Mumbai: There is more positivity about the India growth story abroad than in India, according to Kaku Nakhate, country head, Bank of America Merrill Lynch India (BofAML India). In an interview at Mumbai recently, Nahate comments about investors’ sentiment towards India, the outlook for Bank of America’s revenue streams and the deal-making scenario in India. Edited excerpts:

Give us a sense of the mood among global institutional investors towards investing in India...

The general perception overseas is that India is now firmly on a reform-oriented path. The government, over the last one year, has ushered in structural reforms, intended to dramatically change the face of the Indian economy.

First, a bold step like demonetisation enabled the government to push for digitization of the economy. Then, the implementation of the goods and services tax (GST) in July, which everyone believes—and so does our Global Research—is a seminal event in reforming the tax framework of our country. It’s a step in the right direction as it encourages MNCs (multinational corporations) to come to India, because it ensures a level-playing field.

The government’s initiative to recapitalise banks is a welcome step as it increases the capital efficiency ratios of state-run banks. Also, we believe the formation of the National Company Law Tribunal (NCLT) will help resolve the long-standing NPA (non-performing assets) issue. All these initiatives have helped India strengthen the confidence of foreign investors in recent months. I often feel there is more positivity about the India growth story abroad than in India.

Do you think institutional investors are coming back?

Yes. Last year, investor sentiment had tilted back in favour of China and South Korea as they were preferred markets in Asia.

However, institutional investors are now dialling back into the India story. India has always been a bottom-up story for Foreign Portfolio Investors (FPIs), and they have invested in large sizes in some of the deals in the financial institution category over the last 12 months.

Macro initiatives undertaken by the government will further give a fillip to fresh investments in our equity markets. I continue to be bullish on India as the consumption story continues to play out.

If you were to give a report card on BofAML India’s business streams and outlook for each of them for the coming year…

Over the years, we have built a successful and a profitable enterprise in India. Having been in India for over 50 years, BofAML continues to see sustainable growth for our entire franchise in India.

Global corporate and investment banking (GCIB) and global markets are our main streams of businesses. Client focus is key to our strategy.

Our endeavour is to offer a complete suite of products to our corporate clients ranging from Corporate Banking, Global Transaction Services, Capital Markets, FX to M&A advisory. Our market-leading equities franchise, over the last two decades, continues to serve institutional clients who remain core to our distribution strategy.

The Fixed Income Currencies and Commodities (FICC) business has been one of our biggest revenue generators for the last few years. It’s a business built on the premise of client centricity and we are committed to investing further so as to take this business to the next level.

For a bank to succeed, every line of business has to deliver. We have been building our businesses on this very principle. We have a good team in India. We are selective—both in terms of client acquisition and deals. So, we don’t want to chase every IPO (initial public offering) or an M&A (merger and acquisition) deal.

Our involvement in any deal has to be value accretive for the client; only then does the franchise benefit from a lot of repeat business. Plus, we have a strong risk and governance culture, which is why we have almost negligible NPAs.

Coming back to deals, where are the big deals going to happen?

We anticipate that large corporates will continue to be active in M&A, both for domestic consolidation and making portfolio choices by divesting non-core assets or businesses.

There will be continued consolidation in the e-commerce space. Given the global pressure on drug pricing, we will see some consolidation and continued outbound M&A activity in the pharmaceuticals area as well.

The sale of distressed assets driven by NCLT orders and bank resolution will also attract a lot of interest. Next year, we anticipate IPOs from asset management firms hitting the market. This area is lucrative because there is hardly any capital induction required in asset management firms.

From the view of capital adequacy, banks will continue raising capital, either via bonds or equity, but bonds will look more promising after the Moody’s ratings upgrade.

We also expect to see some listings in the renewable energy sector, which has been growing by leaps and bounds.

You said focus is on working with ‘strategic’ clients. Are these large traditional business houses, or are you also open to working with new-age firms?

Our client selection process is truly global. We lay a lot of emphasis on the right leadership along with a robust corporate governance structure.

There are no cut-offs on the size of the business as we are open to working with new ventures, provided they have a sustainable business model and fit into our risk and governance framework. An ideal client would be when we can service it through all our lines of businesses, as it helps us understand the client better.

We continue to evaluate new-age enterprises as and when such opportunities arise. Fintech, e-commerce and renewable energy are some of the sectors we would like to build further on.

In fact, we have worked aggressively in the renewable energy space. In 2015, we raised India’s first-ever USD green bond issued by EXIM Bank, followed by the first 144A and Climate Bond Initiative certified USD Green Bond out of India for a private bank.

If you go through our history, we have a legacy of introducing new products and sectors to India’s capital markets. For example, in the last 12 months, we took to the market the first life insurance company as well as the first non-life insurance company.