'India’s AI advantage needs better articulation to global investors': Citi's Vis Raghavan

Mumbai: Vis Raghavan, head of banking and executive vice chair of Citi, was in India for its annual India conference, which unites all businesses and 1,000 corporates. It is part of a global push to bring buy/sell side participants, policymakers, and decision-makers onto one platform. Raghavan is credited as a seasoned investment banker and dealmaker for building and leading the banking franchise at Citi and earlier at JP Morgan. In an interview with TOI, he speaks about what it takes for India to attract foreign capital.
Q: It’s almost 100 days now since the West Asia conflict. What is the impact you are seeing?
A: It varies by region. In the United States, the market is very much “risk-on.” We’ve seen a flurry of deals across sectors, especially in tech and AI—data centre financing and AI infrastructure rollout have dominated. We’ve also seen major M&A activity. Citi has been involved in three of the largest deals in Q1 this year including Paramount acquiring Warner Bros.,where Citi advised and helped finance a $54 billion bridge. There was also McCormick acquiring Unilever’s Foods business in a $45 billion deal. Debt markets have largely supported these acquisitions, while the IPO market has been more selective—not as prolific as expected. In Europe, te UK is still adjusting post-Brexit and tax reforms, while Germany’s industrial base needs revival. Countries benefiting the most are those in the AI ecosystem—Taiwan, Korea to some extent, Japan, and the US—where capital and liquidity are flowing. China remains complex from a macro and investability standpoint, but investors recognise that ignoring China is risky.Coming to India, sentiment is largely domestically driven. Retail and domestic institutional participation are strong. However, foreign direct investment (FDI) interest is muted due to two main factors: energy dependency and oil prices, and uncertainty over India’s position in the AI-driven global economy.
Q: So those are the main reasons why FDI is not coming to India?
A: Yes, broadly. Capital seeks alpha, and currently the biggest alpha opportunities are perceived to be in AI. Even in the US, markets are somewhat polarised—AI and tech stocks have surged, while the rest of the economy has performed more moderately. This has created a two-tier market. Chip stocks, for instance, have been major beneficiaries, directing capital towards places like Taiwan. This reallocation of capital has led to softer FDI flows into India.
Q: So the idea that AI is like a black hole sucking in all capital—is that accurate?
A: To a large extent, yes. The scale of capex required is enormous—tens of billions of dollars. A billion dollars no longer feels significant in this context. AI infrastructure involves not just chips and compute, but also land, electricity, water for cooling, and the broader ecosystem. Electricity, in particular, is a critical constraint. As companies move towards becoming AI-native and retool their processes, the demand for compute will surge globally. Everyone is racing to meet this demand, which is why capital is pouring into AI infrastructure.
Q: Yields have been rising globally, especially in the US. Are companies prepared for this, and are higher yields here to stay?
A: That depends on inflation trends across regions. The key drivers are trade friction, tariffs, and energy prices. There’s a growing view that yields may stay higher for longer. This is a concern for sovereigns, especially in the West, given their large debt burdens. The trajectory will depend heavily on macro conditions and geopolitical developments, particularly their impact on energy markets.
Q: So businesses and households can live with it?
A: Corporates are in strong shape—healthy balance sheets, controlled leverage, solid valuations (especially in the US). They can absorb or pass through costs. Households are holding up so far—consumption remains steady, employment is strong, and equity markets support sentiment. But caution is rising.
Q: IPO sizes are increasing—take SpaceX-type mega listings. Do we need better price discovery mechanisms?
A: Deals like SpaceX are reference, benchmark transactions. Fundamentally, these companies represent the future AI champions. There’s a small cohort of such names, and the market treats them as anchor points. The key on price discovery: the IPO market is becoming far more selective. One large transaction doesn’t open the floodgates. Not every company can raise substantial capital. The market will discriminate—back the strongest investment thesis and equity stories, ignore marginal ones. It’s no longer broad participation; it’s a winner-takes-all, flight-to-quality environment. These AI/LLM-driven stories are rare. Hence, when they come, the market gives them a strong reception. On price discovery mechanics, book-building remains the most efficient tool. Increasingly, private markets shape public pricing. Late-stage private rounds set a reference valuation—what informed capital was willing to pay. That becomes the anchor.
