Despite this slowdown, our equipment finance business has grown at a healthy pace, as banks and major institutions have been shying away from lending to the infrastructure sector.
With close to 28,000 common service centres in the rural parts of the country and with a comfortable capital position, Srei Infrastructure Finance Ltd is hopeful of bagging a banking licence from the Reserve Bank of India as and when the apex bank comes out with its final guidelines for licensing of new banks in the private sector.
In an exclusive interview with Business Line, Mr Hemant Kanoria, Chairman and Managing Director, Srei, discusses the challenges confronting the industry in terms of asset quality and margin pressures, the key hurdles in the infrastructure sector and the roadmap of growth for Srei.
Excepts from the interview:
The RBI has come out with draft guidelines for licensing of new banks in the private sector. Will Srei consider foraying into the banking sector?
The RBI is yet to come out with its final guidelines on this issue. However, we have expressed our interest, and if we fulfil the criteria then we would like to go for rural banking in a big way.
The 28,000 common service centres under the Srei Sahaj are well connected. We wish to structure products for rural customers in sectors such as agriculture, healthcare and IT.
Srei's core business lies in the infrastructure segment — whether it be equipment finance or project finance. With the slowdown in the infrastructure segment do you foresee a slowdown in your business?
There has been a slowdown in the economy over the last one year.
Growth is basically a derivative of what we are doing, and if you notice, over the last one year, there has been nothing right happening in the infrastructure sector. This is reflected across all sectors — road, ports, power and telecom.
However, despite this slowdown, our equipment finance business has grown at a healthy pace.
This is because banks and major lending institutions have been shying away from lending to the infrastructure sector. This has given us enough scope to lend to this sector.
Srei, with a 33 per cent market share in the infrastructure and construction equipment financing sector, disbursed close Rs 2,611 crore during the second quarter of this fiscal.
We are hopeful of clocking 35-40 per cent growth in equipment finance business by the end of this fiscal.
Has there been any impact on asset quality? Is there pressure on margins?
The slowdown in the infrastructure sector is primarily due to policy issues. The risks have increased. However, we do not see much pressure on asset quality as we put in place stringent norms. Being a long-term player in the industry, we have been able to analyse the risks and put in place the appropriate risk-mitigants to overcome them.
The constant rise in interest rates has exerted some pressure on our margins, and our profitability has been affected to some extent. However, it is not a cause of concern for us. We expect things to pick up soon.
You had plans to raise $1 billion through infrastructure equity fund by the end of this fiscal. What is the update on that?
We wanted to raise $1 billion through an infrastructure equity fund that will invest in areas such as roads, power and ports. Our colleagues have been ‘pilot fishing' and talking to investors. The funds will be raised primarily through overseas investors.
We are conducting a due diligence. We might not be able to come out with this by the end of this fiscal; however, we are hopeful of going ahead with our plans early next fiscal.