'India Inc's overseas buys to cross $40 bn'

BANKER-SPEAK: Chanda Kochhar

Chanda Kochhar, Deputy Managing Director at ICICI Bank, is currently at the helm of the bank's corporate and international business after having overseen the bank grow into the country's largest retail bank. Since she took charge, the bank's international banking group (IBG) has more than doubled its asset book to over $19.18 billion leveraging the corporate linkage back home. In an interview with Anita Bhoir and Rajendra Palande, Kochhar talks about how ICICI Bank had sensed much earlier the substantial rise in cross-border acquisitions by Indian companies and had accordingly established presence overseas. Excerpts:

What's driving ICICI Bank's corporate and international businesses?

India is at a different inflection point today with the country riding on a healthy demand cycle and the corporate sector in turn investing in capacity building to meet the rising demand. After discussions with about 300-400 of our corporate clients, we have estimated that the investment pipeline has swelled to about $500 billion.

More than half of this is in infrastructure and about 40 per cent in the manufacturing sector. This situation is unlike the 1990s when corporates were highly leveraged. Corporates now have healthy cash flows having generated cash of around $150 billion last year.

How is ICICI Bank capitalising on the investment pipeline?

We are known for our project appraisal skills. We have participated in major projects like the Delhi airport upgrade project, major toll road projects, power projects and steel and cement expansion projects. For appraising risks in various sectors, we have experts.

The in-house expertise helped as the corporate team was cautioned against taking exposure to gas-based power projects with gas availability still some time away. The bank has also been sole underwriter to select rupee loans. We were underwriters to an aggregate of Rs 40,000 crore of loans last year.

How did ICICI Bank prepare itself for tapping business opportunities flowing from Indian companies' overseas forays?

It is pleasing to note that Indian corporates are planning to grow both domestically and globally. The demands of the corporate sector from Indian banks have changed in the recent past.

They are now looking to work with banks that have the balance sheet size to support their inorganic growth and the ability to structure deals and also finance them at competitive rates through innovative structures.

The bank's offices across 18 countries helped in growing corporate business. Our share in the $11.5 billion foreign currency loan market was the highest last year. Of all the M&A transactions in 2006, we participated in 52 per cent of the deals. According to our estimates, this pipeline will continue to be robust as we expect deals of about $40 billion this year. This number could rise.

Given these levels of activities, how has ICICI Bank's international book grown?

We sell almost 80 per cent of M&A finance to other banks within 10 to 15 days. We started a little over three decades ago and today have an international book, which is the largest among all Indian banks. We have the largest network when compared to any private bank in the country.

Our international banking book totals $19.18 billion. We have 6,86,492 non-resident Indians as customers and direct (on-line) banking customers of over 98,860.

The bank handled inward remittances of $8.48 billion last year, which is 28 per cent of the total. In some markets like Singapore and Bahrain, we are larger than all Indian banks present there. In Singapore and Bahrain our assets books are $6 billion and $5 billion respectively.

What has given ICICI Bank an edge over other Indian players overseas?

Like the retail story, we at ICICI Bank had sensed the growing international aspirations of corporate India three-and-a-half years ago. We then decided to give the bank's international foray a big push. We wanted to set up capabilities for loan structuring and syndication.

Today, the bank has 2,000 employees spread across 18 countries. We have also set up a dedicated foreign exchange derivatives business team of 100 people.

Currently, we have a 25 per cent market share in the derivatives business in India. We also have product experts that assist our corporate bankers and help business houses understand various derivative and forex products. We have built this team over a period of three years.