Q: What should India do to attract foreign capital?
A: The macro needs to stabilise—and likely will. Alongside, India must better articulate its position as a major winner in a post-AI world. That narrative is emerging, but not strongly enough. We’re already seeing companies at the frontier—building across energy/AI ecosystems, designing solutions for India while serving global demand, and operating out of India. The cost advantage is clear: a unit of compute produced in India is far cheaper than in the US or other economies. That creates a strong economic case for India as a global compute hub. Yet this advantage is under-communicated. India can be a core node in the global AI architecture—across power, green-energy transition, IP creation, and talent depth. The talent pool is deep; a large share of AI engineers in Silicon Valley are of Indian origin. That capability can be recreated domestically. AI has no borders. Geography is less binding. This opens space for India to participate across the stack—intellectual capability, hardware ecosystem, hyperscaler hosting, and data centres. All of this is viable from India.
Semiconductor manufacturing is different. Chipmaking has long lead times and isn’t plug-and-play. India has begun investing, but returns will take time. If it were quick, every country would scale instantly. This is a longer-cycle play. The near-term opportunity lies elsewhere—compute, infrastructure, talent, and deployment—areas that can scale in quarters, not years.
Q: Currency depreciation worries investors. What should policy focus on?
A: The exchange rate is almost an equilibrium. It is a function of the points we just discussed. If FDI interest strengthens, the currency will strengthen. So the macro feeds into the effects; currency depreciation is a symptom. The key is not having a policy in a vacuum—you need to focus on a whole range of other factors.
Q: Citi has scaled back some operations in India. Has financing activity slowed?
A: No. India is Citi’s second-largest employee base outside the US, with over 35,000 staff, now that we are gradually reducing in Banamex (Mexico). Citi’s focus is cross-border clients—and it dominates that space in India. Examples include advising on RCB’s sale by Diageo, all the Korean companies’ IPOs—LG, Hyundai—and Bharti Airtel’s stake transactions. Citi sits at the centre of cross-border flows. With global trade becoming multipolar, new corridors (India–Vietnam, Europe–India, etc.) are emerging. Citi’s “local–local” model positions it strongly. Its balance sheet (around $420 billion corporate exposure, plus trade finance) supports large deals globally.
Q: The RBI has recently allowed acquisition financing. Are you exploring any partnerships?
A: No. We have a very strong balance sheet and a strong team on the ground with deep experience and long-standing relationships. We have further strengthened the team with recent additions. From our perspective, we are in an excellent position. We have consistently ranked among the top one or two players for many years, and we are deeply embedded in the fabric of corporate India. Our focus now is on execution—moving faster, building on our momentum, and supporting corporate India in achieving its ambitions.
Q: Are there any opportunities you would highlight for corporates in India?
A: First, India offers strong organic growth, so the temptation to go abroad is lower. But there are attractive opportunities overseas, especially in parts of Europe where valuations are compelling. So Indian corporates may need to be more ambitious globally to gain scale, IP, and know-how, and to establish a stronger global presence.
Second, we are closely watching private capital. Liquidity in India is not a constraint given domestic and foreign banks, but private equity and especially private credit are expanding, with growing interest in India.
Third is the AI journey. There are two aspects—building the AI ecosystem and infrastructure, and companies adopting AI across operations. We ourselves are re-evaluating and optimising processes to fully benefit from AI. These are the three areas I would highlight.
Q: Is retail banking now largely domestic?
A: Banking has largely become a domestic business. Across major markets like India, Brazil, and Korea, local champions dominate, especially in retail banking. Global banks face structural disadvantages—trapped capital and liquidity across jurisdictions, and mismatched return expectations versus local players—making it harder to compete on margins and efficiency. Over the past 15 years, this has steadily shifted market share toward domestic institutions.