When your rivals form a pact, wittingly or otherwise, to undermine you, it is a compliment in disguise. In 2015, when Alkem Laboratories, India’s fifth-largest pharma company by revenue, decided to go public, a slew of investment banks made presentations before the management. The agenda was the same: It was less about bagging the contract to lead what was the second-largest public issue by value that year than convincing the pharma company why Nomura India should not be made lead banker for the issue.

Investment banking in India is a closely contested industry. In 2018, the country saw mergers and acquisitions (M&A) and strategic deals worth more than $71 billion, breaking all previous records. However, nearly 25 companies floated initial public offerings (IPOs), raising about $5 billion—50% less than the value of IPOs in 2017. The field comprises players ranging from large American firms such as Morgan Stanley, Citigroup, and Bank of America Merrill Lynch to European firms such as Credit Suisse and homegrown ones such as Kotak Mahindra Capital, Axis Bank, and Edelweiss Financial Services. Even by these standards, making presentations to a management team to dissuade it from picking a certain firm is rare.

Alkem, however, decided to go ahead with Nomura India. The much-awaited public issue had a price band between ₹1,020 and ₹1,050 a share. And Alkem debuted on the stock exchanges at a premium of over 30% over the issue price at a time when eight of the 20 IPOs that year saw their share price slipping below their issue price.

For Alkem, picking Nomura India was a contrarian call. “It was the first time they were handling such a large IPO,” Sandeep Singh, managing director of Alkem, tells Fortune India over the phone. “So, Nomura had a lot to prove… There were several big players they were competing with.” In retrospect, it was the right call. “We knew Nomura was giving us the best,” he says.

Nomura has emerged as one of the top foreign investment bankers in the country today. Nomura India, the local franchise of Japanese financial services group Nomura Holdings, started its operations in the country nearly 10 years ago with a team largely composed of the manpower at Lehman Brothers’ India unit, which it came by through its acquisition of the former U.S. financial giant’s business in the Asia Pacific region.

Today, it is a highly profitable and fast growing franchise for its parent. Since 2017, Nomura India has been involved in deals worth more than $10 billion. It has been a book runner, or primary coordinator, on IPOs that have raised nearly $4.4 billion in India. It advised on eight IPOs in India in 2017, the highest by any foreign bank in the country, according to Bloomberg’s league tables. Currently, Nomura India has nine IPOs in the pipeline for which draft red herring prospectuses have been filed with the Securities and Exchange Board of India, which will again make it one of the top three foreign investment banks here. Besides this, Nomura India has been engaged in block sales of shares, buybacks, American depositary shares and qualified institutional placements worth $2 billion over the last two years. It has also completed M&A trades with a cumulative value of $1.1 billion since 2017 and has been a joint lender on multiple margin loans and a debt financier to private equity players to the tune of $750 million.

Since 2017, Nomura India has been involvedin deals worth more than$10 billion.

Creating long term relationships and doing what would be best for its clients are two things Nomura puts great focus on. In Alkem’s case, the management of the family-owned business was looking for an investment banker who could understand and factor in that important aspect while making preparations for the IPO process. That Singh knew Utpal Oza, managing director and head, investment banking, Nomura India, for nearly a decade also helped. Oza is known for his expertise in the healthcare and pharma sector. “They advised us on the group companies suggesting that they should not be independent companies but rather be subsidiaries. In hindsight, it was a good decision. Without having these group companies as subsidiaries, the IPO would not have been such a success,” Singh says. “It never felt transactional. It seemed Nomura had moved into Alkem,” Singh says.

Vikas Sharma, head of Asia Ex-Japan, Nomura
Vikas Sharma, head of Asia Ex-Japan, Nomura
Image : Photo Courtesy: Nomura
There was no fixed box to think, people could look at things from a very different perspective, and we gave them the bandwidth to create the business.

Prabhat Awasthi, managing director and country head, Nomura India, says the firm started small with a strong focus and a narrow set of clients that has been expanded slowly in order to maintain the highest standards of delivery. “There are a number of things we have done consistently—being careful in choosing our clients, being extremely dedicated to the service we deliver, and the fact that we will deliver everything to the client—if they think of masala bonds we will do that for them, we will do other debt deals for the same client, we will be happy to do M&A advisory or work on an IPO for the same client. We believe our full service build-out and strength of talent allows us to deliver innovation and breadth at the same time,” he explains.

Nomura India’s primary businesses are investment banking, fixed income, and equities. In investment banking, IPOs have been a particularly strong practice for the firm. Nomura acted as joint global coordinator and joint book running lead manager for the fourth largest public offering in 2017—the $1.3 billion IPO of HDFC Standard Life Insurance Co., now known as HDFC Life Insurance Co. Last year, it acted as a joint book runner and lead manager for non-banking finance company IndoStar Capital Finance’s ₹1,844 crore (nearly $258.5 million) IPO. It has also been involved in the public issue of firms such as Tejas Networks, Housing and Urban Development Corporation, Future Supply Chain Solutions, and Reliance Nippon Life Asset Management.

Right pricing of IPOs is crucial and Nomura India seems to get it right, say industry watchers. If one looks at a majority of the IPOs Nomura India has advised on, one sees that the difference between the price at which they go live and the indicative price given to the client during the pitching process is marginal—meaning the company got the pricing right. They rarely fall below the issue price. In August last year, HDFC AMC debuted at ₹1,739, a premium of 58.09% over its issue price of ₹1,100 on the BSE. This is extremely important, experts point out: Stock prices of more than half of all the companies that hit the bourses in 2018 are trading below their issue price due to aggressive, unsustainable pricing, market volatility, and sector-related issues and concerns, leading to losses for investors.

