HSBC India has expanded its funding programme for local tech startups to $600 million as the UK-based bank bets on robust growth in the sector, which would prompt more and more firms to opt for global exposure, a senior executive said to ET.
“What the bank decided five years ago was that this is a big segment and that we can’t ignore it. When you look at India mid-market as we call it, which is Rs 500 crore to Rs 4,000 crore turnover ($50-500 million), we started that focus four-five years ago,” said Ajay Sharma, MD and head, commercial banking, HSBC India.
“We realised that’s where a lot of growth is going to be and there are 1700 identified names and how do you systematically go through those and make sure that you get the right ones. The right ones for us often tend to be the ones that need our global footprint,” he said.
The funding commitment for tech startups started with a balance sheet allocation of $50 million in 2019 , which was subsequently increased to $250 million in 2022 and to $600 million now. Of the present $600 million corpus, 50% has already been allocated, Sharma said. A key enabling factor he cited was the government’s investment in building India’s digital infrastructure and the widespread prevalence of inexpensive data in the country.
Providing a broad break-up of the segments which have been covered in the present round of the funding commitment, the senior HSBC executive listed out segments like B2B commerce, consumer tech -such as used car platforms – fintech, direct-to-consumer, agritech, logistics and electric vehicles amongst others.
“There are two verticals – in the first, you have to be really engaged with the venture capital providers. You then go into series A, B, C and there’s a degree of formality when that money comes into the formal company ecosystem,” Sharma said.
“So, the companies also get a bit more professional in the way they look at it and you typically will get series A or B funding when you have a product market fit. It’s not experimental anymore.”
Speaking about the funding winter that the start-up sector went through over the past eighteen months, Sharma said HSBC’s portfolio in the sector did not experience stress, emphasising that the bank was not aiming at providing equity funding but rather focus on providing working capital finance.
With growth in HSBC’s SME (small and medium enterprise) portfolio in the mid-to-high teens in percentage terms, the bank aims to continue the growth trajectory for its tech start-up funding corpus, keeping in mind the macroeconomic environment.
“Our sweet spot with corporate India tends to be when a company is going international. If it’s going cross-border and doing imports and exports, it has FX requirements and that will continue to be a focus for us because our transaction banking franchise is huge,” he said.
