HSBC: HSBC increases its funding capital for emerging technology companies from 250 million to 600 million dollars

HSBC Bank India has expanded its funds Program for locals new technology companies up to $600 million as the UK-based bank bets on robust growth in the sector, which would prompt more companies to opt for global exposure, a top executive told ET.

“What the bank decided five years ago was that this is an important segment and we cannot ignore it. If you look at the Indian mid-market, as we call it, which has a turnover of Rs 500-4,000 crore ($50-500 million), we started focusing on that segment four to five years ago,” said Ajay Sharma, managing director and head of commercial banking at HSBC India.

“We realised that this is where a lot of growth is going to happen and there are 1,700 names identified. How do you systematically review them and make sure you get the right ones? The right ones for us are usually the ones that need our global presence,” 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 $600 million at present. Of the current $600 million fund, 50% has already been allocated, Sharma said. A key enabling factor he cited was the investment in building India’s digital infrastructure and the widespread prevalence of cheap data in the country.

Giving a broad breakdown of the segments that have been covered in the current round of funding commitment, the HSBC executive listed segments such as B2B commerce, consumer technology (such as used car platforms), fintech, direct-to-consumer, agritech, logistics and electric vehicles, among others.

“There are two verticals: first, you have to be really engaged with the venture capital providers. Then you move to Series A, B, C and there is a certain degree of formality when that money enters the formal company ecosystem,” Sharma said.

“This way, companies are also becoming a bit more professional in the way they look at things and you usually get Series A or Series B funding when the product-market fit is there. It is no longer an experimental thing.” Commenting on the funding winter that the startup sector went through over the past eighteen months, Sharma said that HSBC’s portfolio in the sector was not experiencing stress, stressing that the bank was not aiming to provide equity funding but rather focused on providing working capital funding.

With HSBC’s SME portfolio growing between 15-19% in percentage terms, the bank aims to continue the growth trajectory of its funding corpus for technology startups, given the macroeconomic environment.

“Our sweet spot with Indian companies is usually when a company is going international. If you are going to cross the border and do imports and exports, you have foreign exchange requirements and that will continue to be a focus for us because our transactional banking franchise is huge,” he said.