Global Bank

C: So just to reiterate the client is a Global Bank wanting to enter the Indian Market, right?

I: Yes right! You can proceed with the case

C: So, I have a few questions to understand the industry we are operating in, our client and its operations and finally the new geography we wish to enter. Firstly, I want to know which location our client operates in, since when have we been into operations, who are our customers, what kind of services do we provide, and how much share do we hold in the current market?

I: The Company has been in operation for the last 10-15 years and is an established player. It operates across different countries like Europe, Australia, Singapore, USA and Amsterdam. We cater to anyone and everyone who wants to deposit their money with us. We have specific country-wise criteria to lend loans. Apart from this, we have Value Added Services as well and are present across both online and offline channels.

C: Okay makes sense. Seeing that the company is very well established, why does it actually want to expand to new geography, and do we have any timeline in mind?

I: So they want to maximize their profits through this plan of expansion, and they want to achieve their goals in the next 3 years at max.

C: Understood. Next I would like to understand, is there any geography that they have in mind, what kind of customers are they targeting and what kind of services do they plan to take to India. Also, some information about the competitive landscape in India would be an add on. Finally, are there any budgetary constraints that we need to be aware of when we are taking any decision?

I: Great. The Indian market has 5-6 big players like SBI, HDFC, ICICI, PNB etc. While our client does not have any target geography in mind, they wish to only cater to customers having an income of more than 10 crores per annum. They majorly plan to take all kind of services to India like Banking, AMC, Lockers etc. What do you think now.

C: Okay, so the customer landscape is a big point over here, considering people with more than 10 crores of income would be present in a very less number. So I have the following approach in mind. Firstly I plan to look into the Macroeconomics of the Indian Economy (PESTEL: banking sector is highly regulated, trust factor with existing banks, Inflation rates and Repos and Reverse Repos etc.), then I plan to look into the Microeconomics part of it where firstly I’ll see the banking industry, its size, share and growth, then I plan to look into our company’s outlook where I’ll see the financials of our company, how much profits we can generate and what would be the costs that we might incur in terms of fixed and variable costs. Finally, I’ll look into any barriers to entry that might be there, how we can enter the Industry and if we are planning to set up our own Value Chain, how should we go ahead with doing that. Does this seem like a fair approach?

I: Yes, the approach seems fair. However, due to paucity of time, the client has asked you to ask them 6-7 questions that would make help in giving them clarity whether they should enter the market or not.

C: Okay. So firstly I’d like to understand whether getting through the regulatory barriers in India, fulfilling of compliances of Repo and Reverse Repo by the RBI would be feasible and possible or not?

I: Yes, none of that would be an issue

C: Okay. Next, do we have any idea about the size of market we will be catering to, how much share will we get, and what is the growth of the market?

I: So we’ll be catering to 1,00,000 people and we’ll have profitability margins of around 4-5%. These people come from across the 4 metros.

C: Interesting. So considering that the number of people we would be catering to is not huge and is relatively split across the country, does the profit margin actually seem feasible to our client? 

I: Comparing to global standards, the margins are less. However, in the Indian terms these seem enough and our client is satisfied with that.

C: Okay. But we should also look into how much of the incomes people are actually willing to deposit into banks, considering they have other alternatives also, like investing in the markets. When it comes to taking loans, we need to see if actually a decent chunk of these 1,00,000 would end up taking loans, provided they are already earning so high, the need for loans might not be there.

I: Good points, but the 4-5% margins is after accounting for all these factors.

C: Okay. And what about the competitors. They have already been present in the industry so in order to make a mark, we need to differentiate ourselves in some way so that we can actually cater to the people.

I: Yes, we can surely look into this!

C: So to look into some points of differentiation, the first thing that comes to my mind is a Digital Infrastructure. Are our competitors present through digital modes. If that isn’t a feasible option, we can look into the quality of services as a point of difference.

I: So that is a great point. None of the players are present in an online mode.

C: Great so essentially this reduces our capital requirements hugely, since we can just set up one or two branches and rest we can operate digitally. Since we already are a global player and fulfilling legal requirements of RBI isn’t an issue, trust factor would also not be much of a problem for us. After this, I’ll look into creating demand through awareness campaigns. Would that be an issue or should I chart out a strategy for the same?

I: No that won’t be an issue for us. We have great marketers in all the countries where we operate. 

C: Okay. After this, I would like to look into the available routes through which we can enter the Indian Banking Sector. It can be a Merger, an Acquisition, a Joint Venture or we can enter on our own. Now when we look into an M&A or a JV,  we need to see if we have the capabilities for that, if our demands are actually being satisfied by the other firm and if they are willing for the transaction to happen.

I: Good points but we would be entering ourselves. How should we go about this now?

C: For this, we need to first see where we can set up our operations, then actually go about setting them up in terms of hiring employees, meeting compliances regularly like those of maintaining CRR, SLR etc., setting up the digital infrastructure and finally creating awareness about our services amongst the people and what can be done to ensure that our services are better than all the others.

I: Fair enough. We can close the case now