‘We are a sovereign fund’

Nicolas Dufourcq is the Chief Executive Officer of Bpifrance, the first ever Bank for Public Investment in France. Earlier, he served as Deputy Chief Executive Officer at Capgemini, the informatics giant, which has a workforce of 45,000 in India, a third of its total staff of 125,000. Dufourcq took over Indian operations when Capgemini had a mere 2,000 employees in India and raised the company profile to its present level. Earlier, he co-founded Wanadoo, the French Internet service provider and headed France Telecom’s mass market division. Dufourcq graduated from prestigious French institutions including HEC business school and the elite Ecole Nationale d'Administration (ENA), which produces France’s top officials and diplomats.

In this exclusive interview, he spoke to Vaiju Naravane about the unique institution he heads and his experiences in India.

You have been a creator at Orange and Wanadoo. How did you become a banker? What was the transition?

There was no transition at all. I just got a phone call 10 days before my appointment asking me if I wanted to set up the Bpifrance. And I said what is it? I knew nothing about it. I closely examined the four entities that had to be merged into what would become the Banque Publique d’Investissement (French Bank for Public Investment) and I realised this was an interesting project. I don’t necessarily see it as a bank. To me it’s a company like any other. It was the project that attracted me.

What is the Bpifrance and what is its mandate?

Its mandate is to offer all possible financial resources and facilities to the French entrepreneur, from the hairdresser to the technology marvel listed on the Nasdaq. And that includes some very big companies in which we have an equity stake. We are a sovereign fund.

Are you helping them because they have cash flow issues, a liquidity crunch?

We have different basic activities – six lines of business. The first one is warranties, underwriting the credits given by private banks to companies. In case of default we cover the loan. We are a kind of bank of last resort for those credits. We guarantee approximately 80,000 loans per year. We also have a credit business in which we grant direct loans–treasury loans, medium and long term loans, investment loans and the total size of the balance sheet for those loans is 30 billion euros.

Thirdly, we inject equity into some 280 private investment funds, which are themselves investing in French companies of all types. It’s a massive organisation, the second largest in the world after America and on par with Britain, directly targeting SMEs (small and medium sized enterprises).

Our fourth line of business is venture capital and innovation subsidies. We also inject capital into existing companies -medium sized but with revenues of 50 million euros per annum and a staff of 250. But we are also supporting companies that have revenues of over a billion euros per year. This big-ticket fund was earlier called the French Strategic Fund. And finally, our sixth line of business that of mid-sized tickets — SMEs between 500,000 euros to one million euros.

So you are prepared to help through investment any young person coming to you with an interesting, well thought through project with a good business plan?

We give them all sorts of products. Someone comes with a pilot project. We look at it, we audit it and if it is serious and interesting, we give a reimbursable advance of 200,000 euros or a loan at zero per cent interest. Then, we funnel the founder entrepreneurs, first with venture capital, then with equity and as they start to grow we give them three or even four million euros of innovation loans.

So it’s a phased, sustained accompaniment?

Yes. We start from zero and then we go through early, mid, advanced stages and so on. And this innovation grants a billion euros of subsidies per year and manages I billion euros of venture capital funds. So it’s a two billion euro division.

What would you describe as a priority?

Exports is one of our top priorities. The French export deficit is massive, 75 billion euros and that’s simply not sustainable in the long term. One of our mandates is to convince middle-aged, 45-plus entrepreneurs that they’ve got to go abroad and that we will help them export more, accompany them in their efforts to invest more and to react positively to globalisation. It’s a question of mind-set. there are many that perform well and we push them to export.

How innovative is the idea of this bank, we’ve seen micro-credit fail. So what is so new about this bank?

It’s a novel, innovative idea. It’s a unique entity, which can be replicated. No institution combines the six lines of business that I have described. None of the development banks in Europe are in direct touch with the entrepreneur. They don’t lend directly. They give them liquidity through commercial banks and that “intermediary” scheme is not efficient. We are in touch with 200,000 customers through 42 branches across France. So we are very much part of the country’s economic fabric. When I meet my customers, they are my direct customers and we co-lend with commercial banks.. We are financing that part of the landscape which commercial banks find risky.

How does the Bpifrance fit into the general banking landscape?

