”This pioneering move is all set to change and empower the economies of two most powerful countries in Asia, By Yugansha Malhotra
Tata Sons, is all set to collaborate with world’s largest bank by asset, that is, Industrial and Commercial Bank of China (ICBC). Apart from providing the Tata group with financing products, global cash management, consulting, international trade finance business, investment banking, foreign exchange, derivatives trading, and other global financial services, it will also aid in funding the growth of Tata Sons across the world.
Tata Sons and ICBC have collaborated for a long term partnership, under which ICBC would act as strategic partners to Tata Group. The negotiation was helmed under the authority of Cyrus P Mistry and Jiang Jianging, Chairman for Tata Group and ICBC respectively. ICBC will also create a global service team which will support Tata group’s strategic development plans. The alliance will be a global one with the geographies covered including India, China, Singapore, Europe, the USA, and South America. The Tata group will consider proposals from ICBC and solicit its participation on bilateral transactions and tender offers. Furthermore, the association would seem beneficial for ICBC as well. ICBC, which entered India in September 2011, has a branch in Mumbai and offers corporate banking and trade finance services. The association with India’s largest business house will help ICBC to expand its presence in Asia’s third largest economy that grew 7.4% in the third quarter of this year even as it faces a slowdown in its home country.
However, this tie-up, has in no way perturbed the country’s largest bank, State Bank of India. The alliance which makes ICBC the strategic partner for Tata Sons, might feel like a huge blow to State Bank, which enjoys a strong relation with the Tata group. The bank has supported the group by providing them a guarantee on Rs. 42,000 crores bond to refinance their debt in 2009. The bank has received a special regulatory forbearance to guarantee bonds of Tata Motors which were raised to repay a part of $ 3bn bridge loan it had taken to acquire Jaguar and Land Rover. However, this tie-up is considered as a rightful action done on the part of Tata group. Jaguar Land Rover enjoys a massive presence in Chinese markets, thus, it is quite logical for Tata Sons to collaborate with the largest bank of China.
The Tata group has over 100 independent companies operating in more than 100 countries across six continents. In 2014-15, the combined revenue of Tata companies was over $ 108 billion. ICBC is one of China’s ‘Big Four’ state-owned commercial banks (the other three being the Bank of China, Agricultural Bank of China, and China Construction Bank). It’s the largest bank in the world across all four metrics: $166 billion in sales, $44 billion in profit, $3.32 trillion in asset and $278 billion in market value. As of the end of June 2015, ICBC had a network covering 40 countries and regions overseas, with 17,225 domestic institutions, 389 overseas institutions and 1,661 correspondent banks worldwide. Professedly, this tremendous tie-up can lead to better exposure and economies for both the countries, which might lead to a worldly effect soon.