Foreign investors have pulled money out of India. What will bring them back?
Foreign investors will come in if they get a disproportionate return compared with other markets. Today, unfortunately, Indian returns have not been very disproportionate. They have options to invest in multiple markets and will compare your P/E with another country's P/E. Earlier this year, Taiwan and Korea were among the biggest draws.
The US market continues to grow very strongly. Despite everything you hear in terms of inflation and unemployment, core growth across sectors continues to be quite decent. AI is a very big play in the US. Unfortunately, India doesn't have too much to show on AI. Combining these factors, I think no new foreign capital is coming in. That will change only if the global AI story changes. India is often seen as a counter-trade to the AI story.
What can India do to attract more durable foreign investment?
Long-term capital-gains tax is a big factor on the equity side. On direct investment, the trade agreements are going to be a big positive. Trade agreements create potentially important UK-India and EU-India corridors. We have been doing a lot of work identifying companies that could benefit and engage with clients. For Citi, that opportunity can flow through services and markets and potentially through investment-banking transactions as multinational companies raise capital in India. There are at least half a dozen live discussions with multinationals looking at potential capital raising in India.
Also Read: PNB aims to bring cost-to-income ratio below 50% this fiscal, 45% by FY29: MD Chandra
There are concerns about IPO pricing and retail investor appetite. Are valuations becoming an impediment?
For the right company, pricing is not an issue. The market has corrected from the levels where the Nifty was trading around 24-25 times forward earnings to around 20-21 times. If Indian companies can deliver mid-to-high-teens growth, those valuations can be justified.
Retail investors may not necessarily be coming directly into every IPO, but they are participating indirectly through mutual funds. Domestic institutional capital has therefore become a significant part of the IPO market.
How does the IPO pipeline look from here?
There are three or four transactions of around the billion-dollar range that we are factoring in between now and the end of the year, and Citi is involved in two or three of them. Going into next year, the pipeline continues to build. More than a dozen companies have filed DRHPs and are at different stages of preparation. A lot will depend on where markets are, but I remain optimistic.
Also Read: Banks seek relief from sustainable lending norms for FCNR(B) loans
How did Citibank India perform after exiting the consumer loan business?
Our strategy has been to focus on businesses where we are either among the top three or believe we can get there within a reasonable period. After exiting the consumer business, we reinvested capital and management bandwidth into the core institutional banking franchise. Between March 2023 and March 2026, our institutional revenues, excluding consumer, rose 76% (a CAGR of 21%). Net income rose 56% (about 16% CAGR). Loans grew 78%, while deposits grew 48% over this period. In FY 2026 our net profit rose 17.3% to ₹7,261 crore and total income was up 4.5% to ₹23,176 crore.
How much did Citi raise through the FCNR(B) opportunity?
We couldn't raise FCNR(B) on our books because of the non-compete with Axis Bank until March 2027. We partnered with Axis Bank and raised about $1.5 billion. Including about $2 billion of our own offshore borrowing and roughly $1 billion of ECBs raised for clients, Citi's involvement was in the zip code of $5 billion.
What opportunities open up once the Axis Bank non-compete ends?
Potentially, we can do everything we could earlier. It is still early days, but if there is another FCNR opportunity, the answer is definitely yes. Wealth is another area we could look at. We already have an offshore wealth business; the question is how we originate onshore for offshore.
How has growth been after exiting the retail segment? What is the outlook on the loan book?
Our balance sheet size has grown 16.3% YoY to ₹3.14 lakh crore. In the second quarter, Citi India's institutional client asset portfolio crossed ₹1 lakh crore. This is significant because even when we had the consumer business, we did not have rupee client-asset book of this scale. We expect around 20% year-on-year growth. But we don't want to grow for the sake of growth. We can raise deposits and grow faster, but not if deposits become too expensive. We need to find the right returns while maintaining robust underwriting.
How has Citi India's investment banking performed?
It has been pretty good. We have been involved in several big-ticket advisory transactions, and M&A continues to be material for us. On ECM, we have helped companies raise about $16 billion capital.
Deal sizes are also becoming quite material, with transactions ranging from $750 million to $1 billion. There is also significant block activity as financial sponsors and investors monetise portions of their holdings. Citi has 28% market share in M&A league table as per Dealogic.
How important is GIFT City to Citi's expansion?
It is a big focus area. Our GIFT City assets have grown from about $300-400 million in March 2026 to around $2.5 billion now. We are looking at optimising our balance sheet and expanding our product offering as more clients come into GIFT City. Since it is a standalone branch of Citi New York, the assets do not consolidate into Citibank India's balance sheet.
(Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.)
Subscribe to The Economic Times Prime and read the ET ePaper online.
(Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.)
Subscribe to The Economic Times Prime and read the ET ePaper online.