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Giving The Best Advice

For JP Morgan, if 2019 was about launching and expanding its mid-market commercial banking, the focus this year will be on growing its securitisation business
Aprajita Sharma       Print Edition: March 22, 2020
Giving The Best Advice
Kalpana Morparia, JP Morgan's Chairman for South and Southeast Asia (Photograph by Rachit Goswami)

With continuous tech innovation and focus on business expansion, JP Morgan has widened its client-base across multinational companies, large Indian corporates and financial institutions in India. It has now set its eyes on emerging businesses, for which the company started its mid-sized local corporate business, says Kalpana Morparia, JP Morgan's Chairman for South and Southeast Asia.

With 28.75 per cent growth in operating profits in FY19 and 53.17 per cent jump in deposits, and superior show on some other parameters, JP Morgan was adjudged the best foreign bank in BT-KPMG Best Bank Study even as other foreign banks such as Citibank, Standard Chartered Bank, HSBC and Deutsche Bank had larger balance sheets.

Picking Up Speed

In July 2019, JP Morgan announced that it would expand its commercial banking operations by growing its mid-market business. It expressed interest in providing India-headquartered midcap companies access to leading global financial capabilities, a strong network and deep market expertise. "The mid-cap sector in India is very vibrant and as these companies go beyond their domestic market to do business, their needs will evolve. Our deep local knowledge, global insights and best-in-class solutions make us uniquely positioned to extend services to mid-cap companies," says Morparia.

We decided to go ahead in early 2019, she says, adding that the bank immediately assembled a Corporate Client Banking and Specialized Industries (CCBSI) team within commercial banking, mainly comprised of local experts. The bank has signed up several clients in the midcap space. The other area of focus in 2019 was fintech. It has multiple fintech partners, one of which is Global Payex, which has a branded product called Freepay that offers an Invoice Reconciliation Solution (IRS) to corporate clients in India. The product helped JP Morgan's clients improve their B2B payments. The bank has also invested in Global Payex.

"The partnership with Freepay enables us to greatly improve the experience and increase the stickiness of our cash management clients. It allows smooth migration from paper to electronic receivable solutions; reduces disputes, reconciliation and manual billing adjustment and improves order-to-cash cycles to optimise working capital," says Morparia. The solution is live with two clients and another four-six clients will be integrated over the next few months. The bank is now working with Global Payex to expand into other markets in the Asia Pacific region.

The Mumbai-headquartered banks tech initiatives included deepening its blockchain network. "IIN (Interbank Information Network), our first live blockchain service to better address the complex cross border payment industry, expanded in India. Through this, we look to address the challenges banks face pertaining to friction points caused by multiple hops through the payment chain when further information is required. With IIN, the time taken to resolve these inquiries can be reduced from up to 16 days to mere hours," she says.

Another part of its digital initiatives was the expansion in its virtual presence to help clients avail banking services in real-time. The Virtual Branch allows JP Morgan clients to upload, check and store their underlying documents electronically for cross-border import payments and provides online discrepancy tracking/resolution and online tracking of entire lifecycle of the documents submitted up till payment stage.

"The portal's dashboard offers track-and-trace capabilities that allow clients to check all their cross-border imports transactions within a cohesive platform. It also helps resolve exports reconciliation and compliance challenges," says Morparia.

The Dealmaker

JP Morgan India's core strength is corporate finance advisory and capital market solutions. It held the leadership position in investment banking across mergers and acquisitions (M&A), equity capital markets and debt capital markets categories in 2019 as per technology platform Dealogic's league tables. "The bank continued to be the leading advisor to the Indian tech sector, led some complex transactions spawning advisory and financing deals; and structured some of the most complex bond transactions out of India. Our affiliate ended 2019 at #1 in league tables overall as per Dealogic with nearly 11 per cent market share," says Morparia.

The bank was the lead bookrunner on marquee equity capital market deals such as the $680 million-REIT IPO by Embassy Office Parks, the first ever REIT IPO in India; the $2.2 billion-Qualified Institutions Placement and American Depository Receipts offering by HDFC Bank, the largest dual tranche primary offering by an Indian issuer; the $3.5 billion rights issue by Bharti Airtel, the largest ever in India; and the $750 million IPO by Airtel Africa.

It raised more than $11.5 billion for Indian issuers across 25 deals in 2019. Notable among these were $1.4 billion by Adani Ports, $1.3 billion by Greenko and $1 billion by Vedanta Resources.

Year 2019 was a year of several firsts, as JP Morgan led multiple unique bond transactions such as that of Shriram Transport Finance Company, the first ever dollar bond by an Indian NBFC; Adani Green Electricity, the maiden investment grade-rated renewables issuance; among others. The bank, which was the leading adviser to Flipkart-Walmart deal in 2018, continued its role in the transaction. In 2019, it handled Oyo's $1 billion-plus equity capital issue, one of the largest by an Indian unicorn and Ola's $500 million equity capital raising. Morparia adds that the bank was the exclusive financial adviser to Kraft Heinz on sale of its Indian subsidiary to Zydus Cadila Group for about $625 million.

Investing in the Future

As part of its CSR activities, JP Morgan has set up a financial inclusion lab to incubate and accelerate start-ups focussed on financial products for low-income individuals. Morparia says they are seeing interesting solutions from start-ups such as Navana Tech and RupeeCircle in segments such as micro-insurance, P2P lending, agri-finance and credit for small businesses. Since 2018, 20 start-ups have been incubated or accelerated, serving 9,00,000-plus individuals and helping more than 430,000 customers establish a credit score for the first time. In addition to that, at least 12 participating start-ups have been able to raise over $4.7 million in follow-on capital. Morparia says that when they started, they had a collective capital base of $830,000, which has increased to $6.7 million.

In 2019, the bank made a five-year philanthropic commitment of $25 million ($10 million in collaboration with the World Bank) to help develop skills needed by India's workforce in the future. "The firm will also support skills training and career education programmes to equip people in India for careers in the country's high-growth sectors and will be aligned to market trends in retail, healthcare and IT-enabled services," she says. This will extend to "supporting actionable research and data to inform JP Morgan's future philanthropic investments in India and share best practices on education and training programmes," she adds.

What will 2020 be like? The bank plans to further expand its mid-market business by getting on board more mid-cap companies. It is also keen on getting a piece of India's growing loan securitisation business as banks and NBFCs offload their loan portfolios amidst the credit crunch post the IL&FS crisis. "We are working hard to get that (securitisation business) off the ground. It's work in progress," says Morparia.

@apri_sharma

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