Key Highlights:
- With extensive experience across premier financial institutions, including State Bank of India and Standard Chartered Bank, I’ve developed a versatile skill set adaptable to diverse markets.
- Recognizing India’s proactive approach to shaping sustainable growth, especially in electric mobility, SBI Capital Markets actively engages with stakeholders and leverages governmental incentives to facilitate seamless EV adoption.
- Through sustainable-focused collaborations, SBI Capital Markets navigates the evolving financial landscape by providing tailored solutions and fostering partnerships with policy-makers, startups, established players, and investors alike.
1. Can you share your journey in the finance sector and in your role, how do you navigate the unique market uncertainties specific to the electric mobility sector while maintaining financial stability?
It has been a journey of more than 25 years. The journey started at State Bank of India, moved through to Standard Chartered Bank, in Middle East with a brief stint in between with one of the biggest corporate houses. The culmination of the journey has been the current role in SBI Capital Markets Ltd (SBICAPS), the premier Investment Bank of India.
Though primarily restricted to Financial Markets and Investment Banking, this journey across a few premier organizations, across different geographies with different client base has helped me develop my skill set and more importantly widen my horizon.
I recollect that during my days in the Middle East with one of the European Banks, serious discussions happened internally as well as with external stakeholders on sustainable energy resources and financing. Even back then, the heartening thing was the early realization within the top echelons within all GCC countries that growth must be sustainable and green to the largest extent.
It is this seriousness and sincerity that I am starting to see in India as well. India has its unique challenges. But there is a complete buy in for Sustainable Growth across the entire corporate and policy spectrum.
2. How do you think current and future government policies and regulations in India will shape the investment landscape for electric mobility, and how is SBI Capital Markets positioning itself in this context?
I must say the Government has been very pro-active and cognizant of shaping and implementing the required regulations to drive in progressive and sustainable growth especially in the field of electric mobility. Governmental authorities are providing incentives to increase the number of EV charging stations in India at both the central and state levels to attract investments in charging infrastructure. Under the FAME II, it has sanctioned the establishment of 2877 EV charging stations in 68 cities and 1576 EV charging stations across 9 expressways and 16 highways. Therefore, it can be said that the development of sufficient charging infrastructure is well underway to ensure seamless adoption of EVs as mainstream vehicles.
The government has introduced both demand and supply side incentives which are both financial and operational to enhance both manufacture and sale of EVs. Cost of manufacturing of EVs is still high resulting in higher cost of EVs and more incentives are required to be introduced to give EVs a competitive edge. Subsidies may be provided to manufacturers of EVs and EV components to all stakeholders especially during the nascent stages of development of the EV sector and to push more mainstream adoption.
SBICAPS has been in constant touch with all stake holders, be it the relevant Government Departments, New entrants, Established Players, State Entities and most importantly, investors who are keen to collaborate in this space. We have set up and strengthened our ESG desk to help many of the market participants achieve their ESG targets.
3. Could you elaborate on how SBI Capital Markets is cultivating partnerships to drive success, especially in the burgeoning electric mobility industry?
As mentioned above, SBICAPS has tried to keep the Sustainable agenda in the forefront in all its business decisions. We understand that it is an evolving space and there is a need to collaborate, nurture and accentuate the underlying challenges and resolve them to everyone’s satisfaction.
At Policy Making levels, we are trying to give our inputs after detailed understanding of issues faced by different stake holders. At implementation levels, there have been discussions happening to find appropriate funding solutions. In this evolving space, off the shelf solutions don’t necessarily work and we have worked with different clients to find the most effective and efficient solutions for them.
We also try to understand the investment philosophy of many Investors be it domestic or Multinational firms, to see how that fits into the Indian regulatory environment. We have worked with many Institutional Clients to help them draft their Green Framework.
We are also actively involved with Startups, established players as well as AIFs and PE funds to align their interests and address their funding requirements. Further, our expertise in credit structuring allows us to offer innovative solutions to each stakeholder’s satisfaction.
4. In your perspective, what innovative financial instruments or models could be pivotal in accelerating the growth of the electric mobility sector in India?
Banks, NBFCs, and financial institutions can provide critical financial support to consumers, startups, and established players through loans, guarantees, and innovative financing models. Fin tech companies have collaborated with banks to offer innovative lending schemes, including 12 to 24 months of purchase, lower EMIs and attractive interest rates.
In my opinion, government-facilitated financial collaboration for consumers, startups, and established players is needed to create conducive financial ecosystems for EV adoption, including consumer credit schemes, startup incubation funds, and risk-sharing mechanisms.
NITI Aayog with World Bank is setting up a USD 300mn first-loss risk-sharing instrument to act as a hedging and guaranteeing mechanism that banks and NBFCs can access in the event of payment delays on EV loans. The program is expected to bring down the financing costs for EVs by 10–12 percent.
5. How do you perceive the evolving role of technology in finance, particularly in the context of its impact on capital markets and the electric mobility sector?
The challenge is that the OEM players are not able to adapt themselves to the changing policies of the government. So, once you are consistent and just focus on implementation—with subsidy or without subsidy, doesn’t matter.
India has recently discovered a significant reserve of lithium in the states of Rajasthan and Jammu & Kashmir; the discovery is observed as a game changer for electric vehicle production in the country. As per reports, these reserves are expected to fulfill almost 80% of the country’s lithium requirements.
New fin tech-based NBFCs have started enabling greater EV penetration in tier 2 and tier 3 cities. However, NBFCs have been facing a liquidity crunch since 2017 that has been worsened by the effects of COVID-19. This may translate to EV-first NBFCs struggling to access low-cost finance from banks.
Financing windows for small OEMs and small-scale component suppliers or vendors to the OEMs, e.g., a partial credit guarantee scheme or carving out limits within existing programs in this segment to allow for increased finance flows may help.
6. As the electric mobility sector grows, how does SBI Capital Markets balance the dual objectives of promoting sustainable environmental practices while ensuring profitability for its stakeholders?
Established players with good track records generally face less difficulty in securing loans. However, the overall growth and stability of the Indian EV sector will also influence banks’ risk appetite and willingness to lend. In the EV ecosystem, the startups in Hardware segment phases face more hardship than other segments. The Charging station segment faces an issue as the need for charging points may decrease in the near to medium term as the technological advancement in Battery is expected to increase the scale up to 8 hours per cycle, thus reducing the need of charging stations.
Our role in SBICAPS has been to identify the opportunities, find the stake holders and align their interests to make it a commercially viable option without compromising on the Sustainability pledge.
Private capital is steadily flowing into India’s EV ecosystem, with startups bagging deals worth $1.2 billion between January-August 2023, according to Tracxn. However, because the sector is capex-intensive, many hardware companies are even unable to raise funds in the early stages. We haven’t seen large kind of hardware startups getting VC funding. Hardware startup is largely in between angels and private equity—the mid arena, the whole array, is completely missing.
There has been a slew of recent investments into building out an enabling ecosystem to drive mass adoption. This includes localised manufacturing and battery assembly, battery management systems (BMS), software and telematics, and components.
We see this to be the “Sunrise” sector which will dominate the financial landscape in the coming years. We are trying to be nimble, keeping pace with the changing regulatory environment, ever-changing technologies and fast updating financial parameters set by the investors. We believe we are in a very good space where our connects, our expertise and our structuring capabilities make us a very effective Financial Intermediary for all stake holders in this E-Mobility space.
