HSBC to boost startup funding across sectors

livemint.com:

startups after exhausting 80% of the $250 million earmarked last year, a senior executive said, underscoring the lender’s focus on the sector facing funding challenges. Ajay Sharma, head of commercial banking at HSBC India, said the lender banks 45% of Indian unicorns, and is willing to meet some working capital requirements of startups, while pushing them to maintain high corporate governance standards. Instances of delayed financial reporting and alleged fraudulent practices by some large startups have put the spotlight on governance issues at some entities that have raised billions of dollars from investors.

“This fund is carved out of our balance sheet. We are evaluating having a larger lending appetite for this segment, but the final decision on that is pending," Sharma said in an interview. In June 2022, HSBC India had said it will provide lending support of $250 million to startups, irrespective of the sector they belong to.

Sharma said the decision to put a number to its startup lending appetite was to avoid a haphazard manner of lending without really knowing how much risk the bank was putting on the balance sheet. In 2022, India was the fourth-largest contributor to HSBC Holdings Plc.’s profit, after Hong Kong at $6.2 billion, and Mainland China and the UK at $3.4 billion, each. “We do not lack ambition but we are very careful.

We are willing to take a calibrated approach to risk in terms of lending to startups, diversified as it may be," said Sharma. At present, startups approach HSBC India for working capital and other transaction banking requirements. However, the bank wants to use these as a funnel to onboard them to later cater to other requirements as these companies mature.