“In India, a number of issuers perceive that higher the IPO pitch price, the better,” says Oza. “So the banks which price aggressively generally get the mandate. We decided early on that we will not build our business this way because relationships are not built on one transaction. We want to do multiple transactions with the same client over the next 5-10-20 years, so we never want to start on the wrong foot. We are comfortable if we do not win mandates because issuers feel we are conservative with our IPO pricing. We are happy to be conservative and then work hard to ensure that the client and the investor get the best trade.”

One of the key requirements for a successful investment banking practice is the expertise to create and execute deals that are unique, as requirements for fund-raising are changing fast. Nomura India has been associated with several “first-of-its-kind” transactions, including the first non-convertible debenture (NCD) plus warrant issue in India for HDFC; the first Singapore business trust for Indian healthcare real estate assets for Religare Health Trust; the first masala bond for HDFC; and IPO transactions for the first asset management company—Reliance Nippon Life Asset Management Co.’s $238 million IPO; and the first stock exchange IPO in India for the BSE’s $182 million IPO.

Vikas Sharma, head of Asia ex-Japan, Nomura, says being nimble, thinking out of the box, and creating value for clients have helped deepen relationships. “For us, that’s the most important thing,” he says. “There was no fixed box to think, people could look at things from a very different perspective, and we gave them the bandwidth to create the business. If you see the deals we have done in India, they are very innovative—be it the NCD we launched for HDFC, masala bond, or launching a convertible bond.” Sharma had been pivotal in working on deals since 2005-06 before Nomura started its operations in India, creating relationships that are fructifying now. He was country head till March 2017. Nomura India is looking to increase its focus on tech and new-age companies.

Nomura India is looking to increase its focus on tech and new-age companies. Its parent is one of the lead underwriters for SoftBank Group’s initial public offering of its Japanese wireless business. SoftBank, which has invested over $8 billion in new-age firms in India, is a “very strong relationship for us in Japan”, says Awasthi. He says the firm didn’t have much focus on tech firms initially. “We have done some tech IPOs but not new age and that’s something we are already increasing our focus on as a firm in the region and, therefore, as well in India.”

Nomura India is looking at widening its array of services. A key focus area is the structured credit and lending business and pre-IPO investments. “In this, investment banking partners with our global markets business to service our key client relationships. This is not ad hoc or stand-alone lending. There is a strong client franchise angle here, which is to be closer to the client and build better connectivity with the client,” says Oza.

<b>Top Row - </b>Left to right: Priyanka Khurana – Executive Director, Corporate Sales, India;&nbsp; Arun R – Executive Director, Credit Products, India; Leon D’Souza - General Counsel, India; Indranil Chakravorty - Head of Fixed Income, Institutional Sales, India; Samir Sheth – Head of Execution Services &amp;amp; Head of Equities, India; Kishore Iyer – Chief Administrative Officer, India; Vipul Chatwani – Head of Finance &amp; amp; Chief Financial Officer, India; Sanjeet Singh – Head of Rates Trading, India; Saion Mukherjee – Head of Equity Research, India. <b>Front Row -</b> Left to right: Jyoti Tandon – Head of Compliance, India; Utpal Oza – Head of Investment Banking, India; Prabhat Awasthi – Country Head, India; Amit Thawani – Head of India Coverage, Investment Banking.
Top Row - Left to right: Priyanka Khurana – Executive Director, Corporate Sales, India;  Arun R – Executive Director, Credit Products, India; Leon D’Souza - General Counsel, India; Indranil Chakravorty - Head of Fixed Income, Institutional Sales, India; Samir Sheth – Head of Execution Services &amp; Head of Equities, India; Kishore Iyer – Chief Administrative Officer, India; Vipul Chatwani – Head of Finance & amp; Chief Financial Officer, India; Sanjeet Singh – Head of Rates Trading, India; Saion Mukherjee – Head of Equity Research, India. Front Row - Left to right: Jyoti Tandon – Head of Compliance, India; Utpal Oza – Head of Investment Banking, India; Prabhat Awasthi – Country Head, India; Amit Thawani – Head of India Coverage, Investment Banking.

However, all businesses are subject to market risks. If the market goes down, it hits overall M&A and fund-raise sentiments, choking the flow of big-ticket deals for foreign players. “Foreign i-banks often look for fees ranging from ₹5 crore to ₹15 crore. How many deals are there to generate such fees for each one of us?” asks an official who works for a major foreign investment bank in India.

There are three crucial parts when it comes to running a successful i-banking practice, says Vikram Utamsingh, country leader and MD, Alvarez & Marsal India. “One needs to be in a position to leverage a balance sheet to take the deals through. Pure play advisory can take one only so far, but the ability to put money behind a transaction can be a huge plus, as we have seen with global banks (such as Credit Suisse and Morgan Stanley). Secondly, it’s all about relationships, particularly with the promoters of large groups, who are often in the middle of such transactions. Thirdly, the ability to create deals. If an i-banker can couple this ability with strong relationships, the practice will be a success anywhere in the world, not just India.” On these counts, Nomura India seems to be on the right track.

This was originally published in the February 2019 issue of the magazine.

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