Nomura has capitalised on its October acquisition of Lehman Brothers by launching equity sales and trading and investment banking in India, the company announced in a press release Thursday.
India is becoming increasingly important for Japanese companies, as the recent acquisition by Japanese drug manufacturer Daiichi Sankyo of Indian generic manufacturer Ranbaxy last year attests. Indeed, Nomura was the advisor to Daiichi Sankyo, although at that point the Indian operations were not up and running.
The deal is evidence that the tie-up with Lehman brothers could generate some useful business for Nomura. Prior to the restructuring, Nomura had just 20 employees on the ground in India and served clients offshore. But when Lehman Brothers collapsed, Nomura snapped up the India-based employees in equity research, fixed income liquid market sales and trading, and the investment banking team. Separately, Nomura has also obtained a merchant banking licenses and stock exchange memberships. The equities and fixed-income group will be led by Pankaj Vaish, a Lehman veteran.
Lehman Brothers was not really bought by Nomura. Rather, key staff were absorbed into the Japanese bank. But some observers were sceptical about the strait-laced Japanese bank's ability to assimilate US-trained bankers. That concern is probably valid in Tokyo, but outside Japan, with local staff given more autonomy, and not hindered by Japanese levels of compensation and corporate culture, the presence of Lehman bankers will surely give the Nomura operations a shot in the arm.
Now that Nomura has membership of the National Stock Exchange of India and of the Bombay Stock Exchange, it will be able to provide its global institutional clients with access to the local Indian markets. Nomura will initially focus on the sales and trading of Indian equities, futures and options, and the firm is also seeking regulatory approval for offering Direct Market Access (a form of electronic trading which enables investors to make their trades on Nomura systems directly from their own desks) in the second quarter of this year.
According to the press release, Nomura now employs 2,600 people in India, including its global services hub in Powai, which now supports Nomura's infrastructure globally.
But the next problem for Nomura is to get a pipeline of deals. With the once-soaring Indian economy crashing back to earth, even traditional, non-leveraged activities such as underwriting and advisory will not be easy to come by.