said Mr. Pandit. "I have known Nimesh and JM Financial for over two decades and believe that, given the opportunity, JM Financial can provide the banking and financial services that the country needs."

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JM Financial said Mr. Pandit would also become non-executive chairman of a proposed bank.

Dozens of companies, including many of India's biggest corporate names such as Tata and Birla, are applying for a handful of banking licences which are being offered by the Reserve Bank of India.

Mr. Aiyar worked with Mr. Pandit first at Morgan Stanley and then at Old Lane, the hedge fund that was later sold to Citi when Mr. Pandit joined the U.S. bank in 2007. JM Financial said Mr. Pandit and Hari Aiyar were acquiring the "strategic investment" via warrants.

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Shares in JM Financial rose 16 percent in Mumbai on Thursday before the announcement, giving the company a market capitalization of about Rs17.7 billion ($323 million).

The Indian group was a joint venture partner of Morgan Stanley's in the last decade before the U.S. bank bought out its partner. JM Financial Institutional Securities, the brokerage arm of the group, was one of several Indian brokerages to be fined by the Securities and Exchange Commission in November for soliciting U.S. investors without registering with regulators.