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An opportunity for Indian banks to step in into the syndicated credit market: Lars H Thunell, IFC

An opportunity for Indian banks to step in into the syndicated credit market: Lars H Thunell, IFC

With the global economic prospects uncertain, the World Bank’s private equity arm IFC is geared up to play its traditional counter-cyclical role. In India, the market where it has its largest portfolio exposure of more than $3.7 billion, IFC is looking at possible investment avenues in agri-businesses and infrastructure, says Lars H Thunell, its Executive Vice President & CEO, who is in India to engage with lawmakers and companies on how this organisation can contribute. Here are edited excerpts from a phone interview with ET.

What according to you is the current situation globally for investments?

The economic situation is very fragile around the world, with the European situation as well as all that’s happening with the US super committee (a Congressional debt reduction panel). The interdependence in the world economy is very high. At a time of perceived high risk, those correlations in the market, whether it’s through funds, trade or banking systems, have increased dramatically. In most countries, the economic forecasts are being reduced and therefore it’s very important for countries like India to see what they can do to promote domestic growth and consumption.

And this also fits in with the IFC focus. Because we want to bring in inclusive growth, which means focussing on getting products at the base of the pyramid and getting smaller entrepreneurs and SMEs to grow as much as possible.

What’s your agenda during the trip?

I come to India because India is the largest exposure that we have, from a portfolio point of view. I met up with a number of ministers and I had very good discussion about how IFC can contribute. We talked about what we do in the renewable energy side and also on inclusive growth, water, which is very important, as well as education.

We help Indian companies with technical skills and business models. And help Indian companies really becoming emerging multinationals. That’s been the purpose of the trip.

We have had a very interesting transaction with Sewa (Self Employed Women’s Association). We have worked with them over the years, helping them with the logistics chain and establishing the stores. Now, we are also working on how to increase the financial capability for their members through a kind of a bank, which is one possibility. Then we have a special project where we are looking at financing through a very innovative way stoves and solar lamps, two important things for a household.

We have decided to do this concept of developing a very good stove, which will be manufactured here in India locally. With these manufacturers, we can then aggregate and get a discount on the stove. We hope to do a batch of 300,000 stoves.

IFC has traditionally been a counter-cyclical player. So what role do you see for IFC in the year ahead?

We are looking at a number of things. First of all, it is important to support our existing clients and help them to weather the storm, so to say. Or use this, as in any crises you also have opportunities. For example, what we see now is that some of the European banks are pulling back. And that’s an opportunity for Indian banks to step in into the syndicated credit market, which is a very exciting possibility.

So we are trying to support the banks and the financial system and minimise the negative effect. Trade finance, for example. Earlier this year, I signed an agreement with Exim Bank in India on trade finance. Those are the types of transactions we very much like to do now.

But then there are other areas where you actually can continue in a counter-cyclical kind of mould to do more investments. Again, the high food prices are a real problem for many people. The only good news with that is there are lot of possible good profitable businesses, because prices of food are higher. So that’s an area where there could be more investments.

Infrastructure, of course, is often used in a stimulus package. And here in India with all the need for infrastructure, we are very much there. And it’s an area where both the growth aspects and the climate aspects come together. We are focussing a lot on renewables. Water is part of the climate change agenda and the infrastructure agenda.

At the same time, as India is gearing up for more domestic consumption, you also see opportunities in the manufacturing side. So this is an area where we have been working but we would like to do even more, whether it is components for the automotive industry or agricultural equipment like we have done with Jain Irrigation.



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