HSBC India: Support for tech start-ups will cover companies at different stages of their life cycle

HSBC India, which recently announced loan support of $250 million for high-growth technology-focused start-ups, said it would explore a plethora of start-ups at different stages of the life cycle to expand credit support.

“What we’re saying is it’s not a substitute for fairness. This is an addition after a fair amount of equity has already been invested,” said Rajat Verma, Head of Commercial Banking, HSBC India.

“Our $250 million will cover the plethora of some early-stage startups that have been funded with some level of equity, but need support with working capital, business purchases,” did he declare.

In a conversation with Activity areaVerma said valuing start-ups for this needs to be done consciously, but away from the usual metrics such as balance sheet and earnings.

“Ultimately, there is an element of judgment involved. How much equity has come in, what is the rate of consumption of that equity,” he noted.

While cash burn is part of the bank’s analysis to support these startups, Verma said that doesn’t mean the bank won’t lend to them.

“That means you assess whether they have plans and you think those plans will come out of cash burn, to reduce cash burn,” he said.

In its announcement earlier this month, HSBC India said the loan support would be sector-neutral and used to leverage opportunities across a wide range of industries in the start-up ecosystem.

Growth opportunities

Verma also expressed confidence in the recovery of credit demand after the pandemic and said there are many opportunities for growth in the corporate, mid-sized and SME segments.

“Our own credit portfolio is growing very quickly and much faster than the market. But credit growth, even in the market, is in the mid-teens, which is pretty good demand for credit despite inflation,” he said.

The bank not only focuses on existing enterprises and medium-sized enterprises, but also on finding and creating more business from existing and new customers.

In addition to tech start-ups, there are a number of wholesale banking opportunities in traditional businesses in sectors such as manufacturing, chemicals and construction.

HSBC India’s SME book has grown at a CAGR of around 40% over the past four years and is currently around ₹11,000 crore.

Published on

June 29, 2022

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