Paris Business France Friday 2 nd December 2016 International Desk Asia-Pacific - Group Crédit Agricole HOW TO FINANCE YOUR INVESTMENT IN FRANCE? IN INDIA?
A universal client-focused banking model with European roots Specialised Business Lines Retail Banking Subsidiaries Corporate & Investment Banking No 1 in Europe in terms of asset under management N 1 bancassureur in France and Europe 14 countries No 1 in Europe in fund administration & Bank Depository Key player in Europe in consumer finance Market leader in France in leasing & factoring Page 2 The leading payment processor in France with 8.6 billion transactions, and 2 billion card authorizations processed a year 2 As of December 2015 More than 11,100 branches (Romania) An International network in the key economic areas of EMEA, Americas, and Asia Pacific Key figures 52 million clients 140,000 employees Global presence in 52 countries Tier One capital base of EUR 84bn (Dec 2015) Common Equity Tier 1 ratio of 14.2% (Jun 2016) One-notch upgrade to A1 by Moody s* (Jul 2016) (*) Long-term deposit and senior unsecured debt ratings on CA SA, CA CIB, and the 38 rated Regional Banks, with A ratings from Standard & Poor s (stable) and Fitch (positive outlook)
Crédit Agricole Group in France Crédit Agricole Group ranks No. 1 for retail banking in France and is the first financial partner for the French economy, dedicated to all types of companies : from start-ups to multinationals, domestic and foreign Almost one in two French companies is a client offering a full range of financial products and services including specialized business lines: leasing, factoring, insurance, asset management, consumer finance, etc. CA Group branch footprint in France is represented by two brands : 39 Regional Banks More than 7,000 branches 21 million personal clients 55,00 business and corporate clients 10 Regional Offices More than 2,000 branches 6 million personal clients 29,100 business and corporate clients Crédit Agricole partners for companies internationalisation : LAW FIRMS Page 3 3
CA - CIB in India - Branch Network & Products First branch in Pondicherry in 1878 More than 30 years of presence in the India Market Short and Medium term financing products in INR & foreign currency, trade finance products Strong relationship with top Indian & Foreign corporates Corporate Banking New Delhi Full fledged Dealing room in Mumbai, offering wide product range to clients Leading position in Indian derivatives market. Rupee swap capabilities with maturity up to 10yrs Capital Market Mumbai Pune Bangalore Chennai Leading player in the Syndication Market Syndication Market Page 4 4 Project Finance Ship and Air Finance Trade Finance Export Credit Structured Commodity Finance Reserve-Based Lending Structured Finance Investment Banking and M&A advisory capabilities for both in-bound and out-bound transactions. Convertible bond issuance I - Banking
Recommendation for Indian companies developing business in France HOW TO FINANCE YOUR INVESTMENT IN FRANCE? Page 5 5
Crédit Agricole Group solutions In France : Page 6 each Regional Bank / Regional Office has an International Desk to welcome and accomodate the foreign investors Dedicated teams both at Crédit Agricole and LCL : Relationship managers with extensive experience in crossborder KYC processes and tailored financial services for foreign investors Relationship managers dedicated to foreign investors Crédit Agricole Group is a partner of Business France Crédit Agricole Group has developed strong relationship with specialized legal firms ( a strong advantage in order to accelerate the bank account opening) Page 6
General guidelines when working with banks in France Opening a bank account: not as quick and easy as it seems Page 7 Why is it important to rapidly open an account : It is essential for the deposit of the paid-in minimum capital during the company incorporation process The regulatory framework : A strict client on-boarding process regulated by French/European laws (regarding antimoney laundering and blocking financing of terrorism) The «Know Your Customer» (KYC) process and the compulsory bank due dilligence uncertain delays (from weeks to months! Recommendation: Prepare all the information required for the process (non-comprehensive list) : parent company: identification of all the shareholders, certificate of incorporation, powers to individuals, articles of incorporation, description of activities, recent audited financials, origin and destination of merchandise and financial transactions, all in English or French French subsidiary :Identification of all the shareholders, powers of the individuals to form the subsidiary, business plan, origin and destination of merchandise and financial transactions, main counterparties, background of managers, etc. 7 Select a French bank with extensive experience working with foreign companies and /or with specific branches dedicated to this market Take advantage of your bank s partners in France and of French banks branches in your home country
General guidelines when working with banks in France Access to finance : on a case by cas basis Primary hurdles : Lack of credit history or track record in France Limited creditworthiness of the French subsidiary on a standalone basis, not taking into account the financial strength of the parent company (greenfield projects) The solutions : Ask the bank of your parent company in your home country to issue a bank guarantee /Sblc (beneficiary : the French bank which will authorize credit lines in France) No cross-currency risk for the French subsidiaries Credit spread will be significantly reduced by the bank guarantee Enable to build a credit history in France Page 8 An alternative : financing via the parent company (capital injection or inter-company loan), potentially refinanced by the bank of the mother company: Generally the less expensive Potential cross-currency risk and exposure to with-holding tax Recommendation : each solution merits a detailed analysis on a case by case basis in order to optimize both the cost and the risks 3 years financial statements of the parent company is generally required, Minimum equity requirement 8
What does the company want to finance and for how long? Medium and Long Term Financing for Capital Expenditures Long Term (+ 5 years) real estate, construction, renovation Medium Term (1 to 5 years) equipment, IT, company vehicles, R&D Term loan, Revolver, operating lease Short Term Credit (1 year or less) for working capital inventory, receivables, training Overdraft line, Short term advance (crédit spot), Discounting of receivables (escompte, loi Dailly) Factoring (affacturage) for the entire receivables portfolio; can provide : Page 9 1) financing 2) cash collection 3) credit insurance. 9 This solution is becoming increasingly popular in France.
