Under the plans announced last March, Nomura was expected to become a 40 per cent stakeholder in UTI Securities Exchange Ltd (UTISEL), the stockbroking arm of UTI. To date, Nomura has not put in any money in the venture even though it has already received the Foreign Investment Promotion Board's stamp of approval for picking up up to 49 per cent in UTISEL. As per the joint venture agreement, Nomura was to start with a 40 per cent stake and could take this up to 49 per cent after September 2001.

Top UTI sources disclosed that the venture was heading nowhere. The funds required for picking up the stake are yet to come in as Nomura, which is faced with huge losses worldwide, is on a massive restructuring exercise through which it plans to cut down about 2,000 jobs.Nomura's losses for the first half of this year are pegged at over $ 1.50 billion. Nomura was to have acquired a 40 per cent stake for Rs 14 crore by shelling out Rs 25 per share. The paid-up capital of the securities firm, currently Rs 30 crore, was to have been expanded to Rs 35 crore after the Nomura entry.

Highly-placed sources said that the trust too was no longer very keen to push for the alliance. The new chairman, PS Subramanyam, it is learnt, has different plans for the broking subsidiary. He is keen to synergise its research and dealing operations more and more with the proposed increased focus on better dealing capabilities. In the wake of the US-64 crisis, Subramanyam has decided to undertake a massive increase in the trust's dealing capabilities. He plans to dedicate an entire floor at its Mumbai headquarters to dealing activities and is roping in specialists for the task.

This is where he sees a synergy between the broking outfit and the Trust.

Subramanyam had originally planned to holdtalks with top Nomura executives during his visit to London to attend the board meeting of an offshore fund. He was to have conveyed his thoughts on UTISEL during this meeting but it had to be called off owing to the grave crisis that struck UTI following disclosures about the underlying NAV of the US-64 scheme.

"The venture has not been called off formally. But there has not been much progress from their (Nomura's) end and nor have we been pushing too hard for it. As of now everything is on hold with both sides preferring to overcome other difficulties", said a top UTI source.

"Even though the new chairman is not personally too keen to go ahead with the project, he is also at the same time not going to renege on any concrete commitment from UTI's end. However, as of now everything is on hold", the source added.

In fact, there were certain differences of opinion between UTI and Nomura regarding the focus of the venture from the beginning. While Nomura was keen to focus on M&A at a later stage, UTIwanted the venture to get into this business straightaway. The idea was not only intended to reap the benefits of an active M&A industry but also to aid companies in which UTI had significant holdings to restructure through constructive advice.

Apart from broking, Nomura was looking at playing a major role in managing Indian offerings abroad--a market which has since totally dried up. It was also planning to play a major role in managing domestic equity and debt issues but this market too is as good as dead. As regards broking, a slumped market has led to a host of broking outfits suffering a downslide in profits. A number of top foreign brokerages have, therefore, downed shutters.

INSIGHT
No basis for a tie-up

The alliance is perhaps one of those which had more to do with the fashion of the day rather than a clear assessment of what each party would bring to the table. UTI has little need of Nomura for its local operations, and while the Nomura alliance may have helped UTI sell issuesabroad, it has never had merchant banking as a priority. Under today's climate, there seems to be no synergy between their aims.