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If Somebody Wants a Billion Dollar Cheque, We can Do it

Mizuho Bank, Japan’s third largest ‘megabank’ with close to $2 trillion in assets, made its biggest bet in India with a Rs 4,100-crore capital infusion in November and followed it up with a Rs 1,200-crore investment in NBFC Credit Saison.

Mizuho Bank, Japan’s third largest ‘megabank’ with close to $2 trillion in assets, made its biggest bet in India with a Rs4,100-crore capital infusion in November and followed it up with a Rs1,200-crore investment in NBFC Credit Saison. Asia Pacific co-CEO Yasuhiro Kubota explains to Joel Rebello why India is important for the Japanese lender and how it plans to expand the business here. Edited excerpts.

You infused Rs 4,100 crore ($500 million) capital into India in November – Mizuho’s largest here to date. What does that allow you to do that you couldn't do before ?

We want to create a lending capacity to be able to support our local book. It’s a commitment to the market that we have enough capacity to grow. The $500 million is just the first tranche. We want to do large ticket acquisition financing around our customers, like a loan against shares or what we call promoter financing in India. We had the capabilities in the region but not India. Now, we are developing these capabilities in the country. If somebody wants to acquire a company and they are looking for a billion dollar cheque, I can say with great confidence that we can do it.

Earlier, banks like us could go to a $50 million to $100 million dollars per transaction. Our ability to lend is also greater now because of our understanding of the Indian market, and transaction structure along with capital. The mandate is to double the business by 2026.

Given the competition, what are your bringing on the table that is different for even, say, Japanese companies operating here?

The Indian market is large enough to allow all the players to grow. Yes, to differentiate, it's very difficult, but we aim to provide the solution for Indian corporates to grow. We have specialized advisory and bankers for each sector. We have a strong ESG practice that helps corporates go through those decarbonisation journeys. Traditionally, we've been doing our overseas businesses supporting Japanese corporates. But we also support quite a few Korean, Taiwanese or even Chinese corporates because more than half of our business comes from outside Japan. In 2016, when I was in India, only less than 40% of Japanese corporates were profitable here. A recent JETRO (Japan External Trade Organisation) survey in 2022 says 71% of Japanese corporates are now profitable.

That means Japanese corporates have learnt how to be profitable in this very tough market. Where does India stand in the group’s regional portfolio; what are the plans here?

India is not large but its growth is the fastest. It is at number five in terms of revenue contribution behind China, Singapore, Australia and Thailand but growing rapidly. Two decades ago, we had only one branch in Mumbai, now we have five. We have four legal entities here including our global services and an office equipment leasing company. We are going to serve local Indian corporates, multinationals not only from Japan but also from other parts of the world. So our main focus will be companies but we are also open to retail and SMEs. It is a tough market but there are huge spaces. Even small enterprises and business banking. We have taken a 15% stake in Credit Saison as part of this initiative. One part of the growth is happening in this area, besides corporate finance and we need to be there. We don't want to limit ourselves on one side of the business.

How is the geographic distribution from a revenue standpoint, and what role does Asia play in your expansion?

Nearly 55% of Mizuho Financial Group's revenue comes from overseas businesses outside Japan. It is divided in three regions Asia Pacific, Americas and EMEA (Europe, Middle East and Africa). America the largest and Asia Pacific just behind are the two big pillars. In Asia, we have 14 countries, China in the north, India in the west and Australia in the south. Among these 14 countries, India is the most focused country because it is the fastest growing. The market is huge and of course, a lot of investment is coming not only from Japan but globally. We at Mizuho think we are a global bank, so doing the business in India is a growth opportunity for us.

Talking about China, there is also the aspect of rising geopolitical tensions. How will you navigate that in India?

Everybody knows the China tensions. The pandemic showed that it's very risky to depend only on China. Every corporate is now focusing on a second supply chain. So it goes through the east side of Asia, to the west going through the ASEAN countries and wading through India. This supply chain is getting larger and stronger. For ASEAN including Korea and Taiwan it is a must to be more connected with India. It is just the beginning. It doesn't mean everybody's withdrawing (from China). It's again a huge market but the growing piece may come from this ASEAN to India part on the map. India-Japanese relationship is very deep. The number of times and the positive way in which India comes up in discussion reinforces our belief.

By Joel Rebello

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