Get Instant Loan up to ₹10 Lakh!
‘Corp credit demand soaring; let lenders fund acquisitions’
Mumbai: Axis Bank Ltd has been seeing broad-based growth in corporate loan demand from renewables, chemicals, healthcare and distribution and transmission projects
Mumbai: Axis Bank Ltd has been seeing broad-based growth in corporate loan demand from renewables, chemicals, healthcare and distribution and transmission projects. Rajiv Anand, the private sector lender’s deputy managing director, said in an interview that while the animal spirits are not back yet, the corporate credit cycle is probably at its best in the last three to four years. Edited excerpts:
Where is the current corporate credit growth coming from?
If you look at credit growth to industries, it is about 10%. For several years, this was pretty much at zero growth. It is broad-based now. We are seeing a lot of activity, for example, in renewables, roads, chemicals, city gas distribution, commercial real estate and transmission projects, and post-covid, in healthcare as well. We are also seeing various projects even in the fast-moving consumer goods sector, where people are looking to increase capacities. So, to answer your question, is the animal spirits back in the corporate sector? My answer is: No. However, is the corporate credit cycle well and truly getting broad-based? My answer is: Yes. And, it is probably the best that we have seen in the last three to four years.
Will you consider backing green hydrogen projects?
If you look at renewables, it has taken banks almost 10 years to get comfortable with the technology. There was uncertainty in terms of how tariffs would play out, etc. Then the government came in and banks were a bit apprehensive about funding, especially given the past experience with power purchase agreements (PPAs) for thermal, where states were involved. The whole process of bankability of renewables has taken quite some time. I think we will have to go through the same process on green hydrogen as well. My feeling is that the initial phase of funding of green hydrogen will come more from venture capital, venture debt kind of players. When the viability and scalability of it is established, that is really when the banks will come in. After all, we are not in the venture debt business and are not in the job of taking risks on whether a particular invention will, or will not work.
What is your stance on lending to startups?
That it is a very, very exciting space. We have created 5-6 years ago a group which we call the new economy group, which is primarily focused on serving startups Series A and beyond. Today, we have about a 30% market share, and we bank 60% of unicorns in the country. Our intent is really to work with these startups as they continue to grow and our relationship with them is multi-fold. Transaction banking, employee banking and forex are some things that we work on. Our philosophy on digital has been to compete in some areas and collaborate on others. So, there are many startups whom we collaborate with and they either bring differentiated services or differentiated technology that serve our customers. We are comfortable lending to startups and obviously, the size of transactions would be relatively smaller. These are mostly working capital loans and by land large we do not do term loans in this space.
How is the integration on the Citi deal going?
We have created an integration team which is looking at people issues, technology issues and regulatory issues and we have multiple streams there. That is working well and we are progressing. There is a governance structure at various levels to monitor progress from both sides. Citi is going through the process of seeking customer consent and that is going better than expected. So, all in all, it is progressing well. There are some minor technology challenges because both the banks are on different platforms. We are addressing it.
Will you look at offering acquisition finance, given the number of deals being struck right now?
There is a lot of M&A activity happening. But unfortunately, the regulations are such that banks like us are not allowed to participate in acquisition financing. Therefore, much of this business is effectively taken up by foreign banks on their offshore balance sheets. We are engaging with the regulator to relook at this. If RBI is uncomfortable, it can put appropriate checks and balances, but should not shut us out of these businesses.
Are you open to acquisitions to fill up gaps in your banking and finance propositions?
We have always been looking at inorganic opportunities to fill some capabilities, not necessarily only in the banking space. We will continue to look at such opportunities, but it has to make sense for us and be accretive, and ultimately have to come to us at a reasonable price.
Catch all the Business News , Corporate news , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess
First Published:12 Dec 2022, 10:22 PM IST
- Top Gainers
- Top Losers
- 52 Week High