Companies

Changing tack, Srei Infra shifts focus to equipment financing

PRATIM RANJAN BOSE ABHISHEKLAW Kolkata | Updated on January 15, 2018 Published on November 14, 2016

Devendra Kumar Vyas, CEO, Financial Services, Srei. ASHOKE CHAKRABARTY

Learning a lesson from the past, Srei Infrastructure is moving away from risky long-term project financing. The focus now is on fee-based earnings and catering to the booming demand in the less risky equipment finance sector.

“We are restricting total exposure to projects at approximately ₹14,000 crore,” Devendra Kumar Vyas, CEO (Financial Services), Srei, told BusinessLine.

It doesn’t mean, Srei is exiting project finance completely. The company is now looking to pick up good projects and selling the portfolio to institutional lenders as structured deals against fees.

For Srei, that raises finance from banks, the move insulates them from uncertainties in infra construction. Vyas says it is also helping banks – who had in the past suffered from balance sheet based funding in project – to identify investment opportunities.

Equipment sales booming

Talking on growth potential in equipment finance, he said, after three long years of inactivity, infrastructure equipment sales are booming this year.

In April-June quarter, Srei’s equipment financing portfolio grew by over 45 per cent. The growth was 20 per cent in the second quarter that is a lean season for construction and was expected to clock 30-35 per cent in October-December quarter.

“Normally we don’t see growth in the monsoon season. But this year has been different,” Vyas said. Srei manages its equipment finance portfolio through the wholly-owned Srei Equipment Finance Ltd (SEFL).

He expects equipment sales to grow by 30-35 per cent (CAGR) over next three years riding on hyper activity in roads, irrigation and contract mining.

According to him, National Highway and State Highway construction together is progressing 20 km a day. The construction of rural roads under Pradhan Matri Gram Sadak Yojna (PMGSY) is witnessing faster growth.

Vyas says coal mining is witnessing a shift towards high tonnage equipment – 100 tonne and above – indicating more efficient mining.

“We expect the asset under management (AUM) portfolio of SEFL to double from the current ₹20,000 crore in next three years,” he said.

Pre-owned equipment

Interestingly, Srei is banking big on pre-owned equipment finance and its recently launched marketplace aggregator service (similar to Ola, Uber etc) for future growth.

According to Vyas, pre-owned equipment is mostly possessed by small contractors. Since their existence is linked to the machine, this segment has a greater propensity to repay.

This coupled with the lower ticket size and higher interest for pre-owned equipment loans, increases yield of Srei. Vyas says SEFL is the only organised player in pre-owned equipment space that has tie-ups with equipment makers.

Meanwhile, introduction of new IT-based technologies is opening new earning windows in infra equipment space. Vyas feels the recently launched ‘iQuippo’ services will go a long way to reinvent the business.

The options are wide. The GPS locator helps identify machines in a locality helping owners to increase capacity utilisation. For some big contractors who doesn’t want to block crore of rupees in redundant capacities, it’s a viable fall back option.

“We will earn a fee against this service. The group company Quippo which is into physical rental can also get business. And, we might track new clients for our equipment finance business,” he added.

Published on November 14, 2016

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
null
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.