‘More and More Cos will Now Say There are Op­por­tu­ni­ties to Grow’

The Economic Times - - Money -

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.

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