Mumbai: Japan’s largest lender Bank of Tokyo-Mitsubishi UFJ (MUFJ) Ltd has been at the forefront of financing several large ticket deals in India that include mergers and acquisitions (M&A) and underwriting large structured credit and term loan syndication. In an interview, Shashank Joshi, head of corporate banking for India, talks about the bank’s plan to focus on large inbound deals and project finance led by capacity expansion as the key underlying themes in 2018. Edited excerpts:
Do you envisage a significant growth in corporate credit in the coming year given that 2017 has been a lacklustre year?
We will shortly see the Indian economy emerging stronger after the slowdown post demonetisation and GST (goods and services tax) rollout. I see a clear runway for growth. The other structural reforms like the Insolvency and Bankruptcy Code (IBC), the large public sector bank capitalization together with the strong macroeconomic fundamentals and large forex reserves will lead to a strong revival in growth.
The rehabilitation process under NCLT (National Company Law Tribunal); willingness of PSU banks to lend again for large projects; lower interest rates; strong FDI flows, clear signs of improving corporate profitability and buoyant stock markets are all factors which will improve the overall confidence and lead to larger investments and revive the credit growth in India. This is also supported by the strong global growth outlook. The higher commodity prices would also boost the working capital needs where bank credit can play a bigger role. The dual recovery of consumption and exports will improve capacity utilization. The deleveraging of corporate balance sheets in the last 2-3 years means that a private capex led recovery is likely within the next 2-3 quarters.
Where does India stand in MUFJ’s global allocations?
The Bank of Tokyo-Mitsubishi UFJ, a member of Mitsubishi UFJ Financial Group (MUFG), is among the largest global banks with a presence in India for 65 years. We focus on the top tier, large Indian companies, subsidiaries of our global MNCs and financial institutions. We have established long standing relationships with our clients in India. Both Asia and India are high priority markets for MUFG. We have demonstrated the commitment to the region with an investment of $6 billion in the last five years in Asia (ex-Japan). In India, we have grown our business aggressively in the last few years and are today the market leader in top tier corporate banking, debt capital markets and transaction banking. We have a global partnership with Morgan Stanley for offering equity and M&A advisory for our top clients.
From a deal financing perspective, what will be the underlying theme in the coming year?
MUFG has worked closely with a diverse set of Indian clients on several large M&A financings. We have led all major outbound M&A from India in the last two years with a dominant share in sectors like pharma, auto, IT etc. which have seen some big ticket deals. We expect a busy 2018 as a lot of corporates pursue inorganic global growth opportunities. MUFG is now widely recognized as an efficient and reliable partner who can underwrite large ticket outbound M&A financing with speedy turnaround. We will now also play a much larger role in the inbound M&As.
Which sectors are likely to see the most activity and what are the newer opportunities?
The government’s strong commitment to implementing reforms means India today is at an inflexion point in terms of growth despite the short-term disruption.
We should expect fresh investment in sectors like auto, cement, food, textile and pharma. Roads, infrastructure and the renewables sectors are expected to witness large capex in 2018 and this should then provide a fillip to private sector investments. We have expanded our International Debt Capital Market business aggressively in the last two years and are ranked among the top 5 for G3 bonds (bonds issued in US dollars, yen and euros) issuances from India. MUFG’s rise to the Top 5 is probably the fastest ever for any foreign bank in India. We intend to further build on this success and partner our core clients in leveraging our global sales network to raise capital and also tap incremental investor appetite from niche markets like Japan where we are the largest financial institution.
MUFG has a leadership position in global project finance bond markets and we are now actively pursuing project finance opportunities in India.