MNCs starting to see India as global manufacturing base: Citi investment bank boss

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Manolo Falco, Global Co-Head of Banking, Capital Markets and Advisory, Citigroup

NEW DELHI: After the consumer banking exit, Citigroup which is focused on servicing large local corporates, multinationals, financial institutions, emerging and mid-sized corporate clients in India, says that multinationals are starting to see India as a global manufacturing base, which will positively impact small- and mid-sized businesses. In an exclusive interview to ANI, Manolo Falco, Global Co-Head of Banking, Capital Markets and Advisory, Citigroup said that there is tremendous opportunity to support India’s capital and advisory needs. Here is the transcript of an email interview of Manolo Falco to ANI:

India is the 5th largest economy of the world. What does it mean to you? What reforms/measures pushed India to make in top 5 economies?

Fiscal prudence and discipline, development of physical infrastructure, ease of doing business, thriving start-up ecosystem, and the build out of India’s digital and financial infrastructure (UPI is recognised as amongst the best in the world), underpin the country’s growth. Recent government policies on logistics, hydrogen, spectrum, EV, will support further growth, self-reliance, and efficiency. Multinationals are starting to see India as a global manufacturing base, which will positively impact small- and mid-sized businesses.

For us at Citi, there is tremendous opportunity to support India’s capital and advisory needs. What I hear from our clients is that they want to grow more. What I hear from investors is they want to find meaningful opportunities to take part in.

What are your plans for India after the consumer banking exit?

Citi will be focused on servicing large local corporates, multinationals, financial institutions, and emerging and mid-sized corporate clients. Through our universal banking proposition, we help clients with long-term financing, our global footprint, cash management, and protection against rate increases and volatility. We will double down on this strategy.

I believe banking models such as what we’ve created will be extremely valuable in helping clients navigate through the uncertainty we see in today’s world. In India, within my business, we have advised clients on episodic business, including capital raising and M&A, worth ~$500 billion over two decades. We will continue to capitalize on our deep global relationships.

There is also opportunity to support capital needs of mid and emerging corporates, who bank with our commercial banking business. Our investment bankers will be tasked with identifying these leaders of the future. Our focus and business strategy meant we were on every tech IPO last year.

Indian stock markets are facing the heat of a higher interest rate environment globally. What is your medium-to-long term view on the Indian stock market?

While I don’t expect recovery too soon, given the high interest rate environment, inflation, and volatility in commodities, we may be closer to a recovery, given the work by central banks. India will be at the forefront of that as the economy is performing well. So we expect markets to do well, on a relative basis.

Over the last two years, including 2022 YTD, which was a tough year, India will be a relative outperformer, up 22% 2021-2022 YTD and -2% 2022 YTD. India trades at a very healthy premium to its global EM peers. The country has witnessed high interest rates in the not-so-distant past and yet finds opportunities for continual growth. Recent green shoots and the revival of foreign inflows have resulted in a pickup in secondary market deal activity, albeit in narrow execution windows.

What is your view on India’s primary market. When do you see a revival?

India has a strong primary market and ranks amongst top 5-7 in capital formation globally across years. India’s primary capital markets positioning was further strengthened as it hosted multiple jumbo, $1 billion+ IPOs in the tech space, allowing India’s tech champions to list in their home market, rather than other large financial markets.

India’s primary markets attract best-in-class global investors and sovereign wealth funds; in addition, there is a captive pool of domestic capital. We are bullish the ability of India’s primary markets to finance its long-term equity story. Even short term, India did not close its door to primary capital activity. In a tough year, there was the completion of LIC’s jumbo IPO and the second-largest tech IPO for Delhivery. August and September were very active months in the block and follow-on market, raising over $3 billion.

Away from India, Citi, as a JGC, recently concluded the Euro 9.4bn IPO for Porsche, which is the second-largest IPO this year. The success of the IPO speaks to our global distribution, which is also available to our Indian clients.

Given the global turmoil, like the Ukraine-Russia war, inflation in US-UK and European countries, what kind of capital demand within India can we anticipate?

India Inc. has raised a total of $20 billion and $13 billion in the private and listed equity capital markets spaces, respectively so far this year. There is a healthy bid for the market though it is very price elastic — so pricing, not volume, has meant the cost of capital has fundamentally changed, which is an ongoing issue in the market.

Given the continued tension in IPO markets and narrow windows in secondaries, listed equities could see $5-6 billion in activity through the last three months of 2022. The private markets remain relatively insulated and can see another $6-7 billion worth of volumes over the same time frame. We believe issuance activity should slowly recover as issuers and investors adjust to the new normal.

In terms of debt capital, we expect strong demand from Indian issuers in next 12-18 months, which is expected to result in sizeable debt issuance in 2023. Given the Indian growth story, investor interest remains high for Indian issuances. For Citi, India remains one of the most important Asia Pacific markets with huge interest from global investors.

With MNCs looking at a China+1 strategy, what are the investment opportunities in India for them? Are inbound M&As an opportunity?

India is a huge opportunity — it is a sizeable economy with huge growth potential as well as diverse opportunities and a government which is really focused on the right solutions for the country. I see huge potential in India for continued high growth and the country represents a massive opportunity for both local and international clients. I expect inbound investments in Infrastructure to bring efficient long-term capital.

I think we need to be more aggressive in bringing opportunities to local companies, such as in clean energy, chemicals, renewables, technology and services. My focus will be to ensure we have talented global bankers with deep sector knowledge to help clients navigate the India opportunity. (ANI)

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