We have 5 per cent share in the credit market and we have 40 per cent of the market share in the equity market. So it’s a huge equity fund with a small SME bank. Our relationship with commercial banks is excellent and we do a lot of co-financing. So for one euro from us, an investor gets five euros from a commercial bank. Commercial banks are part of our governance and shareholder structures. We are financing ourselves on the marketplace. Bpifrance has two subsidiaries – the credit part and the equity part and the private sector holds 10 per cent of the credit part.

In real terms how do you operate?

We are a nomadic bank. We have 1000 people in the field, each of whom is expected to meet 150 entrepreneurs each year. They are constantly in their cars, cruising the territory and they spot likely candidates, propose credit and equity services.

You were formally constituted in July 2013? How has your growth curve been?

We started our commercialisation in January. So its now practically one year. We were very active in building up the treasury. In comparison with our predecessor in 2012, we injected one billion euros more into SMEs to offset their cash flow issues, but we also gave development credits to allow companies to grow. The morale of companies was so negative that we did not have a very good semester in equity injection. For equity to be injected, you need an entrepreneur to open his capital and they did not wish to do that. It has now started in earnest and there is a complete change in atmosphere.

What do you think brought about that change?

It’s a blend of factors. The world economy is improving. Companies are being buoyed by the global climate and that is having a positive effect on morale in France just as it is doing in Spain and Italy. Entrepreneurs are more optimistic. Other effects of collective psychology have also come into play. Morale has never been as bad as it was in winter 2012 and we have tracked that through questionnaires etc. – it was the lowest in 27 years. The rebound is impressive. Last summer, June-July 2012, we noticed that entrepreneurs were fed up with being fed up and the upturn was confirmed in the weeks that followed.

What needs to be done?

We have to convince the markets and businessmen that the rebound is sustainable and that the tax landscape in France will be stable. The decisions taken last spring, notably an ambitious reform of the different capital gains taxes, which will make such taxes in France among the lowest in Europe, has contributed to this new optimism.

You worked for a very a long time in India and you have a deep attachment with India. How did your experiences in India help you in your experiences here? Have you taken any lessons from India into your new job?

The main lesson that I take is not God or spirituality. It’s something that is directly linked to a weakness of the French state of mind, which is one of self-negativity, a doubting of the self. In India you have Himalayan problems, which would be considered insurmountable by the average French person. Still, every morning, in India, people get up with the idea that they can do something for the country and that they live in Incredible India. There is a good-humoured attitude and a positivity, which is an unbelievable strength when you have to face such heavy odds.

In France, too, many people have unfortunately got into the habit, and we have to fight against that, to get up negatively. I think this pattern costs France one GDP point per year. That’s huge. It robs them of their drive. It’s a huge energy leak. French leaders have the duty to inject positivity, optimism, will and confidence into French society.

Do you see your role as this new banker as being partly that?

Absolutely. And the four values of the company are simplicity, proximity, will or determination and optimism. Isn’t it wonderful that a bank should have optimism as a core value? And the colour I chose for the logo is sunflower yellow – turn people towards the sun. We are reaching for the sun. You can’t imagine the amount of muscle, intelligence, talent and innovation that exists in France. If we only accepted to look at it with a fresh pair of eyes.

So why this negativity now?

You have to admit that 40 years of mass unemployment takes a toll. Since the first oil shock we are in the 40th year of mass unemployment here and I would place that at the top of the list of reasons. France has always been a great nation and this society is very demanding of itself that sets the bar very high.

This country is never satisfied with itself and the elites here are never satisfied. At school when you’re an excellent student all you can hope for is fourteen on twenty. Teachers tend to mark students below their real levels of achievement. It’s a country obsessed by excellence and very good is not good enough! That puts a pressure on the average person that can be quite unbearable. The French are their own worst critics.

Did India help you look at things in a different prism? And did you end up looking at France differently?

Of all the countries in the world, the country that is facing the most complex challenges is India. To people who are holding the reins of power in France those who are in a position of responsibility, I would say, look at India, look at the serenity displayed by Indian business leaders in the face of massive problems. They make it happen.

Do you think there could be cooperation between your bank to help generate better Indo-French investment? What is lacking is genuine trust and confidence and the ability to invest?

We have a whole set of activities through we advise the French entrepreneur on how they should settle in emerging markets and economies. So the answer is yes. Could we do more? Certainly we could. We could look at a special fund to help investment with India. We already have such a fund with China. It’s a co-financing mechanism injecting equity into French SMEs in China and vice versa. We could do that with India. Proposed that to (former) Ambassador (Rakesh) Sood and the idea can be revived at any time.

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