PremiumSome of the firms that are looking to raise incremental capital will look to defer that decision for the time being, says Shahmir Khaliq, global head of Citibank’s TTS division
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MUMBAI : Citibank’s treasury and trade solutions (TTS) business, comprising payments, working capital solutions and liquidity management, is key to the New York-headquartered bank. In India, it counts nearly half of all unicorn startups among its clients and sees significant opportunities in the fintech sector.
In an interview, Shahmir Khaliq, global head of Citibank’s TTS division, said many clients are interested in India’s production-linked incentive (PLI) scheme, especially semiconductor and pharmaceutical companies. Edited excerpts:
What kind of technology budget does the bank plan to allocate?
At the global level, we have significantly increased our technology and capex spend. A lot of our technologists are based in India. Our annual tech budget this year is around $1 billion for TTS, which includes improving our existing payment pipes, building our instant payment infrastructure across the world, and investing in our APIs (application programming interfaces) and our front-end client connectivity. We are also a good partner to help fintechs scale businesses globally. They have incredible portable businesses considering that their digital model is scalable across markets.
Startup funding seems to have hit a roadblock. When do you expect to see an improvement in the funding environment?
Some of the firms that are looking to raise incremental capital will look to defer that decision for the time being to see if they can get a little bit more certainty. Overall, what we are seeing is a little bit of a slowdown in market activity as the markets adjust to a higher rate environment and the potential for a recession at some point. While valuations may be lower and fresh fundraising may be delayed, that may not mean funding is unavailable; it just means you are getting a different valuation.
Since you rely on transactions, what do you do to shield your business from the uncertainties such as the Russia-Ukraine war and the lockdown in China?
We operate across 95 countries, and the TTS business is a very diversified and global business. There is very little concentration in our TTS business around a particular country or region. If we have a challenge in one country, we see corresponding upticks in a number of other countries. As rates go up, because we are in the deposit-taking business, it positively impacts our deposit spreads. We are also able to do more business with more clients across the globe—North America, Latin America, Asia Pacific, and Europe, the Middle East and Africa. This allows us to offset some negative macro impacts.
Are global companies interested in setting up manufacturing facilities in India?
The scheme was announced in about 15 sectors, but electronic and mobile manufacturing PLI scheme was announced two to three years ago. We have seen maximum client activity for semiconductors.
Another sector we seeing interest in, is pharmaceuticals as large companies are adding capacities and exploring the benefits offered under the PLI scheme. We also see interest in segments of retail and telecom. Some of the schemes have just been announced, so it will take two or three years for the whole capacity to build up. But semiconductor is a good example of how the scheme has worked well for clients.
Are you going after the mid-market segment?
In our business, we have an overall 10% wallet share for big clients globally. But we have a small wallet share of 0.5% on the total commercial banking wallet (small and mid-companies), which was about $175 billion in 2021, per Coalition Greenwich data. Out of that, we estimate the addressable wallet is $60-75 billion. Our aspiration is this 0.5% share is going to increase by at least 50 basis points over three or four years, which translates into around $500 million. We are only targeting the $60-75 billion addressable wallet globally. Each country will help contribute to that aspiration, depending on the market’s size. India has great potential in the commercial banking segment, and we already bank 40% of the unicorns here. These clients are becoming global at a faster pace and will require the same services that large institutional clients do, and we want to capture this opportunity.
What about your presence in Russia?
A majority of our large corporate clients are local subsidiaries of multinational corporations headquartered outside Russia, primarily in the US and Europe. As part of our strategy refresh in 2021, we announced our intent to exit our consumer business in Russia.