The European Bank for Reconstruction and Development (EBRD) is exploring investment possibilities with Indian companies in other emerging economies. Currently, the EBRD, headquartered in London, is active in Mongolia, Turkey, Egypt, Morocco, Jordan and other countries primarily in central and eastern Europe.
Sir Suma Chakrabarti, the bank's President, is on a four-day visit to India. Addressing a few members of the media, he said: "I had an excellent meeting with Finance Minister (Palaniappan) Chidambaram. The minister thought it was particularly important that we were here looking to invest together with high-quality Indian companies in the region where we operate," said Chakrabarti. "The minister said he would also be following up on discussions with Indian companies about how they could cooperate with the EBRD."
This is the first high-level visit by an executive from the bank since 2007. EBRD is a development bank, but unlike the World Bank, which mainly provides loans for infrastructure projects, or the International Monetary Fund, which provides balance of payments loans, EBRD invests in the private sector. It has $40 billion in assets under management and the average size of projects is $30 million. EBRD does project-based programme lending - a combination of debt and equity.
The bank was founded in 1991, a couple of years after the fall of the Berlin Wall, to foster development of market economies in former communist countries.
"It's time to do much more with Indian companies. We have had good cooperation in the past but if you look at the numbers it has been low. The size of the Indian private sector is enormous and we should be doing more. India has a large current account deficit and the government is calling for bigger exports and new markets can be reached," said Chakrabarti. "It's a good time to tell Indian companies to come and export with us, with our finance. And especially look at markets such as Russia, Turkey and Egypt and other resource rich places like Mongolia."
The cumulative value of joint India-EBRD investments since the EBRD started operations was 806.8 million euros as of 31 December 2012. Of special mention here is Tata Tea partnering with the EBRD to acquire 51 per cent of Grand, a branding, packaging and distribution company in Russia.
The bank often teams with high-quality corporations to ensure transfer of technology and know-how to emerging economies. India-EBRD investment has been especially strong in Russia, at 562 million euros, followed by Turkey, at 75 million euros, and Romania, at 56 million euros.
Broken down by industry, joint India-EBRD investment has been 526 million euros in financial institutions, and 280 million euros in industry, commerce and agribusiness.
EBRD has won Europe's best Limited Partner (LP) of the Year award from global private equity industry publication, Private Equity International.
The bank is not investing in private equity funds in India. "But in the long-term we will be exploring if institutional investors in India and the Gulf will be looking at co-investing along with us."
Though it had shown interest in 1991, India is not a member of EBRD. Membership decisions are taken by its 66 shareholders, who include European nations as well as the US, Japan, Korea, Australia and Mexico.
EBRD does long-term finance and follows a country-based model, with 34 countries of operations. Initially it worked in central Europe and then the former Soviet Union, expanding to Mongolia in 2006, Turkey in 2008 and then Egypt, Morocco, Tunisia and Jordan in 2012.
Chakrabarti said Indian businesses can explore new territories and markets in order to grow. "Indian businesses are doing great but can be much bigger in economies like Kazakhstan, Poland. A safe way to enter these markets is by partnering with us for a safe investment and high return. We enable strong due diligence, strong project approach and market expertise and our non-performing loan ratio is just 3 per cent. We have sector bankers for all sectors," he added.
From the Indian side there is great interest in pharma, automotive, petrochemicals and steel, said Chakrabarti. He added that EBRD has held discussions with the biggest Indian corporations, including the Tata Group, Mahindra Group, Reliance Industries, and JSW for project-based cooperation. There is considerable interest from Indian companies for a sustained interaction with EBRD, said Chakrabarti.