Exclusive: Japanese financial services giant Nomura, which acquired Lehman Bros’ European, Middle Eastern and Asian operations including India last year, is entering proprietary trading business in the country. Nomura Financial Advisory & Securities (India) Pvt Ltd, a wholly owned arm of Nomura Holdings, is getting into the new business. The firm is already registered with SEBI as a merchant banker and with BSE and NSE as a stock broker.
It entered the big league in I-banking when it got involved in one of the marquee deals of 2008 where Daiichi Sankyo acquired the country’s largest drug maker Ranbaxy. Nomura had earlier advised another Japanese firm Mitsui in selling its stake in Sesa Goa to Sterlite and also formed a part of the consortium that helped Sterlite to raise $1.2 billion ADS two years ago. The significance of Nomura’s rise can be fathomed by the fact that in 2007, it was not even among the top 20 investment banks operating in India.
Besides the merchant banking and broking activities, Nomura also has three separate units -- Nomura Services India Pvt Ltd which is into business and technology process outsourcing, Nomura Fin Services (India) Pvt Ltd conducting investment and securities research for overseas clients, Nomura Structured Finance Services Pvt Ltd set up last year to get engaged in investment advisory services.
Nomura has now applied to the foreign investment promotion board (FIPB) to expand into proprietary trading business. This would mean Nomura will get into actively trading stocks, bonds, options, commodities, derivatives or other financial instruments with its own money as opposed to its customers' money, to make a profit for itself. This could mean inflow of money into the firm from the parent.
Global Results Disappointing; Lehman Brothers Hangover
What is interesting is that Nomura is looking at India expansion when it has just announced its worst ever annual results today. It posted a loss of more that $7.23 billion for the year ended March’09 due to global financial turmoil, asset write-downs and the cost of acquiring Lehman Brothers. International analysts have said that while Nomura managed to acquire Lehman Bros at a reasonable price, the cost of retaining talent has turned out to be a burden.
Expanding In South Korea
India is not the only market where it is expanding. It has early this week applied for a licence to establish its first asset management company in South Korea. It is planning to launch the firm jointly with a unit of South Korea's small chemical firm, Rifa Industrial, and is likely to specialise in property asset management.