By Ankur Mishra and Malini Bhupta
Axis Bank is looking at becoming a leader in the wholesale segment and is betting on a pick-up in capital expenditure. Rajiv Anand, executive director – wholesale banking – Axis Bank, tells Ankur Mishra and Malini Bhupta that private capex should pick up in six months and that the bank will play a critical role as the economy gains momentum. Edited excerpts:
Axis Bank wants to become a leader in wholesale banking while most other banks are looking to go easy. Why is that so?
Corporate banks will play a critical role as the economy begins to pick up steam. We have the franchise, the capital, the risk appetite, the people and products to be able to partner our corporate clients as they grow their business.
When do you see the capex cycle picking up?
Globally, the stimulus that central banks have pumped in, a part of it will go into consumption and a part of it will go into building infrastructure. Therefore, we will see demand across products and services. In that context, India will also see an increase in private capex. We are seeing a pick-up in capex in industries, like steel and cement. We are also seeing capex kick-in, as a result of the PLI (Production Linked Incentive) schemes. The second wave has set things back by about six months. The initial phase will be driven by government spending through its ambitious National Infrastructure Pipeline.
One of the things we have noticed is that you are focused on mid-corporates and have an operations playbook for the same. Is there a strategic shift towards mid- corporates?
We define mid-corporate clients as those that have a turnover between Rs 250 to Rs 1,000cr. Here we have a lower share as compared to the overall share of lending. This is something we are looking to fix. We find this segment very attractive for multiple reasons. The opportunity is large and spread across geographies and sectors. This plays to our core philosophy of granularising risk. We also intend to bring our best in class transaction banking capabilities to this segment.
We will continue to work with large corporates with whom we have been working with for a very long time. We want to offer a full suite of services to them and have invested in people and technology to be able to up our game. We want to become the transaction bank of choice for our corporate clients. We have a new service architecture and we are working on providing end-to-end digital solutions to our clients. The fact that our market share across various products like FX, LCs, GST payments etc, is going up is a testimony to the new strategy. Last year 95% of our incremental lending was to A- and better clients. This will continue.
Do you want to scale down on SME book given the stress might be there due to Covid-19 pandemic?
There are around seven crore SMEs and only 10-12% of them avail bank credit. So, first and foremost, you ought to differentiate between SMEs who take credit and SMEs who don’t take credit. What we are seeing at this point in time is that slippages on the SME side, have been well controlled as on March 31, 2021. They are within the range that we want them to be. We may see some pressure because of the second wave, but in general we are very bullish on the SME sector. Ultimately, if India needs to grow, we need the SMEs to grow and provide employment.
Are you focusing more on short-term loans deliberately?
We have traditionally been seen as a term loan lender. What we are looking to do is to bring down term loans as a % of our overall portfolio. Today it will be 70:30, we want to bring it down to 60:40. It is not that we will not do term lending, but we want to certainly increase short term loans, which are typically of working capital in nature. This helps us reduce and at the same time increase engagement with clients while seeking out opportunities for trade finance and other non-credit businesses.
How do you plan to leverage ‘One Axis’ capabilities in the corporate loan segment?
The ability to deliver ‘One Axis’, is a key area of distinctiveness for the corporate bank. Let me give you an example of a transaction we did, where we were the advisor to a company in an M&A transaction. Later when the open offer came, we became the banker to that issue. Then we provided transaction banking capabilities to that client for the open offer. We provided trusteeship through Axis Trustee, and then there was surplus liquidity which was parked in Axis Mutual Fund. Therefore, we are able to provide a one-stop solution through the various arms of the Axis Bank group – taking care of loans and working capital requirements, transaction banking services, investment bank solutions, trusteeship, and working with Axis MF to take in the liquidity. It is the job of the RM to deliver One Axis to his or her clients based on the client’s requirements.
How has your underwriting policies changed during the pandemic?
There were two things which we did. One, we came up with a metric during April of 2020, where we looked at each sector to assess which would bear the maximum impact due to the pandemic and which would take the longest to recover. Just to give you an example, the impact on the pharma industry would be marginal and they would take the least amount of time to get out of it. On the other hand, hotels and airlines would face significantly higher impact and would take longer to recover. Accordingly, we recalibrated our underwriting. We also backed some key clients with whom we had long relationships and were facing an uncertain future. This was important for us because we see ourselves as a relationship bank and long-term relationships are built if you partner with clients when they are most vulnerable.
Overall, do you believe that your wholesale book will do better than last year? Will you be able to see double-digit growth this year?
What we typically guide the Street is that we will grow 500-600 basis points (bps) better than the industry. And we are confident that we will continue to do so.
How do you see the second wave impacting asset quality?
Corporate credit books have gone through a long period of recognition of stress on their portfolios. Corporates, on the other hand, have strengthened their balance sheets by raising and deleveraging. Under these circumstances we don’t see elevated levels of risk on corporate portfolios.