MC EXCLUSIVE Today’s capex of a ‘different form’ compared to previous decades, says Citi India CEO

K Balasubramanium, Citi India CEO,

Sectors such as renewables, battery energy storage, semiconductors and electronics hold a lot of promise in terms of attracting fresh capital, leading financial institution Citi’s CEO for India subcontinent sub-cluster and banking head, K Balasubramanian told Moneycontrol in an exclusive conversation.

Balasubramanian was also quick to dismiss the view that private capital expenditure in India is yet to revive, adding that today’s capex is vastly different from what was happening a few decades ago.

“There are pockets of opportunity that corporates are looking at, like renewable energy space, where at a breakneck speed things are happening. There’s a lot of work happening in the infrastructure space including real estate. Then there are new sectors emerging like batteries, semiconductor and electronics. Capex required in these segments is not like putting up a steel plant or a cement plant,” Citi’s India CEO told Moneycontrol, while adding datacenters to the list of promising spaces.

Citi has also recently signed a $200 million deal with Power Finance Corporation where the bank brought in an Australian agency to participate in PFC’s investments in green energy, including power transmission and generation.

“These is a lot of capex happening in the country. It will not be those big-ticket 1990-2000 kinds, it is a very different form of capex that is playing out,” said Balasubramanian, insisting it would be wrong to say domestic capex is missing.

Balasubramanium is also betting on the ESG theme where Jane Fraser, Citi’s global CEO, has committed an investment of about a $1 trillion by 2030. Of this, 50 percent of the slated investment ($500 billion) will be towards environmental activities and the rest for social and governance projects.

“That's a very big number to be done by 2030. India is right in center of the entire piece,” Balasubramanian said, adding that India currently has an ESG book of around $2 billion. “The PFC transaction mentioned earlier qualifies under ESG. There is a very large transaction in the private domain in a metal sector, where we are looking at doing more than $500 million plus of financing.” Citi’s India CEO is clear that the local balance sheet must be deployed for sustainability funding. “For us, climate transition is an absolute necessity, not a hobby. Focus on renewable energy is going to be bread and butter.”

Read More: Citi India CEO Balasubramanian expects $15-billion IPO rush over next 2 months

Citi’s Balasubramanian also sees opportunity in acquisition financing, a segment that has recently opened up for banks to lend.

“When access to capital becomes easier, cheaper and more prevalent, the number of transactions that is going to happen in the country will go up. They're going to be more players and more opportunities,” he explained.

On the recent debate in India Inc about ‘Gen Next’ of large business houses not wanting to take over the reins, Bala’s view is that the second and third generation are probably not very keen to continue the businesses their parents or grandparents were doing.

“They want to branch into new age businesses, which then means that there is always going to be opportunities for acquisitions in the domestic market. Private equity is sitting on huge pots of capital, and they have been pretty active in India over the last several years. With the change that is happening in terms of opening up of banks into that space, there is going to be domestic consolidation,” said Citi India CEO.

Citi’s Balasubramanian said the opening up of acquisition financing to banks and other recent measures by the Reserve Bank will go a long way in ramping up India Inc’s capex plans. “After a very long period of potential tightening of norms, the regulators have started to make norms a bit more flexible. That's primarily because bank balance sheets, not only ours, but across the market, continue to be positive,” said Bala.