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HSBC India, which recently announced a $250 million loan support for high-growth tech-led start-ups, has said that it will explore a plethora of start-ups across different stages of their life cycle to extend credit support.
“What we are saying is that this is not a substitute for equity. This is an addition after a fair amount of equity has already gone in,” said Rajat Verma, Head-Commercial Banking, HSBC India.
“Our $250 million will cover the plethora of some early-stage start-ups that have been funded with some level of equity, but need support on working capital and corporate purchases,” he said.
In a conversation with BusinessLine, Verma said the evaluation of start-ups has to be done in a conscious manner but away from the usual metrics such as balance sheet and profit.
“Ultimately, there is a judgemental element involved in it. How much equity has come in, what is the burn rate of that equity,” he noted.
While cash burn is a part of the analysis done by the bank for lending support to such start-ups, Verma said it does not mean that the bank won’t lend to them.
“It means that you assess whether they have plans and you believe those plans to come out of the cash burn to reduce the cash burn,” he said.
In its announcement earlier this month, HSBC India said the lending support would be sector agnostic and used to leverage opportunities across a wide gamut of industries in the start-up ecosystem.
Growth opportunities
Verma also expressed confidence over the recovery in credit demand post the pandemic and said there are a lot of growth opportunities in the corporate, mid-corporate, and SME segments.
“Our own credit book is growing very fast and at a much faster pace than the market. But credit growth even in the market, is in the mid-teens, which is pretty good credit demand despite inflation,” he said.
The bank is focussing not only on existing corporate and mid-corporate customers but also sourcing and originating more business with existing and newer clients.
Apart from tech start-ups, there are a number of opportunities in wholesale banking in traditional companies in sectors including manufacturing, chemicals, and construction.
HSBC India’s SME book has grown at a CAGR of around 40 per cent over the last four years and is currently about ₹11,000 crore.
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