‘More and More Cos will Now Say There are Opportunities to Grow’
Prabhat Awasthi took over as head of Nomura’s Indian business in April this year after Vikas Sharma was elevated as head of the Japanese firm in Asia excluding Japan. In an interview with Joel Rebello, Awasthi said Nomura is all set to take advantage of India’s growing economy, aided by expanding IndoJapan relations, and the investment bank’s nine-year link with clients in the country. Edited excerpts:
What’s the opportunity for Nomura in Indian market? When you have a market like this, there is a general expansion in the overall opportunity because the market cap is going up, there’s more financing happening, and the pie is getting bigger. Nomura is probably the largest pure Asian investment bank in India. We come from the largest Asian market, Japan, where there’s a lot of interest about India. We have dug in our heels since we came here in 2008. Our Indian business is profitable – it is the crown jewel for our Asian operations. We are essentially now looking at gaining share here. There’s a clear bilateral tailwind we enjoy because of the Indo-Japanese ties and that is helping us in all our businesses. From Nomura’s perspective, India is now a very critical market with a very profitable franchise.
The local equity market is booming... how are you seeing this rally? I was quite bullish after demonetisation because a lot of liquidity got shifted to the formal system. But there’s an underlying theme: In the past 15 years, India has seen two episodes of capex cycle — one was 1994-1997, and other was 20032011, after a pause in 2008. After that, we went to a corrective cycle including inflation, unproductive assets in banking, current account problems and fiscal deficit.
That hangover is largely over. Now the underlying trend is up. More and more companies will now say that there are opportunities to grow. I can see corporates saying that and if the investment cycle picks up, it provides a sustainable pedestal for growth to rise. I think the capex cycle will get bigger and bigger. We are largely past fiscal and inflation issues, and have lower interest rates which are all helping to pull the markets up.
Why is the Indian market important for Nomura? How is India benefitting you? India is a large opportunity which is true for all. But we are an Asian bank which wants to connect markets — east to west. From our perspective, large Asian markets are home markets for us and in any international strategy India sits right at the heart for us because our home market is Asia. In India, there is a large deal pipeline that is building up and this year we are probably the only foreign bank which has done four IPOs.
We are able to add to our business in terms of the pipeline clients we have built and the corporate relationships. If the economy is growing, the connect between these two will grow and we are pretty confident we are in a good position to grow our franchise. Whether we will look at new businesses is something that’s an ongoing discussion. At this point of time, we are just enjoying the tailwind of a strong build-up.
There is also another rising power in Asia, China, which is also a big market. India is seen as a counterbalance. How does Nomura see this? As an investment bank we have interests in both China and India. We have a lot of people in Hong Kong which is a reflection of the kind of opportunity China has provided in the past. But incrementally we are putting a lot more resources to work in India. We have been here for 10 years profitably and therefore there is a comfort within the firm to put more resources to work here. Obviously there’s excitement about the market and economy but it has married with our profitability here. Incremental excitement in India is much higher. China is sort of coming off, so the opportunity is not growing fast there. But there’s a lot of market access within India which is weighing its favour. We have a large P&L here, we have a large balance sheet in India. We have a huge centre in Powai, and in terms of people, India is the second largest nationality within Nomura after Japan. We have 3,040 employees in India, 2,900 of whom are in our global support centre in Powai.
What will be your priority as a CEO? The first priority is to continue to harness the platform. A stable platform is very important. Getting more of the platform by enhancing synergies. One priority will be to actually cross-sell not only our own relationships within the platform but also bring relationships which reside abroad, including Japan to the rest.
The success we are having is because we are able to connect the dots much faster, also stemming from the fact that we are a nimble organisation. The third priority is to see what we can do more for Japan which is also the management priority — be it in terms of getting corporates more seeded into Japanese markets by taking them there. Opening more fund raising avenues is also an important priority. We are increasingly seeing a massive amount of flow of corporates travelling to Japan with us which is very unique. Some of the very large blue blooded travel with us at least once a year and they have benefitted from there.
What can Japan offer Indian companies? Corporates are attracted by the fact that there’s a lot of sticky money in Japan that’s available. It is just the question of familiarising the large players in the Japanese market with India, and that is something we are doing. Diversifying sources of funding is important from a corporate perspective. There’s also large amount of corporate interest from Japan as you have seen with the large amount of cross-border deals. Activities of Japanese companies and investors, both in fixed income and equities, are much higher now than any point in time. May be there have been some bad deals, which happens in any geography, but there is far more activity today than in the past. In terms of inflows of clients from Japan to India, enquiries and corporates we take to Japan – it’s all in a massive upward slope.