Recommendation for French companies developing business in India HOW TO FINANCE YOUR INVESTMENT IN INDIA? Page 10 10
Banking environment and regulations in India The banking regulator is the Reserve Bank of India (Central Bank) The Indian Rupee (INR) is partially convertible Free convertibility for current account transactions, i.e. Import and export of products and services, subject to proper documentation Controlled convertibility for capital account transactions, i.e. capital injections and borrowings from abroad Page 11 Capital injections are under the control of the Foreign Direct Investment Policy Borrowings are regulated by the RBI 11
Borrowing Schemes and regulations in India Basically two options : local financing, in INR or offshore borrowings in foreign currency or INR (Offshore borrowings by a company incorporated in India are authorized within the framework of the External Commercial Borrowings or ECBs) Simple Regulations for INR borrowings from banks in India However, there a few important restrictions to keep in mind : Page 12 No financing allowed for purchase of land and buildings No financing allowed for acquisition of shares Working capital financing: no ECB bank financing allowed. However, parent company financing can be provided, subject to minimum 7 year average maturity. Otherwise, working capital financing in INR can be obtained from both local and foreign banks in India Remember that Bpifrance with Crédit Agricole Group can propose the issuance of bank guarantee in favour of Indian banks and/or financing for the parent company in order to finance the development abroad 12
External Commercial Borrowings Main Regulations ECBs are available in 7 different forms, among which the main ones are bank loans, buyers credits and suppliers credits. ECBs are raised via 2 routes : - Automatic route (no prior approval required from RBI) : for financings of investments in the real economy (industry, infrastructures and specified services - Approval route: financing of various service sectors such as hotels, hospitals, software; projects in excess of 750 M$, specialized institutions such as IFC, NBFC N.B. : The ECB regulations are subject to periodic changes by the RBI Page 13 13
External Commercial Borrowings Main Regulations Recognized Lenders / Investors Foreign equity holders with minimum 25%direct equity in the borrowing entity with minimum 51% indirect equity in the borrowing entity a group company with common overseas parent Eligible Borrowers: Companies in manufacturing, and software development sectors, shipping and airline companies, infrastructure sector, holding companies, core investment companies Minimum Average Maturity Period: 3 years for ECB up to USD 50M or equivalent 5 years for ECB beyond USD 50M or equivalent 10 years irrespective of the amount (Track II, i.a. infrastructure sector) Permitted End-uses : import of capital goods including related services, technical know-how, licence fees local sourcing of capital goods new project, modernisation overseas direct investment in JVs / wholly-owned subsidiaries (Track II : holding companies can also use proceeds for providing loans to their infrastructure SPVs) Page 14 14
External Commercial Borrowings Main Regulations Currency of Borrowing Any freely convertible currency as well as Indian Rupees Equity ratio for ECB raised from direct equity holder under automatic route The ECB liability of the borrower towards the foreign equity holder can not exceed 4x the equity contributed by the latter Under the approval route, this ratio should not be more than 7:1 This ratio will not be applicable if total ECBs raised by an entity is not exceeding USD 5M Page 15 15
Financing of local operations Comparative Summary Representative Office : Local expenses are financed by transfers form the parent company via the normal banking channels Branch : Local expenses are financed by transfers from the parent or by the profits generated by its authorized activities Subsidiary : Financing through capital injection, or borrowings (local or offshore), or internally generated funds Finally, the financing and guarantee products available in France from institutions like Bpifrance are not be overlooked! Page 16 16
Crédit Agricole Group solutions IN FRANCE : Each Regional Bank / Regional Office has an International Desk to welcome and accomodate the French companies as well as the foreign investors Dedicated teams both at Crédit Agricole and LCL : Page 17 17 IN ASIA : Crédit Agricole Group International Desk for Asia and Pacific is the key entry point for Indian companies (see contact at the end of this presentation) Relationship managers with extensive experience in crossborder KYC processes and tailored financial services for foreign investors Relationship managers dedicated to foreign investors
Your contact with Credit Agricole Group Mr. Michel DEMUYNCK International Desk Asia Pacific CREDIT AGRICOLE CIB Hong Kong Branch michel.demuynck@ca-cib.com Tél. : +852 2826 1084 Page 18 18