Why Standard Chartered Bank’s P.D. Singh believes that there are opportunities for larger Indian corporates to do significantly more offshore

Today we are at an intersection where both structural and cyclical cycles are playing out together. Does that fundamentally transform the landscape for banking, even as business models are being upended at a scale never seen before?

You’re spot on. We’ve never seen these kinds of fundamental changes happen so quickly and all at the same time. Yet this is a time when India has shown, compared to the rest of the world, very high growth and low inflation... It’s also a time when a bank is tested by its customers, constituents, and regulators across the world. Customers will see the difference between banks and bankers — they’ll experience who is able to navigate geopolitical risk, help with risk management, advise correctly, connect them to newer supply chains, and make sure the entire complex story is understood as well as possible.

Every morning brings a new headline, and how one deals with it matters. Sometimes the best thing is not to act at all. Take the U.S. tariff situation, for example. Initially, there was a lot of panic and headlines in the garment industry, but, actually, not many orders got cancelled. It’s not so simple to just change supply chains and move on. Sometimes you have to weather the storm, whether the risk is in commodities, currency, a new jurisdiction, or new rules.

Regulations are constantly evolving, and positively so. We’ve come out of this year pretty strong as a banking system. I would credit our regulator, who leads by innovation. Very often there are unintended consequences of regulations but the manner in which we respond, correct, and smooth those bumps shows the international investor community that we are here to build a very solid long-term story for the country.

Is the uncertainty over? How are clients coping, and is there stress in that portfolio?

There are two cohorts that we deal with: the larger Indian conglomerates and clients, and then the SMEs and suppliers to those larger conglomerates. For the latter, there was a fair amount of anxiety about doing business with a constantly changing headline every morning. At least for our bank and broadly across the banking system, I haven’t seen any stress to speak of. While there are some accounts under watch, we are not worried about any systemic issue arising from this.

For bigger corporates, this has been a big opportunity to find the right valuations and acquire or grow meaningful beachheads offshore. In some cases, adding an entirely new line of business, which wasn’t part of their earlier plan, because valuations have been very attractive. In the past year, we have done about 10 of the largest transactions, whether M&A advisory or financing of M&As for large Indian corporates going offshore.⁽¹⁾ I can say we have some of the smartest businessmen in the world, because they have picked the right timing and the right price for some of these assets.

In an uncertain environment, M&As require conviction. Are Indian conglomerates being opportunistic or strategic?

I’m going to be controversial here. I believe India Inc. could do a lot more. While that may sound like it means more business for me, I truly believe the opportunities are out there and larger Indian corporates could do significantly more offshore. It’s an amazing time to make the right picks and take the right bets. If you have the right financial partners and the right risk appetite, why not?

Look at what sponsors and investors are doing in India in sectors such as renewable energy — they bring in large pools of capital, put it to use, and once the risk cycle and build-out are over, they flip the asset and make a strong return. There’s nothing wrong with that.

But the appetite to do more is partly a function of how they see the demand environment, and also when the cost of capital switches overnight, every M&A needs to be weighed far more carefully.

So that’s partly true. If I can add, if you have a neighbour such as China, who has overcapacity in many industries, that capacity is going to find its way into the global market. And if your capacity utilisation doesn’t cross 70-80%, then you need that long-term conviction to continue to add capacity, which requires a lot of capital commitment and long-term investment.⁽²⁾ So, until you see that tipping point coming in, that is the thought process that large corporates have before committing domestic capex.

That said, on the infrastructure side, demand for real-world capacities is going through the roof. Every player in steel, every player in cement is adding or commissioning new capacity… [it’s the] same with renewables. The knock-on benefit of that is visible too: if you look at logistics or commercial vehicle usage, the velocity across the country has increased. We also need to see the productivity gains from all the infrastructure we’ve built — roads, airports, and so on. When that kicks in, I think we’ll see a further acceleration of investment from outside India and within India.

Aggregate large industry credit has grown at a CAGR of maybe 3% over the past 10 years, but mid-market and MSME credit has grown substantially. Is that an opportunity you are chasing as well?

Absolutely. SME is a great focus for us, alongside our focus on the affluent customer — the business requirements as well as the personal requirements of that customer.

The SME of today is not the SME of earlier days. Today’s SME is globally connected, exposed to far more risks such as commodity, currency, and beyond. They need to understand not only the local regulatory environment but that of their buyers and suppliers connected to the global ecosystem. That is why international banks are doing really well in SME, despite competition from many other constituents, including non-banks.

We have 55,000 SME clients, of which some are liabilities, and some asset clients. Our entire focus is to make sure they have the full continuum of products: working capital, asset acquisition, supply chain, and trade finance.⁽³⁾ That’s where we score really well.

Wealth remains one of the biggest opportunities, and yet foreign banks in the past, despite catching the story early, didn’t monetise it. Now home-grown wealth management firms are proving to be tough competitors.

First, I’d like to correct the framing. Foreign banks have made an indelible mark on the banking system in India over many decades. The first digital branch, the first ATM, the first credit card, the first contactless credit card, the formats of LCs and bank guarantees in use today — all were brought in by foreign banks. That contribution must be acknowledged.

Secondly, it is less about scale and more about relevance. In the current context, it is genuinely relevant for an international player to offer end-to-end services: protecting multi-generational wealth, creating international investment connectivity for Indian clients, and providing the best tools and curated content for investment decisions.

How are you plugging into the Viksit Bharat growth story?

Let’s look at the priorities of the country. The first is bringing in FDI and FPI. We have done about 30 international roadshows over the last year to make sure the India story is understood by investors, whether MNCs or portfolio investors. As part of our custody offering, we have seen flows from 90-plus IPOs come through our counters, and about 20% of total cross-border flows pass through Standard Chartered Bank. We play a very important part in that corridor.⁽⁴⁾

MNCs coming into the country also require specialised sector understanding, their banking requirements are specific to the business they are attempting to do in India. Indian corporates have different pools of capital they require depending on their lifecycle.

Take debt capital markets, where we are ranked No. 1 — about 50% of all ECBs in most of last year were raised by foreign banks, largely consumed by Indian companies. About $50 billion of international investor money came into the country through debt capital markets via foreign banks.⁽⁵⁾

All of this also brings currency volatility into play, and managing that is an important function. We provide Indian banks access as a correspondent bank to 120 markets offshore, making sure they have the right products and the ability to manage liquidity.

Is there a shift in the borrowing appetite of India Inc.?

Indian corporates are really smart. Unless it makes commercial sense, the colour of money is the same. Currently, it probably makes sense for better-rated companies to borrow in foreign currency and either use the money overseas or swap it into rupees. There is also a CNH billing theme where suppliers in China may provide a discount, and a fully hedged structure can make sense.

These opportunities come from time to time, and that’s where the expertise of a bank like ours adds real value.

Post-pandemic, while corporates have de-levered their balance sheets, households have levered up. How do you view this?

I don’t know whether that’s the ideal state to be in. But financialisaiton — the ability of consumers to access financial assets, invest in the right products, and borrow to consume — is a sign of growing confidence in their own future and their earning capacity. The ability of banks and other intermediaries to lend to individual consumers is also a testament to lenders’ confidence in their ability to repay... we are still early in this cycle of financialisation and will continue to see it rise.

On corporates sitting on cash, it’s up to their shareholders to ultimately decide what is best for them. But as I alluded to earlier, astute Indian businessmen are increasingly using that capital to access new markets, new businesses, or to bring IP back into the country.